The Power of Networks: Integration and Financial Cooperative Performance

CIRPEE Working Paper No. 05-14

35 Pages Posted: 9 Jun 2005

See all articles by Martin Desrochers

Martin Desrochers

Developpement International Desjardins

Klaus P. Fischer

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: May 2005

Abstract

The purpose of this paper is to perform a cross-country survey of the level of integration of systems of financial cooperatives (FC) and its effect on measures of performance. We develop a classification scheme based on a theoretical framework that builds on published work using transaction cost economics (TCE) to explain integration of large numbers of financial cooperatives into networks. We identify three critical level of increasing integration we call respectively atomized systems, consensual networks and strategic networks. Further, we test some of the propositions that result from the theoretical framework on an international sample of financial cooperative systems. Based on this analysis we can conclude that: i) Integration is less (more) important is developing (more developed) countries and for very small (large) financial cooperatives as a determinant of efficiency. However, integration tends to reduce volatility of efficiency and performance regardless of development. ii) Integration appears to help control measure of managers' expense preferences that tend to affect performance of FC. iii) Despite high costs of running hub-like organizations in highly integrated system, these systems economize in bounded rationality and operate at lower costs that less integrated systems.

Keywords: Transaction cost economics, financial cooperatives, credit unions, networks, x-efficiency

JEL Classification: G2, G3

Suggested Citation

Desrochers, Martin and Fischer, Klaus P., The Power of Networks: Integration and Financial Cooperative Performance (May 2005). CIRPEE Working Paper No. 05-14. Available at SSRN: https://ssrn.com/abstract=739308 or http://dx.doi.org/10.2139/ssrn.739308

Martin Desrochers

Developpement International Desjardins ( email )

Levis G6V 6P8, Quebec
Canada

Klaus P. Fischer (Contact Author)

affiliation not provided to SSRN

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