The Determinants of Membership in Cooperative Banks: Common Bond versus Private Gain

Type of Work

Article

Date

9-2016

Journal Title

Annals of Public and Cooperative Economics

Journal ISSN

1370-4788

Journal Volume

87

Journal Issue

3

First Page

411

Last Page

432

DOI

10.1111/apce.12135

Abstract

Membership in organizations has been rarely studied by economists. We study the determinants of membership in financial cooperatives, organizations that have significant economic and social presence in many countries. By identifying economic and non-economic incentives to be members of cooperatives, our conceptual framework is novel. Our empirical work analyzes panel data from 2001–2009 for Finnish cooperative banks and compares two empirical concepts of the membership ratio. We find evidence that monetary incentives are important reasons to join, but also the size of the community from which members are recruited plays a role. Over time, monetary incentives have increased and this may have contributed to faster growth in membership in cooperatives based in larger municipalities after these changes. Cooperatives attracting new members primarily on the basis of monetary rewards is also consistent, over time, with a reduction in the role of the common bond.

JEL Classification: G21, G28, P13

Hamilton Areas of Study

Economics

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