AFFI International Conference 2017

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Approaches of relationship lending in cooperative and investor owned thrifts: Case of the thrifts in the US

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The object of this paper is to understand whether cooperatives have a different approach to relationship lending, and how this approach can impact the overall financial performance and risk. It focuses on the differences in market strategies and financial performance among different ownership structures of thrifts in the US. We compare the relational approach undertaken by cooperatives to investor-owned savings and loans institutions in the US and how they affect financial performance and risk using a sample of a cross-sectional data of 11280 observations between 1999 and 2014 of 505 cooperatives to 218 investor-owned thrifts. The results show that relationship lending increases the level of performance without increasing the level of risk for cooperatives. The paper also shows that the cooperative structure has a significant impact on the relational strategies. The cooperative structure has a direct and incremental impact on the insolvency risk and the variance of performance rather than the strategies adopted. The results suggest that risk aversion is part of the DNA of cooperatives.

Author(s):

Sandra Challita    
Université de Montpellier
France

Patrick Sentis    
Université de Montpellier
France

Philippe Aurier    
Université de Montpellier
France

 

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