Bruno DE MENNA (LEREPS, UT1): Exploring Co-operative Banking Diversity – Towards a Typology at the European Level

Theoretical Question & Background Literature

Literature in economics has given an extensive account of the debate regarding corporate governance for several decades (a figurehead of this endeavour is Tirole (2006)). Corporations may have different ways to act depending on their business line and goals assigned. Accordingly, it seems that « banks have unique features that influence and interact with corporate governance mechanisms » (John et al., 2016). These unique features advocate for a special treatment once talking about banking industry.

Some scholars have tried to analyze how corporate governance in banks may differ from that in nonfinancial companies in order to grasp banking special features (see, inter alia, Devriese et al. (2004), OECD (2009), Mülbert (2010), Laeven (2013)). This statement is buttressed when one considers the far-reaching changes occurred in this sector since the 1980’s. Nevertheless, banks don’t behave all the same & provide a wide diversity of models. Co-operative banks are an example of such a diversity in the sector (Groeneveld and de Vries (2009), Ferri and Kalmi (2014)). Mainstream economics usually addressed this diversity through the distinction between Shareholder Value (SHV) & Stakeholder Value (STV) companies (Coco and Ferri, 2010). But are these lenses suitable to understand co-operative banks’ diversity ? Do co-operative banks only belong to SHV/STV models, or could some of them be part of both/other categories ?

After exploring the diversity of corporate governance theory in economics and management science 1, we aim at building a co-operative banks typology at the European level. We hope to contribute to a deeper understanding of the current co-operative banks landscape and thus foster their features. To guide our typology based on the idea of Berglof (2011) there is a variable degree of interdependance between ’macro’ governance system and ’micro’ governance mechanisms, the theoretical question is this paper is :

In Europe, what are the country-specific (macro-level) and size-specific (firm-level) factors influencing corporate governance of co-operative banks models ?

Methodology

The methodological approach includes a threefold interrogation process to build our typology. First, we analyze to what extent economics and management science may provide theoretical background to realize co-operative banking corporate governance diversity. If the first step is not fully conclusive, we analyze to what extent economics and management science may provide theoretical background to realize co-operatives’ corporate governance diversity. Then, we apply the theoretical results of the first two steps to European banking sector in order to lay the groundwork of our typology led by country-specific & size-specific factors.

Major Argument

Co-operative banking is not well known in economics, which usually highlights SHV bank standards. The purpose of this paper is to undertake this perspective bearing in mind banking models diversity may do its fair share to financial stability. Our typology suggests an updated version of the concept of hybrid governance applied to co-operative banks in order to enhance their comprehension. This concept goes together with the idea there is a « similarity spectrum » when it comes to compare co-operative banks to other banks. As « dual-bottom line institutions » (Ayadi et al., 2010) with multiple-goals strategies, it is important to recognize co-operative banks as full members of banking industry. Moreover, as pointed out by the EACB 4, it is necessary to consider their features especially in the design of banking supervision and regulation at the European level, currently embodied by the Banking Union.

Conclusions Expected & Relevance at the International Level

We expect to observe co-operative banks differentiation mainly based on country-specific factors as well as size-specific factors (for instance, banks’ degree of internationalization or lobbying by interest groups affecting investor protection). After the transition to the euro, Banking Union may be the second most important step towards European integration. In a globalized & highly competitive market such as banking industry, it is crucial to analyze co-operative banks at the European (if not international) level in order to report their variety and to determine strengths & weaknesses of each category.


Laisser un commentaire

Votre adresse de messagerie ne sera pas publiée. Les champs obligatoires sont indiqués avec *