The Differential Returns Offered by Mutually Owned and Proprietary UK Depository Institutions: 1993–2000

Abstract

The study quantifies the differences in the level of return from investing in deposit (savings) accounts provided by depository institutions, which are either 'mutual' or 'proprietary'. It is shown that for most types of deposit accounts offered in the UK, mutual building societies provide higher returns than proprietary firms. Surprisingly, it is also shown that returns from deposit accounts issued by converted or non-mutual building societies are, generally, lower than either mutual building societies or proprietary firms. These findings are consistent for interest rate data adjusted for the effect of non-price product characteristics and for unadjusted interest rate data.

The relative influence of price and non-price factors on short-term retail deposit quantities?

“…This data includes all short-term retail deposit accounts recorded for the sample building societies from January 1989 to December 2011. Deposit account features such as cash cards are not considered as while these features have a real interest rate value (Ashton and Letza 2003) their measurement is problematic (Heffernan 2002). Throughout, the building society-specific interest rates for £5000-£9999 deposited are considered.…”

The Effect of Organisational Form on Investment Products: an empirical analysis of the UK unit trust industry

“…Instead, all profits are either returned to their mutual members in the form of better products and services or taken into capital reserves for future growth. Therefore, the mutual is thought to have a relative advantage over its proprietary rival in facilitating their members' welfare by offering low‐cost products (Swiss Re, 1999; Letza et al ., 2001; Ashton and Letza, 2003).…”

Interest rate clustering in UK financial services markets

“…Within previous empirical work examining interest rate setting it is commonly assumed that retail interest rates are subject to structural factors such as the costs of wholesale funds (Heffernan, 1997), market structure (see Berger and Hannan, 1989;Diebold and Sharpe, 1990;Heffernan, 2002;Jackson, 1997;Neumark and Sharpe, 1992), the ownership form of banks (Ashton and Letza, 2003) or the degree of market competition (Hannan and Liang, 1993). This study extends this literature through identifying the extent of interest rate clustering in UK retail banking markets and advocating a distinct behavioural model of limited consumer recall to account for interest rate clustering.…”

“…The deposit data is pooled for all periods of notice and different product characteristics. While banking product characteristics influence the level of interest rate recorded (Ashton and Letza, 2003) they have not been previously associated with differences in the level and form of clustering (Kahn et al, 1999). The mortgage data is the institution reference interest rate from which the interest charged on different mortgage contracts is assessed.…”