The diversification and financial performance of US credit unions

Goddard, John; McKillop, Donal; Wilson, John O. S.

doi:10.1016/j.jbankfin.2007.12.015

Cited by 238 publications

(202 citation statements)

References 52 publications

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“…A number of papers have analysed small credit institutions focusing on performance (Goddard et al, 2008a;Kontolaimou and Tsekouras, 2010), diversification (Goddard et al, 2008b;Lepetit et al, 2008;Mercieca et al, 2007, Mckillop andWilson, 2011), risk of failure (Fiordelisi and Mare, 2013) and ownership structure (Gorton and Schmid, 1999 (Hesse and Cihák, 2007;Ayadi et al, 2010) providing empirical evidence that cooperative banks are more stable than commercial banks as they have a great deal of soft information (which is hard to collect) on the creditworthiness of members/customers, and therefore less likely to make lending mistakes. Furthermore, size appears to be positively related to systemic risk (Vallascas and Keasey, 2012;De Jonghe, 2010) and the majority of cooperative banks are small rural credit institutions.…”

Section: Introductionmentioning

confidence: 99%

Competition and financial stability in European cooperative banks

Fiordelisi

Mare²

2014

Journal of International Money and Finance

247

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Cooperative banks are a driving force for socially committed business at a local level accounting for around one fifth of the European Union (EU) bank deposits and loans. Despite their importance, little is known about the relationship between bank stability and competition for these small credit institutions. Does competition affect the stability of cooperative banks? Does banks' financial stability increase/decrease in case of higher competition? We assess the dynamic relationship between competition and bank soundness (both in the short and long run) in the European cooperative banking between 1998 and 2009. We obtain three main results. First, we support the competition-stability view proposed by Boyd and De Nicolò (2005). Bank market power negatively Granger-cause banks' soundness meaning that there is a positive relationship between competition and stability. Second, we provide evidence of the negative impact of the 2007-2009 financial crisis on the individual risk exposure of cooperative banks although it does not change the relationship between competition and stability. Third, we show that herding behaviour affects positively bank soundness. Our findings have important policy implications for designing and implementing regulations that enhance the overall stability of the financial system. JEL-Classification: C23, G21

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Section: Introductionmentioning

confidence: 99%

Competition and financial stability in European cooperative banks

Fiordelisi

Mare²

2014

Journal of International Money and Finance

247

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“…The data seem to suggest that the variables capturing a credit union's size, financial strength and potential for growth may be particularly relevant to a choice of the service menu. A careful examination of the credit union literature suggests considering the following variables: the number of current and potential members, equity capital, 25 reserves and the leverage ratio, defined as the ratio of total debt to total assets (Bauer, 2008;Bauer et al, 2009;Goddard et al, 2002Goddard et al, , 2008. 26 These are the variables entering the selection equations.…”

Section: Framework and Data Descriptionmentioning

confidence: 99%

Varying coefficient panel data model in the presence of endogenous selectivity and fixed effects

Malikov

Kumbhakar

Sun

2016

Journal of Econometrics

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This paper considers a flexible panel data sample selection model in which (i) the outcome equation is permitted to take a semiparametric, varying coefficient form to capture potential parameter heterogeneity in the relationship of interest, (ii) both the outcome and (parametric) selection equations contain unobserved fixed effects and (iii) selection is generalized to a polychotomous case. We propose a two-stage estimator. Given consistent parameter estimates from the selection equation obtained in the first stage, we estimate the semiparametric outcome equation using data for the observed individuals whose likelihood of being selected into the sample stays approximately the same over time. The selection bias term is then "asymptotically" removed from the equation along with fixed effects using kernel-based weights. The proposed estimator is consistent and asymptotically normal. We first investigate the finite sample properties of the estimator in a small Monte Carlo study and then apply it to study production technologies of U.S. retail credit unions from 2002 to 2006.

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“…This study utilized return on assets ROA (Lahovnik, 2011;Ravichandran et al, 2009), return on equity ROE (Delios & Beamish, 1999;Goddard et al, 2008), Tobin's q, and price to book value (P/B Value) as four indicators of performance. ROA provides measurement regarding total profit produced by every dollar invested in assets (Ross, Westerfield, Jaffe, & Jordan, 2011).…”

Section: Measurement Of Objective Corporate Performancementioning

confidence: 99%

“…A diversified company could naturally outperform a focused one through tactics like predatory pricing or price cutting (Goddard, McKillop, & Wilson, 2008;Klier, 2009), cross subsidization (Johnson et al, 2008;Lee, 2002), mutual forbearance (Bernheim & Whinston, 1990;Martin & Eisenhardt, 2001), and reciprocity (George, 2007;Palich et al, 2000). In particular, related diversifiers could gain benefits through backward and forward integration strategies (David, 2011;Gupta et al, 2007) as opposed to unrelated diversifiers.…”

Section: Introductionmentioning

confidence: 99%

Should PLCs Diversify into Related or Unrelated Industries? Evidence from Malaysia

Mehmood¹,

Hilman²

2015

MJSS

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The primary issue in diversification strategy is concerning its type. A large body of research on the relative effect of related versus unrelated diversification still remains inconclusive. Scholars have been studying this topic through different research designs and in different contexts, although a greater part of the research was conducted in western economies. Importantly, certain scholars have asserted that powerful conclusions could be produced if product diversification is measured using powerful techniques and performance is assessed through combination of objective and subjective measures. This research builds up on that suggestion and revisits the subject using a sample of Malaysian PLCs as Malaysia has always been characterised by proliferation of diversified companies. This is also imperative keeping in view the challenges confronted by Malaysian economy in recent years and the significant repercussions of selecting type of diversification by Malaysian corporate sector. This study was conducted for multi-business PLCs listed on Main Market of Bursa Malaysia. T-tests based on 123 diversified PLCs revealed that related diversifiers outperformed unrelated diversifiers on

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The diversification and financial performance of US credit unions

Cited by 238 publications

References 52 publications

Competition and financial stability in European cooperative banks

Competition and financial stability in European cooperative banks

Varying coefficient panel data model in the presence of endogenous selectivity and fixed effects

Should PLCs Diversify into Related or Unrelated Industries? Evidence from Malaysia

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