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Cover of: Pricing and Dividend Policies in Open Credit Cooperatives
William R. Emmons, Frank A. Schmid

Pricing and Dividend Policies in Open Credit Cooperatives

Section: Articles
Volume 158 (2002) / Issue 2, pp. 234-255 (22)
Published 09.07.2018
DOI 10.1628/0932456022975439
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  • 10.1628/0932456022975439
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Summary
This paper develops a model of pricing and dividend policies in open credit cooperatives (i.e., those doing member and nonmember business). For a fixed distribution of member preferences, the larger the fraction of business done by members, the smaller the optimal dividend and the larger the optimal pricing subsidy. For a fixed fraction of member business, the greater the skewness of member preferences toward loan (deposit) business with the credit cooperative, the larger the optimal dividend and the higher (lower) the optimal loan (deposit) interest rate. Aggregate empirical evidence from the German cooperative banking sector supports a version of the latter prediction.