Profit Versus Non Profit: A Third Way? The Case of the Italian Mutual Cooperative Banks

Ivana Catturani and Sandro Trento ()

No 1003, DISA Working Papers from Department of Computer and Management Sciences, University of Trento, Italy

Abstract: The traditional distinction between profit and non profit firms does not necessarily apply to some types of cooperative firms, such as the Italian mutual cooperative banks (MCBs). These MCBs present a peculiar governance structure, a combination between a public company governance model and a non-profit one. Similarly to a "not for profit organization", the ownership of the MCBs is widely diffused among borrowerowners, but dividends are not typically redistributed. Like in "public company bank", MCBs have a spread ownership and a board of directors. MCBs work in order to maximise social utility rather than profits, as a social entrepreneurship. MCBs represent a kind of third way governance model in the financial sector. The board of directors of a MCB acts as a public-good administrator in deciding on how to invest, with a deep impact on the local community. However, the governance of these banks is affected by structural problems. The mutual and co-operative nature of these banks is challenged by the increase in the number of members-owners and in the heterogeneity of the member-owners group. This study aims at investigating the democratic voting mechanism of the board (one-head one-vote) and its appropriateness given enlargement of the member's community. The research would tackle the issue of governance structure and incentive to efficient behavior.

Keywords: cooperative firm; mutualism; cooperative banks; corporate governance; italian banking sector (search for similar items in EconPapers)
JEL-codes: G21 G34 J54 L31 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-07, Revised 2010-07-23
New Economics Papers: this item is included in nep-ban
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Journal Article: Profit versus Non Profit: A Third Way? The Case of the Italian Mutual Cooperative Banks (2011)
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