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Democratic Governance Mechanisms in Cooperative Banks: A Reassessment

Mitja Stefancic (), Silvio Goglio () and Ivana Catturani ()
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Mitja Stefancic: University of Lijubiana
Silvio Goglio: Università degli Studi di Trento; Euricse
Ivana Catturani: Università degli Studi di Trento; Euricse

Journal of Entrepreneurial and Organizational Diversity, 2019, vol. 8, issue 1, 22-41

Abstract: The governance of cooperative banks is arguably so distinctive that it cannot be properly captured by standard economic models. One of the problems that arises in the assessment of the assumed democratic governance in such banks refers to the members’ commitment to the banks. This paper considers the fact that it is not always clear whether cooperative banks’ members have the proper incentives to actively participate in making decisions that relate to bank strategies and policies. To shed light on this problem, this paper provides an improved framework of governance based on some seminal concepts by Albert O. Hirschman (1970), such as voice, exit and loyalty. Given the challenges that cooperative banks are currently facing, the arguments discussed in this paper should help illuminate the kind of reforms that such banks are expected to pursue in the coming years. Their governance model needs to be updated in practice to retain its specific features; otherwise, it may end up mirroring that of standard for-profit banks.

Keywords: Cooperative banks; Democratic governance; Commitment of members; Albert O. Hirschman (search for similar items in EconPapers)
JEL-codes: D71 D72 G21 G3 (search for similar items in EconPapers)
Date: 2019
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