Abstract
Purpose The purpose of this paper is to evaluate the efficiency in financial intermediation and the cost efficiency in banking service of credit unions in Brazil, based on essentially accounting variables, and to analyze the temporal evolution of the efficiency of these cooperatives. Design/methodology/approach With a sample of 315 cooperatives over the period from 2007 to 2014, this research uses a two-stage process: application of regression models with panel data to verify which variables are related to the defined outputs, with the reduction of 31 variables to 8 variables in both models; and application of the data envelopment analysis method to obtain an analysis of credit unions’ efficiency. Findings The results demonstrate a high level of efficiency in financial intermediation, with low variation over time, associated with a low efficiency in the banking service, in which few cooperatives have remained efficient over time. In addition, the cooperatives with highest efficiency in financial intermediation were also the most efficient in providing services. Research limitations/implications This research has some limitations about the capacity of the proxies used to capture the real effect of the variables and assumptions of economic relations resulting in restrictions to generalize the results. Practical implications Cooperatives are usually analyzed under just one dimension. By separating the analysis into financial intermediation and banking services, cooperatives that are more efficient in each dimension can be identified, in addition to analyzing the evolution over time. The authors found that efficiency tends to be lower in banking services, and few cooperatives remain at the highest level of efficiency over time in both models. Social implications Credit unions provide an important service in the banking and credit market. Therefore, understanding its operation and the characteristics that influence its efficiency allows a better management of the cooperatives themselves and a greater understanding of this important segment of the financial market.
Highlights
Credit cooperatives are financial institutions based on cooperation, which act in the capture and distribution of financial resources and in the transfer of values between economic agents and which make up the Brazilian National Financial System (Sistema Financeiro Nacional)
The results found refer to the range of credit unions in the final sample after the elimination of probable outliers, whose descriptive statistics of the main sets of accounts are presented in Table 3: The indicators that affect the output variables, or performance, in the financial intermediation activity and in the banking service provision activity of the credit unions under study were identified based on the evaluation of the impact of the accounting indicators selected to compete as inputs in the models
We found that the results of efficiency in providing banking services were different from those found on Model 1
Summary
Credit cooperatives are financial institutions based on cooperation, which act in the capture and distribution of financial resources and in the transfer of values between economic agents and which make up the Brazilian National Financial System (Sistema Financeiro Nacional). According to McKillop, Glass and Fergunson (2002), the greatest strength of these organizations stems from their philosophy and objectives having a worldwide appeal coming from a diversity of people who see an advantage in achieving greater selfsufficiency in the management of their financial affairs Such organizations aim to meet the social and economic objectives of their membership, and the excess money generated by business activities belongs to their associate members (Mckillop & Wilson, 2011). The performance and efficiency of credit unions have been assessed in different dimensions by different authors, such as Vilela, Nagano, and Merlo (2007); Ferreira, Gonçalves, and Braga (2007); Cook and Bala (2007); Glass, Mckillop, and Rasaratnam (2010); Silva, Gollo, and Rodrigues (2013), Carvalho, Diaz, Bialoskorski Neto, and Kalatzis (2015) and Bittencourt, Bressan, Goulart, Bressan, Costa, and Lamounier (2017). Porter and Scully (1987) affirm the existence of a common line that efficiency results from the appropriate choice of the cooperative’s objectives, and this is measured by matching the marginal benefits for the cooperative association with the cooperative’s marginal costs
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