Abstract
This study aims to identify the reasons that led credit unions in the State of Minas Gerais, Brazil, to carry out processes of incorporation, based on the motives included in the theory of the firm and the agency theory: asymmetrical expectations, compensation and tax incentives, replacement costs and market values, seek for economies of scale, anticompetitive effects and pursuit of monopoly power and reducing the risk of insolvency. We investigated four credit unions that have undergone processes of mergers from 2008 to 2011, by interviewing six managers who participated in the processes of incorporation. Compensation and tax incentives, anticompetitive effects and pursuit of monopoly power were not motivating factors, but we identified the seek for economies of scale as a motivation in all the cooperatives studied. We observed that the cooperative has an organizational structure distinct from other kinds of business, but there is a similarity in their merging processes, because the underlying reasons inserted in the theory of the firm and the agency theory were identified as triggers for the mergers.
Highlights
In today’s society, the cooperative movement has been seeking ever more growth through mergers. Goddard, McKillop and Wilson (2009) report that recent years have witnessed a wave of consolidation amongst USA credit unions: around 3% of the total population of CUs have disappeared annually over the past 10 years
In Brazil, the merger and incorporation processes first began in the 1990s, with the support of the Privatization National Plan and the inflow of foreign capital, which led to private control of various sectors of the economy (Camara, 2007)
We aimed to identify and analyze the reasons why four credit unions affiliated to the Central of Cooperatives of the State of Minas Gerais (Sicoob Cecremge) conducted processes of mergers, by: 1) characterizing the credit cooperatives in Brazil, emphasizing its trend toward merging; 2) describing the incorporation processes; 3) identifying the reasons for incorporation, and 4) relating the reasons identified to the theoretical framework of the theory of firm and the agency theory
Summary
In today’s society, the cooperative movement has been seeking ever more growth through mergers. Goddard, McKillop and Wilson (2009) report that recent years have witnessed a wave of consolidation amongst USA credit unions: around 3% of the total population of CUs have disappeared annually over the past 10 years. Goddard, McKillop and Wilson (2009) report that recent years have witnessed a wave of consolidation amongst USA credit unions: around 3% of the total population of CUs have disappeared annually over the past 10 years. These authors present data to corroborate this assertion: they were 23,866 CUs in 1969; 10,628 in 1999 and 8,372 in 2006. Credit unions are part of the National Financial System, developing the role of financial intermediation, aiming mainly to play a social role They have a distinct legal personality established and regulated by the Cooperative Law 5,764/71. This work may contribute to the further development of the theme and increase the academic knowledge about the Brazilian cooperative credit system, as well as about the processes of mergers in these organizations and the development of future research related to the area of finance
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