Cooperative Banks and Financial Stability

By M. Čihák, Heiko Hesse. Social Science Research Network, 2007

357 citations recorded by the source corpus.

Cooperative banks are an important, and growing, part of many financial systems. This paper empirically analyzes the role of cooperative banks in financial stability. Contrary to some suggestions in the literature, we find that cooperative banks are more stable than commercial banks. This finding is due to the lower volatility of the cooperative banks' returns, which more than offsets their lower profitability and capitalization. This is most likely due to cooperative banks' ability to use customer surplus as a cushion in weaker periods. We also find that in systems with a high presence of cooperative banks, weak commercial banks are less stable than they would be otherwise. The overall impact of a higher cooperative presence on bank stability is positive on average but insignificant in some specifications.

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/4cd00f0e6ae9782a394f7381ab3a46086cddb63c

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Citations in the corpus

ISLAMIC BANKS AND FINANCIAL STABILITY: A COMPARATIVE EMPIRICAL ANALYSIS BETWEEN MENA AND SOUTHEAST ASIAN COUNTRIES (2013, methodology): “…large residuals, thereby making the estimation less sensitive to outliers, followed by a quantile estimation to allow us to address the question whether the factors that cause high fragility are systematically different from the factors that cause medium or low fragility (Čihák and Hesse, 2007).”
Islamic Banks and Financial Stability: An Empirical Analysis (2010, neutral): “To examine the robustness of these preliminary findings, we have also tried some alternatives to the standard definition of the z-score (Table 3). The underlying idea behind these alternative approaches is that the standard deviation underlying the z-score gives only a part of the information about ”
Bank insolvency risk and time-varying Z-score measures (2013, neutral): “• Approach Z3: Hesse and Čihák (2007) use standard deviation estimates σroa that are calculated over the full sample [1 .”
Role of Islamic banks in Indonesian banking industry: an empirical exploration (2020, methodology): “For measuring stability, we use the Z-score, as suggested and used in the banking literature (see, for instance, Lepetit, Nys, Rous and Terazi 2008; Laeven and Levine, 2009; and Cihak and Hesse, 2007, 2010).”
Risk in Islamic Banking (2012, methodology): “…risk analysis, we employ the Zscore measure which is widely used in the literature as a stability indicator (see, for instace, Goyeau and Tarazi, 1992; Boyd and Runkle, 1993; Lepetit et al., 2008a; Hesse and Čihák, 2007; Čihák et al., 2009; Laeven and Levine, 2009; Čihák and Hesse, 2010).”