Governance and ﬁnancial eﬃciency of Brazilian credit unions
Keywords:Credit unions, Cluster analysis, Corporate governance, Multiple correspondence analysis, Stochastic frontier model
Purpose – This paper aims to evaluate the relation between governance and ﬁnancial efﬁciency of credit unions in Brazil. The study shows how poor ﬁnancial efﬁciency in credit unions may result from undesirable conﬁgurations in executive management and other variables related to governance.
Design/methodology/approach – The study develops an innovative methodology to classify credit unions according to the level of governance using indicators of representativeness and participation, leadership, management and supervision. This methodology integrates the use of multiple correspondence and cluster analysis. The study then applies stochastic frontier models to analyze how governance affects the indicators of ﬁnancial efﬁciency.
Findings – The results highlight that better governance substantially increases the efﬁciency of credit unions in terms of a higher level of credit operations per institution.
Originality/value – The paper uses a pioneering survey applied by the Central Bank to almost the total population of credit unions in Brazil. The results highlight how to operationalize a subjective and broad concept related to cooperative governance to identify the remarkable impacts of good governance practices on the ﬁnancial efﬁciency of credit unions.
Copyright (c) 2020 Ricardo Terranova Favalli, Alexandre Gori Maia , Jose Maria Ferreira Jardim da Silveira
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Management Department of the School of Economics, Management and Accounting of the University of São Paulo.
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