COOPERATIVE BANKS VS FINANCIAL CRISIS:

AN APPLICATION OF THE STV VS. SHV DEBATE

ABSTRACT
The Great Financial Crisis of 2007-09 makes an interesting case study to test the shareholder vs.
stakeholder debate in banking and finance. The hegemony of shareholder value maximization in the
financial community showed its weaknesses being a factor in destroying the common good of
financial stability. While shareholder value maximizing (SHV) organizations appear to have greatly
contributed to the financial crisis, stakeholder value maximizing (STV) ones seem to have
continued assuring credit, mortgages, financial services and financial sustainability to communities.
In this paper we use probit and tobit models to test whether the probability of a country being in
crisis in 2007-09 and the associated costs related the extent of the presence of Cooperative Banks
taken as a proxy of STV organizations in the country. We start with the model of Caprio et al.
(2010) introducing a new variable that is the percentage of the total assets of Cooperative Banks on
the total assets of the national banking system. The database that we constructed from Bankscope
features 83 countries containing data for 20,000 banks among Commercial Banks, Cooperative
Banks, Bank Holding Companies, Investment Banks, Savings Banks. We find that the higher the
percentage of Cooperative Banks total assets, the lower the probability of crisis. Through the tobit
estimates, we also show that the costs of the crisis negatively relate to the extent of Cooperative
Banks assets. Thus, Cooperative Banks appear to have reduced both the probability of suffering the
crisis and, in the event, its consequences. This is in line with the virtues of biodiversity in banking.
JEL Classification: G0; G01; G14; G15; G18; G21; G20; G24; G28; G30; G32.
Keywords: Governance; Financial Crisis; Banking Crisis; Government Intervention; Regulation; Economic Institutions
and Organizations; Financial Constitutional Economics, Shadow Banking System.

1. INTRODUCTION

The Great Financial Crisis of 2007-09, the subprime mortgage crisis, materialized under the
hegemony of the shareholder value maximization (SHV) model through financial institutions and
organizations1 (Deakin & Floor, 2010; Ingley et al. 2011; Hellwig, 2009). Different kinds of
financial intermediaries, Banks, Insurance Companies, Mortgages Institutions2, have pursued a
corporate governance model based on SHV generating strong connections between credit and
financial markets3 increating systemic risks forcing the policy makers to apply the Too big too
fail paradigm (Bullard et al., 2009 ) and financing the shadow banking system ( Gennaioli et al
2012). The hegemony of the SHV model was part and contributed to produce several modifications
in the banking business: i) a change in the credit management model from Originate-to-Hold (OTH)
to Originate-to-Distribute (OTD; Berndt & Gupta, 2009; Bord & Santos, 2012); ii) a change in
credit management model from relationship banking to transaction banking (Berger e Udell 2002) ;
iii) improving the importance of the bank-lending channel for the transmission of monetary policy
(Cavalcanti, 2009; Bernanke, 2007; Disyatat, 2011 ); iv) a change in the evaluation of credit risks

In this paper we use the term institution referring to norms, behaviors, best practices and ethical codes working as
rules of the game (North, 1990), while the term organization refers to the players of the game constitutionally
founded on these institutions and using them in the game. For example, corporate governance models are institutions
while financial intermediaries are organizations. The distinction between financial institutions and organizations lets us
investigate the reasons of inefficiency and mal-function in the financial constitution of the economic order.
2
We must consider that the set of financial organizations and institutions features a high degree of heterogeneity.
Financial organizations include Banks, Insurance Companies, Government Banks, and also Financial Markets.
Financial institutions count different economic orders based on financial constitution, for example differentiated on the
basis of their legal origin as in the Legal Origin Theory, and within a single economic order it features different kinds of
financial and banking laws defining obligations, degrees of freedom and geographical and social mandates of financial
organizations. But, despite the heterogeneity of financial organizations and financial institutions, the unique model of
corporate governance based on SHV theory exercised by global financial governance established its hegemony
(Gramsci, 1936). Through this Hegemony global financial governance has changed the meaning of the financial
constitution of the economic order and the management of the financial organizations contributing to the crisis. Only
few kinds of financial institutions and organizations resisted this hegemony, such as cooperation and Cooperative
Banks, Savings Banks, Credit Unions, Micro-credit Intermediaries. These financial institutions and organizations are
the pillars of the embedded stakeholder value (STV) maximization.
3
A great part of the economic literature (Kindleberger, 1978; Minsky, 1982; Galbraith, 2009) studies the causal relation
between the growth of the credit borrowed from financial intermediaries to financial intermediaries and financial
markets and the manifestation of a financial crisis. When the financial system uses credit to generate credit without
connection to the real economy, households, public administrations, socially oriented organizations and firms, the
probability of a financial crisis grows approaching the value of 1. The SHV theory has offered the accounting metanarrative to strengthen the establishment of credit from financial intermediaries to financial intermediaries and financial
markets.

from relationship lending to credit scoring with a reduction of informational capital (Petersen,
2004; Diamond, 1984 and 1989; Boot and Thakor, 1994) ; v) a change in the accumulation
procedure of reputational capital from long-run multi-relationships with economic counterparts in
the community to credit rating agencies especially for SMEs (Mariano, 2012; Moro & Fink, 2013),
and vi) a change in the dynamic of perspective from a long-run perspective to shortermism4 (World
Bank, 2008) through commercial papers and short term debt (Rappaport, 2005, Diamond & Rajan
2001, 2005 and 2009).
The debate between Stakeholder and Shareholder has been reported also in banking (Freeman ,
2010; Coyne, 2011). Stakeholder oriented banks apply originate to hold credit management model
(STH-OTH) developing multiple long-run relationships with households and firms (Slovin et al.
1993, Cornell & Shapiro, 1998), performing an ethical banking governance (Wijnberg, 2010),
producing hard and soft information (Stein, 2002), endogenously evaluating the reputational
capital5 of the borrower.
On the other side we have Shareholder oriented banks applying the originate to distribute credit
management model (STV-OTD) related with credit scoring, hard information and securitization
(Rajan et al. 2008;, Efraim, & Dlugosz. 2008) and shadow banking system generating financial
instability and financial crisis ( Zamagni, 2006 and 2009). SHV-OTD due to their profit orientation
have undervalued the systemic risk related to the securitization of mortgages ( Raghuram G. Rajan,
2005; and Anil K. Kashyap, Raghuram G. Rajan, and Jeremy C. Stein, 2008).
All these modifications were justified by the SHV-OTD model offering the meta-narrative (Eiter,
1997) for these more speculative and sometimes even irrational behaviors increasing systemic
risk and producing the Great Financial crisis.

The short-term temptation is an old question in the economic debate (Hayes and Abernathy,1980; Laverty, 1996).
We can observe a change from endogenous reputational capital to exogenous reputational capital. In the first case the
reputational capital arises for the fact that organizations respect institutions in the long run and they are re-paid by their
counterparts by gains in reputational capital. In the second case reputational capital is accumulated through external
certification offered by a third subject in respect to parties that assign rankings offered to counterparts. An example of
endogenous reputational capital is offered by the relationship banking. An example of exogenous reputational capital is
offered by credit rating lending.
5

Maximizing the value of shares in the short-run (Gaspar et al., 2005) has created a new paradigm in
financial contracting based on shortermism (Rappaport, 2005) that reduced the propensity of
financial organizations to build the future through investment6.
Financial intermediaries have phased out constitutional financial institutions infringing their public
mandate to offer solution to classical market failures and have started to concentrate their effort in
the corporate value function strictly based on the actualization of SHV maximization generating a
more unstable banking model ( Shleifer & Vishny, 2010) .
The strict relationship between financial crisis and the SHV-OTD paradigm has been largely
showed in the economic literature and in the chronicles of the Great Financial Crisis (Purnanandam,
2009).
In this paper we concentrate our analysis on the relationship between stakeholder value
maximization (STV) financial intermediaries and the Great Financial Crisis of 2007-09. In
particular, we ask whether the presence of Cooperative Banks played a role in reducing the
probability of suffering the Great Financial Crisis of 2007-09.
We start our analysis from the paper of Caprio et al. (2010), where the authors investigate the
relationship among financial and banking regulation and the probability to be in crisis in 2007-09.
We focus on some of the Caprio et al.s variables introducing a variable that captures the percentage
of total assets of Cooperative Banks in the national banking system.
Our research question is related to the debate on STV vs. SHV in banking and finance. Cooperative
Banks have an STV oriented management and control and this enforces their ability to work for the
community7.

The relation between saving and investment is one of the main ideas at the foundations of macroeconomics. Indeed,
since Keynes (1936), economists have based their macroeconomic analysis on this relation defined as an identity. But
financial contracting has introduced a third element in this equation. Saving and Investment differ from the value of the
saving that is borrowed in the financial markets in non-investment assets such as securitization. This new element, that
is produced as financial innovation, breaks the identity of saving and investment and produces distortions and risks that
regulators and intermediaries are not able to tackle and that, when increasing their assets, can create a financial crisis.
7
In particular, we can refer to Cooperative Banks as Embedded STV organizations since in these organizations the STV
theory is not exogenously affirmed in their statutory mandate, and in their corporate governance model. In these case
STV theory is embedded in the constitutional mandate and functioning of Cooperative Banks. Other kinds of Banks,
such as Commercial Banks, can use corporate social responsibility codes but in this case they approach STV from a

Cooperative Banks have statutory obligations that impose a one head one vote rule for voting in
the assembly and a social mandate in the exercise of banking business.
The STV orientation of Cooperative Banks8 is juxtaposed to the SHV orientation of Investment
Banks9, Commercial Banks and Bank Holding Companies.
Our research question relates to evaluating the STV orientation in banking and finance.
The economic behavior of STV oriented financial institutions and organizations has been more
virtuous than that of SHV oriented financial institutions and organizations (Beltratti & Stulz, 2011).
In fact, embedded STV organizations are less prone to securitize, to adopt the OTD model, to
financing speculation, and asset-price-bubbles. STV banking and finance focuses on relationship
banking, and OTH enforcing the relationship with communities (Groeveneld & Vries, 2009). STV
oriented financial organizations develop a more sustainable model (Coco & Ferri, 2010). Due to this
theoretical base we have investigated whether more STV oriented countries from the point of
view of their financial constitution were less prone to the Great Financial Crisis (Allen & Gale,
2000).
The Great Financial Crisis at an operational level has been created by the OTD model,
securitization and the strengthening of the finance-credit nexus through the hegemony of the SHV
theory. This hegemony has been implemented by Commercial Banks, Investment Banks, Bank
Holding Companies, while Cooperative Banks generally have a differentiated corporate governance
model based on OTH, relationship banking and more socially oriented business. We have shown
that the more the banking system was STV oriented in the period 1998-2006 the lower was the
probability to suffer the Great Financial Crisis of 2007-09. This seems to show that the banking
SHV orientation. In this case STV maximization is not embedded in the institutional building of financial organization
but its just a tool in a SHV based financial organization.
8
We have used Cooperative Banks as a proxy for all the STV oriented banking and financial institutions and
organizations. During the years the number of STV oriented institutions and organizations in banking and finance has
been increasing. We must consider not only Cooperative Banks but also Savings Banks, Government Banks, and Microfinance and Micro-credit organizations, and never forget to mention the economic organizations devoted to the
reduction of financial exclusion.
9
We know that many of these banks have the skills to pursue socially oriented objectives. Some of them have adopted
rules based on corporate social responsibility and ethical codes devoted to humanitarian ends. But this kind of
normative legislation, as a simple fact, is not sufficient to code these banks as STV oriented. Economists, managerial
scientists and business ethicists address the nexus between corporate social responsibility and STV management.

model of Cooperative Banks is sustainable and actively participates to financial stability (OHara,
1981; Esty, 1997; Fraser & Zardkoohi, 1996).
We have used data based on the paper of Caprio et al. (2010) and data from Bankscope for the total
assets of Cooperative Banks, Commercial Banks, Investment Banks, Bank Holding and Savings
Banks from 1998 to 2006.
The paper is divided as follows. In the second section we present a brief literature review where we
tackle the question of the importance of cooperation in economic games, in which we connect
cooperation with managerial models in banking and finance stressing the macro financial influence
of the banking governance. In the third section we focus on methodology illustrating the strategy
that we have taken to model the econometric technique that we have implemented. Here, we also
illustrate the database and show the results obtained. The fourth section contains our conclusions.

2. LITERATURE REVIEW

In this section we present a brief literature review relative to the topics directly connected with our
research question: the relation between Cooperative Banks and Financial Crisis as a case in the STV
vs. SHV debate. While the Great Financial Crisis has been created by the hegemony of SHV
financial organizations, Cooperative Banks are considered to be a proxy of STV oriented financial
organizations (Freeman, 1984). The first thing to recall is the fundamental importance of
cooperation in economics. In particular, economists such as North have developed a theory of
institutional building based on cooperative behavior. In Norths theory cooperative behavior is a
tool to solve market failures produced by asymmetric information and shortermism. In the theory of
North cooperative behavior has the ability to impede free riding and by this way to develop a
mechanism to build the common good of confidence. Cooperative behavior has the ability to solve
market failures and, at the same time, to develop institutions based on long-run perspective.

The efficiency of cooperation has been showed in the repeated game theory both theoretically and
empirically (Axelrod, 1984; 1986; 1987; 1997). The use of cooperation10 in banking and finance
has important effects on financial stability (Beck et al., 2009). The transformation of individual
risks into systemic risk is more difficult in the case of cooperative banks in which their statute and
economic organization strictly connect to their social mandate (Fonteyne, 2007). In this sense we
have referred to cooperative banks as embedded STV governance11 organizations.
Defining the Cooperative Banks Governance as Embedded Stakeholder Governance, gives us the
possibility to consider the connections between Cooperative Banks and Financial Crisis interlinking
the theory of economic cooperation, the economics of banking and finance, and the governance
modeling in managerial science.
STV banks suffered less the Great Financial Crisis. In particular, some studies show that
cooperative banks may develop a more sustainable lending model (Coco & Ferri, 2010).
Cooperative banks12 have a model of ownership that is egalitarian based on one head one vote
(ICA, 1995; European Commission, 2001). At the same time they have the ability to develop more
socially oriented business (EACB, 2004). Their legal statutory mandate, their ethical codes and the
STV oriented governance produce positive effect on economic development, economic growth,
reducing financial exclusion13, improving the value of entrepreneurial human capital with long run
banking relationships and horizons (Rajan, 1994), and being active part of the soft power locally

10

We know that we cooperative banks are only one kind of economic organizations working on the side of cooperative
behavior in banking and finance. Other organizations can implement cooperative behavior even if they are not
cooperative in their statutory mandate.
11
We have developed the definition of Embedded STV Governance from the definition of embedded liberalism that
we have discovered occasionally and fortunately (Ruggie, 1982). In effect as in the definition of embedded liberalism
we have considered what are the institutions and the organization for which STV theory is not an approach, or an ends,
or an orientation, but it is a constitutional mandate inspiring the exercise of governance. In this sense we can distinguish
Embedded STV Governance from Governance STV Oriented where STV is an approach that can be affirmed in the
SHV organizations.
12
We can accept the proposition of Nobel Prize Yunus (Yunus, 2010) in which he considers the possibility that
cooperative banks can be under a free riding attack. In the sense that it is possible that people in cooperative banks
realize unethical oriented behavior de facto misapplying the constitutional mandate of cooperative banks. But this case
is strongly related with the corruption of the social environment that depreciates the value of human capital. In this case
we have free riding oriented cooperative banks in which the statutory mandate of cooperative banks can be perverted.
13
The reduction of financial exclusion is one of the pillars in the ethical foundation of cooperative banks recalling to
our mind the Latin adage Homo sine pecunia est imago mortis. The goal of reducing financial exclusion is pursued
especially due to Cooperative Banks local ethos (De Bruyn & Ferri, 2005).

defined in exercising governance (Brazda & Schediwy, 2001). Cooperative Banks become active
part of economic change. Cooperative banks, as mutual banks are less prone to take risk (Chaddad
& Cook, 2004; Gurtner, Jaeger & Ory, 2002; Fama & Jensen, 1983, Cannari & Signorini, 1997).
The embedded STV governance of Cooperative Banks affects positively the common goods of
financial stability (Cihk & Hesse, 2007), and economic development and growth even at a local
level (Cosci & Mattesini, 1997; Usai & Vannini, 2005). Cooperative Banks produce financial
sustainability. This ability of Cooperative Banks to produce financial stability is showed both
theoretically and empirically. Theoretically it has been showed that cooperation has the ability to
solve market failures and this per se produces economic equilibrium overcoming the
microeconomic foundation of market failures caused by asymmetric information (Hansmann,
1996). Empirically, it has been demonstrated that Cooperative Banks are less prone to take risks, are
characterized by long-term horizon. Cooperative Banks have the ability to collect both explicit and
implicit information. In particular, on the theoretical point of view Cooperative Banks have the
possibility to solve the agency problem through the collection of explicit and implicit information
building confidence (Kay, 2006). Cooperative Banks have the economic and constitutional mandate
that cast them economically and socially in the role of producing economic sustainability as well as
participating actively to the financial stability building (Ayadi et al., 2010).
Another important implication of the STV oriented banking and financial organizations is
implementing the OTH model in credit management. Originate to hold is a model of credit
management that is based on the practices to generate credit, holding it until maturity. Credit
holding and relationship banking are strictly related. But in the mutation of financial globalization
during the late 1990s and the early years of the new decade OTH has been substituted by OTD
through securitization. The passage from OTH to OTD has been a passage from monitoring based
on implicit information to monitoring based on explicit information collected by credit scoring. This
passage from OTH to OTD has been justified in the interest of SHV maximization. The hegemony
of SHV maximization theory has offered the meta-narrative for the exercising of a financial market

oriented banking governance that through securitizations, financial innovations and risks sharing
has produced the Great Financial Crisis. Many economists and policy makers are calling for a return
to more traditional banking (De Grauwe, 2008; Group of Thirty, 2009; de Laroisire, 2009).
The change from OTH to OTD has created a multiplication of un-hedged risks and the
libertarization14 of financial markets based on non-regulated financial markets has generated the
worst financial Crisis since that of 1929.
Particularly, we can say that the Great Financial Crisis has been aggravated by an approach in
which the traditional relationship banking model based on OTH has been discontinued. On the
contrary, embedded STV Governance in Cooperative Banks produces administrative methodologies
based on relationship banking (Kay, 1991). Relationship banking is the traditional way of doing
banking that is a long track in the history of capitalism15.
Cooperative Banks generally apply relationship banking. Relationship banking is a model in which
banks hold long-run relationships with firms, households, and constituencies. These long-run
relationships put the bank in the position to have more information about the borrower (Ghatak,
2000). Having more information is a strategy to reduce the risk generating long-run relationships
that reinforce the role of the bank in the community and gives confidence to the community. The
relationship banking model has the ability to develop relational capital, confidence and, by this way,
it is a model to produce common immaterial goods that can sustain economic growth (Alexopoulos
and Goglio, 2012).

14

In this case we want to distinguish between liberalization and libertarization. In classical liberalism (e.g. Smith, Mills)
there is the idea that markets should have some public control exercising a defense to small enterprises operating to
solve market failures, while in classical libertarianism the idea of the State as an active economic subject removing
market failures conditions is completely absent.
15
Indeed, we can say that the economics of banking, insurance and financial services is pre-capitalist. In particular, the
history of banking shows us that relationship banking is the rule in the development of financial economics during the
ages. The positive effect of relationship banking on the efficiency of banks is showed in the reduction of the cost of
factoring, in reducing the risk of failures of counterparts, and in reinforcing the stability of the bank and the presence of
the bank in the community. So we can say that relationship banking is the classical model of banking exercising
positive effects in management, in the promotion of the banking business and in the social acceptance and reputation of
the banks as economic organizations.

3. METHODOLOGY
To estimate whether the increasing importance of Cooperative Banks total assets did affect the
probability to suffer the Great Financial Crisis, we have used a probit model putting the value of 0
when the country was not in crisis in 2007-09 and a value of 1 otherwise. We have data on 83
countries in their mean value from 1998 to 2006. Our model is based on a cross section analysis.
We have collected these data by using the database of Caprio et al. (2010), that of La Porta et al.
(1998) and adding new information drawn from Bankscope.
In our cross country analysis we have taken into consideration the mean value of each independent
variable form 1998 to 2006. This could be criticized in the sense that mean values are unable to
capture the dynamics of the change of each variable. If this kind of critique can in a certain sense
produce a sort the skepticism on the methodology used in this paper we can say, on the other side,
that the representative characteristics of the mean as statistical entity are perfectly working. This
lets us infer about some generality of our proposition. Indeed, if we lose some information about the
dynamics of the financial phenomena, on the other side we have the ability to produce a more
general rule due to the statistical properties of the mean value. In particular, taking the mean over an
extended nine-year period reduces the extent of errors in measurement of the exogenous variables.
Although our analysis is based on the paper of Caprio et al. (2010), we have used different variables
from that paper. In line with the model of Caprio et al. (2010) our dependent variable (Table 1) is:
CRISIS = dummy equal to 1 if the country is classified as either borderline crisis or systemic crisis
by Laeven and Valencia (2010) and 0 otherwise. The average value of this variable is 0.23
with a standard deviation of 0.42.
We employ a wide set of independent variables (Table 2) to take into account the various
characteristics of the national financial systems, such as, for example, the banking efficiency,

stability, profitability, the market structure and the regulation16. In particular, we use the following
banking indicators:
CONCENTRATION = annual mean of the asset value of the three largest banks as a share of assets
of all banks, from 1998 to 2006 (source: Beck et al., 2000). The average of this variable is
67.4% with a standard deviation of 18.9%.
CREDIT/DEPOSIT = annual mean of the ratio of loans to deposits from 1998 to 2006 (source: Beck
et al., 2000)17. While a high loan/deposit ratio indicates high intermediation efficiency, a
ratio significantly above one also suggests that private sector lending is funded with nondeposit sources, which could result in funding instability (see Beck et al., 2000; Merrouche
and Nier, 2010)18. The average of credit deposit ratio is 102.2%, with a standard deviation
of 38.6%.
ROA = annual mean of return on assets (net income to total assets) from 1998 to 2006 (source: Beck
et al., 2000). The average ROA is 1% with a standard deviation of 1.1%.
RESTRICTION = mean value of the Overall Restrictions index reported in the three surveys by
Barth et al. (2004). This index measures the degree to which banks face regulatory
restrictions on their activities in: (a) securities markets, (b) insurance, (c) real-estate, and
(d) owning shares in non-financial firms. The index can take values from 0 to 4 for each of
these four sub-categories, where 4 indicates the most restrictive regulations on this subcategory of bank business. Thus, the index of overall restrictions can potentially range
from 0 to 16. Its average value is 7.4 with a standard deviation of 1.7.

16

Our database provides aggregate (that is country-level) information on all countrys banks and not just on larger
banks.
17
This variable only includes customer deposits and does not include interbank deposits.
18
The ratio of credit to deposit measures how much non-deposit funding is used to increase domestic credit. These
alternative sources of funding include short-term debt (e.g. commercial paper and asset-backed commercial paper) and
long-term debt (e.g. bonds). Though desirable, a breakdown of funding into short-term and long-term instruments is not
available even from International Monetary Fund, such as International Financial Statistics, or from international banklevel databases, such as Bankscope (see Huang & Ratnovski, 2009).

BANK Z-SCORE = annual mean of bank z-score from 1998 to 2006 (source: Beck et al., 2000).
The z-score is the ratio of return on assets plus capital-asset-ratio to the 5-years standard
deviation of return on assets. A higher z-score indicates that the bank is more stable,
therefore, this index can be seen as the inverse of the probability of insolvency. Its average
is 11.3 with a standard deviation of 6.6.
CAPITAL = mean value of the Capital Regulation index reported in the three surveys by Barth et
al. (2004). This index includes information on (1) the extent of regulatory requirements
regarding the amount of capital banks must hold and (2) the stringency of regulations on
the extent to which the source of funds that count as regulatory capital can include assets
other than cash or government securities, borrowed funds, and on whether the
regulatory/supervisory authorities verify the sources of capital. Large values indicate more
stringent capital regulations. The index can be considered as a proxy of Basel Pillar 1. The
average value of CAPITAL REGULATION is 6.2 with a standard deviation of 1.5.
SUPERVISION = mean value of the Official Supervisory index reported in the three surveys by
Barth et al. (2004). This index measures the degree to which the countrys commercial
bank supervisory agency has the authority to take specific actions. It is determined by the
information provided on the following features of official supervision: (1) does the
supervisory agency have the right to meet with external auditors about banks? (2) are
auditors required to communicate directly to the supervisory agency about elicit activities,
fraud, or insider abuse? (3) can supervisors take legal action against external auditors for
negligence? (4) can the supervisory authority force a bank to change its internal
organizational structure? (5) are off-balance sheet items disclosed to supervisors? (6) can
the supervisory agency order the bank's directors or management to constitute provisions to
cover actual or potential losses? (7) can the supervisory agency suspend the directors'
decision to distribute: a) dividends? b) bonuses? c) management fees? (8) can the

supervisory agency supersede the rights of bank shareholders-and declare a bank

insolvent? (9) can the supervisory agency suspend some or all ownership rights? (10) can
the supervisory agency: a) supersede shareholder rights? b) remove and replace
management? c) remove and replace directors? The official supervisory index has a
minimum value of 0 and a maximum value of 14, where larger numbers indicate a greater
power. It can be seen as a measure of Basel Pillar 2. The average value of this index is 10.9
with a standard deviation of 2.3.
INT_DEBT_ISS_GROSS_GDP = annual mean of the gross flow of international bond issues as
percentage of GDP, from 1998 to 2006 (source: Beck et al., 2000). This variable measures
the degree to which a countrys financial system is interlinked with international financial
markets. Its average value is 21.9% with a standard deviation of 25.8%.
We augmented this model with a new variable named COOPERATIVE_BANKS defined as:
COOPERATIVE_BANKS = percentage annual mean of total assets of Cooperative Banks on the
sum of total assets of Cooperative Banks, Commercial Banks, Investment Banks, Bank
Holding Companies, Investment Banks. The mean of this variable is 0.1636 with a
standard deviation of 0.1633.
So our model (Table 3 reports pairwise correlations; Table 4 shows descriptive statistics of the
variables) is defined in this way:
Pr(CRISISi)= + 1COOPERATIVE_BANKS i+ 2 CONCENTRATIONi + 3 CREDIT/DEPOSITi
+ 4 ROAi + 5 RESTRICTIONi + 5 PRIVATE MONITORINGi + 5 BANK Z-SCOREi + 6
SUPERVISIONi + INT_DEBT_ISS_GROSS_GDP i + i,

3.1 DATA AND THEORETICAL MODEL

The data have been taken from 3 sources: from the database of the paper of Caprio et al. (2010),
from the Bankscope database and from the paper of La Porta et al. (1998). In particular, we have
taken from the paper of Caprio et al. (2010) the variables related to the international financial
regulations and banking activities. We have taken this model as our reference point since it is
devoted to the analysis of the relationships among financial regulations, banking business and the
financial crisis. This model offers a sound basis for our research question relative to the evaluation
of the impact of Cooperative Banks on Financial Crisis based on both the theoretical framework as
well as on the contemporary development of the international political economy. We have taken
data from La Porta et al. (1998) relative to Legal Origin, using dummy variables for French Legal
Origin countries, German Legal Origin countries, UK Legal Origin countries and Socialist Legal
Origin countries that we have used to instrument the probit model verifying the exogeneity of the
Cooperative Banks variable. From the Bankscope Database we have taken data relative to the total
assets of Cooperative Banks, Commercial Banks, Investment Banks, Bank Holding Companies and
Saving Banks19.
Following the white rabbit of the relationship among Cooperative Banks and Financial Crisis, we
have modified the model of Caprio et al. (2010) in two ways: introducing a new variable and
dropping others. Specifically, we introduced a new original variable, i.e. Cooperative Banks that we
have computed based the Bankscope database. The other variables taken from Caprio et al. (2010)
are: Return on Assets (ROA), Bank Z-Scores, Supervision and INT_DEBT_ISS_GROSS_GDP,
measuring the annual mean of the gross flow of international bond issues as percentage of GDP. We
have done these modifications to better answer our research question. In particular, we have
dropped NET_INTEREST_MARGIN from Caprio et al. (2010) since there is in a certain sense an
effect of substitution between NET_INTEREST_MARGIN and COOPERATIVE BANKS due to
19

We know that the Bankscope database classifies different kinds of financial organizations, for example Government
Banks, Mortgage Banks, Insurance Companies and similar. But we have concentrated our attention on the traditional
banking sector putting it in relation with the Great Financial Crisis. Indeed, we have considered only private banking
organizations excluding Government Banks, and on the other side we have considered pure banking organizations
excluding for this reason Insurance Companies. We are aware that the set of private banking organizations is a subset of
the set of banking organizations while the set of banking organizations is a subset of the set of financial organizations.

the fact that Cooperative Banks have generally high level of NET_INTEREST_MARGIN in their
balance sheet as direct manifestation of the embedded STV maximization. So, for this reason, we
have considered the contemporaneous presence of these two variables as redundant. At the same
time we have introduced new variables ROA, BANK Z-SCORE, SUPERVISION and
INT_DEBT_ISS_GROSS_GDP in the original model of Caprio et al. using them to explain the
relationships between Cooperative Banks and Financial Crisis through variables explain banking
returns and financial regulation on 83 countries.

Pr(CRISISi)= + 1 COOPERATIVE_BANKS i + 2 CREDIT/DEPOSIT i + 3

CONCENTRATIONi + 4 RESTRICTIONi + 5 PRIVATE MONITORINGi + 5 ROAi + 5 BANK
Z-SCORE i + 6 SUPERVISIONi + INT_DEBT_ISS_GROSS_GDP i + i,

Our theoretical model has the right variables developed in the economics of banking for the
evaluation of the banking performance and we have the ability to test it econometrically thanks to
the data collected we have the possibility to test it econometrically.

3.2 RESULTS
We have found a statistical significance of the importance of Cooperative Banks in being negatively
associated with the Financial Crisis of 2007-09.
To address the problem of exogeneity, we use the instrumental variable probit, instrumenting for the
legal origins of the country. Performing the Wald test of exogeneity we have found that the variable
of our interest was not endogenous (Table 7). We have than checked for the marginal effects
quantifying the marginal derivative of the variables and we have confirmed the importance of the
size of the negative association between cooperative banks and the probability of financial crisis.
We have obtained equations that can explain in a dynamic context how the change in the percentage

of Cooperative Banks total assets share can change the probability to suffer the Great Financial
Crisis of 2007-09.
Now we can consider the single regressors in this equation.
The regressor COOPERATIVE BANKS is negatively associated with the dependent variable
CRISIS. The regressor COOPERATIVE BANKS has a coefficient closed to 4.5, with a p-value
equal to 0.018 (Table 5). Marginal effects show a negative relation between the variable
COOPERATIVE and the CRISIS (Table 6). This leads us to affirm that the presence of Cooperative
Banks reduced the probability to suffer for the Great Financial Crisis.
Our analysis shows that there is also a negative relation between the regressor BANK
CONCENTRATION and the dependent variable CRISIS. The BANK CONCENTRATION has a
coefficient value equal to 3 and a p-value of 0.089 (Table 5) that becomes 0.052 checking for the
marginal effects (Table 6).
The value of the CREDIT DEPOSIT RATIO regressor is positively associated with the independent
variable CRISIS and its p-value show a statistical significance either in the probit model (0.011 as
in Table 5) or checking for the marginal effects (0.001 as in Table 6). The CREDIT DEPOSIT
RATIO measures the mean of the ratio of loans to deposits. This variable in the data has a mean of
1.022 a minimum value of .036 and a maximum value of 2.49. This means that on average national
banking systems tend to have a level of credit that overcomes that of deposits and this fact can
destabilize the economy. In particular, we can say that for 33 countries on 8320 the level of the ratio

20

The countries are: Australia (1.36), Austria (1.26), Bolivia (1.13), Burundi (1.13), Chile (1.31), Colombia (1.41),
Costa Rica (1.65), Denmark (2.48), El Salvador (1.06), Estonia (1.51), Finland (1.29), Germany (1.26), Iceland (2.49),
Ireland (1.49), Italy (1.52), Kazakhstan (1.30), Korea Rep. Of (1.29), Latvia (1.42), Malaysia (1.05), Mali (1.08),
Netherlands (1.48), New Zealand (1.37), Norway (1.46), Oman (1.25), Panama (1.13), Portugal (1.48), South Africa
(1.25), Spain (1.33), Sweden (1.92), Switzerland (1.22), Thailand (1.03), Tunisia (1.24), United Kingdom (1.26). We
can observe that even if the subprime crisis has been produced in the United States, United States doesnt figure in this
list. In effect if we look at the data we can see that the level of Credit Deposit Ratio in the USA in the period between
1998-2006 was, on average, lower than 1 and in particular equal to 0.79. This means that the banking system in the
USA was informed to the prudential principle of having a value of Credit Deposit Ratio lower than 1. This let us infer
that the financial crisis was not created in the banking system but in the non-regulated connections between banking
system and financial markets.

is greater than 1 and in two cases the value is greater than 221. We can say that the level of CREDIT
DEPOSIT RATIO when is greater than 1 can produce financial sustainability risks and this can
argue the strong and negative relation between this regressor and the dependent variable.
Our probit model shows that there is a negative relation between the RESTRICTION regressor and
the dependent variable CRISIS. This variable is statistically significant (0.008 in probit and 0.006 in
probit marginal effects as showed in Tables 5 and 6). This relation can be better explained
considering the fact that liberalization produces more competition, competition reduces profits, and
this leads banks to manage more risky portfolio increasing the risk of failure (Hellmann et al.,
2000). Banking restrictions reduce competition, lowering the propensity of banks to manage risky
portfolio bringing down the probability to suffer for the Financial Crisis.
The Z-SCORE regressor is negatively associated with the dependent variable CRISIS. Its
coefficient is small and its p value is equal to 0.045 (Table 5). The negative relation between ZSCORE and CRISIS is explained by the economic meaning of the Z-SCORE regressor, that is
representative of banking stability.
The ROA regressor is positively associated with the probability to suffer for the Great Financial
Crisis measured by the dependent variable CRISIS. This positive relation is statistically significant
with a p-value equal to 0.022 and a coefficient equal to 6.5 (Table 5). This means that an increase in
the return on asset increase the probability to be in Crisis. The reason can be related with the strong
connection between banks and financial markets. Using ROA to evaluate the banking performance
is one of the strategies that can be practiced to realize a shareholder oriented banking governance.
The CAPRIO CAPIT MEAN regressor is positively associated with the dependent variable CRISIS.
The coefficient of this variable is near to 0 and the variable has a p value equal to 0.050 (Table 5).
Marginal effects show a detriment in the statistical significance (p value = 0.057 as shown in Table

21

The value is greater than 2 for Denmark (2.48) and Iceland (2.49). Many economists have showed that the collapse of
the Icelandic banking system actively contributed to let the financial crisis going global. Icelandic banking
organizations have developed a global attitude but their ability to manage for systemic risks wasnt sufficient to secure
the Icelandic economy. The Icelandic banking system international activism was not supported by an adequate Central
Bank monetary policy leading to the crisis (Buiter & Sibert, 2008).

6). The fact that there is a positive relation between the CAPITAL restrictions and the probability of
a Financial Crisis can be explained by a qualitative approach on the basis of an efficient evaluation
of the capital restriction banking legislation.
There is a positive relation between the SUPERVISION regressor and the dependent variable
CRISIS. This means that the more a country has a system of supervision the higher the probability
to suffer for the financial crisis. We can say that this variable is statistically significant at the level
of 5% with a coefficient closed to 0 (Table 5). The negative effect of RESTRICTION and the
positive one of SUPERVISION suggest that, at least in our specification, regulatory restrictions
were particularly important to secure financial stability.
The INTERNATIONAL regressor is positively related with the probability to suffer for the Great
Financial Crisis, measured by the dependent variable CRISIS. The value of the coefficient is 6.315
and the level of the p value is equal to 0.000 (Table 5). This positive relation between the increasing
financial international interconnectedness and the probability to suffer for the Great Financial crisis
shows us that the Great Financial Crisis is global in its causation, materializing also through
contagion.
We have checked not only for Crisis but also for the Ordered Crisis and Cost of the Crisis both
variables present in the paper of Caprio et al. (2010). We have found that in both cases the negative
relation between Cooperative Banks and Financial Crisis though with different significance level
still remains (as showed in Tables 8, 9 and 10).
Firstly, the ordered probit results confirm the signs, the coefficient magnitude and the level of
statistical significance of the variables in the model as showed in Table 8. Also here, the marginal
effects show similar signs, coefficients and statistical significance of the variables as showed in
Table 9.
Finally, we have checked for the variable Cost of the Crisis measured as the cost of government
interventions to salvage banks taken as a ratio to GDP using the tobit model. In this case all the
regressors preserve their statistical relation with the independent variable, with small changes in the

coefficient magnitude, and all the variable are statistical significant at least at a level of 5%, with
the exception of CAPRIO CAPIT MEAN that has a p value equals to 0.181. This check lets us infer
about a certain kind of robustness of the econometric estimation of our theoretical model.

4 CONCLUSIONS
4.1 The importance of Cooperation for economic growth, and financial sustainability
Our results find a negative relation between Cooperative Banks presence and the occurrence of the
Financial Crisis. Our work sheds light on a part of the classical economic theory that economists
and policy makers have ignored in the libertarian post-modern age of financial globalization.
Cooperation has a positive impact on the efficiency of the economic game (North, 1990).
Various economists have shown the importance of cooperative behavior in the institutional building
process able to reduce market failures. Cooperative Banks may produce sustainability (Coco &
Ferri, 2010), enforcing an STV maximizing approach, serving communities and constituencies
(Freeman, 2010), having an egalitarian corporate governance model able to develop more socially
oriented investment. Cooperative Banks preserve a level of competitive operational efficiency with
respect to Commercial Banks (Cebenoyan et al, 1993; Valnek, 1999; Altunbas et al., 2001; Ayadi et
al., 2009). Cooperative Banks can develop the firm-bank nexus, reducing the use of securitization.
Cooperative Banks prevent local capital drain and actively promote local economic growth and
development (Hakenes & Schnabel, 2006; Hakenes, Schmidt & Xie, 2009). Cooperative Banks may
develop a more sustainable oriented banking system.

4.2 Relationship banking

An important strength of Cooperative Banks is their ability to develop relationships with firms and
customers22 (Boot, 2000; Elyasiani & Goldberg, 2004). In this sense Cooperative Banks are very

22

The relationship banking model affects directly the way in which Cooperative Banks produce value added. While in
SHV model valued added is incorporated in profits, in Cooperative Banks, as a proxy for STV banks, the value added is
incorporated in products and services offered to customers (Drake & Llwellyn, 2001). The value added process is based
on relationship and the quality of relationship affect directly the production of value added.

fundamental. Several economists in this post-crisis period argue that it is very important to preserve
relations as a basis to develop human capital and common confidence23. Some economists speak
about the capital of relationships, or, in other terms, the economics of relationships, using this
expression referring to the complex of relationships that are created among economic agents
(Zamagni, 2004). These relationships generate information, both explicit and implicit, promoting
the exchange of immaterial goods among economic agents24 (Stiglitz, 1990; Varian, 1990; Besley &
Coate, 1995). Evaluating the relational capital seems to be fundamental to solve market failures and
create confidence in the market. The nexus among human capital, relational capital and the banking
market seems to be a key for the description of macroeconomic and microeconomic phenomena.
This gives some suggestions for policy makers. Financial political economies based on relationship
banking have three effects: increase the value of human capital; increase the value of relational
capital; producing sustainability.

4.3 Heterogeneity and hegemony in the financial constitution of the economic order
The hegemony of SHV maximization has produced an age of increasing financial risks, of rising
global uncertainties and, at the end, the Great Financial Crisis. The Hegemony of the SHV
maximization is the managerial representation of a widespread post-1989 idea: the idea of the end
of history (Fukuyama, 1993), the idea of the unipolar world, the idea of the definitive victory of
capitalism. The Great Financial Crisis has showed that the idea of a unipolar world is not
sustainable, that the economic order needs heterogeneity of institutions and organizations (Kirman,
2006), and that at the end globalization can be more sustainable in the heterogeneity of economic
orders representative of ethno-anthropological differentiation. Our results show that countries with a
more heterogeneous financial constitution less likely suffered the Great Financial Crisis.
23

We can say that relational goods are able to increase the value of human capital. In effect human capital can
depreciate if it is not applied in the exercise of relational goods, since the fundamental characteristic of human capital is
that to produce a knowledge economics optimized under a relational constraint.

Heterogeneity of institutions and organizations can create the right incentives to overcome classical
distortions of information developed in modern economics, thus securing better allocations.

4.4 Law and banking: a new perspective

In the last few years we have witnessed a development in the field of law and economics, especially
law and finance (La Porta et al., 1998). We can say that the nexus between the financial system and
the banking system has been studied in depth in the last fifteen years. It is important to understand
that the banking system and the financial system are in the relation of a part to the whole, in the
sense that the banking system is completely contained inside the financial system, but at the same
time it is important that the nexus between the banking system and the financial system still remains
under regulatory control. This control is important since it seems that overly increasing the volume
of credit to the financial sector produces financial crises. For this reason it seems important to
develop a law and banking perspective inside the law and finance field in law and economics to
preserve banks from taking excessive financial risks that end up destroying saving as public good.
Within economics, the field of financial economics has been developed more than banking
economics. Financial economics includes the economics of financial institutions and organizations
and, due to the rising relative importance of the financial markets, it is possible recognize a
financial constitution of the economic order that possesses some degree of heterogeneity even in the
financial globalization. Banking economics is a subfield of financial economics but it is the
diamond of the financial constitution of the economic order. The supremacy of the banking
economics is in the pragmatic of capitalism. Economists should weigh the need to defend the
economics of banking with appropriate laws. In this effort, they should not forget the importance to
safeguard cooperative financial institutions and organizations, so to support financial stability
within sustainable economies.

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Review of Economics, September 2009, Volume 56, Issue 3, pp 315-334

TABLE 1. DEPENDENT VARIABLES

Probit Model: CRISIS
Dependent variable
ordered probit model
ORDERED CRISIS
Dependent variable tobit
model: CRISIS_COST

Dummy equal to 1 if the country is classified as either borderline crisis or systemic crisis by Laeven and Valencia
(2010) and 0 otherwise
Dummy equal to 1 is the country is classified as borderline crisis, equal to 2 if the country is classified as systemic
crisis and 0 otherwise (source: Laeven and Valencia , 2010)
Variable as provided by Laeven and Valencia (2010) that measures the cost of public support to the financial system in
term of GDP

TABLE 2. INDEPENDENT VARIABLES

COOPERATIVE BANKS

CREDIT DEPOSIT
RATIO
BANK
CONCENTRATION
PRIVATE
RESTRICTION
Z SCORE

Mean value of the percentage, from 1998 to 2006, of total assets of Cooperative Banks on the sum of total assets of
Cooperative Banks, Commercial Banks, Bank Holding, Investment Banks, Savings Banks, (source: Bankscope
Database)
Mean of the ration of loans to deposits from 1998 to 2006 (source: Beck Demigurc-Kunt and Levine, 2000)
Mean of assets of three largest banks as a share of assets of all commercial banks from 1998 to 2006 (source: Beck,
Demigurc-Kunt and Levine, 2000)
Mean value of the "overall restrictions" index reported in the three surveys (source: Barth, Caprio and Levine , 2004)
Mean value of bank z score from 1998 to 2006 (source: beck, Demigurc-Kunt and Levine , 2000)

CAPRIO CAPIT MEAN

Mean of average return on assets (net income/total equity)=, from 1998 to 2006 (source: Beck, Demigurc-Kunt and
Levine, 2000)
Mean value of the "Capital Regulation" index reported in the three surveys (source: Barth, Caprio and Levine 2004).

CAPRIO SUPER MEAN

Mean value of the "Official Supervisory" index reported in the three surveys (source: Barth, Caprio and Levine, 2004)

INTERNATIONAL

Mean of the gross of international bond issues, relative to GDP from 1998 to 2006 (source: Beck, Demigurc-Kunt and
Levine, 2000)

ROA

TABLE 3. CORRELATIONS
CRISIS

COOP

CONCE
NTRATI
ON

CREDIT
DEPOSI
T

RESTRI
CTION

BANK Z
SCORE

ROA

CAPIT
MEAN

SUPER
MEAN

CRISIS

10.000

COOPERATI
VE BANKS
BANK
CONCENTR
ATION
CREDIT
DEPOSIT
RATIO
PRIVATE
RESTRICTIO
N
BANK Z
SCORE
BANK ROA

-0.2485

10.000

0.0419

-0.3489

10.000

0.3520

-0.2228

0.2682

10.000

-0.4445

0.2687

-0.1515

-0.1273

10.000

0.0569

-0.2212

0.2321

0.1511

-0.1024

10.000

0.0813

0.1037

0.3226

-0.0132

0.0624

0.2321

10.000

CAPRIO
CAPIT MEAN
CAPRIO
SUPER
MEAN
INTERNATIO
NAL

0.1667

0.0621

0.0071

-0.0374

0.0250

-0.0815

0.0379

10.000

-0.0664

0.0799

-0.0624

-0.2512

0.2888

-0.0045

0.2572

0.1326

10.000

0.6074

-0.1951

-0.0267

0.1772

-0.5633

0.0746

0.0001

-0.0192

-0.2418

INTERN
ATIONA
L

10.000

TABLE 4. STATISTICSOF VARIABLES

Variable

Obs

Mean

Std. Dev.

Min

Max

CRISIS

83

.2289157

.4226889

COOPERATIVE BANKS

83

.1636145

.1633758

.77

BANK CONCENTRATION

83

.6739759

.1896398

.25

CREDIT DEPOSIT RATIO

83

1.022.289

.3861736

.36

2.49

CAPRIO RESTRICTION

83

7.427.831

1.741.259

3.33

12

BANK Z SCORE

81

1.125.506

6.626.298

4.2

39.17

BANK ROA

83

.0108434

.0111754

-.02

.04

CAPRIO CAPIT MEAN

83

615.253

1.492.439

10

CAPRIO SUPER MEAN

82

1.093.902

2.310.924

14.25

INTERNATIONAL

73

.2141096

.2563192

1.46

TABLE 5. PROBIT REGRESSION

PROBIT REGRESSION
Number of obs =
71
Wald chi2(9) =
39.07
Prob > chi2 = 0.0000
Pseudo R2
= 0.5981
CRISIS
COOPERATIVE BANKS
BANK CONCENTRATION
BANK CREDIT/DEPOSIT
CAPRIO RESTRICTION MEAN
BANK Z SCORE
BANK ROA
CAPRIO CAPIT MEAN
CAPRIO SUPER MEAN
INTERNATIONAL
CONSTANT

COEF.
R. STD.
-4.499.449
-2.981.543
2.042.641
-.4681251
-.0621564
6.522.032
.299565
.2725048
6.315.616
-3.537.184

ERR.
1.909.812
1.718.613
.7992698
.1774953
.0309377
2.849.678
.1525842
.1291008
1.594.051
2.190.953

Z
-2.36
-1.73
2.56
-2.64
-2.01
2.29
1.96
2.11
3.96
-1.61

P>|Z|
0.018
0.083
0.011
0.008
0.045
0.022
0.050
0.035
0.000
0.106

[95%
-.8160095
-6.349.963
.4761009
-.8160095
-.1227933
9.367.655
.0005054
.0194719
3.191.334
-7.831.372

Conf.Interval]
-7562862
.3868772
3.609.181
-.1202407
-.0015196
121.073
.5986246
.5255378
9.439.898
.757004

TABLE 6. MARGINAL EFFECTS OF PROBIT REGRESSION

Average marginal effects

Model VCE : Robust
Expression : Pr(Crisis), predict()
Number of obs =

CRISIS
COEF.
ROBUST STD. ERR.
Z
COOPERATIVE BANKS
-.5547194 .2323184
-2.39
BANK CONCENTRATION
-.3675828 .1891587
-1.94
BANK CREDIT / DEPOSIT RATIO
.2518292 .0787953
3.20
CAPRIO RESTRICTION MEAN -.0577133 .0209686
-2.75
BANK Z SCORE
-.007663 .0037097
-2.07
BANK ROA
8.040.758 3.274.127
2.46
CAPRIO CAPIT MEAN
.0369322 .0194116
1.90
CAPRIO SUPER MEAN
.0335961 .0156551
2.15
INTERNATIONAL
.7786276 .1721525
4.52

P>|Z| [95%
Conf.Interval]
0.017 -1.010.055
-.0993838
0.052
-.738327
.0031615
0.001
.0973932
.4062652
0.006 -.0988111
-.0166155
0.039 -.0149338
-.0003922
0.014 1.623.586
1.445.793
0.057 -.0011138
.0749782
0.032
.0029126
.0642795
0.000
.4412149
111.604

TABLE 7. WALD TEST OF EXOGENEITY

TEST FOR EXOGENEITY

Instruments: BANK CONCENTRATION BANK CREDIT / DEPOSIT RATIO

CAPRIO RESTRICTION MEAN
BANK Z SCORE BANK ROA CAPRIO CAPIT MEAN CAPRIO
SUPER MEAN INTERNATIONAL

Wald test of exogeneity

chi2(1) =

0.20

71

Prob > chi2 = 0.6560

TABLE 8. PROBIT REGRESSION ORDERED CRISIS

Probit regression
Number of obs = 71
Wald chi2(9) = 39.07
Prob > chi2 = 0.0000
Log pseudolikelihood = -16.157603
Pseudo R2 = 0.5981
ORDERED CRISIS

COEF.

R. STD ERROR

P>|Z|

[95%

Conf. Interval]

COOPERATIVE BANKS

-4.499.449

1.909.812

-2.36

0.018

-8.242.611

-.7562862

BANK CONCENTRATION

-2.981.543

1.718.613

-1.73

0.083

-6.349.963

.3868772

CREDIT DEPOSIT RATIO

2.042.641

.7992698

2.56

0.011

.4761009

3.609.181

CAPRIO RESTRICTION

-.4681251

.1774953

-2.64

0.008

-.8160095

-.1202407

BANK Z SCORE

-.0621564

.0309377

-2.01

0.045

-.1227933

-.0015196

BANK ROA

6.522.032

2.849.678

2.29

0.022

9.367.655

121.073

CAPRIO CAPIT MEAN

.299565

.1525842

1.96

0.050

.0005054

.5986246

CAPRIO SUPER MEAN

.2725048

.1291008

2.11

0.035

.0194719

.5255378

INTERNATIONAL

6.315.616

1.594.051

3.96

0.000

3.191.334

9.439.898

CONSTANT

-3.537.184

2.190.953

-1.61

0.106

-7.831.372

.7570046

TABLE 9. MARGINAL EFFECTS PROBIT REGRESSION ORDERED CRISIS

ORDERED CRISIS

COEF.

R. STD ERROR

P>|Z|

[95%

Conf.Interval]

COOPERATIVE BANKS

-.5547194

.2323184

-2.39

0.017

-1.010.055

-.0993838

BANK CONCENTRATION

-.3675828

.1891587

-1.94

0.052

-.738327

.0031615

CREDIT DEPOSIT RATIO

.2518292

.0787953

3.20

0.001

.0973932

.4062652

CAPRIO RESTRICTION

-.0577133

.0209686

-2.75

0.006

-.0988111

-.0166155

BANK Z SCORE

-.007663

.0037097

-2.07

0.039

-.0149338

-.0003922

BANK ROA

8.040.758

3.274.127

2.46

0.014

1.623.586

1.445.793

CAPRIO CAPIT MEAN

.0369322

.0194116

1.90

0.057

-.0011138

.0749782

CAPRIO SUPER MEAN

.0335961

.0156551

2.15

0.032

.0029126

.0642795

INTERNATIONAL

.7786276

.1721525

4.52

0.000

.4412149

111.604

TABLE 10. TOBIT REGRESSION: COST OF THE CRISIS

Tobit regression

Number of obs =
F( 9, 62) =
3.00
Prob > F
= 0.0049
Log pseudolikelihood = -54.618664
Pseudo R2
COST OF THE CRISIS
COOPERATIVE BANKS
BANK CONCENTRATION
CREDIT DEPOSIT RATION
PRIVATE RESTRICTION
BANK Z SCORE
BANK ROA
CAPRIO CAPIT MEAN
CAPRIO SUPER MEAN
INTERNATIONAL
CONSTANT

COEFF.
-1.763.494
-1.787.427
7.922.134
-2.161.206
-.2957274
3.410.505
-.5189022
104.983
1.352.704
337.836

71

ST. ERR.
8.723.967
8.785.973
2.823.569
.8758605
.1497534
1.196.681
.3832313
.3885652
4.289.816
8.106.243

0.2874
Z
-2.02
-2.03
2.81
-2.47
-1.97
2.85
-1.35
2.70
3.15
0.42

Z>|P|
0.048
0.046
0.007
0.016
0.053
0.006
0.181
0.009
0.002
0.678

[ 95%
-350.739
-3.543.718
2.277.899
-3.912.026
-.5950802
1.018.374
-1.284.971
.2730991
495.182
-1.282.579

CONF. INT. ]
-.1959737
-.3113626
1.356.637
-.4103862
.0036255
5.802.635
.2471663
1.826.561
2.210.226
1.958.251