THE EMPLOYMENT STRUCTURE OF COOPERATIVE BANKS – A TEST OF INSTITUTIONAL HYPOTHESES

We study the claim that, because of their institutional design, current cooperative banks differ in their employment decisions compared to other conventional banks. The success of cooperative banks in the past was grounded on efficiency advantages generated through peer‐monitoring, social sanctions, and institutional trust. Institutional economic theory and anecdotal historical evidence suggest that these core institutional mechanisms also had an effect on the employment structure of early credit cooperatives. By examining the employment structure of current cooperative banks, we aim to provide insights to the question of how and to what extent original institutional mechanisms of credit cooperatives may still be functional. We use administrative establishment data from Germany and compare employment structures of banks by legal form. The results indicate that cooperative banks in comparison with otherwise similar private and savings banks are characterized by more stable employment, an older workforce, more extensive training activities, and a more homogeneous composition of employees.