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A Theoretic Framework for the Analysis of Credit Union Decision Making
Author(s) -
SMITH DONALD J.
Publication year - 1984
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1984.tb03899.x
Subject(s) - preference , principal (computer security) , interest rate , credit union , economics , bond market , credit card interest , function (biology) , financial services , financial market , microeconomics , business , actuarial science , financial economics , credit reference , finance , credit risk , computer science , evolutionary biology , biology , operating system
This paper presents a formal theoretic framework to analyze credit union interest rates on loans and savings deposits. The unique motivational and institutional features of a credit union, in particular its structure as a financial service cooperative, are used to develop the objective function. This is based on a comparison of the credit union's rates to alternatively available market rates and includes parameters to recognize the possibility of borrower‐saver conflict. The principal result is that the optimal rates and reactions to exogenous changes depend critically on the preference of the organization toward financial gain to the borrowing and saving members.