Member Rights and the Effect of Bylaws on Credit Union Banking Spreads

Canassa, Bruno José; Costa, Davi Rogério Moura; Pagliarussi, Marcelo Sanches

doi:10.15728/bbr.2023.1603.en

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Article • BBR, Braz. Bus. Rev. 22 • 2025 • https://doi.org/10.15728/bbr.2023.1603.en linkcopy

Member Rights and the Effect of Bylaws on Credit Union Banking Spreads

Authorship SCIMAGO INSTITUTIONS RANKINGS

Voting and redeeming shares are two of the legal rights that allow members to exercise control over credit unions. As such, this work will investigate whether member rights are effective disciplinary mechanisms for Brazilian credit union managers. Bylaw clauses which discourage the use of these member rights were tested to see their effects on banking spreads due to management choices. Restrictions in terms of candidacies which limit competition in elections are associated with greater spreads, suggesting that there is managerial entrenchment due to the protection they receive. Even improvements in corporate governance may not compensate for this election protection. Meanwhile, redeeming shares has proved to be inefficient as a mechanism of managerial discipline. The results suggest the importance of competition in elections and that regulatory bodies can use their influence to guarantee member rights.

KEYWORDS
Credit Unions; Control Rights; Corporate Governance; Private Benefits of Control; Regulation

	Overall	Sicoob	Cresol	Sicredi	Others	Indep.	χ² or F
Limits on Candidacies (k = 1)	57.30% (463)	71.46% (283)	15.48% (24)	79.83% (95)	58.97% (46)	25.00% (15)	193.62*** (4)
Limits on Redeeming Shares (k = 2)	29.83% (241)	20.71% (82)	38.71% (60)	18.49% (22)	58.97% (46)	51.67% (31)	74.22*** (4)
Assets (millions of R$)	309.98 (622.37)	280.63 (594.78)	58.09 (52.37)	776.95 (751.47)	399.86 (836.58)	111.35 (465.30)	85.98*** (4, 803)
Branches	5.91 (8.32)	5.34 (6.82)	2.52 (2.05)	13.54 (12.10)	6.64 (10.04)	2.32 (6.01)	55.26*** (4, 803)
Specialization (Rural Credit = 1)	18.07% (146)	3.28% (13)	75.48% (117)	0.00% -	3.85% (3)	21.67% (13)	441.05*** (4)
Membership Cost (R$)^a	30.00	95.00	20.00	20.00	100.00	100.00
Observations	808	396	155	119	78	60

	POLS (1)	OLS (2)
Limits to Candidacies (e₁)	0.007**	0.010**
	(0.003)	(0.004)
Limits to Redeeming Shares (e₂)	-0.007**	-0.001
	(0.003)	(0.004)
P2^* (risk)	-0.015	-0.003
	(0.015)	(0.023)
E1^* (financial structure)	-0.140***	-0.153***
	(0.022)	(0.037)
E3^* (financial structure)	-0.039	-0.016
	(0.024)	(0.039)
E4^* (financial structure)	0.232***	0.108
	(0.038)	(0.079)
A3^* (quality of the assets)	0.169***	-0.120
	(0.063)	(0.151)
R5^* (rate of return)	0.392***	0.512***
	(0.091)	(0.188)
R6^* (rate of return)	0.597***	0.688***
	(0.057)	(0.092)
R11^* (rate of return)	-0.106***	-0.112***
	(0.025)	(0.039)
Dummies to control for the year^a	Yes	No
Constant	0.005	-0.005
	(0.038)	(0.004)
Observations	1,838	808
R²	0.378	0.387
F Statistic	14.52***	23.09***
	(17, 1820)	(10, 797)

	POLS (3)	OLS (4)
Limits to Candidacies (e₁)	0.009***	0.013***
	(0.003)	(0.004)
Limits to Redeeming Shares (e₂)	-0.005	0.001
	(0.003)	(0.004)
Separation and Limits to Candidacies (S×e₁)	-0.022**	-0.029*
	(0.010)	(0.016)
Separation and Limits to Redeeming Shares (S×e₂)	-0.008	-0.019
	(0.007)	(0.012)
Separation of the Board of Directors from the Managers (S)	0.023**	0.034**
	(0.010)	(0.017)
P2^* (risk)	-0.013	-0.004
	(0.015)	(0.023)
E1^* (financial structure)	-0.139***	-0.153***
	(0.021)	(0.037)
E3^* (financial structure)	-0.042*	-0.019
	(0.024)	(0.039)
E4^* (financial structure)	0.229***	0.106
	(0.038)	(0.079)
A3^* (quality of the assets)	0.168***	-0.123
	(0.063)	(0.150)
R5^* (rate of return)	0.393***	0.518***
	(0.091)	(0.189)
R6^* (rate of return)	0.597***	0.686***
	(0.057)	(0.093)
R11^* (rate of return)	-0.107***	-0.113***
	(0.024)	(0.039)
Dummies to control for the year^a	Yes	No
Constant	0.002	-0.009**
	(0.039)	(0.004)
Observations	1,838	808
R²	0.381	0.393
F Statistic	12.98***	18.37***
	(20, 1817)	(13, 794)

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[TFN1] Note. Indep. indicates independent credit unions. Below the frequencies appear the quantities, below the averages are the standard deviations, and below χ² or F are the degrees of freedom. Source: The authors.

[TFN2] ^a
Medians for 779 credit unions whose membership costs were not variable under their 2016 bylaws.

[TFN3] *** p-value<0.01