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Credit Union Rate and Earnings Retention Decisions Under Uncertainty and Taxation

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  • Smith, Donald J

Abstract

This paper presents a model of credit union loan and deposit rate setting when net income flows are uncertain and subj ect to taxation. Optimal rates are chosen to maximize the expected va lue of a performance measure based on a comparison of the credit unio n's rates to alternative rates, subject to a probabilistic constraint on the net change in capital reserves relative to a capital adequacy standard. Taxation will alter the end-of-period trade-off between th e change in capital reserves and the immediate distribution of surplu s, and would likely affect credit unions in a nonuniform manner and p erhaps be regressive in nature. Copyright 1988 by Ohio State University Press.

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  • Smith, Donald J, 1988. "Credit Union Rate and Earnings Retention Decisions Under Uncertainty and Taxation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 20(1), pages 119-131, February.
    • Handle: RePEc:mcb:jmoncb:v:20:y:1988:i:1:p:119-31
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    Cited by:

    1. Gregory McKee & Albert Kagan, 2019. "The differential impact of the Dodd–Frank Act on niche non-metro lenders," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(4), pages 291-301, December.
    2. Ellene Kebede & Curtis Jolly, 2001. "Effects of financial structure and instruments on income of low income credit unions," Applied Financial Economics, Taylor & Francis Journals, vol. 11(2), pages 231-236.
    3. David Hillier & Allan Hodgson & Peta Stevenson-Clarke & Suntharee Lhaopadchan, 2008. "Accounting Window Dressing and Template Regulation: A Case Study of the Australian Credit Union Industry," Journal of Business Ethics, Springer, vol. 83(3), pages 579-593, December.
    4. Brown, Christine & Davis, Kevin, 2009. "Capital management in mutual financial institutions," Journal of Banking & Finance, Elsevier, vol. 33(3), pages 443-455, March.
    5. Forker, John & Ward, Anne Marie, 2012. "Prudence and financial self-regulation in credit unions in Northern Ireland," The British Accounting Review, Elsevier, vol. 44(4), pages 221-234.
    6. Geoffrey Rubin & George Overstreet & Peter Beling & Kanshukan Rajaratnam, 2013. "A dynamic theory of the credit union," Annals of Operations Research, Springer, vol. 205(1), pages 29-53, May.
    7. Kevin Davis, 1994. "Prudential Regulation and Australian Credit Unions," Australian Journal of Management, Australian School of Business, vol. 19(1), pages 31-46, June.
    8. Ivana Catturani & Ragupathy Venkatachalam, 2014. "Optimal Interest Rates in Cooperative Banks with Non-member Customers," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 181-199, June.

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