Cooperative banks, business models and efficiency

"Our study examines the relationship between bank business models (BBMs) and the cost and profit efficiency of cooperative banks from fifteen European countries over the period 2010–2020. Using the cluster analysis method, we identify five BBMs, i.e., three retail-oriented BBMs and two market-oriented BBMs, and suggest that although cooperative banks share common characteristics and objectives, such as mutualism, localism and a stakeholder view, they pursue their goals by implementing different strategies. Moreover, we measure the cost and profit efficiency using the stochastic frontier approach (SFA), and the main results underline different levels of efficiency depending on the BBM implemented. Our results mainly suggest that more retail-oriented banks are more cost and profit efficient, while market-oriented banks are less. However, less cost- and profit-efficient banks can improve their efficiency by changing their bank business model. These results are crucial in shedding some light on the efficiency of cooperative banks and on the diversity in terms of business models observed within these specific groups of banks."