Marketing and Lego Essay Example

Marketing and Lego Essay Executive Summary Since LEGO Group’s (LEGO) inception in 1932, the world-famous toy maker overcame numerous challenging obstacles to become the leader in the building toy segment. By 2010, LEGO had witnessed all-time high annual sales of over US$3. 7 billion to become the fourth-largest toy manufacturer in the world. Upon analysis of LEGO’s strengths through Resource-Based View, LEGO holds few key competitive advantages attributed to their success: strong brand name and innovative culture. These traits are not imitable or easily substitutable. However, the competitive landscape has drastically increased in the building toy industry as analyzed with Porter’s Five Forces. Essentially, the deteriorating barriers to entry from loss of trademark protection, Disney’s acquisition of Marvel for greater control of entertainment licensing, and increased rivalry among existing firms from little product differentiation are the main drivers of high competition in the observed market. Therefore, in order to uphold the market leader position in the building toy market and ensure financial success in the years ahead, it is strongly believed that the combination of differentiation and first-mover strategy will best allow LEGO to capitalize on the opportunities available in this growing industry while mitigating the threats from the changes in the market. Although several viable alternatives are present in order to address the mentioned concerns, expanding to the adult market with specialized LEGO sets for hobby and professional purposes is the most suitable. We will write a custom essay sample on Marketing and Lego specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Marketing and Lego specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Marketing and Lego specifically for you FOR ONLY $16.38 $13.9/page Hire Writer By tapping into this huge demographic consisting of many previous LEGO users, LEGO will diversify its product lines, gain a new channel for revenue generation, protect its brand from competitors’ similar products and maintain high brand recognition from wider targets. Problem Statement The LEGO Group (LEGO) is facing new threats emerging in the toy industry from company acquisitions, intensifying competition in the building blocks segment and risk of brand dilution. Representing one of the fastest growing categories in the global toy sales of US$83. billion in 2010, building sets hold a great opportunity despite uncertainty if LEGO is to successfully develop a product expansion strategy that can maintain LEGO’s current market dominance, high brand value and achieve a financial success. Porter’s Five Forces (Appendix A) The threat of the existing toy companies expanding into the building blocks segment is fairly high due to the similar cost structure and operation requirements. LEGO’s biggest competitor MEGA Bloks proved that other companies could carve out a percentage of the building toy market. LEGO is dealing with two kinds of buyers: small retailers and larger chains. With more than two-thirds of LEGO’s revenue coming from the 200 large retailers, these buyers have fairly high bargaining power. The small stores do not have such bargaining power with LEGO considering their order sizes and revenue contribution. The bargaining power of the suppliers is assumed to be weak as the companies in this industry can freely select their suppliers. For instance, LEGO reduced 80% of its suppliers, showing the flexibility of choosing from wide range of suppliers and significant control over supply-related costs. On the other hand, the rivalry level in the industry and the building sets segment is high. The acquisition of Marvel by Disney placed a large amount of entertainment licensing under the control of Disney which indicates that licensing agreements that LEGO relies on to add values to its products will become more difficult to obtain. Lastly, the threat of substitutes for both toys and building blocks products is assumed to be high as parents will often encourage other activities for their children such as playing sports, exercising, or reading books instead of having them play inside. To conclude, it is strongly believed that the combination of differentiation and first-mover strategy will best allow LEGO to capitalize on the opportunities available in the growing industry while mitigating the threats from the changes in the market environment. SWOT Analysis (Appendix B) LEGO is a globally recognized brand with long history of producing creative and educational toys and has established significantly positive image to the consumers. Thus, LEGO can embrace its reputation and knowledge in the industry to further diversify its product offerings. LEGO has many loyal parent customers buying LEGO products for their children. It is important to understand that the consumers are not the buyers of the products. Once the active consumers of LEGO, the parents trust its products and LEGO is deeply rooted in their personal experience. However, new product lines that reflect the current popular children’s culture face the challenge of appealing to the children and answering strict demands of parents. Nonetheless, LEGO has weaknesses as well. Digital Design Program offering customized product offering with delivery can be assumed to be incurring extra costs since LEGO cannot leverage its economies of scale. LEGO’s loss of patent protection is also the weaknesses that other competitors exploit. As competitors introduce plastic brick products that are compatible with the LEGO brick designs, the consumers are misled into buying the products thinking that they are LEGO. As competition and licensing control intensify to threaten LEGO, the organization should avoid expensive/additional marketing and legal campaigns in the building blocks segment, and divert such resources to take advantage of the unexplored segments in the market. Value Chain Resource-Based View Analysis (Appendix C) While LEGO’s business activities create value and competitive advantages for the firm and its customers, they do so with varying degrees. First, among the primary activities, inbound and outbound logistics are assumed to be standard practices across the industry, contributing little towards competitive advantage. The operation systems offer LEGO a high level of competitiveness since LEGO’s corporate governance is rare and difficult for competitors to imitate. Lastly, marketing and sales strategy for LEGO are unique due to the exclusive nature of licensing agreement, its history and long-term effort of brand building. LEGO’s general and human capital management contribute to its competitive advantage by applying the expertise and knowledge accumulated over the decades, making it extremely difficult to imitate. Technology development and procurement activities at LEGO are assumed to be similar to the general and human capital management and they are relatively unique to LEGO due to its organizational culture history. In conclusion, LEGO’s management should continue creating added values in their products through the above activities, with significant focus on marketing and sales to further synergize with their strengths as indicated in SWOT analysis and operations systems, which include product designs, to expand their product lines into new market segments. Alternative 1: Expand product lines targeting girls As indicated in the SWOT analysis, the market coverage for girls in the building blocks is assumed to be fairly low at this point. LEGO can expand its product designs by obtaining the licensing agreements with entertainment companies that girls favor, as well as adopting new product designs for girls. For example, diversifying its Duplo product lines with themes, such as princesses from Disney cartoons that girls will prefer over boys, will allow LEGO to capture the potentially under-served market segment. By increasing their product lines with minimal design expansion, LEGO is effectively ‘creating’ a sub-segment within the industry and challenging other competitors, which are trying to compete in the traditional building sets segment. Essentially, LEGO is positioning itself as a segment leader once again and capturing a large portion of the end-users and customers. Nevertheless, there are several risks associated with the alternative: first is the market uncertainty. In other words, young girls may not be as interested as boys in building blocks products even with appealing themes. Therefore, thorough target segment research involving focus groups and interviews is recommended to mitigate this risk. Secondly, there is low barrier to entry in this sub category of end-users. The competitors are easily able to compete in this market segment, by designing similar products with themes that will be targeting girls instead of boys. This is possible because re-tooling of the equipment is not costly, as the machines are manufactured to be able to handle multiple designs. Lastly, the increased control over licensing agreement is another major concern: with the themes involving Disney characters, it will be very competitive to acquire licensing agreements, given the previous relationship Disney has with Mattel and Hasbro. Fortunately, this risk can be mitigated by creating themes that do not use the characters’ names or key features, thus avoiding any misjudgment or legal conflicts. Alternative 2: Expand product lines targeting adults/previous LEGO users Given LEGO’s long history of being in the toy business, it is correct to assume that the older generation, who are the parents of the children that LEGO targets, have had experience playing LEGO sets. This fact brings up two unique and strong bases for an inimitable business strategy: 1). By targeting the adults LEGO will increase the size of its potential market. Re-attracting the once loyal customers will not involve complicated new marketing strategies as they can be easily connected based on nostalgic elements. While the threat comes from commoditization of LEGO sets due to similar products being produced by LEGO’s competitors, the past user experience of playing with LEGO sets will never be able to be copied. 2). Furthermore, the distinction between children as consumers and parents as customers made it difficult for LEGO to align the interests and expectations of its two stakeholders. Product expansion into the adult market enables LEGO to focus only on the product development as adults will not necessarily look for traditional values (i. e. educational factors) that LEGO toys have. Fortunately, LEGO for adults will not be a pioneer project. Around the world, many LEGO fans have uploaded pictures of items creatively made by the fans themselves with LEGO pieces (APPENDIX D). LEGO for adults will reflect this on-going global trend and design specialized LEGO pieces for adult users. LEGO for adult users will be used for professional and hobby-related purposes. Engineers can use LEGO to design new bridges, buildings and landmarks while general hobbyists can build a new computer case, frame for pictures and small stools. While LEGO sets for children was considered a toy, LEGO for adults will be a whole new category allowing its users to create art, functional items and highly creative masterpieces to attach unique personal experience and irreplaceable values. Recommendation (Appendix D) Ultimately, it is recommended for LEGO management to undertake the second alternative, to redesign the existing LEGO pieces to be more functional and target the adults. Although other strategy is a viable option, in order to address the concern of competition from absence of patents, lack of product differentiation, and higher dependency on popular licensors, the aforementioned solution is the most suitable. By tapping into this huge demographic consisting of many previous LEGO users, LEGO will diversify its product lines, gain a new channel for revenue generation, protect its brand from competitors’ similar products and maintain high brand recognition from wider targets. LEGO building sets for adults will protect LEGO with a new patent and decades of established loyalty. The LEGO sets for adults will be sold online for two main reasons: 1). This new product line is in an unique product category that does not belong in either the traditional toy stores r the home hardware department. 2). Adults have the mean to purchase (i. e. credit cards) things sold online. Furthermore, the unclear future due to Disney’s purchase of Marvel will be neutralized with the concept of the LEGO sets for adults. While the association of popular pop culture in LEGO theme is important to appeal to children, adults will be more concerned with what they can make with the pieces. Therefore, these new LEGO pieces will be bigger, come in greater variety in shapes and allow more complicated technical flexibility and aesthetic brevity. Upon a glance, completed sets made with such pieces will fit well with other furniture and items in a typical household. LEGO can effectively leverage the current usage of LEGO sets by the professionals and hobbyists like the University of Cambridge and Nathan Sawaya to showcase how they use LEGO. Finally, it is highly likely that once the adults start purchasing and manipulating LEGO sets for their own use, they will opt to buy toys and the traditional LEGO sets from LEGO for their own children, establishing stronger and wider customer retention for many years to come. Marketing and Lego Essay Example Marketing and Lego Essay Executive Summary Since LEGO Group’s (LEGO) inception in 1932, the world-famous toy maker overcame numerous challenging obstacles to become the leader in the building toy segment. By 2010, LEGO had witnessed all-time high annual sales of over US$3. 7 billion to become the fourth-largest toy manufacturer in the world. Upon analysis of LEGO’s strengths through Resource-Based View, LEGO holds few key competitive advantages attributed to their success: strong brand name and innovative culture. These traits are not imitable or easily substitutable. However, the competitive landscape has drastically increased in the building toy industry as analyzed with Porter’s Five Forces. Essentially, the deteriorating barriers to entry from loss of trademark protection, Disney’s acquisition of Marvel for greater control of entertainment licensing, and increased rivalry among existing firms from little product differentiation are the main drivers of high competition in the observed market. Therefore, in order to uphold the market leader position in the building toy market and ensure financial success in the years ahead, it is strongly believed that the combination of differentiation and first-mover strategy will best allow LEGO to capitalize on the opportunities available in this growing industry while mitigating the threats from the changes in the market. Although several viable alternatives are present in order to address the mentioned concerns, expanding to the adult market with specialized LEGO sets for hobby and professional purposes is the most suitable. We will write a custom essay sample on Marketing and Lego specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Marketing and Lego specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Marketing and Lego specifically for you FOR ONLY $16.38 $13.9/page Hire Writer By tapping into this huge demographic consisting of many previous LEGO users, LEGO will diversify its product lines, gain a new channel for revenue generation, protect its brand from competitors’ similar products and maintain high brand recognition from wider targets. Problem Statement The LEGO Group (LEGO) is facing new threats emerging in the toy industry from company acquisitions, intensifying competition in the building blocks segment and risk of brand dilution. Representing one of the fastest growing categories in the global toy sales of US$83. billion in 2010, building sets hold a great opportunity despite uncertainty if LEGO is to successfully develop a product expansion strategy that can maintain LEGO’s current market dominance, high brand value and achieve a financial success. Porter’s Five Forces (Appendix A) The threat of the existing toy companies expanding into the building blocks segment is fairly high due to the similar cost structure and operation requirements. LEGO’s biggest competitor MEGA Bloks proved that other companies could carve out a percentage of the building toy market. LEGO is dealing with two kinds of buyers: small retailers and larger chains. With more than two-thirds of LEGO’s revenue coming from the 200 large retailers, these buyers have fairly high bargaining power. The small stores do not have such bargaining power with LEGO considering their order sizes and revenue contribution. The bargaining power of the suppliers is assumed to be weak as the companies in this industry can freely select their suppliers. For instance, LEGO reduced 80% of its suppliers, showing the flexibility of choosing from wide range of suppliers and significant control over supply-related costs. On the other hand, the rivalry level in the industry and the building sets segment is high. The acquisition of Marvel by Disney placed a large amount of entertainment licensing under the control of Disney which indicates that licensing agreements that LEGO relies on to add values to its products will become more difficult to obtain. Lastly, the threat of substitutes for both toys and building blocks products is assumed to be high as parents will often encourage other activities for their children such as playing sports, exercising, or reading books instead of having them play inside. To conclude, it is strongly believed that the combination of differentiation and first-mover strategy will best allow LEGO to capitalize on the opportunities available in the growing industry while mitigating the threats from the changes in the market environment. SWOT Analysis (Appendix B) LEGO is a globally recognized brand with long history of producing creative and educational toys and has established significantly positive image to the consumers. Thus, LEGO can embrace its reputation and knowledge in the industry to further diversify its product offerings. LEGO has many loyal parent customers buying LEGO products for their children. It is important to understand that the consumers are not the buyers of the products. Once the active consumers of LEGO, the parents trust its products and LEGO is deeply rooted in their personal experience. However, new product lines that reflect the current popular children’s culture face the challenge of appealing to the children and answering strict demands of parents. Nonetheless, LEGO has weaknesses as well. Digital Design Program offering customized product offering with delivery can be assumed to be incurring extra costs since LEGO cannot leverage its economies of scale. LEGO’s loss of patent protection is also the weaknesses that other competitors exploit. As competitors introduce plastic brick products that are compatible with the LEGO brick designs, the consumers are misled into buying the products thinking that they are LEGO. As competition and licensing control intensify to threaten LEGO, the organization should avoid expensive/additional marketing and legal campaigns in the building blocks segment, and divert such resources to take advantage of the unexplored segments in the market. Value Chain Resource-Based View Analysis (Appendix C) While LEGO’s business activities create value and competitive advantages for the firm and its customers, they do so with varying degrees. First, among the primary activities, inbound and outbound logistics are assumed to be standard practices across the industry, contributing little towards competitive advantage. The operation systems offer LEGO a high level of competitiveness since LEGO’s corporate governance is rare and difficult for competitors to imitate. Lastly, marketing and sales strategy for LEGO are unique due to the exclusive nature of licensing agreement, its history and long-term effort of brand building. LEGO’s general and human capital management contribute to its competitive advantage by applying the expertise and knowledge accumulated over the decades, making it extremely difficult to imitate. Technology development and procurement activities at LEGO are assumed to be similar to the general and human capital management and they are relatively unique to LEGO due to its organizational culture history. In conclusion, LEGO’s management should continue creating added values in their products through the above activities, with significant focus on marketing and sales to further synergize with their strengths as indicated in SWOT analysis and operations systems, which include product designs, to expand their product lines into new market segments. Alternative 1: Expand product lines targeting girls As indicated in the SWOT analysis, the market coverage for girls in the building blocks is assumed to be fairly low at this point. LEGO can expand its product designs by obtaining the licensing agreements with entertainment companies that girls favor, as well as adopting new product designs for girls. For example, diversifying its Duplo product lines with themes, such as princesses from Disney cartoons that girls will prefer over boys, will allow LEGO to capture the potentially under-served market segment. By increasing their product lines with minimal design expansion, LEGO is effectively ‘creating’ a sub-segment within the industry and challenging other competitors, which are trying to compete in the traditional building sets segment. Essentially, LEGO is positioning itself as a segment leader once again and capturing a large portion of the end-users and customers. Nevertheless, there are several risks associated with the alternative: first is the market uncertainty. In other words, young girls may not be as interested as boys in building blocks products even with appealing themes. Therefore, thorough target segment research involving focus groups and interviews is recommended to mitigate this risk. Secondly, there is low barrier to entry in this sub category of end-users. The competitors are easily able to compete in this market segment, by designing similar products with themes that will be targeting girls instead of boys. This is possible because re-tooling of the equipment is not costly, as the machines are manufactured to be able to handle multiple designs. Lastly, the increased control over licensing agreement is another major concern: with the themes involving Disney characters, it will be very competitive to acquire licensing agreements, given the previous relationship Disney has with Mattel and Hasbro. Fortunately, this risk can be mitigated by creating themes that do not use the characters’ names or key features, thus avoiding any misjudgment or legal conflicts. Alternative 2: Expand product lines targeting adults/previous LEGO users Given LEGO’s long history of being in the toy business, it is correct to assume that the older generation, who are the parents of the children that LEGO targets, have had experience playing LEGO sets. This fact brings up two unique and strong bases for an inimitable business strategy: 1). By targeting the adults LEGO will increase the size of its potential market. Re-attracting the once loyal customers will not involve complicated new marketing strategies as they can be easily connected based on nostalgic elements. While the threat comes from commoditization of LEGO sets due to similar products being produced by LEGO’s competitors, the past user experience of playing with LEGO sets will never be able to be copied. 2). Furthermore, the distinction between children as consumers and parents as customers made it difficult for LEGO to align the interests and expectations of its two stakeholders. Product expansion into the adult market enables LEGO to focus only on the product development as adults will not necessarily look for traditional values (i. e. educational factors) that LEGO toys have. Fortunately, LEGO for adults will not be a pioneer project. Around the world, many LEGO fans have uploaded pictures of items creatively made by the fans themselves with LEGO pieces (APPENDIX D). LEGO for adults will reflect this on-going global trend and design specialized LEGO pieces for adult users. LEGO for adult users will be used for professional and hobby-related purposes. Engineers can use LEGO to design new bridges, buildings and landmarks while general hobbyists can build a new computer case, frame for pictures and small stools. While LEGO sets for children was considered a toy, LEGO for adults will be a whole new category allowing its users to create art, functional items and highly creative masterpieces to attach unique personal experience and irreplaceable values. Recommendation (Appendix D) Ultimately, it is recommended for LEGO management to undertake the second alternative, to redesign the existing LEGO pieces to be more functional and target the adults. Although other strategy is a viable option, in order to address the concern of competition from absence of patents, lack of product differentiation, and higher dependency on popular licensors, the aforementioned solution is the most suitable. By tapping into this huge demographic consisting of many previous LEGO users, LEGO will diversify its product lines, gain a new channel for revenue generation, protect its brand from competitors’ similar products and maintain high brand recognition from wider targets. LEGO building sets for adults will protect LEGO with a new patent and decades of established loyalty. The LEGO sets for adults will be sold online for two main reasons: 1). This new product line is in an unique product category that does not belong in either the traditional toy stores r the home hardware department. 2). Adults have the mean to purchase (i. e. credit cards) things sold online. Furthermore, the unclear future due to Disney’s purchase of Marvel will be neutralized with the concept of the LEGO sets for adults. While the association of popular pop culture in LEGO theme is important to appeal to children, adults will be more concerned with what they can make with the pieces. Therefore, these new LEGO pieces will be bigger, come in greater variety in shapes and allow more complicated technical flexibility and aesthetic brevity. Upon a glance, completed sets made with such pieces will fit well with other furniture and items in a typical household. LEGO can effectively leverage the current usage of LEGO sets by the professionals and hobbyists like the University of Cambridge and Nathan Sawaya to showcase how they use LEGO. Finally, it is highly likely that once the adults start purchasing and manipulating LEGO sets for their own use, they will opt to buy toys and the traditional LEGO sets from LEGO for their own children, establishing stronger and wider customer retention for many years to come.

Tu Quoque (Logical Fallacy) - Definition and Examples

Tu Quoque (Logical Fallacy) s A type of ad hominem argument in which a person turns a charge back on his or her accuser: a logical fallacy. Also called the you too, the two wrongs, or the look whos talking fallacy. Pronunciation:  tu-KWO-kwayAlso known a s:  the two wrongs fallacy, the pot calling the kettle blackEtymology:  From the Latin, you too For a broader definition of tu quoque  arguments, see examples and observations below.   Examples and Observations: It is clear that a tu quoque response to an accusation can never refute the accusation. Consider the following: Wilma: You cheated on your income tax. Dont you realize thats wrong?Walter: Hey, wait a minute. You cheated on your income tax last year. Or have you forgotten about that? Walter may be correct in his counter-accusation, but that does not show that Wilmas accusation is false.(William Hughes and Jonathan Lavery, Critical Thinking, 5th ed.  Broadview, 2008) Recently, we highlighted a British journalist’s story about the underside of Dubai’s startling ascent. Some in Dubai called foul, including one writer who wants to remind Britons that their own country has a dark side. After all, what to think of a country in which one-fifth of the population lives in poverty? (Dubai’s Rebuttal, The New York Times, April 15, 2009) The tu quoque fallacy occurs when one charges another with hypocrisy or inconsistency in order to avoid taking the others position seriously. For example: Mother: You should stop smoking. Its harmful to your health.Daughter: Why should I listen to you? You started smoking when you were 16! In this example, the daughter commits the tu quoque fallacy. She dismisses her mothers argument because she believes her mother is speaking in a hypocritical manner. While the mother may indeed be inconsistent, this does not invalidate her argument.(Jacob E. Van Vleet,  Informal Logical Fallacies: A Brief Guide. University Press of America, 2011) A Broader Definition of Tu Quoque The tu quoque argument or you too argument, according to the broader account, can be described as the use of any type of argument to reply in like kind to a speakers argument. In other words, if a speaker uses a particular type of argument, say an argument from analogy, then the respondent can turn around and use that same kind of argument against the speaker, and this would be called a tu quoque argument . . .. So conceived, the tu quoque argument is quite a broad category that would include other types of argument as well as ad hominem arguments.(Douglas N. Walton,  Ad Hominem Arguments. University of Alabama Press, 1998)   The Childish Response Of all human instincts, not even the urge to say I told you so is stronger than the response called tu quoque: Look whos talking. To judge from children, it is innate (Cathy says you took her chocolate, Yes but she stole my doll), and we dont grow out of it . . .France has led calls for pressure to be put on the Burmese junta at the security council and through the EU, where foreign ministers discussed the issue yesterday. As part of the push, it has tried to enlist a recalcitrant Russia which, conscious perhaps of Chechnya, has no great wish to be seen criticizing anyone elses internal affairs. Hence a Russian ministers response that the next time there were riots in France he would refer the matter to the UN.This reply was at once childish, irrelevant, and probably very gratifying. (Geoffrey Wheatcroft, The Guardian, Oct. 16, 2007)

Utopianism and Idealism in Boy Meets Boy Assignment

Utopianism and Idealism in Boy Meets Boy - Assignment Example Does this utopian secondary school give false want to LGBTQ youthful mature people that there could one day be a world like this where everybody is so tolerating? I might contend that as opposed to imparting a false trust in junior book fans that Levithan give adolescent bookworms the reasonable depictions of what their lives could be similar to and characters that book lovers could join with instead of overstated spoofs like Infinite Darlene. The issues in the story is that social order has desires for its part and unfortunately being hetero is simply a normal standard and to go against that standard is not taken compassionate. The world is not how it is depicted in Boy Mets Boy the "perfect world" is not this present reality that Lucy exists in. Social order, and Lucy, anticipated that her will like and need young men on the grounds that that is the reason social order has let her know to do. It is terrifying to go against the standards, to go against your folks desires and the desires you had for yourself to acknowledge your emotions as typical. This accentuation on practical issues and circumstances that

Relationships between individuals were profoundly altered by the Term Paper

Relationships between individuals were profoundly altered by the experience of terror and genocide. Using Lydia Chukovskaya's - Term Paper Example Inhumane living conditions made people doubt about the future of humanity. For instance, those who managed to survive in Auschwitz admitted that people there were not humans. They were creatures who longed to survive. Some may say that distorted relationships between individuals in concentration camps should be regarded as the most horrible example of taking humanness away from humans. However, the relationships between individuals during the Great Purge in Soviet Union are the case of unprecedented eradication of basic human traits: compassion, empathy and readiness to help. Altered interpersonal relationships in Auschwitz This statement can be easily proved when comparing the two cases. In the first place, it is possible to consider the peculiarities of relationships between individuals who had to live through the horrors of concentration camps. Notably, many inmates understood that the majority of people would die in the camps and â€Å"[o]nly a minority of ingenuous and deluded souls continued to hope† (Levi 14). At the same time one of the basic biological rules can hardly be evaded. Therefore, though people in Auschwitz knew that prisoners were dying there, everyone tried to survive. From the very first seconds inmates witnessed things that could not be understood or accepted by moral or at least reasonable people. Wretched prisoners were beaten, humiliated, tortured and eventually killed. Starving and frightened to death people saw terrible scenes which could make anyone crazy, so their ideas about the world or rather perception of the world were distorted. The new world, nightmare-like reality which absorbed millions of innocent people deadened the best feeling and best human traits. Young, strong, intelligent people were turned into â€Å"squalid human specimens† who lost their strength to resist (Levi 92). Of course, many inmates tried to help each other when no one was watching as the helper could become one more victim. However, there were prisoners who could easily set up their comrades for a scrap of bread or for being left alone (without tortures). Primo Levi who survived in one of those horrible camps claimed that it was impossible to call those who lived their humans (Levi 10). Interpersonal relationships in Soviet Union during the Great Purge This was the life in prison. Prisoners had to survive and sometimes did â€Å"indecent† things. On the other hand, Soviet people who lived in late 1930s were free people (at least the leaders of the country proclaimed principles of freedom in their speeches). Nonetheless, they were not safe and they lived in constant fear. There was quite enough food and people had their homes. However, every minute something horrible could happen. For instance, Lydia Chukovskaya depicted a story of a woman (herself) who lost her son because of some uncertain accusations. The young man was a Komsomol activist, who admired the Party, but someone testified against him and he simpl y vanished. All Soviet people knew of the vanishing and were afraid to do something wrong. As far as wrongful acts are concerned it could be anything: a wrong (too bold) word, relationships with suspicious people, or even a misprint. For example, a skilled and professional typist, Natasha, was fired because she typed Ret Army, instead of Red Army (Chukovskaya 63). The meeting, where the case of Natasha was discussed, is really illustrative and it can justify that

A paper on To Forgive Design by Petroski Essay Example | Topics and Well Written Essays - 1250 words

A paper on To Forgive Design by Petroski - Essay Example The blames of these occurrences are directed to poor design. However, Henry Petroski in his writing, â€Å"To Forgive Design,† says for determining causes and correction of engineering failure, we must look beyond design. Petroski in his writing examines many of famous failures of our time from Minneapolis bridge collapse in 2007 to Gulf oil spill in 2010 (Petroski, pg. 5). These inevitable disasters show the interdependency of machines and people whose complex behavior the designers did not foresee. Petroski says even simple technology is embedded in socioeconomic and cultural constraint constraints, contradictions and complications. This work will explore the necessity to imagine failure, the causes of error in engineering and ultimately explore how failure is the best teacher. The most profound mistake engineers and designers can commit failing to imagine the possibility of failure. Having in mind that some people have failed before and as an individual failure is a real issue, makes engineers develop better designs. For instances, Petroski cites software developers who analyzed their historical developmental failures and helped them come out with better designs of their products. Petroski shows that by explaining the interconnectedness culture, technology and dangers seen to emerge from the complex then it leads to a successful path (Petroski, pg. 23). This forms a platform to encourage the engineers and designers before taking any of the construction; they need to imagine of the possible failures. This will act as an analysis opportunity for them as they determine what can be the cause of those failures. Sometimes people fail to heed to the warnings and this ends up being catastrophic. Even the strongest structure of the world with the best design can c ollapse. Therefore, when one imagines that way he explores on the possible designs that are better than the one in place. This opens up the mind of the engineers as they develop towards

Understanding Corporate social responsibility and its effects

Understanding Corporate social responsibility and its effects What is the Corporate Social Responsibility? business encompass the economic, legal ethical and discretionary expectations that society has of organisation at given point in time. [Carroll A B 1979 (497-505) a three dimensional conceptual model of corporate performance; a academy of management review]  ²societal expectation of corporate behaviour, a behaviour that is alleged by a stakeholder to be expected by society or morally required and is therefore justifiably demand of a business ². [ Whetten D.A.Rands, G. Godfrey P {2002} what are the responsibility of business to society]. To be a socially responsible corporation, a company must be more than legal and ethical person also. CSR is not always a legal necessity; increasingly it is an obligation. However a company has to be socially responsible even though it is not a legal obligation The corporate behaviour pyramid: [Aras G Crowther D (2008); The social obligation of corporation; Journal of Knowledge Globalisation1 (1), 43-59] The shareholder view: The social responsibility of a business is to make profit. (Friedman) The justification for this are: Pursuing profit will result in increase employment, generate economic growth, stimulate innovation, increase the tax take and generally raise living standards. Making profit is therefore itself a public good and is a sufficient purpose of business. Directors should be acting on behalf of shareholders. CSR too often means that directors are being charitable with other people money. Shareholders are free to use their dividends to contribute towards CSR if they wish. Business is not competent to deicide moral and ethical matters. Where is the domestic connection between what a business decides to spend money and efforts on and where that money and efforts are actually needed or wanted by society? Are CSR projects chosen simply because they are areas where directors, or their spouses, are personally interested? (ACCA study text-Business Analysis) The longer-term self-interest view: It is in the long-term economic self-interest of business to act in a reasonably responsible manner. (Drucker) Failure to do so will prompt legislation. Failure to do so will damage the business and even the industry. The public relations and enhancement of reputation arising from CSR will increase profit in the long term. CSR is therefore seen and justified as expenditure that helps to generate long term profits. (ACCA study text-Business Analysis) The stakeholder view: This view assumes that shareholders are simply one stakeholder among many, and that their interests are not necessarily paramount. There may be circumstances where shareholder interest has to be sacrificed for the greater good of other stakeholders. Quite how it is decided which stakeholders deserve generosity at any particular time is not clear. There is a danger that the stakeholders that benefit are those with most power which is not necessarily the same as the stakeholders who might deserve attention. (ACCA study text-Business Analysis) Workplace: The British Airways develop to supply a working environment that motivates, engages, supports and develops their colleagues. The intend of airline workplace is to encourage their colleagues to be committed to corporate responsibility and all colleagues onboard one destination. The airline is trying to work with new way. The airline aspiration to be the best is by safety of the people and functioning excellence with culture values. Equality and Diversity: Legislation, voluntary codes of practice and equality initiatives have resulted in some progress towards equality of treatment for minority groups at work, but there remains inescapable evidence of continuing discrimination. More recent approaches under the banner of management of diversity include the economic and business case for equality, the valuing and managing of diversity in organisations, culture change and mainstreaming of equality initiatives. (Torrington, Hall and Taylor, 2005 p.529) The British Airways is committed equal opportunity. Their policies aims to that no job applicant or employee receives less favorable treatment on the basis of their age, sex, creed, disability, full or part time status, nationality, or ethnic origin, race, religion or sexual orientation. Dignity and respect is at the hub of British airways diversity initiatives, focusing on the relationship between colleagues and customer, irrespective of their background, religion or culture. The airline ran a diversity week, holding a series of events to raise awareness of differences to help create a more positive and productive work environment. (International Air Transport Association (IATA) Airline employees 2008. City Business Library London) (http://www.iata.org/membership/airline_members_list?All=true) Employee retirement age: It is unlawful for an employer to discriminate against someone on the grounds of age, i.e. against someone of a particular age or someone in any age band. The age discrimination legislation provides for a default retirement age of 65. Compulsory retirement ages below 65 are unlawful unless objectively justified. In addition, employees have the right to request to work beyond that age. Employers have a duty to consider such requests. (www.businesslink.gov.uk) The airline make an effort to fulfill new Age Decimation Act, The airline were operating crew and pilot retire age 55 but now are 60 and in future it will be exceed to 65. Training programmes: The airline deliver 211 to 215 days of training during the year, including 4,500 training days to cabin crew to enable them to deliver the very highest level of services to our customer travelling in premium cabin and 2,248 days to ground staff. Online mandatory training course for all colleagues was introduced this year. The premium services training programme allows approximately 11,000 cabin crew to receive expert training on services and the food and beverages offered on First, Club World and Club Europe. Development programmes: Strategy of airline is to develop workplace at level which leads the business through on current challenging operating environment. High Performance Leadership (HLP) is embedding a high performance culture amongst airline leader. The leadership capabilities that are needed to lead the business were defined and communicated and individuals performance against measured during the year. The capabilities are communicating a common vision, agreeing accountabilities and motivating and inspiring other. Employee induction: The purpose of induction in organisation to settle the new employee as quickly and efficiently as possible. The airline is trying to achieve the objective of induction and have introduced a new process to ensure that this happens. Employee relation: The airline is working with total of three trade unions demonstrating colleagues across the business. The new Human Resources (HR) model has been implemented. HR business partner now focus on good people management and employee relation and are responsible for day to day industrial relation matters. In addition, 15 effective IR (Interpersonal Relation) skills workshops were provided throughout the year, with 118 delegates presence. Line manager and trade union representatives were able to come together at these workshops to focus on joint problem solving. A further 75 manager attended our new introduction to industrial relation courses. Reward: The carriers cabin crew could see their pay docked by up to  £5,000 each as part of proposals put forward by the airline to cut costs. BA wants to cap the amount its 14,000 crew members can claim in allowances for working long haul flights. The proposal is in addition to changes to working practices that BA will impose from next month (Time online 28 October 2009) The British Airways is claiming in Corporate Responsibility report 2008-2009 that the airline developing good salary structure in the organisation help to create an environment that encourages sustainable high performance. The airline developed salary structure not only that salary costs can be managed more effectively, but also that salaries are internally equitable across roles and differences in roles and differences in responsibility, skill and performance can be recognised and reward. The airline is also functioning bonus scheme using a of financial and non financial performance indicator. Since 2005 airline Employees Reward Plan (ERP) has allowed non management employees to share in the success of the business based on achievement of corporate measures and targets. However, due to unfavourable trading condition, the scheme did not manage in 2008/2009. (Source: www.britishairways.com) Marketplace: Market is human activity directed at satisfying need and wants through exchange processes (Kotler, 1986, p-6) There are two main pillars of marketplace customer and supplier. The airline is encouraging commitment to corporate responsibility and to build sustainable business. The airline is operating over 33 million customers and 2000 supplier. The airline is focusing on customer and supplier to secure the position as a global premium airline. 1-Supplier Its social responsibility for the airline to pay its supplier according to term. In reference that the airline paid their supplier on average, 91 per cent were on time in the UK for the year ended March 31, 2009.The airline aim to exceed in next year. The airlines are party to the Confederation of British Industry (CBI) code of practise on supplier payment and are dedicated to paying the supplier on agreed term. The number of days purchases in creditors at March 31, 2009 is calculated in accordance with the provision of the companies Act 1985 and was 32 days (2008: 33 days). The airline carry on to reduce the carbon footprint with the acquirer of environmentally capable aircraft (A380) and airline will have taken delivery of its first three by the end of June with a further 36 aircraft on order. Particular concern has been given to ensuring environmentally efficient and lightweight materials will be used in the construction of both. The airline also working in long term with Grundon, using their energy from waste plant to produce electricity for the National Grid 2-Customer In the market place customer are broken down into group with different ideas of what they want. The largest group is the one looking for a low-price, no frills services- but of course low prices often go hand in hand with low profits. The group who are prepared to pay for exceptional quality small, but probably more profitable as individual. The company has to decide where its own strengths lie in terms of meeting customer expectation, and then decide whether it is able to meet the needs of its chosen target group better than the competition can do it (Jim Blythe, Principle Practice of Marketing, 2005, p-178) In these different groups of customer the British airways lies in the group D, which customer are willing to pay more for exceptional quality, because the airline are operating at premium services. Premium customer also wants reliability and consistency in the services and customer also like the increased flexibility and the wider choice of movie, TV programmes, audio and interactive games. The main problem is that the airline failure to achieve the profit in the particular segment. British Airways World Cargo continues to focus on providing premium products. The airline people play a crucial role in providing the upgrade travel experience. They are committed to excellent services and are investing heavily in training customer facing colleagues. Some of customers are unhappy because the British Airways will start charging passengers up to  £60 to reserve a seat as part of the airlines plans to cut costs and increase revenues. (Time online, 25 September 2009) British Airways focuses on offering online services to retain old customers and to attract new customers. It has made several upgrades to the e-services offered on its website, www.ba.com.The online portal is helping British Airways to drive down costs and increase revenues. Almost a third of all the companys bookings are made on ba.com, with almost half of all European leisure fares sold via the UK site, as a testimony to its popularity with customers. The customers are also provided with the option to book hotels and hire cars through the website. In FY2009, the company introduced a new feature allowing customers to upgrade their booking at any time between buying a ticket and checking-in online. British Airways had launched a new service, allowing customers to check-in or access real time arrivals and departures information through their mobiles. Therefore e-services help the company to attract more customers, enabling it to generate more revenues its allows airline customer to offset the carbon emissions of their journey with all proceeds going towards UN-certified emission reduction projects. (Source: www.britishairways.com) Community welfare programmes: Philanthropy encompasses those corporate actions that are in response to societys expectation that businesses be good corporate citizens. This includes actively engaging in acts or programs to promote human welfare or goodwill. Examples of philanthropy include business contributions to local communities, building education centre and charitable donations (Carrols model, ACCA text book P1 Professional Accountant) The airline continues to promote the community which one of the stepped to build a Community Learning Centre (CLC). Around 50,000 young people and adult learners on range of education programmes since its opening in 1999.The course are run in the Community Learning Centre with partnership of the United Nation International childrens Emergency Fund (UNICEF) focus on information and communication, Technology and the environment. The airline staff including (retired 3,500 and current) donated over  £630,000 ,their chosen charities through the airline giving Scheme directly from their payroll and airline also supported Children in Need and Red Nose Day across the airline raising over  £13,000 for charities in the UK and Overseas. Preceding years BA fun run raised in excess of  £55,000 for Cancer Research UK; during 2008/09 the airline World Cargo team collected and delivers over 95 tonnes of high quality gift, donated by employees from across the airline. The airline working with partnership United Nation International childrens Emergency Fund (UNICEF) has raised over  £26 million since in 1994 and has changed the lives of helpless children across the world. The a (Source: www.britishairways.com) Environment programmes British Airways impact on the environment involves the following: Climate Change The Climate Change Programme is CSR because it is about taking actions to reduce its impact on the environment. Climate change is a growing threat to the environment and to societies everywhere. British Airways actions on climate change go beyond compliance, demonstrating that it is taking voluntary actions to reduce its contribution to carbon emissions and better understand its impact on climate change. The British Airways climate change programme is focused on the following main areas: 1-Long term CO2 target: The airline develop long term plan to reduce CO2 by require the improvements in operational efficiency, investments in new aircraft technology, development of sustainable aviation fuels and investments in low emission technology in other sector of the economy through carbon trading. This trading is illustrates in figure below 2-EU and UK Emission Trading System (EU ETS): Airline will be fully sheltered by the EUs Emission Trading System from January 2012.The British Airways emission target has been set at 97 per cent of average annual emission in the reference period from 2004 to 2006. From 2013 the target is tightened to 95 per cent. British Airways set a target of total reductions in annual emissions of 125,000 tonnes of CO2, to be achieved over the five years 2002-2006. In 2004 the company agreed with the UK government to increase the voluntary target. 3-Carbon Efficiency: The airline is continuous try to reduce carbon by removing unwanted items from the aircraft to reduce the fuel burn, by developing light weight aircraft and modifications and simple changes such as the IFE spares pack removal, modifications to the World Traveller seats and the removal of the air stairs on 737 aircraft have already generated savings in excess of 6,500 tonnes of CO2. Carbon efficiency shows in following from 2006 to 2008. Airline is also developing procedure for the aircraft to taxi-out to the runway with an engine shout down wherever possible. This reduces fuel burn, CO2 and NOx emission. As comparison with Virgin Atlantic airline, on 24 February 2008 its become the first airline in the world to operate a commercial aircraft on bio fuel blend. The Boeing 747 flew a short flight from London to Amsterdam, using a 20% bio fuel and 80% kerosene blend in one of its four engines. Carbon Footprint: The airline is using the Greenhouse Gas Protocol corporate standard to measure the carbon footprint. The GHG (Greenhouse Gas) Protocol Corporate Standard provides standard and guidance for companies and other organizations preparing a GHG emissions inventory. It covers the accounting and reporting of the six greenhouse gases covered by the Kyoto Protocol- carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydro fluorocarbons (HFCs), per fluorocarbons (PFCs), and sulphur hexafluoride (SF6) (http://www.ghgprotocol.org/standards/corporate-standard) The below graphs represent how the airline manage its carbon footprint year by year. Global ground emission footprint: The airline global ground operation generated a footprint of 164,535 tonnes of carbon dioxide emissions, arising from our building, vehicles and ground equipment. Global ground emission footprint (tonnes of CO2) (Source: www.britishairways.com) British Airways producing 8% (1,626,262/ 20,670,517) CO2 emission of the total airlines. Virgin Atlantic Airways producing 1.8% (372,552/20,670,517) CO2 emissions of the total airlines in world. C02 emission by sector aviation is second highest CO2 emission producing in the world and most one energy industries. 5-Noise and Air Quality: Quota count is a system used by Londons Heathrow, Gatwick, and Stansted airports to limit the amount of noise generated by night-time aircraft movements Noise restrictions for a plane during take-off: 94 decibels (Maximum level) during the day. (Add times) 7am 11pm 89 decibels (Maximum level) in the shoulder period. (Add times) 6am -7am and 11pm to 11.30pm 87 decibels (Maximum level) at night. (Add times) 11.30pm to 6am These limits set by the Department of Transport (DfT) apply at 6.5km from the start of the roll, i.e. the point on the runway where the plane starts to move in order to take off. Planes that break the noise limits on departure at specific locations are fined by BAA:  £500 for the first 3 decibels over the limit and  £1,000 above that. (Source: BAA website 2008) EPNdB over 101.9 = 16 Quota Count EPNdB 99 101.9 = 8 Quota Count EPNdB 96 98.9 = 4 Quota Count EPNdB 93 95-9 = 2 Quota Count EPNdB 90 92.9 = 1 Quota Count EPNdB less than 90= 0.5 Quota Count EPNdB less than 87 is exempt =0 Quota Count (^ National Air Traffic Services (2007-02-02) (PDF). London Heathrow, London Gatwick and London Stansted Airports Noise Restrictions Notice 2007. http://www.boeing.com/commercial/noise/notamfeb2007.pdf. Retrieved 2007-10-28) The airline noise energy has remained the same over the last three years regardless of an increase in the use of our aircraft fleet. The airline continuous achieved noise level of Department of Transport (DFT) which is Quota Count 0.5(EPNdb90-87=0.5 Quota Count) and also the airline has objective is to reduce the average noise per flight by 15 per cent by 2015. Airline already achieved a reduction in NOx emission through the adaption of Boeing 747 (RB211) engines and Boeing 777 (GE90) engines. Its plan to further modify Boeing 737 engines delivering a 20 per cent reduction in NOx. For all routines take off airline use reduced take off thrust which significantly reduce NOx emission. 7-Waste: Currently the airline is developing the procedure to recycling paper, cardboard, plastics, pallets, carpets, batteries, drinks cans and have removed general waste bins in many office areas to encourage recycling and with transporting components, the airlinehave reduced or replaced non recyclable packaging material with recyclable material. A paper crusher is used to produce packaging, which is used to protect aircraft components during transportation. In 2007 airline recycled 35% of its waste at Heathrow and Gatwick (up from 30% last year). (Source: www.britishairways.com) Airline target is the recycling 50% of its waste by 2010 and the amount of annual waste managed through its contracts at Heathrow and Gatwick disposed to landfill reduced by 7.2% from 3,688 tonnes to 3,424 tonnes. At Virgin Atlantic also aim to achieve the recycle or reuse level 50% by 2012. To do this airline are choosing more items that are reusable recyclable or biodegradable and sourcing that use fewer materials. Business ethics What is ethics? Ethics is the set of rule prescribing what is good or evil, or what is right or wrong for people. What is business ethics? Business ethics means honesty, confidence, respect and fair acting in all circumstance. However, such values as honesty, respect and confidence are rather general concepts without definite boundaries. Ethics can also be define as overall fundamental principle and practices for improving the level of wellbeing of humanity. [David Crowther Guler Aras 2008 corporate social responsibility,p54] Ethical stances: The extent to which an organization will exceed its minimum obligations to stakeholder (Johnson, Scholes and Whittington) British Airways is committed to the highest standard of corporate behaviour from its Directors and employees. British Airways requires its entire people to perform their duties with efficiency and diligence and to always behave to customers and other people alike with courtesy and decorum. British Airways procurement process has strong controls to ensure that any dealings are open and transparent, avoids any suspicion of conflicts of interest, misuse of information and opportunity, confidentiality, fair dealing with customer and suppliers, proper use of company asset, compliance with laws and regulation. Conflict of Interest: A conflict of interest occurs when an individuals private interest interferes or appears to interfere with the interest of the airline. As a matter of airline policy, employees must not leave conflict of interest unresolved unless approved by airline. In particular employees must never use or attempt to use their position at the airline to obtain any improper personal benefit for themselves, for their families, or for any person. Confidentiality: The airline has strict policy that all employees to maintain the confidentiality information about the airline, its customer, suppliers, or joint venture parties. Employees must maintain the confidentiality of all information so entrusted to them, except when disclosure is authorised or legally mandated. Confidential or proprietary information of our Company, and of other companies, includes any non-public information that would be harmful to the relevant company or useful or helpful to competitors if disclosed. Fair Dealing: The airline does not seek competitive advantages through illegal or unethical business practices. Each employee should endeavour to deal fairly with the companys customers, service providers, suppliers, competitors and employees. No employee should take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misrepresentation of material facts, or any unfair dealing practice. Protection and Proper Use of Company Assets: All employees should protect the airline assets and ensure their efficient use. All airline assets should be used only for legitimate business purposes. (source:www.bashares.com/phoenix.zhtml?c=69499p=irol-govconduct) Benefit of become good citizen The British Airways can obtain great number of benefit by fulfill the corporate social responsibility policies to the entire stakeholder, including the enhanced airline image (this in itself can lead to increase sales), health and safety benefit, ease of attracting investments and lowered cost of such investments, better community relationship (this can lead to easier and quicker approval of plans through the planning process), improved relationship with regulator, improved morale among workers (leading to higher productivity, lower staff turnover and consequently lower recruitment and training cost), general improved and relationship with customer. In particularly which include; 2009 2008 Goodwill  £m 4  £m 4 No of employees 42098 42121 Passenger revenue  £m 7836  £m 7600 [www.bashares.com/phoenix.zhtml?c=69499p=irol-reportsannual] Impact on key stakeholder What is a stakeholder? Any group or individual who can affect or is affected by the achievement of the organisation objective [ACCA course book P1 Professional Accountants] The classification of stakeholder There are two main way to classify the stakeholder, Internal v external: Internal stakeholder are those include within organisation such as employees, manager and director etc and where as external stakeholder are such group customer or suppliers who are generally not be of part of the organisation. Voluntary v involuntary: Voluntary those who have choice to engages with the organisation (employees, most customer, suppliers and shareholder) and involuntary those who have not choice to engages with organisation (local communities, neighbours, the nature world, future generation). [David Crowther Guler Aras 2008 (p30) corporate social responsibility] The corporate and social responsibility policies of British Airways greatly affect the stakeholders. The stakeholders of British Airways are the key customers, shareholders, employees, trade unions, lenders, Central Government, media, local community, pressure groups, local government and individual householders. I used Mendelowss Matrix for mapping the impact British Airways corporate and social responsibility policies on the stakeholders listed above. High Power Low Key Players E.g. key customer, active major shareholders, trade unions, employees, secured lenders. Involve Keep Informed E.g. Local Government, pressure groups, local media, local community, individual shareholders, individual customers. Consult / Inform Keep Satisfied E.g. Central Government, passive major shareholders, national media. Consider impact of action / inform Minimal Effort E.g. Individual shareholders living nearby. Ignore High Interest Low (ACCA study text-P1 Professional Accountants) Key Players: Key players are those stakeholders who have high interest and have high powers. The organisations strategy must be acceptable to them. Many business customers fly the same route on a regular basis. They want BA to do well so they can continue to use their service. Due to excellence of Terminal 5 the customer recommendations increase 61% to 65% But the shareholder little worried about the company performance because last two years the company was in loss. Keep Satisfied: Keep satisfied are those stakeholders who have low interest and high power to influence the policies of the company. The British Airways behaving these stakeholders are very well because the airline fulfill the requirements, like government and local community need good environment and less carbon emission which the airline successful are reducing carbon by 50% at end of 2050 years. Keep Informed: This group has high interest and low powers in company, but this group can be move to key player Colum. The British Airways ensure before every investment that laws and policy is full fill. Minimal Effort: This group has low power and low interest in the company. As British Airways can ignore them. These are individual shareholder or living near to airports. Conclusion It was a great idea to analysis the corporate and social responsibility policies of a division who is greatly involved in the production CO2 emissions and highly responsible for the climate change. During my research, I came crossways a number of facts, which I believe will help me to give a conclusion of my report. The facts are as under: The company started the operation in 1974 with the name of British Airways. During this period British Airways has build up an image as premium airline through its policies and positive image of its brand in the public. FY2009, Europe, the companys largest geographic market, accounted for 62.5% of the total revenues. I realise that the British Airways are more focus on Corporate Social Responsibility it might be effect on the company financial performance because its made loss in last two years. It is unethically for the sum of shareholder who wants profits from the company. British Airways is well behaving with their employees; who include the Induction, training, health and safety, promotion, high performance leadership, good salary structure and reward (ERP). At market place the British Airways failed to get reasonable profit from customer segment (premium customer), due to the airline did not report profit in last two years. Although the airline maintain good relationship with supplier through follow the code of practise (CBI). The airline maintain the position as Philanthropy (Carroll model), due to the airline continuously support poor world, people and working with UNICEF, UK Cancer and Research. The real fact is that the airline only make plan for reduction of 50% Carbon Emission (CO2) in 2050.But currently the CO2 more than last years. To achieving this objective the airline is need to invest in new aircraft technology, low emission trading project. For this objective the airline have good capita

Military Technology Essays -- Technological Research Persuasive Essays

Military Technology   Ã‚  Ã‚  Ã‚  Ã‚  Technology in the military has greatly increased strength and eased the ranking among world powers and effected the development of new military weapons. The term â€Å"Survival of the fittest† means that the strong will succeed but the meek will not, this is the case with military technology. The U.S. has the best technology in the world, therefore we are the highest military power.   Ã‚  Ã‚  Ã‚  Ã‚  Technology is a very important part of warfare. Technology is driven by the military. The army's race during the cold war, spawned some of the greatest technical achievements in human history. Space travel for example is a result of the X-plane project. The Internet was produced by the military as well. If we stop investing in military technology, we risk our safety. If other nations had more advance technology than we do, they would have more power than we do. If that was to happen, we face the threat of that nation taking over us.   Ã‚  Ã‚  Ã‚  Ã‚  Military technology may be divided into five categories. Offensive arms harm the enemy, while defensive weapons ward off offensive attacks. Transportation technology moves soldiers and weaponry; communications coordinate the movements of armed forces; and sensors detect forces and guide weaponry.   Ã‚  Ã‚  Ã‚  Ã‚  There are many types of technological developments in the military happening at all times. They range from new aircraft to sophisticated guidance systems. Teams of specialists work for years to develop some of our simplest equipment. These people’s everyday lives are devoted to the safety and protection of the citizens of the U.S.   Ã‚  Ã‚  Ã‚  Ã‚  Aircraft are one of the biggest areas of advancement in the past. Military aircraft have become more sophisticated in variety, effectiveness, and maneuverability techniques in recent years. After it was found that aircraft could be very useful in war, they started to become a necessity of war. After World War 2, technological advances in aircraft began. The advances include stealth, targeting, maneuverability, etc. With stealth technology, many new and extremely effective aircraft have been developed for air warfare. One of the very first stealth aircrafts was developed for Operation Dessert Storm. This stealth fighter jet was the F-117A. The U.S. sent out 43 of these jets, and all of them returned and with not as much as a scratch on them. During Dessert Storm, the F-117A pr... ...litary uses. Military technology has been effecting the rules of war for years and it will for years to come. In medieval times, there were many advances that today we would not think of as technology but they are. Chain mail armor was invented to prevent injuries from sword fighting, catapults were used to throw objects over castle walls and break down doors. The American Revolution had an impact on technology, the first guns were just being made, without this technology we would be nowhere today. In WWI machine guns were invented by the Germans, and then more finely tuned for WWII. Since WWII, there have been so many developments that they can’t even be counted. The future has a good outlook for new technology in the military. Many possibilities include the unmanned war, where all the fighting will be done by robots and computers. Other possibilities include, space travel, new fuels, vehicles, and more. Military technology has greatly improved our world and has put ahead the strongest nations. Many other uses come from these developments far from what they were originally designed for. Technology has been the largest influence on the world since the beginning of time. Military Technology Essays -- Technological Research Persuasive Essays Military Technology   Ã‚  Ã‚  Ã‚  Ã‚  Technology in the military has greatly increased strength and eased the ranking among world powers and effected the development of new military weapons. The term â€Å"Survival of the fittest† means that the strong will succeed but the meek will not, this is the case with military technology. The U.S. has the best technology in the world, therefore we are the highest military power.   Ã‚  Ã‚  Ã‚  Ã‚  Technology is a very important part of warfare. Technology is driven by the military. The army's race during the cold war, spawned some of the greatest technical achievements in human history. Space travel for example is a result of the X-plane project. The Internet was produced by the military as well. If we stop investing in military technology, we risk our safety. If other nations had more advance technology than we do, they would have more power than we do. If that was to happen, we face the threat of that nation taking over us.   Ã‚  Ã‚  Ã‚  Ã‚  Military technology may be divided into five categories. Offensive arms harm the enemy, while defensive weapons ward off offensive attacks. Transportation technology moves soldiers and weaponry; communications coordinate the movements of armed forces; and sensors detect forces and guide weaponry.   Ã‚  Ã‚  Ã‚  Ã‚  There are many types of technological developments in the military happening at all times. They range from new aircraft to sophisticated guidance systems. Teams of specialists work for years to develop some of our simplest equipment. These people’s everyday lives are devoted to the safety and protection of the citizens of the U.S.   Ã‚  Ã‚  Ã‚  Ã‚  Aircraft are one of the biggest areas of advancement in the past. Military aircraft have become more sophisticated in variety, effectiveness, and maneuverability techniques in recent years. After it was found that aircraft could be very useful in war, they started to become a necessity of war. After World War 2, technological advances in aircraft began. The advances include stealth, targeting, maneuverability, etc. With stealth technology, many new and extremely effective aircraft have been developed for air warfare. One of the very first stealth aircrafts was developed for Operation Dessert Storm. This stealth fighter jet was the F-117A. The U.S. sent out 43 of these jets, and all of them returned and with not as much as a scratch on them. During Dessert Storm, the F-117A pr... ...litary uses. Military technology has been effecting the rules of war for years and it will for years to come. In medieval times, there were many advances that today we would not think of as technology but they are. Chain mail armor was invented to prevent injuries from sword fighting, catapults were used to throw objects over castle walls and break down doors. The American Revolution had an impact on technology, the first guns were just being made, without this technology we would be nowhere today. In WWI machine guns were invented by the Germans, and then more finely tuned for WWII. Since WWII, there have been so many developments that they can’t even be counted. The future has a good outlook for new technology in the military. Many possibilities include the unmanned war, where all the fighting will be done by robots and computers. Other possibilities include, space travel, new fuels, vehicles, and more. Military technology has greatly improved our world and has put ahead the strongest nations. Many other uses come from these developments far from what they were originally designed for. Technology has been the largest influence on the world since the beginning of time.

Cooperative Banks

WP/07/2 Cooperative Banks and Financial Stability Heiko Hesse and Martin Cihak  © 2007 International Monetary Fund WP/07/2 IMF Working Paper Monetary and Capital Markets Department Cooperative Banks and Financial Stability Prepared by Heiko Hesse and Martin Cihak1 Authorized for distribution by Mark W. Swinburne January 2007 Abstract This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy.Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Cooperative banks are an important, and growing, part of many financial systems. This paper empirically analyzes the role of cooperative banks in financial stability. Contrary to some suggestions in the literature, we find that cooperative banks are more stable than commercial banks. This finding is due to the lower volatil ity of the cooperative banks’ returns, which more than offsets their lower profitability and capitalization.This is most likely due to cooperative banks’ ability to use customer surplus as a cushion in weaker periods. We also find that in systems with a high presence of cooperative banks, weak commercial banks are less stable than they would be otherwise. The overall impact of a higher cooperative presence on bank stability is positive on average but insignificant in some specifications. JEL Classification Numbers: G21, P13 Keywords: financial sector stability, cooperative banks, commercial banks, savings banks Author’s E-Mail Address: [email  protected] org; [email  protected] rg 1 We are indebted to Klaus Schaeck for useful discussions during the early stages of the project. We also thank the following for their comments: Edward Al-Hussainy, Thorsten Beck, Ralf Elsas, Wim Fonteyne, Francois Haas, Patrick Honohan, Plamen Iossifov, Alain Ize, Barry Johnston, Luc Laeven, Eduardo Ley, Andrea Maechler, Paul Mills, John Muellbauer, Miguel Segoviano, Mark Swinburne, Alexander Tieman, and participants in an IMF seminar and a conference entitled â€Å"Public versus Private Ownership of Financial Institutions† in Frankfurt in November 2006. Contents Page I. Motivation and Literature Overview †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 3 II. Data and Methodology †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 6 A. Data †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 6 B. Measuring Bank Stability†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ C. Methodology †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 8 III. Results†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 11 A. Decomposition of Z-Scores and Correlation Analysis †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 11 B. Regression Analysis †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 14 IV.Conclusions and Topics for Further Research†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 18 References†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 35 Tables 1. Summary Statistics of Bank-Specific Variables in the Sample, 1994–2004 †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚ ¬ ¦ 20 2. Decomposition of Z-Scores for the Full Sample, 1994–2004 †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 21 3. Decomposition of Z-Scores for Selected Countries, 1994–2004†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 2 4. Sensitivity of the Z-score Decomposition†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 23 5. Fitch: Long-Term Ratings: Distribution of the Banks in Sample†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 24 6. Correlation Coefficients between the Z-Score and Selected Key Variables, 1994–2004†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 25 7. Regression Results (Full Sample)†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 6 8. OECD Regressions with Governance Variable †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 27 9. Regression Results (Large Banks) †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 28 10. Regression Results (Small Banks) †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 29 11. Robust Regressions†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â ‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 30 12.Quantile Regressions (Full Sample) †¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦. 31 Figure 1. Cooperative Banks: Retail Market Shares in Selected Countries†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦.. 3 Appendix I. Data Issues†¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦Ã¢â‚¬ ¦ 32 3 I. MOTIVATION AND LITERATURE OVERVIEW Cooperative (mutual ) banks are an important part of many financial systems. 2 In a number of countries, they are among the largest financial institutions when considered as a group.Moreover, the share of cooperative banks has been increasing in recent years; in the sample of banks in advanced economies and emerging markets analyzed in this paper, the market share of cooperative banks in terms of total banking sector assets increased from about 9 percent in the mid-1990s to about 14 percent in 2004. Cooperative banks are particularly numerous and large in Europe. The five largest cooperative banks in the European Union (EU) rank among the EU’s top 25 banking groups in terms of consolidated equity.Reflecting the cooperative banks’ focus on retail banking, their market share in retail business is even more substantial: for example, five EU member countries have more than a 40 percent market share of cooperative banks in terms of branch networks (Figure 1). In non-European advanced economies and emerging markets, the share of cooperative banks is generally lower, but there are several countries where they play a non-negligible role. 3 Figure 1. Cooperative Banks: Retail Market Shares in Selected Countries 70 Percent of all branches 60 50 40 30 20 10 Netherlands Finland Germany Portugal 0 Austria France Spain Greece ItalySource: OECD’s Bank Profitability Report; and authors’ calculations. We use the term â€Å"cooperative bank† to include also credit unions. The main distinctive feature of credit unions is that their customers are identical with members. In other cooperative banks, not all customers are members. For more background on institutional history and structure of cooperative (mutual) banking, see Fonteyne (forthcoming) and Cuevas and Fischer (2006). 3 2 4 The importance of cooperative banks—and in particular the implications of their specific nature for financial stability—has not yet received appropriate attention in the emp irical literature.The literature devotes disproportionately little attention to cooperative banks in comparison with commercial banks, smaller than would correspond, for example, to their market share. For example, only about 0. 1 percent of all banking-related entries in EconLit, a major database of economic research, relates to cooperative banking. 4 This contrasts with the share of cooperative banks, which account on average for about 10 percent of banking system assets in advanced economies and emerging markets, reaching as much as 30 percent in some countries in terms of assets (and even more in terms of branches—see Figure 1).Most of the EconLit entries devoted to cooperative banks deal with specific country cases or with issues relating to efficiency rather than those relating to financial stability. For example, Brunner and others (2004) analyze revenue and cost efficiency of cooperative banks in France, Germany, Italy, and Spain, finding that cooperative banks are no t less effective at managing revenues and costs than commercial banks. The regulatory framework, including the recent amendments, is also generally designed with commercial banks in mind.For example, the third pillar of the New Basel Capital Accord (Basel II)—which relies on extensive disclosure to ensure that banks are subject to market discipline—has significantly reduced effectiveness in the case of cooperative banks (Fonteyne, 2007). Cooperatives’ disclosure practices and requirements are substantially below those of commercial banks, especially listed ones. Even if disclosure were adequate, there are rarely markets that could exert effective disciplining pressure.Shareholder pressure cannot be relied upon and cooperatives do not rely much on interbank markets or debt issuance as sources of funds. Finally, loyal and insured retail depositors are not likely to exert an effective market disciplining effect either at an early enough stage. Macroprudential work on financial systems, such as the IMF’s Financial System Stability Assessment reports (FSSAs), Article IV staff reports, and the Global Financial Stability Report, as well as reports on financial stability published by central banks (for a survey, see Cihak, 2006) pay relatively little attention to cooperative banks.Fonteyne (forthcoming) cites the FSSAs for France and Germany as two reports that devoted some attention to cooperative banks; however, the references to cooperative banks in those reports focused on mutual support and deposit insurance mechanisms, efficiency, and financial sector consolidation issues, rather than on financial stability implications.Several authors have noted in passing the potential of cooperative banks to increase the fragility of financial systems. For example, commenting on a finding by Barth, Caprio, and A search of the EconLit database was carried out on June 15, 2006, looking for all entries that had â€Å"banks† or â€Å"bankingâ⠂¬  among keywords or in the abstract. A search was then run for those that referred to â€Å"cooperative banks,† â€Å"cooperative banking,† or â€Å"mutual financial institution(s). † 4 5Levine (1999) that a higher degree of government ownership of banks tends to be associated with higher fragility of financial systems, Goodhart (2004) interprets this result as perhaps indicating that the presence of any non-profit-maximizing banking entities may make financial systems more fragile. Goodhart does not elaborate on the underlying mechanism of this relationship between the presence of non-profit-maximizing entities and financial stability, but possible mechanisms are not difficult to envision in the case of cooperative banks.Cooperative banks’ stated objective is not to maximize profits, but rather their members’ consumer surplus; this is in some cases complemented by additional objectives that seek to contribute to the well-being of stakeholders o ther than member-consumers, such as employees. 5 If a cooperative bank’s pursuit of objectives other than profit maximization results in very low profitability, its balance sheet risks grow faster than its capital, leading to deteriorating solvency.If cooperative banks accept lower profitability as the price to pay for delivering financial services at below-market prices to retail clients, they may pull down the profitability of the banking system, with negative repercussions for other banks’ soundness. The literature’s verdict on cooperative banks’ role in financial stability is less than clear. Several papers suggest that cooperative banks may have more difficulties adjusting to adverse circumstances and changing risks.For example, Brunner and others (2004) note that the Swedish cooperative banking sector did not survive the crisis of the early 1990s in a cooperative form, as it faced high marginal costs of capital—the need to restore capital was a major factor in the decision to demutualize. Fonteyne (forthcoming) suggests that cooperative banks may be more vulnerable to shocks in credit quality and interest rates, because they are more focused on traditional financial intermediation than other institutions, and therefore have higher exposures to credit and interest rate risk.At the same time, several studies suggest that cooperative banks have generally lower incentives to take on risks. For example, Hansmann (1996) and Chaddad and Cook (2004) find that mutual financial institutions in the United States tend to adopt less risky strategies than demutualized ones. Whether cooperative banks have a positive or negative impact on financial stability therefore remains an empirical question. We address this question by analyzing individual bank data for major advanced economies and emerging markets. We examine two related issues:In addition, some authors have suggested that due to relatively less oversight by members, as opposed to owners in a commercial bank, managers in cooperative banks may be more likely to pursue their own goals (e. g. , â€Å"empire building†) rather than members’ interests, potentially hurting their stability. Fonteyne (forthcoming) discusses cooperative banks’ objective functions in more details and summarizes the relevant literature. 5 6 †¢ Cooperative banks’ soundness and resilience to stress. We test the hypothesis that cooperative banks are relatively weaker in responding to stress because of the features of their business model.Cooperative banks’ impact on other banks. We test the hypothesis that the presence of cooperative banks reduces the stability of other banks. As explained, this may be, for example, because the cooperative banks use their lower average cost of capital to pursue aggressive expansion plans that may weaken other financial institutions. †¢ The remainder of the paper is structured as follows. Section II introduces the data and variables used in the paper (characterized in more detail in Appendix I), and presents the estimation methodology. Section III presents the empirical results.Section IV sums up the conclusions, and suggests topics for further research. II. DATA AND METHODOLOGY A. Data Our calculations are based on individual bank data drawn from the BankScope database, provided by Bureau van Dijk. We use data on all commercial, cooperative, and savings banks in the database from 29 major advanced economies and emerging markets that are members of the Organization for Economic Cooperation and Development (OECD). 6 In total, we have data on 16,577 banks from 1994 to 2004, comprising 11,090 commercial banks, 3,072 cooperative banks, and 2,415 savings banks.Several general issues relating to the BankScope data need to be mentioned. First, the database, while being the most comprehensive commercially available database of banking sector data, is not exhaustive. Coverage varies from country to country; for most countries in our sample, the BankScope data cover 80 to 90 percent of the total banking system assets, and the coverage of cooperative banks is lower than for commercial banks (in particular, only a small number of cooperative banks is included in the United States). However, the coverage of our paper is still higher than in most banking studies (and in particular studies that focus on banks with particular features, such as large banks or banks that are listed on stock market), and even for cooperative banks our sample captures a majority in terms of total assets. We therefore believe the sample is comprehensive enough to make reliable inferences. 6 7 See Appendix I for a list of the OECD member countries.Also, our sample does not cover some specialized types of banking institutions, such as development banks or specialized investment companies (even though our analysis covers, for example, investment banking activities carried out by commercial banks on their balance sheet). 7 Second, BankScope gives the specialization (status) of a bank in the sample (commercial, cooperative, and savings) in the current year. Therefore, it is for instance likely that the commercial bank subset contains some banks that have been cooperative or savings banks in earlier periods.Where information was available, we adjusted the status of a bank accordingly. For example, France was subject to a banking reform in June 1999 in which all savings banks were converted into cooperative banks. The Alliance & Leicester (United Kingdom) as well as First National (Ireland) Building Societies were demutualized and were stock market listed in 1997 and 1998, respectively. Given the large number of banks in the sample, it was not possible to individually check potential changes in specialization over time. However, we do not think that this limitation of the BankScope dataset biases the results.Third, our analysis is based on unconsolidated bank statements. Ideally, we wou ld have opted for consolidated statements whereby the parent company integrates the statements of its subsidiaries. However, given that about 90 percent of BankScope observations for the selected countries and periods are based on unconsolidated data, we focus on results based on unconsolidated data. Nonetheless, we have also performed the same calculations with consolidated data, and obtained very similar results (available upon request). In addition to the bank-by-bank data, we also use a number of macroeconomic and other system-wide indicators.Those are described in more detail in Appendix I. B. Measuring Bank Stability Our primary dependent variable is the z-score as a measure of individual bank risk. The zscore has become a popular measure of bank soundness (see Boyd and Runkle, 1993; Maechler, Mitra, and Worrell, 2005; Beck and Laeven, 2006; Laeven and Levine, 2006; and Mercieca, Schaeck, and Wolfe, forthcoming). Its popularity stems from the fact that it is directly related t o the probability of a bank’s insolvency, i. e. , the probability that the value of its assets becomes lower than the value of the debt.The z-score can be summarized as z? (k+ µ)/? , where k is equity capital as percent of assets,  µ is average after-tax return as percent on assets, and ? is standard deviation of the after-tax return on assets, as a proxy for return volatility. The z-score measures the number of standard deviations a return realization has to fall in order to deplete equity, under the assumption of normality of banks’ returns. A higher z-score corresponds to a lower upper bound of insolvency risk—a higher z-score therefore implies a lower probability of insolvency risk. For banks listed in liquid equity markets, a popular version of the z-score is distance-to-default, which uses stock price data to estimate the volatility in the economic capital of the bank (Denmark National Bank, 2004). 8 (continued†¦) 8 One issue relating to the use o f z-scores for analyzing cooperative banks is whether the zscores are a fair measure of soundness across different groups of institutions, in particular given that cooperative banks are much less focused on returns and profitability than commercial banks.We think that the z-score is an objective measure, as all banks (cooperative, commercial, and savings), face the same risk of insolvency in case they run out of capital. This is exactly the risk captured by the z-score, which has the same methodology for any type of bank. If an institution â€Å"chooses† to have lower risk-adjusted returns, it can still have the same or higher z-score if it has a higher capitalization. C.Methodology We start by two preliminary steps: a decomposition of observed differences in z-scores into the underlying factors (capitalization, returns, and volatility of returns), and a calculation of correlation coefficients between z-scores and other variables of interest. The main part of our approach is to test the two hypotheses outlined in the introduction (Section I) using regressions of z-scores on a number of explanatory variables. We estimate a general class of panel models of the form z i , j ,t = ? + ? Bi , j ,t ? 1 + ? I j ,t ? 1 + ? ? s Ts + ? ? s Ts I j ,t ? 1 + ? ? s Ts Bi , j ,t ? 1 + ?M j ,t ? 1 + ? ? j C j + ? ? t Dt + ? i , j ,t where the dependent variable is the z-score z i , j ,t for bank i in country j and at time t; Bi , j ,t ? 1 is a vector of bank-specific variables; I jt ? 1 are time-varying banking industry-specific variables in country j; Ts , Ts I j ,t ? 1 and Ts Bi , j ,t ? 1 are the type of banks and the interaction between the type and some of the industry-specific variables as well as bank-specific variables, respectively; M j ,t , C j , and Dt are vectors of macroeconomic variables, country, and yearly dummy variables, respectively; and ? i , j ,t is the residual.To distinguish the impact of bank type on the z-score, we include two dummy variables. T he first dummy variable takes the value of 1 if the bank in question is a commercial bank, and 0 otherwise; the second one takes the value of 1 for savings banks, and 0 otherwise. If cooperative banks are relatively weaker than commercial (or savings) banks, the first (second) dummy variable would have a positive sign in the regression explaining z-scores. For most cooperative banks, however, market price data are not available. This paper therefore relies on the specification of the z-score that relies only on accounting data. At the systemic (country) level, we want to examine cooperative banks’ impact on other banks and the hypothesis that the presence of cooperative banks lowers systemic stability. For this reason, we have calculated the market share of cooperative banks by assets for each year and country and interacted it with the commercial bank dummy. For example, a negative sign of the sum of the coefficients of the cooperative banks’ market share and its inte raction with the commercial bank dummy would indicate a decrease in commercial banks’ stability (in their z-scores).In addition to these key variables of interest, the regression includes a number of other control variables, both on individual bank level and on country level. Appendix I provides a description of the variables. To control for bank-level differences in bank size, asset composition, and cost efficiency, we include the bank’s asset size in billions of U. S. dollars, loans over assets, and the cost-income ratio. Also, to control for differences in structure of banks’ income, we calculate a measure of income diversity that follows Laeven and Levine (forthcoming). The variable measures the degree to which banks diversify from traditional lending activities (those generating net interest income) to other activities. To further capture differences of cooperative banks in their business orientation, we interact the income diversity variable with the coope rative bank dummy. Controlling for these variables is important because there are differences in these variables between cooperative banks and the other groups. For example, commercial banks are on average larger than cooperative banks throughout the sample period.Similarly, the asset size of cooperatives is less volatile than for commercial banks but significantly more volatile than for savings banks. We want to adjust for the differences in these variables to ensure that we capture the â€Å"pure† impact of the bank’s legal form (commercial, cooperative, or savings) on stability. 10 Table 1 shows the summary statistics of the bank-specific variables by type of bank. On the country level, we also adjust for the impact of the macroeconomic cycle by including a number of macroeconomic variables (GDP growth rate, inflation, the real long-term interest rate, and exchange rate appreciation).To account for cross-country variation in z-scores caused by differences in market concentration, we include the Herfindahl index, defined as the sum of squared market shares (in terms of total assets) of all banks in the country. 11 9 The income diversity measure is defined as 1 ? (Net interest income ? Other operating income ) . Higher values of Total operating income the variable correspond to a higher degree of diversification. 10For completeness, we have also tested whether the impact of bank-specific variables such as asset size is different for the different types of banks (by multiplying the asset size with the relevant dummy variables), but this has not led to any significantly robust results. We do not have a strong prior on the impact of the Herfindahl index, because the existing literature contains two contrasting views on the relationship between concentration and stability. For example, Allen and Gale (2004) put forth theoretical arguments why more concentrated markets are likely to be more stable, and Beck, 11 (continued†¦) 0 In separate regres sions, we account for the quality of corporate governance in a country, using a popular indicator by Kaufmann, Kraay, and Mastruzzi (2005). The authors provide six governance measures (voice and accountability, political stability, government effectiveness, regulatory quality, rule of law, and control of corruption). We average the six measures across the available years (2004, 2002, 2000, 1998, and 1996) into one single index per country. The governance indicator should capture cross-country differences in institutional developments that might have an effect on banking risk.All bank-specific and macroeconomic variables, the Herfindahl index, and the cooperatives’ market share and its interaction with the commercial bank dummy are lagged to capture possible past effects of these variables on the banks’ risk. We also test for the robustness of the lagged effects by restricting the explanatory variables to contemporaneous effects. Across the whole sample, most observatio ns of the z-score are found in the 20–80 range; however, there are some extreme observations, resulting in the sample range being from -81 to 14,811 with an average of 57.This leads to the question whether to eliminate observations at the extreme end of the z-score distribution. On one hand, we are interested in situations of instability, and therefore would like to include extreme observations; on the other hand, some of the extreme observations may be due to very specific, one-off events, or sometimes data errors. To assess the robustness of our results with respect to the outliers, we have done all the calculations both for the full sample and for a sample that excludes the most extreme outliers.To keep the presentation succinct, this paper presents results for a sample that eliminates the 1st and 99th percentile from the distribution of the z-score. The results for the full sample including those extreme outliers are available from the authors; the main conclusions are th e same for both approaches. To further assess the robustness of the results with respect to the selected sample, we estimate the same regression for different country samples, and different bank size samples. We start with the widest sample that includes all OECD countries (except Slovakia, for which the BankScope contains no data on cooperative banks).We then estimate the same regression for the Euro area (EU12),12 and for countries where the cooperatives’ market share Demirguc-Kunt, and Levine (2005) provide empirical results consistent with the view that more concentration is associated with more financial stability. Contrary to these findings, for example, Boyd and de Nicolo (forthcoming) and Mishkin (1999) suggest that too concentrated systems can be characterized by increased risktaking behavior by banks. 12 We have also carried out all the estimates for EU15 countries (EU12, Denmark, Sweden, and the United Kingdom).The results have not been substantially different from those for EU12 and are therefore not reported here. Nonetheless, they are available from authors upon request. 11 exceeds 5 percent in our sample (Coop5). 13 As regards the robustness with respect to bank size, we estimate the regressions separately for large and small banks. We also test the robustness of our results with respect to the estimation methods. We start by pooled ordinary least squares (OLS) and fixed effects estimates, followed by a robust estimation technique, and a quantile regression.The robust estimation technique assigns, through an iterative process, lower weights to observations with large residuals, thereby making the estimation less sensitive to outliers. The quantile regression allows to address the question whether the factors that cause high fragility are systematically different from the factors that cause medium or low fragility. We would like to stress that our analysis is based on individual banks’ z-scores. The impacts calculated from the estim ated regressions are average impacts per bank.This approach provides a baseline assessment of stability and is frequent in the literature. However, to arrive at a more complete assessment of systemic stability, one needs to look also at correlation of losses across defaults and losses given default—a topic for further research. III. RESULTS A. Decomposition of Z-Scores and Correlation Analysis A preliminary analysis shows that the cooperative banks’ z-scores are on average significantly higher than for commercial banks (and slightly, but insignificantly, higher than for savings banks), suggesting that cooperative banks are more stable than commercial banks.Interestingly, this is not because of capitalization or profitability—those two are on average weaker for cooperative banks than for commercial banks. The result is driven by the fact that the cooperative banks’ standard deviation of returns is much lower, resulting in the high zscore (Tables 2 and 3). Why do we find the low volatility of returns over time in cooperative banks? A plausible explanation is that the cooperative banks use the customer surplus as a first line of defense in weaker times.Cooperative banks pass on an important part of their returns to customers in the form of surplus. Indeed, their stated objective is not maximization of profits, but rather maximization of the consumer surplus. This leaves the cooperative banks with relatively low average return ratios in normal years. However, in weaker years, they are able to extract some of the consumer surplus, thereby mitigating the negative impact of stress on returns. 13 The Coop 5 countries are Austria, France, Germany, Italy, Japan, Netherlands and the United Kingdom. 12We are therefore observing a lower variability of returns in cooperative banks than in commercial banks (and about the same as in savings banks). 14 In other words, our calculations suggest that the consumer surplus can be viewed as the first line of defense for cooperative banks, in a similar way as profits are the first line of defense for commercial banks. However, there are some important differences. First, consumer surplus is a very complex concept to measure. We are not able to observe consumers’ surplus on a consistent basis; even though we can make inferences about it from the pattern of returns.Second, while undistributed profits can be relatively easily used to replenish capital, extracting consumer surplus is one more step removed from capital and requires time. To address the idea that cooperative banks are less able to raise capital in situations of stress, we have also examined volatility in cooperative banks’ capitalization compared with commercial banks’ capitalization (even though volatility in capitalization is not a part of the z-score calculation). The results only onfirm our findings about z-scores, because cooperative banks also have a significantly lower volatility of capitalizati on. The finding that cooperative banks have higher z-scores is novel, but not inconsistent with the existing literature. The empirical papers on the subject note that cooperative banks have lower reported returns, but they find no compelling evidence that the lower returns would be due to a less effective management of revenues and costs than in commercial banks (e. g. , Brunner and others, 2004; and Altunbas, Evans, and Molyneux, 2001). 5 If the lower returns were due to inefficiencies in cooperative banks’ operation, then it would be difficult to argue that there are cushions that can be used in weak times. However, the finding that cooperative banks have lower returns with the same efficiency suggest that there are cushions that can be used in situation of stress, an idea that is consistent with our finding. 16 We also find no evidence for our sample that cooperative banks are less efficient than commercial banks in terms of the cost-income ratio (Table 1).To assess the ro bustness of our findings, we have also tried some alternatives to the standard definition of the z-score (Table 4). The underlying idea behind these alternative approaches (which have to our knowledge not yet been discussed in the literature) is that the standard An additional explanation of the lower volatility of returns can be the networks that cooperative banks form to provide a safety net. However, these support mechanisms are typically triggered only in extreme stress, and are therefore likely to explain only a small part of the observed difference in the volatility of returns. 5 14 The finding about lower returns is in contrast with previous observation by Valnek (1999), who finds that mutual building societies in the United Kingdom have higher returns and risk-adjusted returns on assets than commercial banks. In a recent paper, Mercieca, Schaeck, and Wolfe (forthcoming) estimate an equation for z-scores in a sample of small European banks, including small cooperative banks, but their estimated slope coefficient for a cooperative bank dummy is insignificant. 16 13 deviation underlying the z-score gives only a part of the information about the behavior of zscores.In particular, when assessing stability, we are much more interested in the downward spikes in returns on assets (ROAs) and z-scores than in the upticks. Table 3 has four panels, corresponding to four alternative variables that we have investigated, in particular: †¢ We have defined downward (upward) volatility of ROA as the sample average of the difference between the bank-specific ROA per year and its mean of ROA if the ROA is below (above) the bank-specific mean. Table 4 indicates that both downward and upward volatility of ROA are higher for commercial banks than for cooperative and savings banks.Comparing the absolute values within each bank type shows that the commercial banks' downward volatility of ROA is higher than its upward volatility. This finding does not hold for cooperative and savings banks. Similarly, we have defined the downward (upward) volatility of the z-scores as the sample average of the difference between the bank-specific z-score per year and its mean of the z-score if the z-score is below (above) the bank-specific mean. We cannot observe any statistical difference in the downward (upward) volatility of the z-scores.Furthermore, the downward (upward) volatility of the capitalization is defined as the sample average of the difference between the bank-specific equity-to-assets ratio per year and its mean of the capitalization if the equity-to-assets ratio is below (above) the bankspecific mean. The downward (upward) volatility of capitalization is lower for cooperatives than for commercial and savings banks. Commercial banks’ z-scores have a higher frequency in the lower distribution of the zscores than cooperative and savings banks.This supports the previous results of lower average z-scores for commercial banks during the sample period . †¢ †¢ †¢ Overall, the above robustness checks support the findings for the simple z-scores. 17 To further assess the robustness of our findings, we can also look at measures of financial soundness that are alternative to the z-scores. An obvious alternative are ratings by rating agencies. Table 5 presents a distribution of long-term credit ratings by the Fitch Ratings for cooperative banks and commercial banks in the 29 advanced economies and emerging markets.The overall conclusion is that at least on the first look there does not seem to be a major difference between the ratings for cooperative banks and commercial banks. For both groups, for example, about 90 percent of institutions have investment grade long-term credit 17 We have also calculated a modified z-score, defined as capitalization plus the ROA over the absolute value of the downward volatility of ROA. Results for this modified z-score confirm that on average, cooperative banks are more stable than comm ercial banks, reinforcing the findings from the above robustness tests.The results do not change qualitatively whether we use the absolute value of downward/upward deviation from the mean for the volatilities of the ROA, z-score and capitalization measures, or whether we use the squared downward/upward deviation from the mean. 14 rating (defined as BBB- or higher). It should be noted, however, that the distribution of ratings for cooperative banks is highly influenced by the ratings for German cooperative banks, all of which were given the same (A+) rating. This limits the usefulness of ratings for further, econometric analysis.In the next section, we will therefore focus on the z-scores. Before discussing the regression results, we provide correlation coefficients between the zscore and selected key variables in Table 6. Here, we differentiate between all the banks in the sample and large (small) banks that have assets larger (smaller) than US$1 billion. Similar to the findings fro m the decomposition of the z-score in Table 1, commercial banks tend to have lower z-scores than cooperative and savings banks in all model specifications.Also, both the cooperative bank dummy and the z-score are positively correlated across the different samples. While there is no evidence that the cooperative market share per country and year is negatively correlated with the z-scores of all commercial, cooperative and savings banks, we do find a significantly negative correlation between the z-scores and the interaction term of the share of cooperatives and commercial bank dummy in all models as hypothesized previously.A stronger cooperative sector is associated with higher commercial banks’ risk. Since correlation findings do not necessarily reflect causal relationships and do not account for other control factors, we now turn to the panel regressions. B. Regression Analysis Table 7 presents pooled OLS and fixed effects estimates for the z-scores in the full sample of ban ks in OECD countries, in the Euro zone (EU12), and the countries where the cooperatives’ market share exceeds 5 percent (Coop5). 8 All panel regressions include clustered standard errors (by bank), year and country dummy variables. Our main focus in discussing the results is on the two hypotheses outlined in the introduction, namely that cooperative banks are weaker and that their presence reduces the stability of other banks. All the pooled OLS regressions provide strong evidence that cooperative banks have higher z-scores than commercial and savings banks.The estimated signs of the commercial bank dummy and savings bank dummy are negative in all the pooled OLS and fixed effects regressions (and significant at the 10 percent level in all but one the regressions). That is, cooperative banks appear less likely to become insolvent than the other two bank types. This 18 In general, it is not possible to identify the commercial and savings bank dummies in the fixed effects regres sions since they are not time-varying. Since we have changed the status of a few banks as discussed before, we could in principle identify the bank dummies.But we do omit the commercial and savings bank dummies in the fixed effects estimations, as only a few dummies are time-varying, and therefore the coefficients and p-values might not be very meaningful. 15 is in line with the findings from the decomposition of the z-score in the previous section. It strengthens the previous findings, because the conclusion about higher z-scores in cooperative banks holds even if we adjust for other explanatory factors, such as the fact that cooperative banks are typically more retail-oriented than commercial banks.As regard the impact of a higher presence of cooperative banks on banking stability, the first approximation is provided by the estimated slope coefficient of the â€Å"share of cooperatives† variable, which is positive and significant in all but one specification. Based on this estimated slope coefficient, we can say that a higher share of cooperative banks increases stability (measured by z-score) of an average bank in the same banking system. It is important to stress, however, that this is only an average effect based on all the commercial, cooperative, and savings banks in the sample. 9 To analyze in more detail the cooperative banks’ impact on other (e. g. , commercial) banks, one needs to analyze the sum of the coefficients of (i) the share of cooperative banks and (ii) the interaction of the share of cooperative banks with the other bank (e. g. , commercial bank) dummy. Looking again at the estimates in Table 7, and focusing on commercial banks, we find that a higher market share of cooperative banks has a significantly negative effect on commercial banks’ risk in the pooled OLS model for OECD countries.This would be consistent with the hypothesis that a higher presence of not-profit-maximizing cooperative banks could pull down the sou ndness of commercial banks. This could be because cooperative banks â€Å"over-pay† for deposits or â€Å"under-charge† for assets, or because the commercial banks get crowded out of the retail market and have to turn to markets that are more volatile. 20 However, this finding does not hold for the other model specifications. There is thus some, but limited, evidence in support of Goodhart’s (2004) hypothesis in the full sample. 1 The other explanatory variables have the expected signs. In particular, we find that larger banks tend to have lower z-scores, perhaps because they engage in riskier activities than smaller banks (and reflecting a relatively higher risk aversion of small banks). Also, banks with higher loan-to-asset ratios tend to be riskier (even though this result is valid only for the 19 If we measured a â€Å"portfolio z-score† of the banking system, it would increase even more than the average zscore, due to the simple fact that a higher ma rket share of cooperative banks means a higher share of banks with higher -scores. However, our approach in this analysis is derived from individual bank z-scores. To examine the hypothesis that cooperative banks over-pay for deposits or under-charge for loans, we have calculated the implicit deposit and lending rates for the commercial and cooperative banks, defining the implicit deposit rate as total interest rate expenses over deposits and the lending rate as interest rate income over loans. Based on this calculation, there is no significant difference for deposit rates, but there is some evidence that cooperative banks charge lower lending rates than commercial banks (9. percent compared with 13. 2 percent). 21 20 For savings banks, the impact of a higher cooperative bank share is insignificant and not reported in Table 7. 16 OECD sample as a whole, but not necessarily in the EU12 and Coop5 sub-samples). Banks with higher loan portfolios on their balance sheets relative to their total assets might be more likely to experience problems with non-performing loans and thus be riskier. Finally, inefficient banks in terms of their cost-to-income ratio are less likely to cover their costs when hit by adverse shocks, so they tend to be riskier.The evidence on the effect of bank concentration on individual bank risk is mixed and unclear in the pooled OLS and fixed effects regressions. The results from the income diversity variable and its interaction with the cooperative bank dummy support the above hypothesis. Overall, an increase in diversity (which could be interpreted as less focus on the traditional lending business) tends to increase banks’ risk; however, cooperative banks tend to become more stable if they diversify their activities (sum of the coefficients of the income diversity variable and its interaction with the cooperative bank dummy).This result can be explained by the fact that commercial banks are about 30– 40 percent more diversified than cooperative banks (both in the whole OECD sample and the EU12 and Coop5 sub-samples—see Table 1). Because of their stronger focus on the lending (retail) business, cooperative banks’ stability improves from an increase in diversification of their activities; in contrast, a further move away from retail business in commercial banks, which have already a relatively higher share of other (wholesale) activities, results in decreasing stability (z-scores).Table 8 presents the OECD pooled regressions with the governance indicator constructed by Kaufmann, Kraay, and Mastruzzi (2005). As expected, banks in countries with a higher level of institutional development are on average less risky than banks in countries which lack the same governance quality. From a comparison of Tables 7 and 8, the governance indicator does not have a significant impact on the estimated slope coefficients for the commercial and savings bank dummies, suggesting that cooperative banks are not mo re or less sensitive to governance problems than the other types of banks.However, this finding has to be taken with a grain of salt, because we use the overall quality of governance in the country as a proxy for corporate governance in the individual banks, on which there are unfortunately no direct cross-country data. To assess the robustness of our results, we have also estimated models for large and small banks, n addition to the full sample regressions. 22 Table 9 replicates the previous regressions on the OECD, EU12, and Coop5 countries only with large banks, defined as those that have assets larger than US$1 billion.The commercial bank dummy is significantly negative in the In addition, to account for systemic importance, we have also estimated a weighted regression, weighting the different observations by total assets. The results, which were not substantially different from those for large banks in Table 8, are available from the authors upon request. 22 17 pooled OLS estim ations (except the OECD sample). The previous result that a strong cooperative banking sector on average does not weaken the commercial banking sector is strongly supported in the regressions with large banks for all model specifications except the OLS OECD model.Table 10 gives the model findings for small banks (those with assets below US$1 billion). Small commercial banks tend to be riskier than small cooperative banks but there is no substantial evidence that an increase in the cooperative market share has a consistently and significantly negative effect on the smaller commercial banks’ individual risk. As a further sensitivity test, we estimated the models with the robust estimation technique, which assigns lower weights to observations with large residuals, to avoid the impact of outliers (Beck, Cull, and Jerome, 2005).The results in Table 11 support the main conclusion from the previous discussion. Finally, to address the question whether the factors that cause high fra gility are systematically different from the factors that cause medium or low fragility, we adopt quantile regression techniques. Table 12 gives the regression results at the 25th, 50th, and 75th percentiles of the OECD, EU12, and Coop5 countries. 23 The model setup is the same as for the full sample with the same variables included and the same outliers excluded (1st and 99th percentile of the distribution of the z-score).Based on the coefficients of the commercial bank dummy, the gap between the z-scores of commercial and cooperative banks tends to widen with the quantiles in the OECD, EU12, and Coop5 models, which suggests that the distribution of z-scores in cooperatives is much more skewed to the right: if one compares strong cooperative banks and strong commercial banks, the difference in z-scores is much bigger than for weak cooperative banks and weak commercial banks. A similar conclusion is valid also for the comparison of cooperative banks and savings banks, even though th e differences in their z-scores are generally smaller.Upon inspecting the sum of the coefficients of the cooperative share and its interaction with the commercial bank dummy, it appears that an increased presence of cooperative banks per country and year has a negative effect on the weakest commercial banks. In other words, commercial banks that already have low z-scores suffer more from a stronger cooperative sector than commercial banks with higher z-scores. Whereas the previous estimations did not provide any substantial evidence for a negative effect of a higher presence of cooperative 23The 50th percentile gives the median least square estimator which minimizes the median square of residuals rather than the average. In the generalized quantile regression, we estimate an equation describing a quantile other than the median. Specifically, we estimate the first quartile (25th percentile) as well as the 75th percentile. 18 banks on the average commercial bank’s stability, in stead there appears to be some (negative) effect on the weaker commercial banks. In all the regressions, restricting the explanatory variables to only contemporaneous effects does not change the main findings (tables available upon request).We also defined alternative z-scores as ln(1+(z/100)), but this did not affect the main conclusions. IV. CONCLUSIONS AND TOPICS FOR FURTHER RESEARCH The findings in this paper indicate that cooperative banks in advanced economies and emerging markets have higher z-scores than commercial banks and (to a smaller extent) savings banks, suggesting that cooperative banks are more stable. This finding, perhaps somewhat surprising at first, is due to much lower volatility of the cooperative banks’ returns, which more than offsets their relatively lower profitability and capitalization.We suggest that this observed lower variability of returns, and therefore the higher z-scores, may be caused by the fact that cooperative banks in normal times pass on most of their returns to customers, but are able to recoup that surplus in weaker periods. To some extent, this result can also reflect the mutual support mechanisms that many cooperative banks have created. The finding about the higher z-scores in cooperative banks is quite robust with respect to modifications in the measurement of volatility and z-scores.It also remains valid if one distills the â€Å"pure† impact of the cooperative nature of a bank, by using regression analysis and adjusting for differences in bank size, loan to asset ratios, income diversity, and other factors with potential impact on individual bank’s stability. Using the regression analysis, we also find that a higher share of cooperative banks increases stability (measured by z-score) of an average bank in the same banking system. The impacts differ by the groups of banks, however.High presence of cooperative banks appears to weaken commercial banks, in particular those commercial banks that are already weak to start with. This finding is consistent with Goodhart’s (2004) hypothesis that the presence of non-profit-maximizing entities can pull down stability of other financial institutions. This empirical result can be explained by the fact that a higher cooperative bank presence means less space for weak commercial banks in the retail market and therefore their greater reliance on less stable revenue sources such as corporate banking or investment banking.When interpreting the results, one needs to bear in mind some caveats relating to the z-score, such as its reliance on accounting data and its focus on capital and profits rather than, say, liquidity or asset quality. As a robustness test, we have therefore tried to include some possible alternatives to the z-scores, such as ratings. The available data suggest that the ratings of cooperative banks are not substantially worse than those for commercial banks; 19 however, the dominance of observations from one cou ntry (Germany) in the ratings database does not allow for a full-fledged cross-country analysis.Several issues not addressed in this paper could be analyzed in future research. One of them is corporate governance issues. As discussed in Fonteyne (forthcoming) or Cuevas and Fischer (2006), corporate governance issues in cooperatives are often more prominent than in commercial banks. Among these issues is the presence of an owner-less endowment, since members of cooperatives are only invested with the notional value of their shares and have no right to the accumulated capital. Furthermore, there is a collective action problem that might lead to empire-building by management.BankScope and similar databases do not contain institution-specific data on the quality of the corporate governance, but with a more detailed database, perhaps on a smaller sample, it may be possible to analyze this issue. Another issue for further research is the impact of networks on cooperative banks’ sta bility. Cooperative banks can realize important benefits by forming networks, as it allows the pursuit of economies of scale and scope, and the provision of a safety net or mutual support mechanism. However, a more complex structure can also create new challenges for stability.For example, Desrochers and Fischer (2005), in a cross-country survey on the level of integration of cooperatives, note that lateral contracts between cooperatives involve risks that counterparts will behave opportunistically to appropriate the rent generated by the alliance. The analysis based on individual banks’ z-scores, presented in this paper, provides a baseline assessment of systemic stability. To arrive at a more complex assessment, one should look also at losses given default and correlation of losses across defaults (Cihak, 2007).This issue goes beyond the scope of this paper, and is an important topic for further research. Finally, we have treated the share of cooperative banks as an exogeno us variable that impacts the z-scores. When longer time series become available, it might be possible and useful to test whether the share of cooperative banks is in fact endogenous with respect to the z-scores, i. e. , whether this measure of stability affects the share of cooperatives in a system. 20 Table 1. Summary Statistics of Bank-Specific Variables in the Sample, 1994–2004 (In percent, unless indicated otherwise) Assets (Billion USD) Mean Std. Dev.OECD Commercial Cooperative Savings EU12 Commercial Cooperative Savings Coop5 Commercial Cooperative Savings Loans to Assets Cost-Income Ratio Mean Std. Dev. Mean Std. Dev. Income Diversity Mean Std. Dev. 3. 78 1. 90 1. 90 32. 52 14. 41 6. 93 0. 57 0. 59 0. 63 0. 21 0. 14 0. 18 70. 27 72. 26 70. 03 44. 47 16. 91 32. 86 0. 33 0. 24 0. 24 0. 25 0. 19 0. 20 8. 94 1. 22 2. 65 43. 06 8. 14 6. 64 0. 43 0. 59 0. 58 0. 28 0. 14 0. 13 70. 10 71. 99 67. 09 42. 23 14. 30 13. 22 0. 39 0. 28 0. 23 0. 49 0. 19 0. 12 18. 06 1. 87 2. 02 79. 75 14. 47 4. 11 0. 50 0. 59 0. 58 0. 28 0. 14 0. 13 71. 79 72. 52 67. 55 43. 43 16. 87 10. 07 0. 34 0. 25 0. 24 0. 4 0. 18 0. 08 Source: Authors' calculation based on BankScope Data. Note: The 1st and 99th percentile of the distribution of the z-score variable is excluded. 21 Table 2. Decomposition of Z-Scores for the Full Sample 1994–2004 Z-score Equity to Assets (percent) ROA (percent) Standard deviation of ROA (% points) All banks Commercial Cooperative Savings Large banks Commercial Cooperative Savings Small banks Commercial Cooperative Savings 50. 0 60. 8 60. 1 12. 13 7. 19 9. 29 0. 94 0. 39 0. 55 0. 59 0. 28 0. 35 29. 6 46. 6 47. 3 7. 06 5. 62 5. 91 0. 69 0. 28 0. 48 0. 71 0. 37 0. 35 46. 5 56. 9 55. 4 11. 21 6. 84 7. 99 0. 90 0. 37 0. 53 0. 65 0. 1 0. 35 Source: Authors’ calculations based on BankScope data. Note: To avoid possible outliers in this sample, the 1st and 99th percentile of the distribution of each variable is excluded. Large (Small) banks are defi ned as having assets larger (smaller) than 1 billion USD. 22 Table 3. Decomposition of Z-Scores for Selected Countries, 1994–2004 Z-score Equity to Assets (percent) ROA (percent) Standard deviation of ROA (percent) Austria Commercial Cooperative France Commercial Cooperative Germany Commercial Cooperative Italy Commercial Cooperative Japan Commercial Cooperative Netherlands Commercial Cooperative UK Commercial Cooperative 28. 70. 9 15. 95 6. 83 1. 01 0. 45 1. 708 0. 122 44. 4 82. 2 13. 31 5. 44 1. 07 0. 29 0. 471 0. 067 25. 8 33. 5 4. 47 5. 43 -0. 16 -0. 04 0. 949 1. 001 30. 7 40. 3 11. 44 12. 89 0. 43 0. 88 1. 246 0. 465 37. 3 78. 8 12. 05 5. 08 0. 48 0. 28 1. 197 0. 124 17. 8 42. 1 10. 69 6. 64 0. 39 0. 58 2. 088 0. 223 33. 8 34. 3 11. 20 6. 02 0. 70 0. 39 0. 846 0. 407 Source: Authors’ calculations based on BankScope data. Note: To avoid possible outliers in this sample, the 1st and 99th percentile of the distribution of each variable is excluded. All selected count ries have a market share of cooperative banks higher than 5%. 23Table 4. Sensitivity of the Z-score Decomposition Bank type Commercial Cooperative Savings Return on assets Downward volatility (percentage points) Upward volatility (percentage points) Z-scores Downward volatility (percentage points) Upward volatility (percentage points) Equity to assets Downward volatility (percentage points) Upward volatility (percentage points) -0. 46 0. 38 -0. 19 0. 20 -0. 21 0. 21 -3. 79 3. 99 -3. 47 3. 85 -3. 78 4. 12 -1. 53 1. 69 -0. 53 0. 58 -0. 78 0. 81 Distribution of Z-scores (% of observations in banks of the same type) Less than 0 0. 37 0 to 10 13. 65 10 to 20 14. 74 20 to 30 13. 2 More than 30 57. 52 0. 62 9. 20 10. 72 13. 04 66. 42 0. 13 6. 38 9. 85 14. 80 68. 84 Source: Authors' calculation based on BankScope data. Note: To eliminate outliers, the 1st and and 99th percentiles of the distribution of the downward (upward) volatility variables were excluded. 24 Table 5. Fitch's Long-Term R atings of the Banks in Sample All Banks No. Percent 2 0. 17 16 1. 36 26 2. 21 72 6. 11 781 66. 30 77 6. 54 64 5. 43 40 3. 40 35 2. 97 29 2. 46 10 0. 85 2 0. 17 15 1. 27 4 0. 34 3 0. 25 2 0. 17 1,178 100. 00 Commercial No. Percent 2 0. 54 14 3. 75 23 6. 17 66 17. 69 53 14. 21 54 14. 48 39 10. 46 38 10. 9 28 7. 51 24 6. 43 7 1. 88 2 0. 54 14 3. 75 4 1. 07 3 0. 80 2 0. 54 373 100 Cooperative No. Percent 0 0. 00 1 0. 15 2 0. 29 2 0. 29 664 96. 37 9 1. 31 7 1. 02 0 0. 00 2 0. 29 1 0. 15 0 0. 00 0 0. 00 1 0. 15 0 0. 00 0 0. 00 0 0. 00 689 100. 00 AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BTotal Note: All 637 cooperative banks in Germany have a Fitch rating of A+. 25 Table 6. Correlation Coefficients between the Z-Score and Selected Key Variables, 1994–2004 Commercial Bank Dummy Cooperative Bank Dummy Savings Bank Dummy Share Coop Share Coop* Commercial Full Sample OECD -0. 060*** 0. 026*** 0. 051*** -0. 041*** -0. 38*** Large Banks OECD -0. 225*** 0. 115*** 0. 147*** 0. 100*** - 0. 168*** Small Banks OECD -0. 047*** 0. 013*** 0. 050*** -0. 034*** -0. 105*** EU12 -0. 244*** 0. 178*** 0. 041*** 0. 128*** -0. 184*** Coop5 -0. 221*** 0. 137*** 0. 066*** 0. 068*** -0. 195*** Commercial Bank Dummy Cooperative Bank Dummy Savings Bank Dummy Share Coop Share Coop* Commercial EU12 -0. 340*** 0. 115*** 0. 236*** 0. 130*** -0. 241*** Coop5 -0. 288*** 0. 091*** 0. 208*** 0. 085*** -0. 245*** Commercial Bank Dummy Cooperative Bank Dummy Savings Bank Dummy Share Coop Share Coop* Commercial EU12 -0. 179*** 0. 160*** -0. 008*** 0. 098*** -0. 144***Coop5 -0. 155*** 0. 119*** 0. 001 0. 052*** -0. 141*** Note: * significant at 10%; ** significant at 5%; *** significant at 1%. 26 Table 7. Regression Results (Full Sample) OECD (1) Assets (-1) Loans/ Assets (-1) Cost-Income Ratio (-1) Income Diversity (-1) Income Diversity* Cooperative Bank Dummy (-1) Herfindahl Index (-1) Commercial Bank Dummy Savings Bank Dummy Share of Cooperatives (-1) Share of Cooperatives * Commercial Bank Dummy (-1) GDP Growth (-1) Inflation (-1) Exchange Rate Appreciation (-1) Real Long-Term Interest Rate (-1) Constant Observations R-squared Clustered by Banks Type -0. 026 (0. 000)*** -13. 123 (0. 00)*** -0. 185 (0. 000)*** -19. 299 (0. 000)*** 23. 107 (0. 000)*** -0. 005 (0. 000)*** -4. 79 (0. 029)** -2. 547 (0. 196) -0. 094 (0. 324) -0. 386 (0. 000)*** -0. 246 (0. 037)** 0. 44 (0. 006)*** 0. 043 (0. 009)*** -0. 398 (0. 004)*** 39. 898 (0. 000)*** 78,298 0. 103 14,025 OLS (2) -0. 013 (0. 023)** -3. 225 (0. 000)*** -0. 001 (0. 572) -1. 132 (0. 004)*** 3. 67 (0. 000)*** 0. 001 (0. 002)*** (3) -0. 027 (0. 073)* 3. 802 (0. 318) -0. 044 (0. 038)** -3. 4 (0. 155) 6. 877 (0. 184) -0. 005 (0. 005)*** -22. 685 (0. 000)*** -7. 437 (0. 003)*** 0. 278 (0. 033)** -0. 027 (0. 866) -0. 081 (0. 786) -1. 901 (0. 000)*** 0. 34 (0. 096)* 0. 597 (0. 145) 55. 966 (0. 000)*** 22,665 0. 112 3,239 OLS EU12 (4) -0. 043 (0. 000)*** -1. 996 (0. 347) -0. 009 (0. 076)* -0. 742 (0. 184) 4. 534 (0. 000)*** -0. 0 004 (0. 537) (5) -0. 019 (0. 001)*** 3. 461 (0. 349) -0. 078 (0. 000)*** -4. 12 (0. 107) 13. 418 (0. 004)*** 0. 001 (0. 643) -17. 143 (0. 000)*** -4. 314 (0. 080)* 0. 086 (0. 557) -0. 003 (0. 989) 1. 002 (0. 000)*** 0. 091 (0. 789) 0. 061 (0. 015)** -0. 006 (0. 987) 22. 558 (0. 000)*** 25,241 0. 106 3,723 OLS Coop5 (6) -0. 015 (0. 028)** 0. 882 (0. 705) -0. 008 (0. 032)** -0. 858 (0. 077)* 2. 585 (0. 001)*** 0. 005 (0. 000)*** 0. 114 (0. 01)*** 0. 019 (0. 699) -0. 14 (0. 001)*** 0. 133 (0. 009)*** 0. 068 (0. 000)*** 0. 184 (0. 000)*** 46. 652 (0. 000)*** 78,298 0. 058 14,025 FE 0. 127 (0. 007)*** -0. 101 (0. 093)* 0. 012 (0. 924) -0. 427 (