Organizational Form, Business Strategies and the Demise of Demutualized Building Societies in the UK, 1987-2007

Shiwakoti, Radha K. and Iqbal, Abdullah and Funnell, Warwick N. (2018) Organizational Form, Business Strategies and the Demise of Demutualized Building Societies in the UK, 1987-2007. Journal of Banking and Finance, . ISSN 0378-4266. (doi:https://doi.org/10.1016/j.jbankfin.2018.05.002) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided)

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Abstract

This paper examines and compares the performance and operating behaviour of demutualized building societies (DBS) over the period of 1987-2007 relative to mutual building societies and major retail banks in the UK. We find significant differences in their operating behaviour over this period and show that the operating behaviour varies with the form of ownership. We also investigate the potential causes of the failure of all DBS in the UK. Our findings show significant changes in the funding and lending strategies of DBS which expose them to higher risk. We also find a strained capital formation and deteriorating capital base of DBS in the post-conversion period. Our results suggest that changes in the business model, diminished capital base and, in part, failing to get all the necessary funding from the wholesale market at the time of the financial crisis of 2007-08 contributed to the demise of a once a successful financial institution in the UK.

Item Type: Article
Uncontrolled keywords: Building societies; Mortgage banks; Banks; Organizational form; Demutualization; Financial crisis
Subjects: H Social Sciences > HF Commerce > HF5351 Business
H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School
Faculties > Social Sciences > Kent Business School > Accounting and Finance
Depositing User: Abdullah Iqbal
Date Deposited: 28 Nov 2017 13:39 UTC
Last Modified: 14 Aug 2018 09:48 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/64829 (The current URI for this page, for reference purposes)
Iqbal, Abdullah: https://orcid.org/0000-0002-3013-1007
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