The Effects of Credit Union Service Organization on Credit Union Performance

Abstract

This study examines the effects of credit union service organizations (CUSOs) on credit union performance for the period 2009-2012. I use random effects models with Mundlak (1978) correction to estimate the relationships between CUSOs and credit union performance variables. Credit union participation in CUSOs grew over the sample period and participation increases with credit union size. CUSO participation is divided based on whether the credit union wholly owned the CUSO or was required to collaborate with other institutions. I find evidence that wholly-owned CUSOs increase the interest rate spread and several significant relationships between CUSO participation and the performance variables that are dependent upon CUSO type. The results of the study support existing findings that small organizations are reluctant to give up autonomy through diversification and offer insight on which CUSOs provide benefits to credit unions and their members.