Loan book management is important to community credit union survival, particularly in deprived localities. Consistent with agency theory, prior studies of credit unions report an association among individual monitoring mechanisms, trade association monitoring, and female board representation, respectively, and reduced loan losses. This study provides a more nuanced understanding by investigating the moderating influence of these monitoring mechanisms on the relationship between loan losses and deprivation and by considering the effect of bundle combinations of different levels of the two monitoring mechanisms on loan losses. The results reveal that credit unions subject to trade association monitoring have the lowest loan losses. However, in the absence of trade association monitoring, female board representation has a moderating effect on loan losses as deprivation increases. Finally, trade association monitoring and female board representation have a substitutive, rather than a complementary effect on loan losses.
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The authors acknowledge the excellent advice and suggestions received from the anonymous reviewers and the editor. Special thanks also to Jeffrey Wooldridge for assisting in the application of CRE. The authors, however, take full responsibility for any remaining errors. Finally, we thank participants for feedback at seminar presentations and conferences. The author(s) disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: The authors are grateful to the Chartered Accountant Ireland Education Trust for funding in support of this study.
© The Author(s) 2021.
- credit unions
- interaction effects
- loan losses
- nonprofit monitoring mechanisms