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Alternative Arrangement for the Residual Control Rights in Cooperative Financial Organizations——The Risk Matching Model and the Case of Bange Village

【Authors】
LIU Xichuan & ZHONG Miqi
【WorkUnit】
Zhejiang Sci-Tech University, 310018.
【Abstract】

In addition to the sponsor control model in which the sponsors are responsible for exercising the remaining control rights, there exists another possibility for the arrangement of residual control rights of cooperative financial organizations, in which the residual control rights are implemented by the members according to the principle of risks and rights correspondence (referred to as the decentralized model). Under a framework of the allocation and implementation of residual control rights of cooperative financial organizations,this paper empirically analyzes the arrangement of residual control rights of Xincheng Rural Credit Mutual Help Professional Cooperative of Bange Village and its characteristics. This paper initially verifies the logical feasibility of the decentralized model, that is, the decentralized model can allocate residual control rights among the members based on equity participation, and decentralize the implementation of residual control rights through the member guarantee mechanisms which should be explicit and specific. The theoretical significance of the decentralized model is that it reveals more than one option exists for the implementation of residual control rights. At the end, the paper reflects on existing problems in the practice and policy about cooperative financial organizations and puts forward pertinent suggestions from the perspective of the “divisibility” of residual control rights.


JEL:O12, O16, O17

【KeyWords】
Cooperative Finance, Credit Cooperative Organizations, Decentralization, Residual Control Rights, Risk Control, Credit Guarantee