What accounts for the differences in the performance of cooperatively-owned
banks in the Dutch financial crisis of the early 1920s? This thesis measures and
explains the (relative) performance of boerenleenbanken (rural Raiffeisen banks)
and middenstandsbanken (urban Schulze-Delitzsch banks) during the Netherlands'
interwar banking crisis by applying various economic methods to new historical
evidence. The thesis asks: (1) what were the effects on risk-taking behaviour of
differences in the religious attitudes of bankers and their customers? (2) what was
the relationship between interbank competition and financial stability? and (3) what
was the consequence of the liability choices made by shareholders for their banks'
continued survival? Using a combination of economic theory, quantitative financial
analysis and qualitative business histories, this thesis finds that: (1) banks serving
small religious groups were less willing, despite being more able, to take on risks
than those serving majority denominations; (2) those banks that were subject to the
lowest competitive pressures enjoyed the most liquid investment portfolios; and (3) the
choice of liability limitation available to bankers in
uenced their balance sheet risks,
for the worse. Together, these findings lead to the conclusion that social, organisational
and institutional factors each explain part of the heterogeneity in the fate of the
Netherlands' cooperative banks during a period which includes unprecedented debt-
deflationary financial turmoil: hence, (1) strict membership criteria and the use of
personal guarantors in loan agreements acted as strong devices to allow banks for
minorities, regardless of their denomination, to screen and monitor their customers;
(2) the switching costs associated with religious affiliation resulted in a competition-
stability tradeoff during periods of extreme distress; and (3) the stakeholders of the
banks which failed were probably less risk-averse than those of banks which did not,
the consequence of endogenous group formation by risk type
