A 'Friend and Advisor': Management, Auditors, and Confidence In Germany's Credit Cooperatives, 1889-1914

42 Pages Posted: 28 Jun 2001

See all articles by Timothy W. Guinnane

Timothy W. Guinnane

Yale University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 2001

Abstract

Economic enterprises face two, related, managerial problems: effective management of the enterprise's activities, and communicating to outsiders that the enterprise is in fact well-run. These problems were especially difficult in the credit cooperative movement that grew up in Germany in the second half of the nineteenth century. These successful cooperatives thrived because they could harness the information and ties among local people to obviate many of the problems that faced other lenders. Doing so required managers who were themselves local people. Yet few if any locals had any banking experience, and most were not even familiar with basic accounting methods. These local managers created internal management problems and enhanced outside suspicion of the cooperatives as banking enterprises. The methods developed to overcome these problems relied on a combination of local initiative and regional assistance that was typical of the movement as a whole. The movement's ability to train its own talent suggests a broader impact not captured by statistics on membership or financial assets.

Keywords: Credit cooperative; External audit

JEL Classification: G2, N23, O16, M40, M46, M49

Suggested Citation

Guinnane, Timothy W., A 'Friend and Advisor': Management, Auditors, and Confidence In Germany's Credit Cooperatives, 1889-1914 (May 2001). Available at SSRN: https://ssrn.com/abstract=275185

Timothy W. Guinnane (Contact Author)

Yale University - Department of Economics ( email )

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HOME PAGE: http://sites.google.com/site/timothywguinnanec/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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