Indirect member representation in cooperatives and dividend policy

Abstract In this paper, we examine the effects of introducing indirect democratic representation of cooperative members on the policies of cooperatives. For cooperative banks in a large federal state in Germany, we demonstrate that having a representative assembly in which members are only indirectly represented leads to a reduction in dividends. From a theoretical perspective, however, this may contribute to the cooperative bank’s long-term economic success and the interests of younger and future members.