| Publication |
2006.
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| Summary/Abstract |
Ample empirical evidence suggests that Rural Credit Cooperatives (RCCs), which are the core financial institutions in rural China, are not accountable to their member households. This article argues that this conundrum can be explained by an institutional analysis of the credit cooperatives using the multiple principals-agent framework: the credit cooperatives as agents are accountable to multiple heterogeneous principals¾with multiple conflicting objectives. The multiple principals are (1) the County RCC Unions, which exercise control using the evaluation criteria on which the remuneration of grassroots RCC officers is assessed; (2) local party secretaries, who exert influence through top personnel appointment and dismissal in the credit cooperatives; and (3) member households, which are a "collective" principle. In a multiple-principals scenario, the "collective" principal has weaker control over the agents due to the "collective action" problem.
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