Stock Banks and Mutual Banks
1988, Journal of Law and Economics
Eric Bennett Rasmusen
Because mutual banks do not allow shareholders to discipline bad managers and so have higher costs, they have been disappearing since bank entry deregulation in the 1980's. They were common before regulation in the 1930's, and are more common in the 19th century. I propose that this is because of the absence of deposit insurance. Depositors wanted safety more than low operating costs, and a mutual manager, in a cushy job he could not lose except by bankrupting his firm, would also value safety.
Rasmusen, Eric Bennett (1988), "Stock Banks and Mutual Banks," Journal of Law and Economics, Vol. 31, October, 395-422. Reprinted in Banking Law Anthology , Volume IV (1988), Bethesda, Md: International Library. (118).