The Korea Local Administration Review

As a financial cooperative, credit unions have both economic goals and social goals and thus they have great influences on local community and economy. Despite repeated agency problems including poor management, however, external control mechanisms to prevent those problems seem still insufficient. Assuming that members’ participation would play as a democratic internal control mechanism, this study investigated the effects of participation on trust in the union mediated by responsibility. The results of analyses indicated that members’ participation would promote the union’s responsibility, and further increase in responsibility would promote trust in the union. Specifically, participation increased the union’s legal, economic, ethical, and discretionary responsibility. In addition, those responsibility components had significant influences on trust. This study provided important insights into the internal control of financial cooperatives.

□ Keywords: financial cooperatives, responsibility, participation, trust