Analysis of size and financial efficiency relationship of employees’ credit cooperative societies in Karnataka

This study examines whether institutional size significantly influences the financial efficiency of Employees’ Credit Cooperative Societies (ECCSs) in Karnataka. Using a balanced panel dataset of four cooperative societies observed over the period 2019-2020 to 2023-2024, the study employs panel data regression techniques and one-way analysis of variance (ANOVA) to evaluate the size-efficiency relationship. Financial efficiency is measured using Return on Assets (ROA) and Return on Equity (ROE), while institutional size is proxied by total assets and total deposits. Both pooled and panel estimators are applied, and the Hausman specification test is used to determine the appropriate model. The empirical results consistently indicate that institutional size does not exert a statistically significant impact on financial efficiency across most model specifications. Only weak and marginal evidence is found for a positive relationship between deposit size and ROE, which is not robust across estimators. The ANOVA results further confirm the absence of significant efficiency differences across societies classified into small, medium, and large size groups. Overall, the findings challenge the conventional assumption that larger cooperative institutions are inherently more efficient and suggest that financial performance in employee-based cooperatives is primarily driven by internal governance structures, managerial efficiency, and operational practices rather than by scale alone.