THE CONSEQUENCES OF GROWTH MAXIMISATION AND EXPENSE PREFERENCE POLICIES OF MANAGERS: EVIDENCE FROM UK BUILDING SOCIETIES. A STUDY OF THE CAUSES OF PROFIT INSUFFICIENCY DURING A PERIOD OF INCREASED COMPETITION USING DISCRIMINANT ANALYSIS

It has often been argued that the monopolistic position of building societies and the lack of constraints on policies of their managers has brought inefficiencies and managerial utility maximising results. This may be seen in society growth policies and their expense preference behaviour. When there is increased competition affecting margins some building societies may earn insufficient profits so as to threaten their financial stability. The present study uses multiple discriminant analysis to study the period 1978–1980 and verifies the hypothesis that both growth and expense preferences caused profit insufficiency which could lead to financial distress.