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Cooperative Mergers and Acquisitions: The Role of Capital Constraints

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  • Richards, Timothy J.
  • Manfredo, Mark R.

Abstract

Several explanations for merger activity exist for publicly traded firms, but none consider the unique aspects of cooperatives. This study develops a test for the hypothesis that cooperative consolidation occurs primarily in response to capital constraints associated with a lack of access to external equity capital. An empirical model estimates the shadow value of long-term investment capital within a multinomial logit model of transaction choice in a panel data set of the 100 largest U.S. cooperatives. The results substantially confirm the capital-constraint hypothesis. Thus, the primary implication is that internal growth may be a more viable alternative to consolidation if new forms of cooperative financing are developed.

Suggested Citation

  • Richards, Timothy J. & Manfredo, Mark R., 2003. "Cooperative Mergers and Acquisitions: The Role of Capital Constraints," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 28(1), pages 1-17, April.
    • Handle: RePEc:ags:jlaare:30718
    DOI: 10.22004/ag.econ.30718
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    Cited by:

    1. Justine Valette & Paul Amadieu & Patrick Sentis, 2018. "Les coopératives résistent-elles mieux ? Une analyse de survie des coopératives agricoles françaises," Post-Print hal-01990418, HAL.
    2. Juan Juliá-Igual & Elena Meliá-Martí & Gabriel García-Martinez, 2012. "Strategies developed by leading EU agrifood cooperatives in their growth models," Service Business, Springer;Pan-Pacific Business Association, vol. 6(1), pages 27-46, March.
    3. Cheng, Yuxi & Katchova, Ani, 2018. "Cooperatives capital structure adjustment during the agricultural downturn," 2018 Annual Meeting, August 5-7, Washington, D.C. 273788, Agricultural and Applied Economics Association.
    4. Manfredo, Mark R. & Richards, Timothy J. & McDermott, Scott, 2003. "Agricultural Cooperatives And Risk Management:Impact On Financial Performance," 2003 Annual meeting, July 27-30, Montreal, Canada 22217, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Nathan Smart & Brian C. Briggeman & Jesse Tack & Edward Perry, 2019. "Examining U.S. grain marketing and farm supply cooperatives’ sustainable growth rates," Agribusiness, John Wiley & Sons, Ltd., vol. 35(4), pages 625-638, October.
    6. Musson, Anne & Rousselière, Damien, 2020. "Identifying the impact of crisis on cooperative capital constraint. A short note on French craftsmen cooperatives," Finance Research Letters, Elsevier, vol. 35(C).
    7. Grashuis, Jasper & Cook, Michael, 2016. "Governance and Performance in the U.S. Agri-Food Industry: A Comparative Study of Firms and Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235676, Agricultural and Applied Economics Association.
    8. Jasper GRASHUIS & Ye SU, 2019. "A Review Of The Empirical Literature On Farmer Cooperatives: Performance, Ownership And Governance, Finance, And Member Attitude," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 90(1), pages 77-102, March.
    9. Secor, William & Boland, Michael A., 2021. "Section 199 and Agribusiness Investment Decisions," 2021 Annual Meeting, August 1-3, Austin, Texas 313910, Agricultural and Applied Economics Association.
    10. Grashuis, Jasper & Cook, Michael, 2016. "Capital, Ownership, and Governance: Analyzing the Structure of U.S. Farmer Cooperatives," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235677, Agricultural and Applied Economics Association.

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