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Why do Agricultural Credit Cooperatives Merge? The Portuguese Experience

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  • Paula Cabo
  • Joao Rebelo
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    Abstract

    Over the last decade, increasing financial problems in the Portuguese Agricultural Credit Cooperatives (ACCs), mainly difficulty in gathering equity, have forced them to pursue an intensive merger activity. This paper describes the economic reasons that have led the ACCs to merge, and analyses the ex post merger impact on their economic performance. The results show that: (a) incorporating ACCs are larger, more profitable and hold a better credit management; (b) incorporated ACCs are smaller, face difficulties in reaching a minimum efficient scale and have weaker credit management as well as leverage problems; and (c) merged ACCs have a heavy administrative cost structure and also face profitability problems. Regarding the mergers' ex post impact on the ACCs performance, we find no positive influence on cost reduction, credit management and solvency ratio. Copyright CIRIEC, 2005.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Annals of Public & Cooperative Economics.

    Volume (Year): 76 (2005)
    Issue (Month): 3 (09)
    Pages: 491-516

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    Handle: RePEc:bla:annpce:v:76:y:2005:i:3:p:491-516

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    Cited by:
    1. Cabo, Paula & Rebelo, Joao, 2006. "Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25338, International Association of Agricultural Economists.
    2. Cabo, Paula & Rebelo, Joao, 2005. "Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24623, European Association of Agricultural Economists.
    3. Wim Fonteyne, 2007. "Cooperative Banks in Europe--Policy Issues," IMF Working Papers 07/159, International Monetary Fund.

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