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Financial leverage and agency costs in agricultural cooperatives

Author

Listed:
  • Levi A. Russell
  • Brian C. Briggeman
  • Allen M. Featherstone

Abstract

Purpose - The purpose of this paper is to examine the extent to which agency costs of leverage are present in farm supply and marketing cooperatives. Design/methodology/approach - The authors calculate total factor productivity growth of a sample of agricultural cooperatives from 2005 to 2010 and use regression to determine the effect of leverage on productivity growth. Findings - The findings indicate that there is a small but statistically significantly negative effect of leverage on productivity growth. This indicates that, at the margin, the costs of leverage outweigh the benefits. Originality/value - This paper measures the magnitude of what is typically considered an important financial transaction cost. The authors find that the magnitude of this effect is small, indicating that government policy should address other financial issues.

Suggested Citation

  • Levi A. Russell & Brian C. Briggeman & Allen M. Featherstone, 2017. "Financial leverage and agency costs in agricultural cooperatives," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 77(2), pages 312-323, July.
    • Handle: RePEc:eme:afrpps:afr-09-2016-0074
    DOI: 10.1108/AFR-09-2016-0074
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    Citations

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    Cited by:

    1. Ofori, Eric Makafui & Yeager, Elizabeth & Briggeman, Brian, "undated". "Agricultural Cooperative mergers and efficiency gains: An ex-ante analysis," 2020 Annual Meeting, February 1-4, 2020, Louisville, Kentucky 302323, Southern Agricultural Economics Association.
    2. Erika Ribašauskienė & Diana Šumylė & Artiom Volkov & Tomas Baležentis & Dalia Streimikiene & Mangirdas Morkunas, 2019. "Evaluating Public Policy Support for Agricultural Cooperatives," Sustainability, MDPI, vol. 11(14), pages 1-15, July.
    3. Miranda, Mario J. & Chen, Meng-Fen, 2021. "Leverage, Liquidity and Agricultural Cooperative Profitability," 2021 Annual Meeting, August 1-3, Austin, Texas 314012, Agricultural and Applied Economics Association.
    4. Kuhle Prudence Mnisi & Abdul Latif Alhassan, 2021. "Financial structure and cooperative efficiency: A pecking‐order evidence from sugarcane farmers in Eswatini," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 92(2), pages 261-281, June.
    5. Krishna Dayal Pandey & Tarak Nath Sahu, 2019. "Debt Financing, Agency Cost and Firm Performance: Evidence from India," Vision, , vol. 23(3), pages 267-274, September.
    6. Cadot, Julien & Féral, Arnaud, 2022. "Good Co-ops, Bad Co-ops : Financing Cooperatives in Asymmetric Information," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322550, Agricultural and Applied Economics Association.
    7. Mahdi Salehi & Mohammad Sadegh Adibian & Zakiyeh Sadatifar & Ehsan Khansalar, 2021. "The relationship between corporate governance characteristics and agency costs," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 39(1), pages 199-220.
    8. Cadot, Julien & Féral, Arnaud, 2023. "Cooperative Finance: Signaling Risk with Investment and Retained Earnings," 2023 Annual Meeting, July 23-25, Washington D.C. 335976, Agricultural and Applied Economics Association.

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