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Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives

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  • Cabo, Paula
  • Rebelo, Joao
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    Abstract

    Over the last decade Portuguese Agricultural Credit Cooperatives (ACCs) have increasingly face survival challenges related to their difficulty in gathering equity. The main source of ACCs equity is the net benefit; thus, understanding how ACCs governance can work on correcting bad economic performance is of crucial importance to overcome this constraint. The main objective of this paper is to describe the governance control mechanisms in the ACCs. Five governance mechanisms are identified: board and chairman change (internal mechanisms), central ACC intervention by an agent or by management board replacement and merger. Empirical analysis proved that the internal governance mechanisms activity is not related to the ACC performance. Additionally: (a) ACCs with a central ACC agent and merged ACCs hold a weaker credit management and a heavy administrative costs structure and profitability problems; and (b) ACCs with a management board replacement by the central ACC hold a weaker credit management and present solvency problems.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24623.

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    Date of creation: 2005
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    Handle: RePEc:ags:eaae05:24623

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    Keywords: cooperatives; credit; governance; multinominal logit; Agricultural Finance; D23; L29;

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    12. Staatz, John M., 1987. "Recent Developments in the Theory of Agricultural Cooperation," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 2.
    13. Paula Cabo & Joao Rebelo, 2005. "Why do Agricultural Credit Cooperatives Merge? The Portuguese Experience," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 76(3), pages 491-516, 09.
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