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The Effect of Capital Constraints on the Growth of Agricultural Cooperatives

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  • Yen, Meng-Fen
  • Katchova, Ani

Abstract

In this paper, we examine how capital constraints affect the growth of US agricultural cooperatives. Employing a panel data set obtained from CoBank on 669 US agricultural cooperatives over 5 years, we employ system-generalised method of moments to estimate models of cooperative growth that incorporate long-term debt, allocated reserves, and retained earnings as continuous measures of capital constraints. We find that long-term debt use and size have positive impacts on cooperative growth, in violation of Gibrat's law, which posits that firm size and firm growth are independent. In particular, cash flow, unallocated equity and long-term debt financing are critical contributors to asset growth for small and medium-sized cooperatives.
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  • Yen, Meng-Fen & Katchova, Ani, 2016. "The Effect of Capital Constraints on the Growth of Agricultural Cooperatives," 2016 NCERA-210 Cooperatives Annual Meeting, November 2, Minneapolis, Minnesota 265451, NCERA-210 Improving the management and effectiveness of cooperatively owned business organizations.
    • Handle: RePEc:ags:ncer16:265451
    DOI: 10.22004/ag.econ.265451
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    1. Giorgio Fagiolo & Alessandra Luzzi, 2006. "Do liquidity constraints matter in explaining firm size and growth? Some evidence from the Italian manufacturing industry," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 15(1), pages 1-39, February.
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    6. Zvi Lerman & Claudia Parliament, 1990. "Comparative performance of cooperatives and investor-owned firms in US food industries," Agribusiness, John Wiley & Sons, Ltd., vol. 6(6), pages 527-540.
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