Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Cooperative Firm as Monitored Credit

Contents:

Author Info

  • Hueth, Brent

    (U of Wisconsin)

  • Marcoul, Philippe

    (Iowa State U)

Abstract

We develop a financial-contracting theory of the cooperative fim where production requires three generic tasks: working, managing, and monitoring. Workers provide an intermediate input (or labor directly); managers convert the workers' input into a final output; and directors monitor managers. We model the cooperative firm by letting the workers act also as directors. We show how bundling the labor and monitoring tasks can expand the scope for equilibrium market activity, even when doing so results in a strictly positive deadweight loss. Our theory provides new insight with respect to a substantial theoretical and empirical literature on the "life cycle" of worker-managed firms, and with respect to a complementary body of anecdotal evidence on the causes of worker buyouts and cooperative "degeneration". Our theory is also consistent with differences between the board compensation policies of cooperative firms, where members typically receive little more than travel and per-diem reimbursements, and of investor-owned firms, where members receive substantial pay often based in part on firm financial performance.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.aae.wisc.edu/pubs/sps/pdf/stpap508.pdf
Download Restriction: no

Bibliographic Info

Paper provided by University of Wisconsin, Agricultural and Applied Economics in its series Staff Paper Series with number 508.

as in new window
Length:
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:ecl:wisagr:508

Contact details of provider:
Postal: 427 Lorch Street, Madison, WI 53706-1503
Phone: 608-262-8966
Fax: 608-262-4376
Email:
Web page: http://www.aae.wisc.edu/pubs/sps/
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Patrick W. Schmitz, 2005. "Allocating Control in Agency Problems with Limited Liability and Sequential Hidden Actions," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 318-336, Summer.
  2. Murray Fulton & Konstantinos Giannakas, 2001. "Organizational Commitment in a Mixed Oligopoly: Agricultural Cooperatives and Investor-Owned Firms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(5), pages 1258-1265.
  3. Banerjee, Abhijit V & Besley, Timothy & Guinnane, Timothy W, 1994. "Thy Neighbor's Keeper: The Design of a Credit Cooperative with Theory and a Test," The Quarterly Journal of Economics, MIT Press, vol. 109(2), pages 491-515, May.
  4. Oliver Hart & John Moore, 2004. "Cooperatives vs. Outside Ownership," ESE Discussion Papers 114, Edinburgh School of Economics, University of Edinburgh.
  5. Itoh, Hideshi, 1994. "Job design, delegation and cooperation: A principal-agent analysis," European Economic Review, Elsevier, vol. 38(3-4), pages 691-700, April.
  6. Bonin, John P & Jones, Derek C & Putterman, Louis, 1993. "Theoretical and Empirical Studies of Producer Cooperatives: Will Ever the Twain Meet?," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1290-320, September.
  7. Holmström, Bengt & Tirole, Jean, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," IDEI Working Papers 40, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. Ben-Ner, Avner & Jun, Byoung, 1996. "Employee Buyout in a Bargaining Game with Asymmetric Information," American Economic Review, American Economic Association, vol. 86(3), pages 502-23, June.
  9. Jonathan Levin & Steven Tadelis, 2005. "Profit Sharing and the Role of Professional Partnerships," The Quarterly Journal of Economics, MIT Press, vol. 120(1), pages 131-171, January.
  10. Fabio R. Chaddad & Michael L. Cook, 2004. "Understanding New Cooperative Models: An Ownership–Control Rights Typology," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 26(3), pages 348-360.
  11. Sinclair-Desgagne, Bernard, 1999. "How to Restore Higher-Powered Incentives in Multitask Agencies," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(2), pages 418-33, July.
  12. Roberta Dessï¾’, 2005. "Start-Up Finance, Monitoring, and Collusion," RAND Journal of Economics, The RAND Corporation, vol. 36(2), pages 255-274, Summer.
  13. Gregory K. Dow, 2000. "Allocating Control Over Firms: Stock Markets Versus Membership Markets," Discussion Papers dp00-03, Department of Economics, Simon Fraser University, revised Feb 2000.
  14. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
  15. Laux, Christian, 2001. "Limited-Liability and Incentive Contracting with Multiple Projects," RAND Journal of Economics, The RAND Corporation, vol. 32(3), pages 514-26, Autumn.
  16. Ben-ner, Avner, 1988. "The life cycle of worker-owned firms in market economies : A theoretical analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 10(3), pages 287-313, October.
  17. Philippe Aghion & Patrick Bolton & Jean Tirole, 2004. "Exit Options in Corporate Finance: Liquidity versus Incentives," Review of Finance, Springer, vol. 8(3), pages 327-353.
  18. Dow, Gregory K. & Putterman, Louis, 2000. "Why capital suppliers (usually) hire workers: what we know and what we need to know," Journal of Economic Behavior & Organization, Elsevier, vol. 43(3), pages 319-336, November.
  19. Besanko, David & Kanatas, George, 1993. "Credit Market Equilibrium with Bank Monitoring and Moral Hazard," Review of Financial Studies, Society for Financial Studies, vol. 6(1), pages 213-32.
  20. Steven J. Holland & Robert P. King, 2004. "Trading Mechanisms for New-Generation Cooperative Stock: The Architecture of Organizational Formation and Demise," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1262-1268.
  21. Fulton, Murray E. & Ketilson, Lou Hammond, 1992. "The Role of Cooperatives in Communities: Examples from Saskatchewan," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 7.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Marcoul, Philippe & Veyssiere, Luc, 2008. "A Financial Contracting Approach to the Role of Supermarkets in Farmers' Credit Access," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6366, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ecl:wisagr:508. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.