IDEAS home Printed from https://ideas.repec.org/a/caa/jnlage/v66y2020i1id151-2019-agricecon.html
   My bibliography  Save this article

The effects of capital constraints on the growth of agricultural cooperatives

Author

Listed:
  • Meng-Fen Yen

    (Center for Research in Econometric Theory and Applications, National Taiwan University, Taipei, Taiwan)

  • Mario J. Miranda

    (Department of Agricultural, Environmental and Development Economics, The Ohio State University, Columbus, OH, USA)

  • Ani Katchova

    (Department of Agricultural, Environmental and Development Economics, The Ohio State University, Columbus, OH, USA)

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.

Suggested Citation

  • Meng-Fen Yen & Mario J. Miranda & Ani Katchova, 2020. "The effects of capital constraints on the growth of agricultural cooperatives," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 66(1), pages 27-33.
    • Handle: RePEc:caa:jnlage:v:66:y:2020:i:1:id:151-2019-agricecon
    DOI: 10.17221/151/2019-AGRICECON
    as

    Download full text from publisher

    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/151/2019-AGRICECON.html
    Download Restriction: free of charge
    File URL: http://agricecon.agriculturejournals.cz/doi/10.17221/151/2019-AGRICECON.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.17221/151/2019-AGRICECON?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Barton, David G. & Boland, Michael A. & Chaddad, Fabio Ribas & Eldon, Eversull, 2011. "Current Challenges in Financing Agricultural Cooperatives," Choices: The Magazine of Food, Farm, and Resource Issues, Agricultural and Applied Economics Association, vol. 26(3), pages 1-5.
    2. Blandina Oliveira & Adelino Fortunato, 2006. "Firm Growth and Liquidity Constraints: A Dynamic Analysis," Small Business Economics, Springer, vol. 27(2), pages 139-156, October.
    3. 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.
    4. Murray E. Fulton & Joan R. Fulton & J. Stephen Clark & Claudia Parliament, 1995. "Cooperative growth: Is it constrained?," Agribusiness, John Wiley & Sons, Ltd., vol. 11(3), pages 245-261.
    5. Ziran Li & Keri L Jacobs & Georgeanne M Artz, 2015. "The cooperative capital constraint revisited," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(2), pages 253-266, July.
    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.
    7. Zvi Lerman & Claudia Parliament, 1993. "Financing Growth in Agricultural Cooperatives," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(3), pages 431-441.
    8. Chang, Ya-Kai & Chou, Robin K. & Huang, Tai-Hsin, 2014. "Corporate governance and the dynamics of capital structure: New evidence," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 374-385.
    9. Ziran Li & Keri L Jacobs & Georgeanne M Artz, 2015. "The cooperative capital constraint revisited," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 75(2), pages 253-266, July.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. 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.
    4. repec:vuw:vuwscr:18942 is not listed on IDEAS
    5. Elena Meliá‐Martí & Deolinda Meira & José Corberá Martínez & Rui Bertuzi, 2023. "Cross‐border cooperation: A response to the challenges facing agri‐food cooperatives in Southern European countries," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 94(3), pages 981-1006, September.
    6. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 18942, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Li, Ziran & Jacobs, Keri L. & Artz, Georgeanne M., 2012. "The Relative Capital Structure of U.S. Agricultural Grain and Supply Cooperatives and Investor Owned Firms," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124755, Agricultural and Applied Economics Association.
    8. Quader, Syed Manzur, 2017. "Differential effect of liquidity constraints on firm growth," Review of Financial Economics, Elsevier, vol. 32(C), pages 20-29.
    9. Coad, Alex & Segarra, Agustí & Teruel, Mercedes, 2013. "Like milk or wine: Does firm performance improve with age?," Structural Change and Economic Dynamics, Elsevier, vol. 24(C), pages 173-189.
    10. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2010. "Are small firms more sensitive to financial variables?," Working Papers 2072/151623, Universitat Rovira i Virgili, Department of Economics.
    11. Chaddad, Fabio Ribas, 2006. "Investment Constraints in Agricultural Cooperatives: Theory, Evidence and Solutions," 44th Congress, July 23-27, 2006, Fortaleza, Ceará, Brazil 143259, Sociedade Brasileira de Economia, Administracao e Sociologia Rural (SOBER).
    12. Isaac Marcelin & Daniel Brink & David Oluwatosin Fadiran & Hammed Adedeji Amusa, 2019. "Subsidized labour and firms: Investment, profitability, and leverage," WIDER Working Paper Series wp-2019-50, World Institute for Development Economic Research (UNU-WIDER).
    13. Gardebroek, Cornelis & Turi, Kedir N. & Wijnands, Jo H.M., 2009. "Growth Dynamics of Dairy Processing Firms in the European Union," 2009 Conference, August 16-22, 2009, Beijing, China 51473, International Association of Agricultural Economists.
    14. Giulio Bottazzi & Angelo Secchi & Federico Tamagni, 2014. "Financial constraints and firm dynamics," Small Business Economics, Springer, vol. 42(1), pages 99-116, January.
    15. Achilleas Kontogeorgos & Panagiota Sergaki & Anastasia Kosma & Vassiliki Semou, 2018. "Organizational Models for Agricultural Cooperatives: Empirical Evidence for their Performance," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1123-1137, December.
    16. Stephane Verani, 2018. "Aggregate Consequences of Dynamic Credit Relationships," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 29, pages 44-67, July.
    17. Massimo Molinari & Silvia Giannangeli & Giorgio Fagiolo, 2016. "Financial Structure and Corporate Growth: Evidence from Italian Panel Data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 45(3), pages 303-325, November.
    18. Filipe Silva & Carlos Carreira, 2012. "Measuring Firms’ Financial Constraints: A Rough Guide," Notas Económicas, Faculty of Economics, University of Coimbra, issue 36, pages 23-46, December.
    19. Cristiana Donati, 2017. "Service industries, growth dynamics and financial constraints," The Service Industries Journal, Taylor & Francis Journals, vol. 37(3-4), pages 190-205, March.
    20. Syed Manzur Quader, 2017. "Differential effect of liquidity constraints on firm growth," Review of Financial Economics, John Wiley & Sons, vol. 32(1), pages 20-29, January.
    21. Antoine Godin & Stephen Kinsella, 2012. "Leverage, liquidity and crisis: A simulation study," ASSRU Discussion Papers 1205, ASSRU - Algorithmic Social Science Research Unit.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:caa:jnlage:v:66:y:2020:i:1:id:151-2019-agricecon. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ivo Andrle (email available below). General contact details of provider: https://www.cazv.cz/en/home/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.