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Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives

  • Cabo, Paula
  • Rebelo, Joao
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    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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    File URL: http://purl.umn.edu/25338
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    Paper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25338.

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    Date of creation: 2006
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    Handle: RePEc:ags:iaae06:25338
    Contact details of provider: Web page: http://www.iaae-agecon.org/
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    1. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
    2. 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.
    3. Blackwell, David W. & Brickley, James A. & Weisback, Michael S., 1994. "Accounting information and internal performance evaluation : Evidence from Texas banks," Journal of Accounting and Economics, Elsevier, vol. 17(3), pages 331-358, May.
    4. Kevin Davis, 2001. "Credit Union Governance and Survival of the Cooperative Form," Journal of Financial Services Research, Springer, vol. 19(2), pages 197-210, April.
    5. Anderson, Christopher W. & CampbellII, Terry L., 2000. "Restructuring the Japanese banking system Has Japan gone far enough?," International Review of Financial Analysis, Elsevier, vol. 9(2), pages 197-218.
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