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Risk And Equity In Agricultural Cooperatives

Author

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  • Parliament, Claudia
  • Lerman, Zvi
  • Huseby, Dana

Abstract

This research examines the effects of risk-related factors on the proportion of equity held by agricultural cooperatives. The empirical analysis indicates that capital structure is significantly affected by the level and variation of profitability, commodities handled, and market function. The proportion of equity is not affected by size or pooling. Contrary to expectations, the results indicate an inverse relation between profit variability and the proportion of equity. Cooperatives rely on profit for equity accumulation through retained earnings. If this source of equity is unstable, the cooperative may not be able to generate sufficient equity causing the estimated inverse relationship.

Suggested Citation

  • Parliament, Claudia & Lerman, Zvi & Huseby, Dana, 1991. "Risk And Equity In Agricultural Cooperatives," Staff Papers 14032, University of Minnesota, Department of Applied Economics.
    • Handle: RePEc:ags:umaesp:14032
    DOI: 10.22004/ag.econ.14032
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    References listed on IDEAS

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    1. Schrader, Lee F., 1989. "Equity Capital and Restructuring of Cooperatives as Investor-Oriented Firms," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 4, pages 1-13.
    2. Staatz, John M., 1989. "Farmer Cooperative Theory: Recent Developments," Research Reports 52017, United States Department of Agriculture, Rural Development.
    3. Sporleder, Thomas L. & Malick, William M. & Tough, Cynthia H., 1988. "Relationship of Pooling to Equity Capital and Current Assets of Large Producer Marketing Cooperatives," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 3, pages 1-11.
    4. Zvi Lerman & Claudia Parliament, 1991. "Size and industry effects in the performance of agricultural cooperatives," Agricultural Economics, International Association of Agricultural Economists, vol. 6(1), pages 15-29, October.
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    2. Jeffrey P. Katz, 1997. "Managerial behavior and strategy choices in agribusiness cooperatives," Agribusiness, John Wiley & Sons, Ltd., vol. 13(5), pages 483-495.
    3. Srinivasan, R., 2011. "The Cost of Risky Debt in Cooperatives," Journal of Cooperatives, NCERA-210, vol. 25, pages 1-16.
    4. Russo, Carlo & Sabbatini, Massimo, 2005. "Incentives to Efficient Investment Decisions in Agricultural Cooperatives," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24455, European Association of Agricultural Economists.
    5. Neves, Mateus de Carvalho & Braga, Marcelo J., 2015. "Assessing public policy impacts: one application of Cooperatives Participating of Agricultural Cooperatives Capitalization Program (Procap-Agro) in Brazil," 2015 Conference, August 9-14, 2015, Milan, Italy 212528, International Association of Agricultural Economists.
    6. Sporleder, Thomas L. & Goldsmith, Peter D., "undated". "The Risk Mitigation Aspects of Agricultural Cooperatives," Cooperatives: Their Importance in the Future Food and Agricultural System - FAMC 1990 Conference 265910, Food and Agricultural Marketing Consortium (FAMC).
    7. Franken, Jason R.V. & Cook, Michael L., 2015. "Investment Constraints in Agricultural Cooperatives," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205427, Agricultural and Applied Economics Association.

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