A comparative study of capital structure compositions in grain marketing and input supply cooperatives
Abstract
Purpose
The objective of the study is to explore explanations for the capital structure compositions of farmer cooperatives, which have a unique equity structure with allocated equity as well as unallocated equity.
Design/methodology/approach
Data came from a panel of US grain marketing and input supply cooperatives for the 2010–2020 period. The study is concerned with the proportions of debt, allocated equity and unallocated equity, which requires the application of a fractional multinomial panel model to ensure predictions fall within the observed data range (i.e. 0–1).
Findings
Larger cooperatives have relatively high debt proportions. Diversification of the product portfolio has a positive effect on the debt proportion. Profitability is associated with higher debt proportions in input supply cooperatives and higher allocated equity proportions in grain marketing cooperatives. Over time, the proportion of unallocated equity increased. Overall, some results differ across grain marketing and input supply cooperatives.
Practical implications
Increasing proportions of unallocated equity warrant a debate about the future value of ownership and governance by members of farmer cooperatives.
Originality/value
Previous empirical investigations of the capital structure compositions of cooperatives lacked a distinction between allocated and unallocated equity. Our results show that the proportions of the two equity accounts respond differently to given predictors. Furthermore, much of the prior empirical literature fails to separate cooperatives on the basis of economic activities (i.e. marketing, supply and mixed).
Keywords
Citation
Grashuis, J. and Jacobs, K. (2024), "A comparative study of capital structure compositions in grain marketing and input supply cooperatives", Agricultural Finance Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/AFR-09-2023-0112
Publisher
:Emerald Publishing Limited
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