The Effects of Uncertainty and Capital Source on Cooperative Firm Leverage

Gregory McKee and Ryan Larsen

Journal of Rural Cooperation, 2012, vol. 40, issue 2, 18

Abstract: The organizational structure of cooperatives generates a complex link between member equity and overall corporate capital structure. This link is further complicated by macroeconomic and firm-based risks. This paper presents a model of optimal debt ratio, subject to cooperative financial characteristics and capital requirements. We test the proposition that macroeconomic and idiosyncratic uncertainty tend to decrease the optimal debt to total asset ratio. We find that macroeconomic and idiosyncratic risk negatively affect optimal borrowing in cooperatives with sales of $25 million or less. Conversely, no clear relationship exists between these types of risk and cooperatives with greater sales. These findings suggest an important relationship between firm operations and member equity as small cooperatives contemplate entry into world markets.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://ageconsearch.umn.edu/record/249595/files/0 ... 0Firm%20Leverage.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:jlorco:249595

DOI: 10.22004/ag.econ.249595

Access Statistics for this article

More articles in Journal of Rural Cooperation from Hebrew University, Center for Agricultural Economic Research Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().