Short-term financial sustainability of agricultural cooperatives

Pedro Piccoli, Nilton Bianchini Junior, Jeferson Coser and Vilmar R. Moreira

Agricultural Finance Review, 2020, vol. 81, issue 3, 444-457

Abstract: Purpose - From 2006 to 2016, Brazilian agricultural cooperatives exhibited a sharp increase in sales. Since the operational cycle of these organizations demands a positive net working capital that is usually funded by debt, the authors examine whether this rise in sales was obtained at the cost of the short-term financial sustainability. As a matter of comparison, the authors conduct the same analysis for Brazilian agricultural public traded companies. Design/methodology/approach - The authors employ the dynamic analysis of working capital method to measure the short-term financial sustainability of these organizations. Findings - The authors find that the expansion of net working capital caused by the growth of the revenues of the sampled cooperatives was mostly funded by short-term debt, which rose by 31% in annualized terms. The authors also document that around 60% of these firms displayed a current capital structure that can be considered risky in terms of indebtedness, and that the majority of firms exhibited a non-sustainable growth in the period, what contrasts with the performance presented by Brazilian agricultural publicly traded companies, since only 16% of the firms from this group have shown a non-sustainable growth. This distinction seems to be explained by the lower capacity of agricultural cooperatives to provide resources from their operations. Originality/value - The authors investigate the short-term financial sustainability of a unique dataset of 65 Brazilian agricultural cooperatives and provide insight for researchers analyzing the dual nature of these firms.

Keywords: Financial sustainability; Agricultural cooperatives; Working capital management; Dynamic analysis of working capital; D22; D25; G30; G31 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afrpps:afr-06-2020-0097

DOI: 10.1108/AFR-06-2020-0097

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