Financial behavior of cooperatives and investor‐owned firms: An empirical analysis of the Spanish fruit and vegetable sector

Abstract

A partial adjustment model was formulated to compare financial ratios between cooperatives and investor‐owned firms from a dynamic perspective. Empirical results from a sample of Spanish fruit and vegetable firms for the period between 2009 and 2012 reveal different adjustment processes of current, debt, and return on assets ratios between cooperatives and IOFs. We find significant differences between these firms, with slower adjustment rates for current and debt ratios in cooperatives. These findings may arise from the weakness associated with ownership structure in cooperatives, which reduces their adjustment processes compared to those of IOFs. The identification of differences in adjustment processes between cooperatives and IOFs may provide us with additional information regarding the specific management characteristics of these agri‐food firms, thus identifying those firms that are most dependent on external market conditions. [EconLit citations: C33, G30, Q13].

Short-term financial sustainability of agricultural cooperatives

“…While the difference between the financial cycle of both samples is not statistically significant (p-value 5 0.13), the self-funding rates of the groups proved to be different at the 1% level (p-value 5 0.00), indicating that it is the firms' capacity to provide resources from their operations (self-funding) that determines their ability to achieve sustainable growth. This evidence is consistent with the dual nature of cooperative firms (Valentinov and Iliopoulos, 2013;Martinez-Vict oria et al, 2018). As they can maximize members' interests through prices, agricultural firms have an incentive to operate with lower margins, thus benefiting the members, who are also providers/clients of their organizations.…”

“…Our results also indicated that this difference between the quality of growth in the two groups is due to the lower capacity of agricultural cooperatives to provide resources from their own operations (self-funding) in comparison with their publicly traded peers, leading them to fund their working capital needs with higher levels of debt. A possible explanation for this difference in financial performance is the dual characteristic of cooperative members (Valentinov and Iliopoulos, 2013;Martinez-Vict oria et al, 2018). Since, in addition to being owners, they are also clients and suppliers, the results due to the growth in sales could be distributed to them through prices, lowering the operational margins of coops, causing the stagnation (or even deterioration) of their financial sustainability.…”

“…The paper aims to contribute to the literature in several ways. First, it provides new insights into the ongoing discussion of the dual nature of cooperatives and the corresponding conflict between firm profitability and members' benefits (Soboh et al, 2009;Costa et al, 2012;Martinez-Vict oria et al, 2018). Second, the Working Capital Management literature has attracted growing interest in the last 10 years.…”

Harnessing a ‘Currency Matrix’ for Performance Measurement in Cooperatives: A Multi-Phased Study

“…Financial ratio analysis is used for comparative purposes too (e.g., industry-specific sector comparisons) [72,73]. Strikingly, a large body of work comparing the performance of cooperatives with that of IOFs in the same sector(s) (e.g., dairy, grain, farm supply) is present (e.g., [73][74][75][76][77][78][79][80]). Moreover, some studies (e.g., [81][82][83]) employ sales-based metrics (e.g., market shares, sales growth, the Lerner index) next to financial ratios to paint a more complete picture of financial measures and cooperative performance.…”

Evaluating the Financial Health of Agricultural Enterprises in the Conditions of the Slovak Republic Using Bankruptcy Models

“…At present, however, there remains a scarcity of research that is suitable for practical decisions about whether a company is at risk and should tackle the potential crisis [13]. There are several authors who have examined the financial health of agricultural companies, including Kravčáková Vozárová et al [14][15][16], Valašková et al [17], Adamišin et al [18], Hornungová and Milichovský [19], Henning and Jordaan [10], Martínez-Victoria et al [20], Sjauw-Koen-Fa et al [21], Lopez-Valeiras et al [22], Majewski [23], and Soboh et al [24]. However, there remains a scarcity of studies that engage in designing a systematic and comprehensive model for measuring the financial health of agricultural companies.…”