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Members' Financial Evaluation And Cooperatives' Decision Processes

Author

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  • Russo, Carlo
  • Weatherspoon, Dave D.
  • Peterson, H. Christopher

Abstract

The paper presents an analysis of cooperative investment decision based on the coalition theoretical framework (Staatz 1983, 1987, 1989). According to this framework, cooperatives can be considered as coalitions of groups with different interests. The behavior of any cooperative is determined by the interaction of its many groups (different types of farmers, managers, lenders, input suppliers, buyers, etc.) with different objectives. The group that can impose its will on the coalition will determine the cooperative's strategy. The other parties may accept this leadership, leave the cooperative or try to use their bargaining power to modify the final outcome. The paper discusses the impact of group bargaining on cooperatives' decision process. In particular, the paper addresses the issues related to the consequences of members' heterogeneity on cooperative efficiency. The proposed model utilizes tools from financial theory already successfully applied in the literature (Peterson 1992, Hendrikse 1998) providing a more detailed insight into the determinants of the cooperative decision process. The paper shows that cooperatives evaluate investments differently from IOFs due to the unique characteristics of their patrons compared to other types of investors.

Suggested Citation

  • Russo, Carlo & Weatherspoon, Dave D. & Peterson, H. Christopher, 2000. "Members' Financial Evaluation And Cooperatives' Decision Processes," Staff Paper Series 11719, Michigan State University, Department of Agricultural, Food, and Resource Economics.
    • Handle: RePEc:ags:midasp:11719
    DOI: 10.22004/ag.econ.11719
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    References listed on IDEAS

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    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    2. Peterson, H. Christopher, 1992. "The Economic Role and Limitations of Cooperatives: An Investment Cash Flow Derivation," Journal of Agricultural Cooperation, National Council of Farmer Cooperatives, vol. 7, pages 1-18.
    3. Hanson, Steven D. & Myers, Robert J., 1995. "Testing for a time-varying risk premiumin the returns to U.S. farmland," Journal of Empirical Finance, Elsevier, vol. 2(3), pages 265-276, September.
    4. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    5. George W. J. Hendrikse, 1998. "Screening, Competition and the Choice of the Cooperative as an Organisational Form," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 202-217, June.
    6. John M. Staatz, 1983. "The Cooperative as a Coalition: A Game-Theoretic Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(5), pages 1084-1089.
    7. L. F. G. De Cazaux, 1965. "On The Budget," Journal of Accounting Research, Wiley Blackwell, vol. 3(2), pages 264-265.
    8. H. Christopher Peterson & Bruce L. Anderson, 1996. "Cooperative strategy: Theory and practice," Agribusiness, John Wiley & Sons, Ltd., vol. 12(4), pages 371-383.
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    Cited by:

    1. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 18942, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    2. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    3. repec:vuw:vuwscr:18942 is not listed on IDEAS

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    Agribusiness; Agricultural Finance;

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