Determinants of financing decisions and management implications: evidence from Spanish agricultural cooperatives

Abstract

The unique characteristics of agricultural cooperatives are likely to affect the availability of the funding they can access. This paper analyses the determining factors behind the financing decisions made in these cooperatives, and the management and organisational implications these decisions have for these entities. Financial information obtained from a sample of 106 Spanish agricultural cooperatives was used to calculate the variables that modelled the research hypotheses, which were then introduced into regression models to determine which ones had a significant effect on their financing decisions. According to the economic theory of cooperativism, the results show that these entities come closer to the pecking order theory, i.e. policies that maximise the prices received by members to the detriment of the entity’s self-financing abilities, coupled with restrictions on cooperatives’ equity capital that may lead them to use debt to fund growth. The results also show positive relationships between cooperatives’ indebtedness and other factors, such as investments in non-current assets, liquidity and cooperative size in terms of turnover per member.