A study on the determinants of financial performance of U.S. agricultural cooperatives
Abstract
A significant number of studies have been made in the area of agricultural economics; however, there is a paucity of work that investigates factors or determinants which influence the financial performance of agro cooperatives. This paper investigates determinants of financial performance for the United States (U.S.) agricultural cooperatives for the period 2009–2017. By using the United States Department of Agriculture (USDA) database, we created a sample of 37 U.S. agro cooperatives. For analysis, we used panel regression analysis as it is suitable to deal with fixed effect or random effect error component presented in the model. Finding states that the U.S. agro cooperatives are found highly sensitive to economic policy uncertainty. The results provide evidence of a negative relationship between size and profitability. Moreover, the impact of growth and capital intensity is also reflected in the return on asset (ROA). In this study, we considered ROA as a proxy for firm performance. Implications and suggestions for further new research are also discussed.
Keyword : agricultural cooperatives, financial performance, economic policy uncertainty, return on asset (ROA), United States (U.S.), capital intensity
How to Cite
Singh, K., Misra, M., Kumar, M., & Tiwari, V. (2019). A study on the determinants of financial performance of U.S. agricultural cooperatives. Journal of Business Economics and Management, 20(4), 633-647. https://doi.org/10.3846/jbem.2019.9858
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Foley, C. F., Hartzell, J. C., Titman, S., & Twite, G. (2007). Why do firms hold so much cash? A tax-based explanation. Journal of Financial Economics, 86(3), 579-607. https://doi.org/10.1016/j.jfineco.2006.11.006
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Frederick H. deB. Harris. (1988). Capital intensity and the firm’s cost of capital. The Review of Economics and Statistics, 70(4), 587-594. https://doi.org/10.2307/1935821
Gao, J., Grinstein, Y., & Wang, W. (2014). Cash holdings, precautionary motives, and systematic uncertainty. SSRN. https://doi.org/10.2139/ssrn.2478349
Gartenberg, C. M., Prat, A., & Serafeim, G. (2016). Corporate purpose and financial performance. Retrieved from https://doi.org/10.2139/ssrn.2840005
Ghosh, B., Basit, A., & Hassan, Z. (2017). Impact of corporate social responsibility on financial performance: A study on manufacturing companies listed in London Stock Exchange (LSE)-UK. International Journal of Accounting & Business Management, 5(2), 2289-4519.
Grashuis, J. (2018). A quantile regression analysis of farmer cooperative performance. Agricultural Finance Review, 78(1), 65-82. https://doi.org/10.1108/AFR-05-2017-0031
Greene, W. H. (1997). Econometric analysis (3rd ed.). New Yersey: Prentice-Hall International.
Griffin, J. J., & Mahon, J. F. (1997). The corporate social performance and corporate financial performance debate: Twenty-five years of incomparable research. Business & Society, 36(1), 5-31. https://doi.org/10.1177/000765039703600102
Gujarati, D. N. (2009). Basic econometrics (5th ed.). New York: McGraw-Hill.
Hansmann, H. (1988). Ownership of the Firm. Journal of Law, Economics, & Organization, 4(2), 267-304.
Harris, F. H. D. (1994). Asset specificity, capital intensity and capital structure: an empirical test. Managerial and Decision Economics, 15(6), 563-576. https://doi.org/10.1002/mde.4090150604
Hart, O., & Moore, J. (1996). The governance of exchanges: members’ cooperatives versus outside ownership. Oxford Review of Economic Policy, 12(4), 53-69. https://doi.org/10.1093/oxrep/12.4.53
Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the Econometric Society, 1251-1271. https://doi.org/10.2307/1913827
Hoechle, D. (2007). Robust standard errors for panel regressions with cross-sectional dependence. Stata Journal, 7(3), 281. https://doi.org/10.1177/1536867X0700700301
Hussain, M. A., & Hadi, A. R. (2017). Corporate governance and firm performance: Evidence from CIDB Malaysia. American Journal of Research Communication, 5(12), 1-21.
Im, H., Park, H., & Zhao, G. (2017). Uncertainty and the value of cash holdings. Economics Letters, 155, 43-48. https://doi.org/10.1016/j.econlet.2017.03.005
International Labor Organization (2014). The cooperative way of doing business. Sustainable enterprise programme, (pp.3-4). ILO.
Kang, W., & Ratti, R. A. (2013). Oil shocks, policy uncertainty and stock market return. Journal of International Financial Markets, Institutions and Money, 26, 305-318. https://doi.org/10.1016/j.intfin.2013.07.001
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