Agric. Econ. - Czech, 2016, 62(1):45-50 | DOI: 10.17221/204/2015-AGRICECON

The optimal capital structure in agricultural cooperatives under the revolving fund cyclesOriginal Paper

Yung-Chang WANG
Department of Banking and Finance, Chinese Culture University, Taipei, Taiwan

Due to the financial features specific to agricultural cooperatives, the paper constructs a constrained-maximizing model under the assumption that the financial objective of an agricultural cooperative is to maximize the present value of the patron after-tax total income on an infinite time horizon by choosing the dividend rate, the cash patronage refund rate, and the length of the revolving fund cycles. The model is solved numerically in a numerical illustration. In equilibrium, the optimal capital structure is derived for the agricultural cooperative. The effects of the changes in personal tax rates and discount rates are also explored.

Keywords: cash patronage refund rate, constrained-maximizing model, dividend rate, present value

Published: January 31, 2016  Show citation

ACS AIP APA ASA Harvard Chicago Chicago Notes IEEE ISO690 MLA NLM Turabian Vancouver
WANG Y. The optimal capital structure in agricultural cooperatives under the revolving fund cycles. Agric. Econ. - Czech. 2016;62(1):45-50. doi: 10.17221/204/2015-AGRICECON.
Share...
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Ananiadis Y., Notta O., Oustapassidis K (2003): Cooperative competitiveness and capital structure in the Greek dairy industry. Journal of Rural Cooperation, 31: 95-109.
    2. Beierlein J. G., Schrader L. F. (1978): Patron valuation of a farmer cooperative under alternative finance policies. American Journal of Agricultural Economics, 60: 636-641. Go to original source...
    3. Boland M., Barton D. (2013): Overview of research on cooperative finance. Journal of Cooperatives, 27: 1-14.
    4. Barton D., Parcel J., Featherstone A. (1996): Optimal Capital Structure in Centralized Agricultural Cooperatives. In: WAEA Meetings, Reno/Sparks, Nevada, July 13-16.
    5. Barton D., Boland M, Chaddad F., Evelsull E. (2011): Current challenges in financing agricultural cooperatives. Choices, 26: 12-16.
    6. Dahl W.A., Dobson W.D. (1976): An analysis of alternative financing strategies and equity retirement plans for farm supply cooperatives. American Journal of Agricultural Economics, 58: 198-208. Go to original source...
    7. Dahlgren J.J. (2007): A question of value proposition and capital structure in search of a more satisfying approach. In: The Law of Cooperatives: Business, Structure, and Legal Issues. Stoel Rives LLP press, Minneapolis, Minnesota.
    8. Diaz-Hermelo F., Gray A., Smith E. (2001): Modeling member responses to farmer owned cooperative's alternative capital management strategies. In: The 2001 Annual Meeting of the American Agricultural Economics Association, Chicago, Illinois, August 5-8.
    9. Eversull E. (2010): Cooperative Equity Redemption. Research Report 220. Rural Business-Cooperative Programs, United States Department of Agriculture, Washington, DC.
    10. Hailu G., Jeffrey S.R., Goddard E.W. (2007): Capital structure, firm size, and efficiency: the case of farm petroleum and animal feed cooperatives in Canada. Agricultural Finance Review, 67: 279-293. Go to original source...
    11. Harris A. (1998): Financing Agricultural Cooperatives: An Overview. A Project funded by Canada/British Columbia Farm Business Management Program.
    12. Parcell J.L., Featherstone A.M., Barton D.G. (1998): Capital structure under stochastic interest rates: an empirical investigation of the midwestern agricultural cooperative. Agricultural Finance Review, 58: 49-61.
    13. Royer J.S. (2014): Determining Your Cooperative's Cost of Equity. Cornhusker Economics, Department of Agricultural Economics, University of Nebraska-Lincoln Extension.
    14. Russell L.A. (2013): Cost Efficiency and Capital Structure in Farms and Cooperatives. Unpublished Dissertation, Kansas State University.
    15. VanSickle J.J., Ladd G.W. (1983): A model of cooperative finance. American Journal of Agricultural Economics, 65: 273-281 Go to original source...

    This is an open access article distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International (CC BY NC 4.0), which permits non-comercial use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content