FINANCING GROWTH IN AGRICULTURAL COOPERATTVES

Zvi Lerman and Claudi^a Parlinment

This studyexamines the hypothesis thatcooperatives suffer from a shortage of equitycapital because of ownership structure andnonmarketability of cooperative equity. Theempirical findings indicate that agriculturalcooperatives finance nearly half of theirgrowth with equity. Contrary to theoreticalexpectations, the equity financing proportionof cooperatives is found to be statisticallyindistinguishable from the national averageof nonfinancial corporations for 1973-1983,and is higher than the national average since1984. Cooperatives are observed to raise newdebt mainly through short-term borrowing.This indicates that banks may be reluctantto give long-term loans to cooperatives

ffiff":t their "unorthodox" ownership

Increasing complexity and sophisticationof markets and technolory has stimulated atrend toward growth, conglomeration, andgeographical expansion of investor-owned agrt-businesses (van Dijk and Veerman). There isevidence that higher market share achievedthrough growth is positively correlated withhigher profitability (Buzzell and Wiersema) -

an objective pursued by both shareholders andmanagers in investor-owned firms.

Cooperatives must also grow if they areto maintain their competitive posture and tocontinue providing services to their members.In fact, Schrader found that management feltgrowth was essential for their cooperatives toremain viable, and Koller suggested that,ncooperatives need to grow to take advantageof a continuum of new technologies, newopportunities for economies of size, andincreased efficiency.' In line with this philosophy

Zi l-erman is Senior lrcturer in the Departmentof Agricultural Economics and Management, HebrerrUniversity, Rehorrct, Israel. Claudia Parliament is AssociateProfessor, Department of Agricultural and AppliedEconomics, University of Minnesota, St. Paul, MN.

This researchwas supported by BARD -U.S.-Israel

Binational Agricultural Research and DorelopmentFoundation as part of a three-year study.

The authors acknorvledge the useful comments ofYoav Kislev and three anonvrnous rwiewers.

and spurred by competitive pressures frominvestor-owned agribusinesses, agriculturalcooperatives in the U.S. have shown a highfrequency of consolidations, increasing theaverage sales volume per cooperative. Thenumber of farm supply and marketing cooper-atives declined by more than one-third over thedecade from 1976 to 1985, while the cooper-atives' share of farm supply purchases increas€dfrom 18 percent to 26 percent, and the shareof farm products marketed remained near ?3percent (U.S. Department of Agriculture).

Growth requires financing which, forinvestor-owned firms, can be raised in the formof new stock issues (externally raised equity),retained earnings (internally generated equity),or increases in debt. Cooperatives, because oftheir unique user-based ownership and theresulting nonmarketability of their stock, arebelieved to suffer from restrictions on theavailability of the two equity sources of capital.Cooperatives are thus viewed as'equity boundn(Schrader; Schmitt) and as a result are thoughtto rely more heavily on debt financing thancomparable investor-owned firms (IOF"s).

A previous study comparing financialperformance of cooperatives to IOFs foundthat contrary to exp€ctations, the debt-to-assetsratios for cooperatives were not higher thanfor comparable IOFs (Lrrman and Parliament).This unexpected behavior of debt levels incooperatives may be attributed to two factors:(1) cooperatives face difficulties borrowing allthey need because commercial banls are uncom-fortable with their nunorthodox" ownershipstructure; (2) moperatives have lower invest-ment needs than IOPs because they maintainlower rates of growth. Yet, cooperatives in twoindustries - dairy and food processing - werefound to grow at the same rate as comparableIOFs: around 10 percent per annum based onfixedassets (krman and Parliament).In anotherstudy, cooperatives in the food sector wereactually found to have higher growth rates thancomparable IOFs (Chen, Babb, and Schrader).

REVIEW OF AGRICULTURAL ECONOMICS, Vol. 15, No. 3, September 1993

Already, the erridence from these prwiousstudies questions the validity of the hypothesisof "equity starvatiqn" in ooperatives. Yet" thesestudies have looked at total debt and equitylevels of cooperatives in only trro industries,without examining the year-by-year sources ofgrowth financing. The present study uses asubstantially larger sample of U.S. agriculturalcooperatives drawn from a wider range ofindustries to examine howcooperatives financetheir growth. The moperative sources of growthfinancing are then compared to the financingmix of investor-owned corporations as repre-sented by the nonfinancial business sector ofthe U.S. economy.

Equity Capital in Cooperatives

Cooperatives are user-owned firms: ownersare at the same time the patrons. The ownenhipstructure of cooperatives is thus different fromthat of the conventional firm, which transactsbusiness with clienteles that are typicallyseparated from the investors who own the firm.Investors in conventional firms (referred to asinvestor-owned firms, or IOFs) receive a returnproportional to their investment, and thereforeIOFs aredriven to maximizeearnings adjustedfor risk in the interest of the owners. Investorsin cooperatives, on the other hand, expect toreceive direct benefits through doing businesswith the cooperative rather than earn a returnon their invested capital. It can be argued thatmemben' interests are not necessarily bestserved by ma,ximizing the earnings of thecooperative: better results for the member-owners may be achieved by reducing the chargesthey pay for the services provided by theoooperative or increasing the prices they receivefor the products marketed through the coopera-tive, although both strategies inevitably reducecooperative earnings.

The difference in objectives betweencooperatives and IOFs stemming from thedissimilarity in ownership structure suggests anumberofdistinctions in both thebusiness andthe financial strategies of cooperatives (C-ondon;Cotterill; I-eVay; Parliament, I-erman, andFulton; Staatz 1987). One of the main differ-ences is that cooperative equity, unlike IOF

stock, is not marketable. Nonpatrons have nomotivation to invest in a cooperative, becausethe distribution of cooperative earnings is basedon patronage, and not investment. As a result,there are no secondary markets for cooperativestock, and cooperatives are restricted to raisingequity ftom member-producers who use theservices of the cooperative (Condon andVitaliano; Staatz 1989).

Because of the nonmarketability ofcooperative stock, members may be reluctantto increase their illiquid equity stake in thecooperative. Members may also be reluctantto allow the cooperative to increase its equitybase through retained earnings, because retainedearnings translate into lower effective pricesfor marketed products or higher effective costsof farm inputs. In contrast, shareholders inIOF"s are indifferent, at least in theory, benpeencash distributions and retained earnings, becausethe latter translate into market appreciationof equity, which can be realized by investorsthrough selling their shares in the secondarymarket.

Faced with such fundamental restrictionson accumulation of equity capital, manycooperatives have developed a system wherebypart of the earnings are retained in the formof allocated patronage refunds, which areredeemed, i.o., paid out in cash to members,with a lag of several years (Cobia et al.). Thissystem partly alleviates the members' liquidityconstraints caused by nonmarketability ofcooperative stock and at the same time providesthe cooperative with an important source ofequity capital for growth: on average, the top1Cl0 cooperatives have 50 percent of their equityin the form of allocated retained earnings(I(ane). Unlike the traditional permanent equity,however, the allocated patronage refunds arein the nature of 'deferred dividendsn or 'interest

free loans' (depending on the bias of the finan-cial analyst), and the cooperative is forced togenerate enough earnings to finance periodicequity redemption in addition to financing itsgrowth.

However, these equity retention systemsin cooperatives are basically an analog of equityaccumulation from retained earnings in IOFs:they cannot replace the other source of equity

FINANCING CROWTI{ IN AGRICULTURAL COOPERATIVES krman, Parliament 433

available to IOFs, namely raising equity throughnew stock issues. Despite the promise ofultimate rede4ption of allocated patronagerefunds, cooperatives probably cannot abusethis mechanism by relying on it to satis$ allof their equity needs. The potential danger of'equity star%tionn in a moperative thus remains.

The anticipated shortage of equity incooperatives is expected to influence theirgrowth and financing decisions (Schrader).Cooperatives may compensate for the theoreti-cally exp€cted shortage of equiry capital byfinancing a relatively high portion of theirgro\ilth with debr The present study determinesthe proportions of equity and debt used bycooperatives to finance their growth andexamines more carefully than before theevidence to support or refute the hypothesisof "equity starvation' in cooperatives.

Methodologr

For this study, growth is defined as theincrease in the total assets in a particular year.By the basic balance-sheet equation:

d T 4 , = d T L , , + d E Q i , (r)

where dTA, is the change in total assets, dTliris the change in total liabilities (debt), anddEQ11 is the change in equity. The subscriptsnitn denote cooperative i in year t. The left-handside of eqution (1) represents the uses of fundsor the total investment; the right-hand siderepresents the sources of funds: increase in debtand increase in equity net of redemption. Thegrowth measures calculated in equation (1) arebased on curent-year changes. Therefore, thesesour@s and uses components are relativelyunbiased by the historical accounting conven-tions that unavoidably affect the debt-to-equityratios used in previous studies.

Equation (1) can be broken down intomore detailed components of sources and usesof funds, thus:

dF4, + dCA. =(2)

d C L i , + d L T , , + d E Q , ,

Among the uses of funds, dFA, is the changein net fixed assets (capital expenditure net ofdepreciation) and dCA, is the change in currentassets (related to investment in working capital).Among the souroes of funds, dCIn, is the changein current liabilities (short-term debt andsuppliers'oedit) and dLT. is the change in long-term debt. The change in equity dEQi, is madeup of additions to retained earnings in all forms(both unallocated and allocated) phs new equitycontributed by members, less any redemptionof equity. Depreciation is not included amongthe sources, because the change in equity isbased on reported retained earnings,which arecalculated after depreciation expense. Thesourcqs and uses for moperatives are thuscalculated on the basis of book values, not cashflows.

The sources and uses @mponents areexpressed in proportion of total investment bydividing both sides of equations (1) and (2) bydTA,. The sources of funds in the right-handside of equations (1) or (2) divided by dTA*indicate the proportions of growth financed bydebt and equity. The sources and uses propor-tions for each year were averaged over allcooperatives with positive growth in that year.Annual obsenations with negative growth wereomitted, because the sources proportionscalculated with a negative change of total assetsin the denominator are difficult to interpret.Therefore, this analysis focuses on growth andignores contraction.

The data for the analysis of cooperativeswere collected bywriting to the nonbargainingcooperatives listed in the Dbectory of FarmerCooperatives published by the USDA Agri-cultural C;ooperative Service (Jermolowicz andKennedy). The resulting database consists ofthe audited financial reports of 60 U.S. regionalagricultural cooperatives with complete observa-tions for the 15-year period 1973-L987. Thesample includes dairy, food, grain, and farmsupply cooperatives. These are regional cooper-atives with 1987 average sales of around $4mmillion which is similar to the sales volume ofthe top 100 U.S. cooperatives regularly surveyedby the Agricultural C-ooperative Service (IQne).

REVIEW OF AGRICULTURAL ECONOMICS, Vol. 15, No. 3, September 7993

Results

Sources of Gron4n ,o. Cooperatives

Table 1 presents the sources and usesproportions averaged over the cooperatives foreach year during the period from t973 to 1987.It is apparent that the equity component in thefinancing of cooperative annual investments isby no means negligible: the annual increase inassets financed with equity ranges from a lowof 2l percent to a high of over 69 percent. Themean equity financing proportion over the entirel5-year period is 45.4 percent of totalinvestment, with a standard deviation of 14.7percenl Thns, cooperatives in this study financenearly half of their growth with equity, evenafter taking care of all redemption outflows.Figure f. illustrates the equity and debtproportions in the financing of cooperativegrowth.

New debt was raised by the cooperativesin this study mainly in the form of currentliabilities. As indicated in Figure 1 and Table1, most of the increase in debt financing isshort-term, while the long-term debt componentis relatively small. In three of the 15 yean (19ti3,1986, and 1987) there was a decrease in long-term debt. In these years, current liabilitiesincreased not only to finance the new investmentbut also to adjust the debt structure to moreshort-term loans.

Cooperatives in this study apparently usepermanent equity funds rather than debt tofinance the increase in their long-lived capitalassets. The close match between the equityfinancing component and the capital expenditurecomponent of total investment is illustrated inFigure 2, where the time series indicating theproportions of equity and capital expenditureare seen to be intertwined. The differencebetween the equity financing proportions in thesource accounts and the capital expenditureproportions in the uses accounts of cooperativesis not statistically significant at the 10 percentlevel, both by the standard t-test and by theWilcoxon nonparametric test. This finding doesnot support the theoretical suggestions that,because of moral-hazard behavior, cooperativesmay tend to overinvest in'mortar and bricks,"financing their fixed assets with liberal

proportions of debt (Irrman and Parliament;Zsman). On the @ntrary, the results in Figure2 indicate that cooperatives follow a fairlyconservative strateg/, investing in fixed assetsto theextent that the investment can be financedwith available equity.

Comparison of Cooperative andIOF Financing of Growth

The financing proportions of cooperativesare mmpared to the sources and uses data fromthe summary statements of savinls and invest-ment of U.S. nonfinancial corporations pub-lished in the Federal Reserve System's Flowof Funds Accounx (Board of Governors). Theseare aggregated data for nonfinancial corporatebusinesses in manufacturing, trade, and serviceindustries. Farms (both corporate and noncor-porate) are excluded from this category. TheFederal Reserve System's sample is sufficientlylarge and general to be used as a proxy for thenonfinancial corporate sector of the U.S.economy. Insofar as most corporate businessesin this sample are IOPs, these flow of fundsdata provide a relevant reference or benchmarkagainst which the behavior of cooperatives maybe judged.

Table 2 presents the mean proportionsof sources and uses of funds for the U.S.nonfinancial corporations, based on FederalReserve System aggregated data. T\e Flow ofFunds Accounts data are published on a cashflow basis. Adjustment to book values is madeby subtracting the depreciation charges and theinventoryvaluation adjustment from the pub-lished figures for total internal funds on thesources side and from the changes in fixed assetsand inventory on the uses side. The sources anduses proportions calculated after this adjustment(Table 2) are definitionally comparable to theproportions calculated from the annual reportsof the cooperatives (Table 1).

Equity Financing. Figure 3 plots theproportion of equity financing for bothnonfi nancial coqporations and cooperatives. Thetwo series are statistically indistinguishableduring the period ln3-1983: the average equityfinancing proportions for this period are 46.8percent of the total investment for cooperativesand 45.7 percent for nonfinancial corporations,

FINANCING GROWTFI IN AGRICULTURAL COOPERATwES krman. Parliament 435

Figure 1. Mean Sources of Funds in Cooperatives

1973 1976 1977 1979 1981 1983 1986 1987

N Short-Term Debt ffi Long-Term Debt fl Equlty

with standard deviations of 14.8 percent and10.4 percent respectively. From lg8y'', however,the equity financing @mponent of nonfinancialcorporations drops dramatically to negativevalues, while that of cooperatives continues atthe same level as in prior years.

Closer examination of the data in Flowof Funds Accounts indicates that the negativeequity financing proportions of nonfinancialcorporations are attributable to persistentlynegative amounts of new stock issues since l98y'..Although the nonfinancial corporations inaggregate continued to report profits and theretained earnings remained positive, no newequity was issued on average; instead, the IOFsengaged in extensive stock repurchases, adjustingtheir capital structure toward higher leverage(Brealey and Myers).

Debt Financing. The reduction of equityfinancing of nonfinancial corporations since 1984has becn accompanied by an increase in long-

term debt financing without noticeable changesin the component of short-term loans. Non-financial corporations are evidently adjustingtheir capital structure shifting toward higherpermanent debt levels, and the negative equityfinancing proportions are an indication of along-term strates/.

The differences between short-term debtproportions of cooperatives and nonfinancialcorporations are not statistically significant overthe entire perid.The differences between long-term debt proportions of cooperatives andnonfinancial corporations, while statisticallyinsignificant up to 1983, become statisticallysignificant at 10 percent when the years 1984-1987 areadded to the timeseries. Nonfinancialcorporations have been using significantly morelong-term debt financing than cooperatives sincergu.

Table 3 presents a summary of the sourc€sand uses proportions of cooperatives and

proportlon of totel Invertment

REVIEW OF AGRICULTURAI- ECONOMICS, Vol. 15, No. 3, September 1993

I

Table 1... Sources and Uses of Funds: Means of 60 Agricultural Cooperatives,1973-1987 (percent of total investment)

1973 t974 1975 1976 1977 1978 1979 1980

1. USESC-apital ExpenditureInvestment in Current Assets

10.4 30.9 58.6 55.789.6 69.1, 4t.4 U.3

u.8 45.3 54.4 35.255.2 54.7 45.6 &.8

TOTAL USES

2. SOURCESIncrease in Short-Term DebtIncrease in l,ong-Term Debt

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

7r.o 44.t 24.r 25.93.8 11.8 8.2 15.6

%.7 58.0 49.47.4 1.4 19.4

20.5?4.4

Increase in DebtIncrease in Equity

74.9 55.925.t M.l

48.9 U.I51.1 55.9

59.4 68.9Q.6 31.1

32.3 41.467.7 58.6

TOTAL SOURCES 100.0 100.0 1m.0 100.0 100.0 100.0 100.0 100.0

1981 L982 1983 t984 1985 1986 t987

1. USESC-apital ExpenditureInvestment in Current Assets

38.8 108.0 -4.1 32.2 24.46r.2 -8.0 104.1 67.8 75.6

23.L76.9

25.774.3

TOTAL USES

2. SOURCESIncrease in Short-Term DebtIncrease in lnng-Term Debt

100.0 100.0 100.0 100.0 100.0 100.0 100.0

20.7 34.3 109.1 79.241.t 10.9 -30.1 -32.3

58.5 10.7 78.16.7 19.9 -14.5

65.2 30.6 63.6 61.8 45.2 ',19.O 6.934.8 69.4 36.4 38.2 54.8 2r.O 53.1

Increase in DebtIncrease in Equity

TOTAL SOURCES 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Source: Audited financial statements of participating cooperatives.

FINANCING GROWTII IN AGRICULTURAL COOPERATIVES [-erman. Parliament

Figure

1...*Or,ul

Brpenditure and Equity Financing Proportions in Cooperatives

proportlon of totel Invcctmcnt1.2

I

0.8

0.6

0.4

o.2

o

-o.2

nonfinancial corporations, averaged over the15-year perid from L973 to 1987. The averagesfor the 1l.-year subperiod 1973-t983 are alsopresented, because of the dramatic change inIoF nnan"*'::::,:_ 1e84

Theoretical considerations suggest thatcooperatives are liable to suffer from a shortageof equity capital. Yet, on average, theagricultural cooperatives in this study werefound to finance almost half of their totalinvestment with equity - not exactly a sign ofequity starvation. Perhaps this is due to thespecial mechanisms of per-unit retains andallocated patronage refunds that successfulmoperatives implement to broaden their equityretention opportunities and thus sustain theirgrowth in a competitive environment. Or

1973 1976 1977 1979 1981 1983 1986 1987

-+- Capltal Expendlture -+- Equlty

perhaps, as suggested by Caves and Petersen,the high equity financing proportions observedin these cooperatives are the result of thespecific tal( treatment of cooperatives thatenlarges the stream of internal financing perdollar of net margin. [n any ex/ent" the empiricalevidence presented here does not support thetheoretical hypothesis that cooperatives are"equity bound".

Cooperatives were found to raise new debtmainly in the form of short-term borrowing.It has been argued that cooperatives may havedifficulty borrowing long-term, becausecommercial banks are uncomfortable with the'unorthodoxn ownership structure and thedynamic nature of cooperative equity associatedwith various retention and redemption plans(Cobia and Brewer). There are no suchdifficulties in obtaining short-term credit forcooperatives, because it is normally backed by

438 REVIEW OF AGRICULTURAI- ECONOMICS, Vol. 15, No. 3, September 1993

Table 2. Sources and Uses of Funds: Nonfinancial C-orporations (percent of total)"

1973 t974 1975 t976 1977 1978 1979 1980

1. USESNet Capital ExpenditurebInvestment in Current Assets'

27.3 30.3 47.972.7 69.7 52.1

39.2 42.0 39.0 29.6 38.260.8 58.0 61.0 70.4 61.8

TOTAL USES

2. SOURCESIncrease in Short-Term DebtdIncrease in L,ong-Term Debt

100.0 100.0 100.0 1m.0 100.0 100.0 100.0 1m.0

ss.z 49.6 -4.8 24.79.2 15.0 35.1 20.5

33.9 46.3 48.5 38.019.8 14.7 7.6 10.9

Increase in DebtIncrease in Equitf

&.4 e.5 30.3 45.1 53.735.6 35.5 69.7 54.9 6.3

61.0 56.1 48.939.r 43.9 51.1

TOTAL SOURCES 100.0 100.0 1m.0 100.0 1m.0 1m.0 100.0 100.0

1981 t98Z 1983 1984 1985 1986 t987

1. USESNet C-apital ExpenditurebInvqstment in Current Assets'

44.5 74.0 25.7 30.555.5 26.0 74.3 69.5

n.9 25.0 12.659.1 75.O 87.4

TOTAL USES

2. SOURCESIncrease in Short-Term DebtdIncrease in Long-Term Debt

1m.0 100.0 100.0 1m.0 100.0 100.0 1m.0

45.5 60.5 45.419.3 -9.6 12.0

70.8 67.9 50.1 39.832.3 60.1 87 .4 67 .3

Increase in DebtIncrease in Equitt'

&.9 50.9 57.4 103.135.1 49.r 42.6 -3.1

128.0 137.4 107.1-28.0 -37.4 -7.1

TOTAL SOURCES 100.0 100.0 100.0 100.0 100.0 100.0 100.0

"Columns may not add up exactly due to rounding.blncrease in net fixed assets, after depreciation charges.'Includes increase in inventories at book value, without Inventory Valuation Adjustment.dlncludes increase in accounts payable.

"Net equity issues plus retained earnings.

Source: Board of Governors of Federal Reserve Slntem, Division of Research and Statistics.nSector Statements of Saving and Investment: Nonfinancial Corporate Business, Excluding Farms."Flow of Funds Accounts, various quarterly issues, pp. 10-11.

FINANCING GROWTII IN AGRICULTURAL COOPERATryES krman. Parliament 439

Figure 3. Equig Financing Proportions in Cooperatives and Investor-Ov/ned Firmst '

proportlon of totel Invertmcnt0.8

0.6

0.4

o.2

-0.4

familiar liquid assets, such as inventories andreceivables. This argument is consistent witha previous finding of generally low levels oflong-term debt among dairy cooperatives(Parliament, Lrrman, and Fulton).

During the period from 1973 to 1983, theproportion of total investment financed withequity in cooperatives was found to bestatistically indistinguishable from thebenchmark used to repres€nt IOFs. Again, thisis contrary to theoretical expectations whichclaim that cooperatives will resort to more debtfinancing than IOPs. Since Ig8y'.,the nonfinan-cial corporations have followed a strategl ofstock repurchases which has resulted in adramatic reduction in the financing of growthwith equity, while the cooperatives havecontinued to finance growth with the sameequity proportions as in prior years. This trend

o

-0.2

Coops

I'-{

\-)(---

\\\\\ / ,ft-

tItIII

Nonflnanclal \I

Corporatlonr \III

II

tt

tt

x.

1973 1976 1977 1979 1981 1989 1985 1987

for the nonfinancial corporations is probablya manifestation of the leveraged buyoutphenomenon that enjoyed popularity in mid-1980's. Cooperatives, as suggested by ananonymous reviewer, are protected by theirstructure and the nonmarketability of theirequities from the huge accumulation of debtthat accompanies leveraged buyouts. Perhapsin addition to acting as a competitive yardstick(Nourse), cooperatives perform another public-policy function by counteracting the borrowingexcesses associated with leveraged buyouts.

The observation of high equity financingproportions among the sample of cooperativesdoes not, however, unambiguously resolve thehypothesis of equity constraints in cooperatives.Because of equity redemption schemes, somecooperative equity may be regarded as loansfrom members and it is left to future research

REVIEW OF AGRICULTURAL ECONOMICS, Vol. 15, No. 3, September 1993

Table 3. Sources and Uses Components: Averages for L973-1983 and 1973-87'(percent of total investment; standard deviations in parentheses)

1973-1987Nonfinancial

Cooperatives Corporations

1973-19834Nonfinancial

Cooperatives Corporations

1. USESCapital F:rpenditure

Investment in Current Assets

SOURCESIncrease of Equity

Increase of Short-Term Debt

Increase of Long-Term Debt

Increase of Total Debt

38.9(2s.6)

61.1(2s.6)

45.4b(1,4.7)

4t|.0(27.6)

6.5b(1e.8)

54.6b(r4.7)

36.5(13.e)

63.5(13.e)

29.5b(31.8)

44.8(18.3)

?5.8b(2s.e)71.5b(31.8)

43.4(28.7)

56.6(28.8)

46.8(14.8)

43.4(21.8)

9.8(11 .4)

53.2(14.8)

39.8(13.s)

ffi.2(13.s)

45.7(10.4)

40.3(r7.e)t4.l

(10.e)

54.3(10.4)

"A separate test of the coefficient of variation (Sokal and Rohlf) failed to detect significant differences in thevariability of the conesponding variables for co{ps and IOFs in 1973-1983. The only exception was the CVof the investment in current assets (50.8 percent for co-ops and only 22.4 prcent for IOFs), which was foundto be significantly different at the 5 percent level.bDifference between coop€ratives and nonfinancial corporations significant at the 10 percent level.

to more closely examine the composition ofcooperative equity with regard to new capitalinfusion, allocated earnings, and the actualredemption outflows. Also, a more detailedstudy is needed of the comparative growth ratesof cooperatives and IOF"s in a wider range ofindustries than previously attempted. Thisanalpis of growth should link the financingpatterns of cooperatives with financing needsand shed further light on the hypothesis ofcapital starvation in cooperatives.

References

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FINANCING GROWTIJ IN AGRICULTURAL COOPERATTVES l-erman. Parliament U7

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