Three essays on the dynamic ownership and governance of U.S. farmer cooperatives
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[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] In order to better understand the long-term behavior of farmer-owned economic organizations, the cooperative life cycle model is advanced and improved via the application of economic theory to each of its five phases. Specifically, transaction cost theory, property rights theory, and agency theory help explain the birth-to-death trajectory of farmer cooperatives, which tinker and reinvent to remain optimal in the competitive market. Tinkering is the adaptation of constitutional rights, policies, and procedures to adjust member objectives, and reinventing is defined as the adaptation of organizational scope or purpose to adjust cooperative actions. As such, tinkering and reinventing are two processes to maintain the long-term cooperative equilibrium. Another aspect of importance to the economic viability of farmer cooperatives is governance, which involves all the mechanisms to manage the separation of control and ownership. Cooperative governance is often assumed to be identical to corporate governance, yet differences in structures and objectives suggest otherwise. Secondary data analysis is conducted to descriptively inform the difference in governance and performance for two samples of agri-food firms and cooperatives. Demographically, all financial characteristics as well as most board and management characteristics are observed to be significantly different for the two samples. According to the main result of the empirical analysis, the causal impact of board size, female directorship, director independence, and director equity ownership on financial performance is also significantly different, which implies cooperative governance is not identical to corporate governance. As compared to the firm, the overall structure of farmer cooperatives is often analyzed in isolation. There exist typologies of the ownership structure, the governance structure, as well as the capital structure. However, the interrelationship is underexplored. To address the gap in the literature, a three-dimensional framework is informed by agency theory, finance theory, and cooperative theory. The three dimensions are member ownership diversity, member control delegation, and financial flexibility, for which a positive linear relationship is hypothesized. Primary survey data is collected for the full population of U.S. farmer cooperative to test hypotheses of the framework. Based on 371 survey responses, a relatively wide tunnel of cooperative life is observed in which low ownership diversity and low member control delegation do not correspond to high financial flexibility. Further, empirical data analysis indicates the relationship of ownership and capital is independent, while the relationship of ownership and governance is bi-directional.
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