PurposeThe purpose of this paper is to examine the extent to which agency costs of leverage are present in farm supply and marketing cooperatives.Design/methodology/approachThe authors calculate total factor productivity growth of a sample of agricultural cooperatives from 2005 to 2010 and use regression to determine the effect of leverage on productivity growth.FindingsThe findings indicate that there is a small but statistically significantly negative effect of leverage on productivity growth. This indicates that, at the margin, the costs of leverage outweigh the benefits.Originality/valueThis paper measures the magnitude of what is typically considered an important financial transaction cost. The authors find that the magnitude of this effect is small, indicating that government policy should address other financial issues.
Agricultural Finance Review – Emerald Publishing
Published: Jul 3, 2017
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