Open AccessTesting capital structure theories for agricultural cooperatives
Author(s) -
Yuxi Cheng,
Ani L. Katchova
Publication year - 2019
Publication title -
the international food and agribusiness management review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.474
H-Index - 35
eISSN - 1559-2448
pISSN - 1096-7508
DOI - 10.22434/ifamr2018.0050
Subject(s) - pecking order theory , capital structure , pecking order , economics , agriculture , equity (law) , debt , order (exchange) , finance , microeconomics , ecology , evolutionary biology , biology , political science , law
This study investigates adjustments in capital structures for agricultural cooperatives and differences before and during the agricultural downturn which started in 2013. We estimate a simultaneous equation model to test for cooperatives’ capital structure strategies based on two main theories from the corporate finance literature: the trade-off theory and the pecking order theory. Estimation results reveal that agricultural cooperatives in the U.S. generally adjust to short-term financial targets for equity and debt, supporting the trade-off theory while there is little support for the pecking order theory within the agricultural cooperatives sector.