| Abstract |
Financial stress in agricultural cooperatives may be due to a combination
of three factors: inadequate profitability, excessive debt, or high interest
rates. This paper uses an analytical technique to determine the relative
degree of financial stress in agricultural cooperatives attributable to
each factor. Roughly 30 percent of agricultural cooperatives in our sample
suffered financial stress from 1987 through 1992. The analysis indicates
that the greatest portion of financial stress, 54 percent, originated from
low earnings. High interest rates accounted for roughly 24 percent of the
financial stress while leverage accounts for the remaining 22 percent.
The results also indicate that smaller cooperatives are more than twice
as likely to face financial stress than larger cooperatives. Small cooperatives
are more likely to face profitability problems whereas large cooperatives
are more likely to face debt and interest rate problems. |
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