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Short-term financial sustainability of agricultural cooperatives

Author

Listed:
  • Pedro Piccoli
  • Nilton Bianchini Junior
  • Jeferson Coser
  • Vilmar R. Moreira
Abstract
Purpose - From 2006 to 2016, Brazilian agricultural cooperatives exhibited a sharp increase in sales. Since the operational cycle of these organizations demands a positive net working capital that is usually funded by debt, the authors examine whether this rise in sales was obtained at the cost of the short-term financial sustainability. As a matter of comparison, the authors conduct the same analysis for Brazilian agricultural public traded companies. Design/methodology/approach - The authors employ the dynamic analysis of working capital method to measure the short-term financial sustainability of these organizations. Findings - The authors find that the expansion of net working capital caused by the growth of the revenues of the sampled cooperatives was mostly funded by short-term debt, which rose by 31% in annualized terms. The authors also document that around 60% of these firms displayed a current capital structure that can be considered risky in terms of indebtedness, and that the majority of firms exhibited a non-sustainable growth in the period, what contrasts with the performance presented by Brazilian agricultural publicly traded companies, since only 16% of the firms from this group have shown a non-sustainable growth. This distinction seems to be explained by the lower capacity of agricultural cooperatives to provide resources from their operations. Originality/value - The authors investigate the short-term financial sustainability of a unique dataset of 65 Brazilian agricultural cooperatives and provide insight for researchers analyzing the dual nature of these firms.

Suggested Citation

  • Pedro Piccoli & Nilton Bianchini Junior & Jeferson Coser & Vilmar R. Moreira, 2020. "Short-term financial sustainability of agricultural cooperatives," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 81(3), pages 444-457, December.
    • Handle: RePEc:eme:afrpps:afr-06-2020-0097
    DOI: 10.1108/AFR-06-2020-0097
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    More about this item

    Keywords

    Financial sustainability; Agricultural cooperatives; Working capital management; Dynamic analysis of working capital; D22; D25; G30; G31;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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