Cooperative Mergers and Acquisitions: The Role of Capital Constraints

Several explanations for merger activity exist for publicly traded firms, but none consider the unique aspects of cooperatives. This study develops a test for the hypothesis that cooperative consolidation occurs primarily in response to capital constraints associated with a lack of access to external equity capital. An empirical model estimates the shadow value of long-term investment capital within a multinomial logit model of transaction choice in a panel data set of the 100 largest U.S. cooperatives. The results substantially confirm the capital-constraint hypothesis. Thus, the primary implication is that internal growth may be a more viable alternative to consolidation if new forms of cooperative financing are developed.
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Richards, Timothy J.; Manfredo, Mark R., Cooperative Mergers and Acquisitions: The Role of Capital Constraints, Journal of Agricultural and Resource Economics, Volume 28, Issue 1, April 2003, Pages 152-168

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