Why do credit cooperatives disappear? The determinants of Portuguese agricultural credit co‐operatives failure
Abstract
Purpose
The paper aims to identify “problematic” agricultural credit co‐operatives (CCAM) and to evaluate their risk of insolvency as a function of financial indicators, providing regulators and other stakeholders with a set of tools that would be predictive of future insolvency and perhaps bankruptcy.
Design/methodology/approach
Using a database of CCAM failures in the period between 1995 and 2009, statistical models of failure of CCAM, are estimated and compared, using logistic regression analysis and multiple discriminant analysis for assessing the potential failure of CCAM as a function of financial/economical indicators.
Findings
The paper identified the variables customer resources growth, transformation ratio, credit overdue, expenses ratio, structural costs, liquidity, indebtedness and financial margin as determinants of CCAM failure. It suggests that CCAM take measures geared to boosting business, to shoring up the financial margin and the deposit base, to bolstering the complementary margin and to improving the credit recovery processes. Additionally it is necessary to increase cost efficiency, rationalizing structures and procedures consistent with reducing operating costs without detriment to the quality of service provided.
Originality/value
This paper helps to understand why agricultural credit co‐operatives fail.
Keywords
Citation
Cabo, P. and Rebelo, J. (2012), "Why do credit cooperatives disappear? The determinants of Portuguese agricultural credit co‐operatives failure", Agricultural Finance Review, Vol. 72 No. 3, pp. 341-361. https://doi.org/10.1108/00021461211277222
Publisher
:Emerald Group Publishing Limited
Copyright © 2012, Emerald Group Publishing Limited