Authors
Advisor(s)
Abstract(s)
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.
Description
Keywords
Agricultural credit co-operatives Agriculture Credit Insolvency Logit analysis Multiple discriminant analysis
Citation
Cabo, Paula; Rebelo, João (2012). Why do credit co-operatives disapear: the determinants of portuguese credit co-operatives failure. Agricultural Finance Review. ISSN 0002-1466. 72:3, p. 341-361
Publisher
Emerald