Epsilon Archive for Student Projects

Abstract

There is an increasing number of agricutural cooperative management in acquiring more debt capital in order to compensate member equity and achived higher growth. At the same time, exposing the cooperative to higher financial risks indicate that the member interests are being replaced for other priority interests. Once the members do no have incentives to involve in cooperative governance due to their small investment correlation to the total capital base of the cooperative, they no longer consider themselves as real owners and consequently the free rider problem emerge. When the member perceived that benefits could also arrive from borrowed money and other capital sources instead of their own investing money, a decrease of their contribution as well as their less involvement in participate the governance of cooperative will occur. Inspried by the importance of member commitment and the great potentials of debt capitals, our prime focus of this study is whether the acquisition of debt capital has some influences on member commitment in agricultural cooperatives.

The empirical approach consisted of the theorical framework of the social capial theory, the property right theory and the agency theory. The data gathered from the phone interviews with seven representative managers of Chinese agricultural cooperatives and are used to test the hypotheses in which correspond to the aim. Debt capital’s effects on member commitment are measured by five indicators consisted of members’ willingness to invest, level of member control, superiority of members’ interests, members’ benefit from their cooperatives and level of social capital. The choice method is qualitative with explanation and example from cooperatives participated while the set of open-end type of question is used for the phone interview.

Based on interviews with cooperative members from Zhejiang province, we found that debt capital can have both positive and negative impacts on level of member commiment by influencing cooperatives’ financial performance, members’ willingness to invest, member control, member interests and level of social capital in cooperatives.