The Cost of Risky Debt in Cooperatives

This article values the debt of an input cooperative that procures a single commodity from farmers and then processes and markets the output, and an otherwise identical firm structured as an investor-owned firm (IOF) using the Black-Scholes option pricing model. The major conclusion of this article is that a cooperative can be designed to be safer for lenders, which implies a lower cost of debt, than an otherwise identical firm structured as an IOF. This conclusion is a logical consequence of the difference between the residual claims of the owners of cooperatives and of IOFs.


Issue Date:
2011
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/164703
Published in:
Journal of Cooperatives, Volume 25
Page range:
1-15
Total Pages:
16




 Record created 2017-04-01, last modified 2017-12-02

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