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Abstract

A conceptual marketing-finance framework is proposed which links channel contracting in agriculture and the use of financial facilitating services (e.g., financial derivatives) to (shareholder) value creation. The framework complements existing literature by explicitly including channel contract relationships as market-based assets that can be managed to reduce cash flow volatility and hence increase shareholder value. We show how financial facilitating services (e.g., derivatives) can be used to complement the cash flows components of channel contract relationships thereby further reducing the risk adjusted cost of capital and improving shareholder value. In a field study of producers, wholesalers, and processors, in the potato and meat industry the framework shows how shareholder value can be enhanced by using financial facilitating services, such as derivatives, to complement marketing channel relationships. Moreover, this study shows how producers and managers from agribusiness companies can use such financial services as conflict-solving tools in case of incongruent contract preferences between channel members.

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