An Investigation of the Factors Influencing the Financial Performance of Agricultural Cooperatives in Thailand

Ngamjan Prajya, . and Buranasiri Jiroj, . An Investigation of the Factors Influencing the Financial Performance of Agricultural Cooperatives in Thailand. pp. 2343-2358. ISSN 0128-7702

This study investigates the factors influencing the financial performance of 1 766 agricultural cooperatives in Thailand by applying the DuPont analysis framework. Financial performance measured using ROE (return on equity) was decomposed to three contributing factors viz. profitability asset efficiency and financial leverage. Linear regression and quantile regression analyses were employed to respectively estimate the conditional mean and conditional quantiles. Profitability was found to be the strongest driver of ROE. Asset efficiency and financial leverage were also positive contributors to ROE. An alternative regression model was carried out where the financial performance construct ROE was replaced with ROA (return on assets). The findings suggest that increasing leverage leads to decreasing performance contradicting the earlier results. This implies that whether leverage hurts or benefits performance can depend on the variable choice. Employed as control variables location and age were found to be associated with performance. In particular the cooperatives in the central region in general appeared to have the lowest financial performance. The study empirically pointed out that negative equity led to violations of the ordinal and interpretable properties of ROE. Thus ROE components should be carefully examined. Regarding cooperative management policy cooperatives should concentrate on both operating and financial performances with the priority given to profitability which involves the efficiencies of cost and sales management.

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Abstract

This study investigates the factors influencing the financial performance of 1 766 agricultural cooperatives in Thailand by applying the DuPont analysis framework. Financial performance measured using ROE (return on equity) was decomposed to three contributing factors viz. profitability asset efficiency and financial leverage. Linear regression and quantile regression analyses were employed to respectively estimate the conditional mean and conditional quantiles. Profitability was found to be the strongest driver of ROE. Asset efficiency and financial leverage were also positive contributors to ROE. An alternative regression model was carried out where the financial performance construct ROE was replaced with ROA (return on assets). The findings suggest that increasing leverage leads to decreasing performance contradicting the earlier results. This implies that whether leverage hurts or benefits performance can depend on the variable choice. Employed as control variables location and age were found to be associated with performance. In particular the cooperatives in the central region in general appeared to have the lowest financial performance. The study empirically pointed out that negative equity led to violations of the ordinal and interpretable properties of ROE. Thus ROE components should be carefully examined. Regarding cooperative management policy cooperatives should concentrate on both operating and financial performances with the priority given to profitability which involves the efficiencies of cost and sales management.

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Item Type:	Article
AGROVOC Term:	Agricultural cooperatives
AGROVOC Term:	Cooperatives
AGROVOC Term:	Financial cooperatives
AGROVOC Term:	Owner's equity
AGROVOC Term:	Assets
AGROVOC Term:	Business management
AGROVOC Term:	Operating costs
AGROVOC Term:	Sales
AGROVOC Term:	Profitability
Depositing User:	Mr. AFANDI ABDUL MALEK
Last Modified:	24 Apr 2025 00:55
URI:	http://webagris.upm.edu.my/id/eprint/9377

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