INCENTIVE INCOMPATIBILITY IN CO-OPERATIVE AGRIBUSINESS FIRMS IN CANADA: DOES SUPPLY MANAGEMENT MATTER?

Abstract

Relatively few studies have estimated and tested the impact of agency costs of debt on costs of production or productivity of firms (e.g., Kim and Maksimovic 1990; Featherstone and Al-Kheraiji 1995; Bernstein and Nadiri 1993; Hossain and Jain 2001). The empirical evidence from these studies indicates that the estimated magnitude of agency costs would undoubtedly influence the firm’s capital-structure decision. All of these studies have been conducted for firms in the U.S.; agency costs of debt have not yet been addressed in the context of Canadian co-operative agribusiness firms, specifically in supply-managed industries.