Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives

though such an outcome may be socially suboptimal.

4. Conclusion

The internal governance mechanisms: management board or chairman change mechanisms
are not related to the ACC performance, which indicates potential weakness of the ACCs internal
control mechanisms. Additionally, by comparing the ACCs experiencing governance intervention
to those that did not witnessed this experience the main conclusions are: (1) the merged ACCs
and the ACCs intervened by a central ACC nomination agent are smaller and hold a weaker
credit management with higher bad loans and moreover they hold a heavy administrative costs
structure and profitability problems; (2) ACCs with a management board replacement by the
central ACC are bigger, hold a weaker credit management and present solvency problems.

This outcome confirms the decision-related incentive problems of cooperatives, which create
a potentially weak internal system of corporate governance and is similar to the empirical
evidence provided by other research (Crespi et. al., 2004; Gorton and Schmid; 1999; Prowse,
1997).

References

Anderson, C. and Campbell II, T. (2000). Restructuring the Japanese banking system: Has Japan
gone far enough?. International Review of Financial Analysis 9 (2): 197-218.

Blackwel, D., Brickley, J. and Weisbach, M. (1994). Accounting information and internal
performance evaluation. Evidence from Texas banks. Journal of Accounting and Economics
17:331-358.

Cabo, P. (2003), As Fusoes no Sistema Integrado de Crédito Agricola Mùtuo Português.,
Universidade do Minho, Braga.

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