Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives

publicly raised capital. The ACCs capital base growth is supported by their retained profits. Thus
understanding how ACCs governance can work on correcting bad economic performance is a
matter of crucial importance to overcome this constraint and ensure the economic and financial
survival of ACCs.

The main aim of the paper is to analyse the determinant factors of ACCs governance control
mechanisms. To achieve this purpose, the remainder of this paper consists of four sections.
Section 2 provides a summary of some issues related to the governance of the ACCs. Section 3
describes the model, sample and results. Section 4 offers some concluding remarks.

2. Governance of Portuguese Agricultural Credit Cooperatives: Some issues

The agricultural credit cooperative system in Portugal is made up of an integrated system of
two types of cooperatives: the central and the singles. Being the main institution of the
Agricultural Credit Cooperative Integrated System (ACCIS) the central ACC is the top
responsible and guardian for the running of the whole ACCs system.

In terms of the governance, the central ACC is responsible for the coordination and the
control of all the affiliated¹ singles' operational processes, i. e., it is the guardian of the system
with a high capacity to interfere in the management of the ACCs and even replace their board of
management.

On the banking activity, through the singles, the central ACC, beside deposits and loans,
offers a wide range of financial services, including, for instance, insurance operations, financial
advice, and exchange foreign currency². Acting as central ACC agent, single ACCs can perform
various operations out of their product market³ and “services to members only” restrictions.

¹ ACCs are free to stay out of the ACCIS, but in that situation they must comply with the more demanding
regulations applied to the other institutions of the Portuguese banking system.

² The organigram of the ACCs group is shown in appendix.

³ The activity of each ACC is restricted to the county (“concelho”) where it is located, i.e., the ACCs are regional

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