On the other hand, when an ACC gets into financial distress, the central AAC have an
incentive to protect this ACC from default because it is important to maintain the whole ACCs
system with high reputation and confidence to the different stakeholders (depositors, loaners,
Banco of Portugal, ...).
Moreover, by distributing the control rights over the ACC equally across the cooperative
members, power is actually passed to the management. Since the equity ownership structure is
exogenous, it cannot adjust to eliminate managerial inefficiency (Gorton and Schmid, 1999). And
because equity can only be traded with the ACC itself, a takeover by means of an equity
acquisition is not possible.
As mentioned earlier, understanding how ACCs governance can work on correcting bad
economic performance is of crucial importance to overcome the financial problems of ACCs and
ensure their survival. In the next section we analyse the determinant factors of ACCs governance
control mechanisms.
3. Model, data and results
3.1. Model
To analyse the determinant factors of ACCs governance control mechanisms we used a
multinomial logit model. This approach has been applied by several authors for banks (Anderson
and Campbell, 2000; Blackwell et al., 1994; Crespi et al., 2004; Prowse, 1997).
The multinomial logit is used when the dependent variable takes on more than two discrete
outcomes. In our case it assumes values of 0, 1, 2, 3, 4 or 5, reflecting six different situations6,
respectively: (0) no intervention; (1) board change; (2) replacement of the chairman; (3) central
6 The values assigned to every governance intervention only reflect different categories, and the ordinal value has no
further meaning.