Governance Control Mechanisms in Portuguese Agricultural Credit Cooperatives

ACC intervention by nomination of an agent; (4) management board replacement by the central
ACC; (5) and merger. The cases (1) and (2) reflect internal control mechanisms and the others,
essentially external control mechanisms. The value of each event in the t period will be
determined according to the behaviour of the ACC in the t+1 period.

Multiple equations are estimated jointly in order to make efficient use of the available
information (Greene, 2000), and the coefficients for each possible outcome are to be interpreted
with respect to a reference group. In our case ACCs that did not experiencing any governance
intervention in any particular year (value 0 of the dependent variable).

In the case of the merger operation it can adopt the form of a merger or a incorporation. In
the last one, only the ACC merger target (incorporated) was considered in the analysis.

Central ACC intervention can take the form of the nomination of an agent, usually to decide
on and manage credit risks, or taking a safeguard, strong and deeper decision, by the replacement
of the board of management, which indicates that we are clearly in the presence of two different
governance mechanisms.

Board of management changes can assume the form of a partial change or a complete board
change. The first alternative is the most usual in our sample: there are only 13 cases of complete
board change. Furthermore, only the cases for which there is evidence that the board and
chairman changes are not due to retirement or death are considered.

Finally, since mergers are often followed by changes in the management board, for those
ACCs that continue, changes in their management are not considered.

When different mechanisms are simultaneously present we consider the one that takes deeper
effects, i. e., in a decreasing way, from the whole data sample, the AAC-year observations for
which a merger has occurred are first identified and a value of 5 is assigned to theses cases. With
the remaining data, we proceed to search for the ACC-year observations with a central ACC

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