We determine the circumstances when the absence of public listing, often believed to be a disadvantage, makes a cooperative the unique efficient governance structure. This is established in a multi-task principal-agent model, capturing that cooperatives are not publicly listed and their CEOs have to bring the downstream enterprise to value as well as to serve upstream member interests. Not having a public listing prevents the CEO from choosing the level of the downstream activities too high. Cooperatives are uniquely efficient when the upstream marginal product multiplied with a function increasing in the strength of the chain complementarities is higher than the downstream marginal product.

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doi.org/10.1093/erae/jbr007, hdl.handle.net/1765/37798
European Review of Agricultural Economics
Erasmus Research Institute of Management

Feng, L, & Hendrikse, G.W.J. (2012). Chain interdependencies, measurement problems and efficient governance structure: cooperatives versus publicly listed firms. European Review of Agricultural Economics (Vol. 39, pp. 241–255). doi:10.1093/erae/jbr007