Equity-Liabilities Distinction: The Case for Co-Operatives

33 Pages Posted: 13 Oct 2009

See all articles by Germán López-Espinosa

Germán López-Espinosa

University of Navarra

John Maddocks

affiliation not provided to SSRN

Fernando Polo-Garrido

affiliation not provided to SSRN

Abstract

Members' shares in co-operative entities are financial instruments with particular characteristics. In this paper we analyse the relation between firm leverage and systematic risk to provide empirical evidence on the economic substance of the member shares of members of cooperatives. We have studied the characteristics of members' shares in six European countries: France, Germany, Italy, Portugal, Spain and United Kingdom. We have also conducted tests on co-operatives of these countries over the period 1993–2005. The study reports that in global terms the economic substance of the redeemable part of equity in co-operatives is not the same across countries. Therefore if accounting standards setters want to develop a global standard for co-operatives, a recommendation derived from this study would be to follow a probabilistic model to classify the redeemable part of co-operative financial instruments, where the entity does not have the unconditional right to refuse the redemption, or to report this part as an intermediate item with characteristics of debt and equity.

Suggested Citation

López-Espinosa, Germán and Maddocks, John and Polo-Garrido, Fernando, Equity-Liabilities Distinction: The Case for Co-Operatives. Journal of International Financial Management & Accounting, Vol. 20, Issue 3, pp. 274-306, Autumn 2009. Available at SSRN: https://ssrn.com/abstract=1486855 or http://dx.doi.org/10.1111/j.1467-646X.2009.01033.x

Germán López-Espinosa (Contact Author)

University of Navarra ( email )

Facultad de Ciencias Económicas y Empresariales
Edificio Amigos
Pamplona, Navarra 31080
Spain
+34 948425600 (Phone)
+34 948425626 (Fax)

John Maddocks

affiliation not provided to SSRN ( email )

Fernando Polo-Garrido

affiliation not provided to SSRN

No Address Available

Register to save articles to
your library

Register

Paper statistics

Downloads
3
Abstract Views
769
PlumX Metrics