The impact of board of director characteristics on Farm Credit Association performance: REGULAR ARTICLES

Abstract

Purpose

The purpose of this paper is to identify how board size and board member compensation impact the operating performance of Farm Credit Associations. Cooperatives are a unique business structure that might not have profit maximization as a goal. Thus measures of performance other than return on equity are used to establish the link.

Design/methodology/approach

The paper uses regression to explain the relationship between board characteristics and performance.

Findings

The results of the models of return on assets and equity indicated that board size and compensation explain little of the variability in performance in these profitability measures. The results of the models of operating efficiencies explained a greater proportion of the variability in the operating efficiency and operating expenses‐to‐average assets ratios. In both models the relationship exhibited diminishing returns to board size and per member compensation.

Research limitations/implications

The data are based on just one year of performance, limiting the generalizability of the results.

Practical implications

The paper includes implications for the size of boards of directors and director compensation.

Originality/value

This paper fulfils an identified need to study the impacts of boards of directors for cooperatives.

Citation

Gunderson, M., Gloy, B. and Rodgers, C. (2009), "The impact of board of director characteristics on Farm Credit Association performance: REGULAR ARTICLES", Agricultural Finance Review, Vol. 69 No. 2, pp. 149-159. https://doi.org/10.1108/00021460910978652