Capital procurement of a consumer cooperative: Role of the membership market |
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Authors: | Kazuhiko Mikami |
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Institution: | Department of Applied Economics, University of Hyogo, 8-2-1 Gakuen Nishi Machi, Nishi Ward, Kobe, Hyogo 651-2197, Japan |
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Abstract: | Cooperative firms are commonly thought to be financially weak and unable to flourish in the market economy. This paper addresses the idea that a consumer cooperative issues a membership, which represents an ownership share in the cooperative, as a method of procuring equity capital. It then shows that, in theory, consumer cooperatives are not necessarily financially weaker than investor-owned firms in the presence of a membership market. This implies that the consumer cooperative is potentially a promising alternative to the investor-owned firm when the latter type of firm induces serious market failure in the product market. |
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