Horizon and Portfolio Investment Constraints in Agricultural Cooperatives

Though horizon and portfolio problems are commonly thought to limit cooperatives’ ability to capitalize on investment opportunities, empirical inquiry into the existence of these constraints is sparse, and recent conceptual arguments suggest that the horizon problem in particular may be less severe than commonly believed. Using surveys of members of three cooperatives, this study investigates the extent to which indicators of potential horizon and portfolio problems influence members’ preferences for cooperative investment in value-added processing technology. The evidence points to the existence of two types of horizon problems and two types of portfolio problems influencing cooperative members’ investment preferences.