The Determinants of Ownership Structure: Evidence from Brazilian Agricultural Cooperatives Davi R. de Moura Costa School of Economics, Management and Accounting, University of S˜ ao Paulo, Ribeir˜ ao Preto, Brazil. E-mail: drmouracosta@usp.br Fabio Chaddad Division of Applied Social Sciences, University of Missouri, Columbia, MO. E-mail: chaddadf@missouri.edu Paulo Furquim de Azevedo S˜ ao Paulo School of Economics, Fundac ¸˜ ao Get ´ ulio Vargas, Brazil. E-mail: paulo.azevedo@fgv.br ABSTRACT The separation of ownership and control observed in large corporations is common to other organizations such as large professional partnerships, financial mutuals, nonprofits, and cooperatives. This separation gives rise to control and influence cost problems in cooperatives. However, it is not observed in all Brazilian agricultural cooperatives, where certain members have both residual claim and formal control rights. In this article, we examine the allocation of decision management and control rights and the determinants of ownership structure in a sample of Brazilian agricultural cooperatives. Using survey data, we employ multivariate regression techniques to empirically investigate the factors determining the allocation of ownership rights and the separation of ownership and control. Our findings do not lend strong support to agency theory, but they help inform research seeking to shed light on the determinants of decision rights allocation in agricultural cooperatives. [EconLit classification: Q130]. C  2013 Wiley Periodicals, Inc. 1. INTRODUCTION Since the seminal work of Berle and Means (1932), the separation of ownership and control in corporations—and associated corporate governance problems—has been a major research topic in organizational economics. According to agency theory, complex organizations with diffuse ownership—including agricultural cooperatives—have a better chance of survival if the decision and risk-bearing functions are borne by different agents. Fama and Jensen (1983) argue that “separation of decision and risk bearing functions survives in these organizations in part because of the benefits of specialization of management and risk bearing, but also because of an effective common approach to controlling agency problems caused by separation of decision and risk-bearing functions. In particular, our hypothesis is that the contract structures of all of these organizations separate the ratification and monitoring of decisions from initiation and implementation of the decisions” (pp. 301–302). The separation of decision and risk-bearing functions observed in large corporations is com- mon to other organizations such as large professional partnerships, financial mutual firms, nonprofit organizations, and cooperatives (Hansmann, 1996). In particular, members of agri- cultural cooperatives delegate formal control rights to the board of directors. Cooperative boards, in turn, delegate management rights to professional executives (Bijman & van Dijk, 2009; Cook, 1994; Hendrikse, 2007). The consequent separation of ownership and control gives rise to control and influences cost problems in cooperatives (Cook, 1995). However, the separation of ownership and control is not observed in all agricultural co- operatives (Chaddad & Iliopoulos, 2013). For example, Zylbersztajn (1994) and Bialoskorski Neto (2003) document the fact that certain members of Brazilian agricultural cooperatives have both residual claim and formal control rights. This apparent misalignment between Fama and Jensen’s (1983) hypothesis and the survival of agricultural cooperatives without the separation of decision and risk bearing functions has motivated our research. Agribusiness, Vol. 29 (1) 62–79 (2013) C  2013 Wiley Periodicals, Inc. Published online in Wiley Online Library (wileyonlinelibrary.com/journal/agr). DOI: 10.1002/agr.21325 62