Navigating Economic Uncertainty: Exploring Financing Preferences and Member Utility in Cooperatives -A Case Study of Nordic Agri-food Cooperatives

Sammanfattning: The economic uncertainty of 2022/2023 has presented several financial challenges. High inflation and rapidly increasing interest rates have caused modern and unaccustomed corporations to experience recessive conditions, challenging them to acquire the skills necessary for effective navigation during an economic downturn. Given this context, this thesis aims to investigate how financing preferences of nordic cooperatively owned agri-food firms are affected by the economic uncertainty of 2022/2023. Even though previous research has shown that economic uncertainty can affect financing preferences, nordic cooperatives are not widely covered in prevailing literature. Hopefully, this novelty can contribute value to existing literature. In order to answer a research question regarding preferences, a rich understanding of firms’ actions and thought processes are important, hence a qualitative method was used. This thesis conducted case studies on four Nordic agri-food firms: Lantmännen, Coop, Arla and Norrmejerier. The results suggest a general preference for internal financing in line with the pecking order theory, and limited agreement with the trade off theory. However, cooperatives are inclined to sidestep preferences and instead exploit debt in order to enhance patronage dividends. Furthermore, in times of economic uncertainty, the results show that cooperatives tend to prioritize short-term needs of members at the expense of the firm’s financial position, if possible. Cooperatives' ability and incentive to prioritize member-utility over own profitability is reliant on strong finances and members’ position in their collective supply chain. The thesis concludes that during uncertain economic market conditions cooperatives still prefer internal financing, but due to members' short-term focus, firms become more reliant on debt to continue their quest of member value maximization.