An examination of successful cooperative-owned firms: The effect of capital structure on financial performance

This dissertation presents an original analysis that addresses gaps in the literature and provides new insights for applied finance by examining the relationship between capital structure and financial performance within the context of cooperative ownership. Based on an interactive panel data analysis of manufacturing firms operating in Turkey, the study explores the capital–performance interaction between cooperative and non-cooperative firms from a multidimensional perspective, comparing theoretical capital structure frameworks with empirical findings. In this study, the term cooperative firm refers both to enterprises formally established as cooperatives and to firms majority-owned by cooperatives. The most striking finding of the research is the empirical evidence that the impact of the debt-to-equity ratio on return on equity is significantly higher in cooperative firms. This meaningful distinction indicates that cooperatives adopt a more cautious approach to financial leverage, and when they do incur debt, such decisions tend to have a greater impact on profitability. This result is consistent with cooperatives' prudent borrowing behavior, member-based equity structures, and their orientation toward community benefit rather than profit maximization. Accordingly, it is recommended that legal regulations be developed to diversify debt and equity instruments, enabling cooperatives and cooperative-owned enterprises to manage their capital structure decisions more effectively. The findings contribute to theoretical debates on understanding the financing behavior of cooperatives while also providing practical guidance for policymakers and practitioners.