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Credit Scoring, Loan Pricing, And Farm Business Performance

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Author Info

  • Barry, Peter J.
  • Ellinger, Paul N.

Abstract

In light of recent developments in agricultural credit evaluations, this study employs a multiperiod simulation model that endogenizes farm investment decisions, credit evaluations, and loan pricing based on the credit scoring procedures of agricultural lender. Model results show that credit-scored pricing yields time patterns of performance, credits classifications, and interest rates that parallel the firmÂ’s investment, financing, and debt servicing activities. Moreover, the lenderÂ’s price responses dampen growth incentives as credit worthiness diminished, stimulate growth as credit improves, and lead to similar capital structures over time.

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File URL: http://purl.umn.edu/32464
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Bibliographic Info

Article provided by Western Agricultural Economics Association in its journal Western Journal of Agricultural Economics.

Volume (Year): 14 (1989)
Issue (Month): 01 (July)
Pages:

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Handle: RePEc:ags:wjagec:32464

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Web page: http://waeaonline.org/
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Related research

Keywords: Agricultural Finance;

References

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  1. Schnitkey, Gary D. & Barry, Peter J. & Ellinger, Paul N., 1987. "A Microcomputer Analysis Of Farm Financial Performance," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 19(02), December.
  2. Hardy, William E., Jr. & Weed, Johno B., 1980. "Objective Evaluation For Agricultural Lending," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(01), July.
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Citations

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Cited by:
  1. Featherstone, Allen M. & Wilson, Christine A. & Kastens, Terry L. & Jones, John D., 2005. "Factors Affecting the Agricultural Loan Decision-Making Process," Proceedings: 2005 Agricultural and Rural Finance Markets in Transition,October 3-4, 2005; Minneapolis, Minnesota 132749, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  2. Turvey, Calum G. & Ellinger, Paul N., 2002. "A Comparative Study of the Financial Performance of Grain and Oilseed Farms in Ontario and Illinois," Proceedings: 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado 132376, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  3. Zhao, Jianmei & Barry, Peter J. & Katchova, Ani L., 2008. "Signaling Credit Risk in Agriculture: Implications for Capital Structure Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(03), December.
  4. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Factor Markets Working Papers 123, Centre for European Policy Studies.
  5. Bramma, Keith M., 2000. "Pricing farm loans for credit risk," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123607, Australian Agricultural and Resource Economics Society.
  6. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Working Papers 122846, Factor Markets, Centre for European Policy Studies.

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