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Fundamental q, Cash Flow, and Investment: Evidence from Farm Panel Data

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  • Ralph Bierlen
  • Allen M. Featherstone

Abstract

This study used a 1976-1992 panel data set to test whether farm machinery investors face finance constraints. Tests were based on fundamental q investment equations in which cash flow was added as an additional explanatory variable. Results indicated that (1) credit constraints were generally not a problem during the 1970s boom, (2) credit constraints became a problem during the 1980s and early 1990s because of tighter credit and/or more conservative financial managerial styles, (3) the investment-cash flow relationships of low-debt and older-operator farms were not significantly affected by farm business cycles, and (4) the investment-cash flow relationships of high-debt and young-operator farms were affected strongly by business cycles. Debt level was the strongest determinant of credit constraints; asset size and operator age were less important. © 1998 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Review of Economics and Statistics.

Volume (Year): 80 (1998)
Issue (Month): 3 (August)
Pages: 427-435

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Handle: RePEc:tpr:restat:v:80:y:1998:i:3:p:427-435

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