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Credit Score Migration Analysis Of Farm Businesses: Conditioning On Business Cycles And Migration Trends

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  • Phillips, Jill
  • Katchova, Ani L.

Abstract

This study examines credit score migration rates of farm businesses. We test whether migration probabilities differ across business cycles. Our results suggest that agricultural credit ratings are more likely to improve during expansions and deteriorate during recessions. We also test whether agricultural credit ratings depend on the previous period migration trends. Our results show that credit score ratings exhibit trend reversal where upgrades (downgrades) are more likely to be followed by downgrades (upgrades).

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File URL: http://purl.umn.edu/20136
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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 20136.

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Date of creation: 2004
Date of revision:
Handle: RePEc:ags:aaea04:20136

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Related research

Keywords: business cycle; credit migration; migration trend; path dependence; rating drift; trend reversal; Agricultural Finance;

References

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  1. Katchova, Ani L. & Barry, Peter J., 2003. "Credit Risk Models: An Application to Agricultural Lending," Proceedings: 2003 Regional Committee NCT-194, October 6-7, 2003; Kansas City, Missouri, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition 132519, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  2. Anil Bangia & Francis X. Diebold & Til Schuermann, 2000. "Ratings Migration and the Business Cycle, With Application to Credit Portfolio Stress Testing," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 00-26, Wharton School Center for Financial Institutions, University of Pennsylvania.
  3. Yusuf Jafry & Til Schuermann, 2003. "Metrics for Comparing Credit Migration Matrices," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 03-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
  4. Pamela Nickell & William Perraudin & Simone Varotto, 2001. "Stability of ratings transitions," Bank of England working papers 133, Bank of England.
  5. Escalante, Cesar L. & Park, Timothy A. & Barry, Peter J. & Demir, Ebru, 2002. "Determinants Of Farm Credit Migration Rates," Proceedings: 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition 132368, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
  6. Lando, David & Skodeberg, Torben M., 2002. "Analyzing rating transitions and rating drift with continuous observations," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 423-444, March.
  7. Til Schuermann & Yusuf Jafry, 2003. "Measurement and Estimation of Credit Migration Matrices," Center for Financial Institutions Working Papers, Wharton School Center for Financial Institutions, University of Pennsylvania 03-08, Wharton School Center for Financial Institutions, University of Pennsylvania.
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Citations

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Cited by:
  1. Dixon, Bruce L. & Ahrendsen, Bruce L. & Landerito, Aiko O. & Hamm, Sandra J. & Danforth, Diana M., . "Determinants of FSA Direct Loan Borrowers' Financial Improvement and Loan Servicing Actions," Journal of Agribusiness, Agricultural Economics Association of Georgia, Agricultural Economics Association of Georgia.
  2. Durguner, Seda & Barry, Peter J. & Katchova, Ani L., 2006. "Credit Scoring Models: A Comparison between Crop and Livestock Farms," 2006 Annual meeting, July 23-26, Long Beach, CA, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 21431, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Pederson, Glenn D. & Chu, Yu-Szu & Richardson, D. Wynn, 2011. "Community Bank Assessment of Agricultural Portfolio Risk Exposure: The Literature and the Methods in Use," Staff Papers, University of Minnesota, Department of Applied Economics 107483, University of Minnesota, Department of Applied Economics.
  4. Katchova, Ani L. & Nam, Sangjeong, 2005. "Credit Risk Migration Analysis Focused on Farm Business Characteristics and Business Cycles," 2005 Annual meeting, July 24-27, Providence, RI, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 19451, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  5. Gunderson, Michael A. & Gloy, Brent A. & LaDue, Eddy L., 2005. "Pricing Agricultural Loans to Account for Long-Term Default Risk," Proceedings: 2005 Agricultural and Rural Finance Markets in Transition,October 3-4, 2005; Minneapolis, Minnesota, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transit 132750, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.

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