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Credit Risk Migration Analysis Focused on Farm Business Characteristics and Business Cycles

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  • Katchova, Ani L.
  • Nam, Sangjeong

Abstract

We applied the migration approach to credit scoring measurement to determine how ratings, focused on farm characteristics such as farm size, age, and farm business type, change across business cycles. The empirical results from analyzing migration matrices using data from FBFM suggest that old, large and grain farms are more likely to upgrade their classes, while young, small, livestock farms are likely to downgrade. The migration matrices for each characteristic across the business cycles show that all farm businesses (except small, livestock farms) have a tendency to deteriorate during the recession cycles regardless of their characteristics.

Suggested Citation

  • 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 19451, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19451
    DOI: 10.22004/ag.econ.19451
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    References listed on IDEAS

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    1. Jill M. Phillips & Ani L. Katchova, 2004. "Credit score migration analysis of farm businesses: conditioning on business cycles and migration trends," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 64(1), pages 1-15, May.
    2. Nickell, Pamela & Perraudin, William & Varotto, Simone, 2000. "Stability of rating transitions," Journal of Banking & Finance, Elsevier, vol. 24(1-2), pages 203-227, January.
    3. Deng, Xiaohui & Escalante, Cesar L. & Barry, Peter J. & Yu, Yingzhuo, 2004. "Discrete And Continuous Time Models For Farm Credit Migration Analysis," 2004 Annual meeting, August 1-4, Denver, CO 20062, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Peter J. Barry & Ralph W. Bierlen & Narda L. Sotomayor, 2000. "Financial Structure of Farm Businesses under Imperfect Capital Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 920-933.
    5. Bruce Bjornson, 1995. "The Impacts of Business Cycles on Returns to Farmland Investments," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 566-577.
    6. Bangia, Anil & Diebold, Francis X. & Kronimus, Andre & Schagen, Christian & Schuermann, Til, 2002. "Ratings migration and the business cycle, with application to credit portfolio stress testing," Journal of Banking & Finance, Elsevier, vol. 26(2-3), pages 445-474, March.
    7. Escalante, Cesar L. & Barry, Peter J. & Park, Timothy A. & Demir, Ebru, 2004. "Farm-Level And Macroeconomic Determinants Of Farm Credit Migration Rates," 2004 Annual meeting, August 1-4, Denver, CO 20227, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. 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.
    9. Ani L. Katchova & Peter J. Barry, 2005. "Credit Risk Models and Agricultural Lending," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(1), pages 194-205.
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    Keywords

    Agricultural Finance;

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