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Optimal Capital Structure as Business Risk Changes

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  • Featherstone, Allen M.

Abstract

Optimal capital structure is one of the more important decisions farmers make. This study quantitatively examines how optimal capital structure may change as land quality changes. Results suggest that farmers on poor quality land will raise more hogs and own less farmland if the increased riskiness of marginal land is not bid into the mean returns to assets.

Suggested Citation

  • Featherstone, Allen M., 1990. "Optimal Capital Structure as Business Risk Changes," 1990 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, January 28-31, 1990, Sanibel Island, Florida 271544, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    • Handle: RePEc:ags:rrsr90:271544
    DOI: 10.22004/ag.econ.271544
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    References listed on IDEAS

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    1. Allen M. Featherstone & Timothy G. Baker, 1988. "Effects of Reduced Price and Income Supports on Farmland Rent and Value," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(2), pages 177-189.
    2. Oscar R. Burt, 1986. "Econometric Modeling of the Capitalization Formula for Farmland Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 10-26.
    3. Peter J. Barry & C. B. Baker & Luis R. Sanint, 1981. "Farmers' Credit Risks and Liquidity Management," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(2), pages 216-227.
    4. J. DeBoer-Lowenberg & Michael Boehlje, 1986. "The Impact of Farmland Price Changes on Farm Size and Financial Structure," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(4), pages 838-848.
    5. McCarl, Bruce A., 1986. "Innovations In Programming Techniques For Risk Analysis," Regional Research Projects > 1986: S-180 Annual Meeting, March 23-26, 1986, Tampa, Florida 271825, Regional Research Projects > S-180: An Economic Analysis of Risk Management Strategies for Agricultural Production Firms.
    6. Allen M. Featherstone & Charles B. Moss & Timothy G. Baker & Paul V. Preckel, 1988. "The Theoretical Effects of Farm Policies on Optimal Leverage and the Probability of Equity Losses," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(3), pages 572-579.
    7. Stephen C. Gabriel & C. B. Baker, 1980. "Concepts of Business and Financial Risk," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 560-564.
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