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Testing For The Presence Of Financial Constraints In U.S

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Author Info
Chaddad, Fabio R.
Cook, Michael L.
Abstract

It is commonly argued in the literature that agricultural cooperatives are financially constrained because they are unable to acquire sufficient risk capital to invest in productive assets. This study examines whether agricultural cooperatives’ investment is constrained by estimating neoclassical and cash flow augmented Q investment models. Panel data regression results suggest that cooperative physical capital investment responds positively and significantly to both the marginal profitability of capital and cash flow. Results also indicate that all cooperative sub-samples face binding financial constraints when making investment decisions, but some cooperatives appear to be less financially constrained than others. The empirical analysis of the cooperative financial constraint hypothesis suggests that eliminating restrictions on residual claims might be a necessary condition for the attenuation of capital constraints in agricultural cooperatives.

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Paper provided by University of Missouri Columbia, Department of Agricultural Economics in its series Working Papers with number 26045.

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Date of creation: 2002
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Handle: RePEc:ags:umcowp:26045

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Keywords: Agribusiness;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hubbard, R Glenn & Kashyap, Anil K, 1992. "Internal Net Worth and the Investment Process: An Application to U.S. Agriculture," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 506-34, June. [Downloadable!] (restricted)
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  2. Hart, Oliver & Moore, John, 1996. "The Governance of Exchanges: Members' Cooperatives versus Outside Ownership," Oxford Review of Economic Policy, Oxford University Press, vol. 12(4), pages 53-69, Winter.
    Other versions:
  3. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October. [Downloadable!] (restricted)
  4. Huntley Schaller, 1993. "Asymmetric Information, Liquidity Constraints and Canadian Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 26(3), pages 552-74, August. [Downloadable!] (restricted)
  5. Myers, Stewart C. & Majluf, Nicolás S., 1945-, 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Working papers 1523-84., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  6. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June. [Downloadable!] (restricted)
  8. Sean Cleary, 1999. "The Relationship between Firm Investment and Financial Status," Journal of Finance, American Finance Association, vol. 54(2), pages 673-692, 04. [Downloadable!] (restricted)
  9. Joao F. Gomes, 2001. "Financing Investment," American Economic Review, American Economic Association, vol. 91(5), pages 1263-1285, December. [Downloadable!] (restricted)
  10. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November. [Downloadable!] (restricted)
  11. Steven Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," NBER Working Papers 2387, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Johnson, James & Perry, Janet E. & Korb, Penni & Sommer, Judith E. & Ryan, James T. & Green, Robert C. & Durst, Ron & Monke, James, 2001. "Structural and Financial Characteristics of U.S. Farms: 2001 Family Farm Report," Agricultural Information Bulletins 33707, United States Department of Agriculture, Economic Research Service. [Downloadable!]
  13. Ralph Bierlen & Allen M. Featherstone, 1998. "FUNDAMENTAL q, CASH FLOW, AND INVESTMENT: EVIDENCE FROM FARM PANEL DATA," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 427-435, August. [Downloadable!] (restricted)
  14. Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1991. "Corporate Structure, Liquidity, and Investment: Evidence from Japanese Industrial Groups," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 33-60, February. [Downloadable!] (restricted)
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  15. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January. [Downloadable!] (restricted)
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  1. Giannakas, Konstantinos & Fulton, Murray, 2003. "Agricultural Cooperatives And Cost-Reducing R&D In The Agri-Food System," 2003 Annual meeting, July 27-30, Montreal, Canada 22193, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
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