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Credit Scoring, Loan Pricing, And Farm Business Performance

Author

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  • Barry, Peter J.
  • Ellinger, Paul N.

Abstract

In light of recent developments in agricultural credit evaluations, this study employs a multiperiod simulation model that endogenizes farm investment decisions, credit evaluations, and loan pricing based on the credit scoring procedures of agricultural lender. Model results show that credit-scored pricing yields time patterns of performance, credits classifications, and interest rates that parallel the firmÂ’s investment, financing, and debt servicing activities. Moreover, the lenderÂ’s price responses dampen growth incentives as credit worthiness diminished, stimulate growth as credit improves, and lead to similar capital structures over time.

Suggested Citation

  • Barry, Peter J. & Ellinger, Paul N., 1989. "Credit Scoring, Loan Pricing, And Farm Business Performance," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(01), July.
  • Handle: RePEc:ags:wjagec:32464
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    File URL: http://purl.umn.edu/32464
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    References listed on IDEAS

    as
    1. Hardy, William E., Jr. & Weed, Johno B., 1980. "Objective Evaluation For Agricultural Lending," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 12(01), July.
    2. Schnitkey, Gary D. & Barry, Peter J. & Ellinger, Paul N., 1987. "A Microcomputer Analysis of Farm Financial Performance," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 19(02), pages 203-209, December.
    3. Hardy, William E. & Weed, Johno B., 1980. "Objective Evaluation for Agricultural Lending," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 12(01), pages 159-164, July.
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    Citations

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    Cited by:

    1. Bramma, Keith M., 2000. "Pricing farm loans for credit risk," 2000 Conference (44th), January 23-25, 2000, Sydney, Australia 123607, Australian Agricultural and Resource Economics Society.
    2. Turvey, Calum G. & Ellinger, Paul N., 2002. "A Comparative Study of the Financial Performance of Grain and Oilseed Farms in Ontario and Illinois," Proceedings: 2002 Regional Committee NC-221, October 7-8, 2002, Denver, Colorado 132376, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    3. Allen M. Featherstone & Christine A. Wilson & Terry L. Kastens & John D. Jones, 2007. "Factors affecting the agricultural loan decision-making process," Agricultural Finance Review, Emerald Group Publishing, vol. 67(1), pages 13-33, May.
    4. Zhao, Jianmei & Barry, Peter J. & Katchova, Ani L., 2008. "Signaling Credit Risk in Agriculture: Implications for Capital Structure Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(03), December.
    5. Chisasa, Joseph, 0. "Agriculture – A Corporate Finance Perspective," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, issue 1.
    6. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Working Papers 122846, Factor Markets, Centre for European Policy Studies.
    7. Curtiss, Jarmila, 2012. "Determinants of Financial Capital Use: Review of theories and implications for rural businesses," Factor Markets Working Papers 123, Centre for European Policy Studies.
    8. Chisasa, Joseph, 0. "Sources Of Growth In South African Sources Of Growth In South African Agriculture – A Corporate Finance Perspective," Journal of Agribusiness and Rural Development, University of Life Sciences, Poznan, Poland, issue 4.

    More about this item

    Keywords

    Agricultural Finance;

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