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Financial Structure of Farm Businesses under Imperfect Capital Markets

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  • Peter J. Barry
  • Ralph W. Bierlen
  • Narda L. Sotomayor

Abstract

Recent finance studies have considered whether gaps between a firm's costs of internal and external sources of investment funds, arising from capital market imperfections, influence its investment behavior and funding preferences. This study tests the applicability of the pecking order and partial adjustment theories of financial structure to farm businesses by fitting a set of simultaneous financial equations with farm panel data from Illinois. Model results indicate that Illinois farms adjust to long-run financial targets for equity, debt, and leasing, but that additional financing needs follow a pecking order that is stronger for farms with greater asymmetric information problems Copyright 2000, Oxford University Press.

Suggested Citation

  • 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.
  • Handle: RePEc:oup:ajagec:v:82:y:2000:i:4:p:920-933
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00091
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    Citations

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    Cited by:

    1. Petrick, Martin & Kloss, Mathias, 2012. "Drivers of agricultural capital productivity in selected EU member states," Factor Markets Working Papers 137, Centre for European Policy Studies.
    2. Chaddad, Fabio Ribas & Cook, Michael L., 2001. "Testing For The Presence Of Financial Constraints In Agricultural Cooperatives," 2001 Annual meeting, August 5-8, Chicago, IL 20746, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Hadrich, Joleen C. & Larsen, Ryan A. & Olson, Frayne E., 2012. "Incentives for Machinery Investment," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124897, Agricultural and Applied Economics Association.
    4. Chaddad, Fabio Ribas & Heckelei, Thomas, 2003. "Access To Capital And Firm-Level Investment Behavior In Food Industries: A Comparison Of Cooperatives And Publicly Traded Firms," 2003 Annual meeting, July 27-30, Montreal, Canada 22205, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Silke Hüttel & Oliver Mußhoff & Martin Odening & Nataliya Zinych, 2008. "Estimating Investment Equations in Imperfect Capital Markets," SFB 649 Discussion Papers SFB649DP2008-016, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    6. Cadot, Julien, 2013. "Collateral, bank monitoring and firm performance: the case of newly established wine farmers," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(3), September.
    7. Anastassiadis, Friederike & Mußhoff, Oliver, 2013. "Evaluating the role of financial flexibility in farmers' investment decisions using latent class analysis," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158707, Agricultural Economics Society.
    8. Kułyk Piotr, 2012. "The imperfections of a credit market in agriculture," Management, De Gruyter Open, vol. 16(1), pages 250-263, May.
    9. Curtiss, Jarmila & Petrick, Martin & Balmann, Alfons, 2005. "Beiträge des 3. Doktorandenworkshops zur Agrarentwicklung in Mittel- und Osteuropa 2005
      [Contributions of the 3. Workshop for PhD Candidates on agricultural development in Central and Eastern Europ
      ," IAMO Discussion Papers 83, Leibniz Institute of Agricultural Development in Transition Economies (IAMO).
    10. Chaddad, Fabio Ribas & Cook, Michael L., 2002. "Testing For The Presence Of Financial Constraints In U.S," Working Papers 26045, University of Missouri Columbia, Department of Agricultural Economics.
    11. Stutzman, Sarah A., 2016. "U.S. Farm Capital Investment 1996-2013: Differences by Farm Size and Operator Primary Occupation," Dissertations-Doctoral 235179, AgEcon Search.
    12. Micheels, Eric T. & Katchova, Ani L. & Barry, Peter J., 2004. "Machinery Investment in Illinois: A Study Examining Existing Investment Motivations," 2004 Annual meeting, August 1-4, Denver, CO 20374, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. 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).
    14. Bakhshi, Samira & Kerr, William A., 2009. "Is There Supply Distortion In The Green Box? An Acreage Response Approach," Working Papers 51093, Canadian Agricultural Trade Policy Research Network.
    15. Ahearn, Mary Clare & Collender, Robert N. & Diao, Xinshen & Harrington, David H. & Hoppe, Robert A. & Korb, Penelope J. & Makki, Shiva S. & Morehart, Mitchell J. & Roberts, Michael J. & Roe, Terry L. , 2004. "Decoupled Payments In A Changing Policy Setting," Agricultural Economics Reports 33981, United States Department of Agriculture, Economic Research Service.
    16. Sporleder, Thomas L. & Moss, Leeann E., 2001. "Capital Structure Decisions Of U.S.-Based Food Processing Firms: A Transaction Cost Economics Perspective," Proceedings: 2001 Regional Committee NC-221, October 1-2, 2001, McLean, Virginia 132394, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    17. Anastassiadis, Friederike & Liebe, Ulf & Musshoff, Oliver, 2012. "Finanzielle Flexibilität In Landwirtschaftlichen Investitionsentscheidungen: Ein Discrete Choice Experiment," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137142, German Association of Agricultural Economists (GEWISOLA).

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