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Does Capital Market Structure Affect Farm Investment? A Comparison using French and British Farm-Level Panel Data

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  • Catherine Benjamin
  • Euan Phimister

Abstract

This article considers whether differences in the structure of agriculture credit markets in France and the United Kingdom alters the investment sensitivity to financial variables particularly cash flow. Using two panel datasets of French and British farms, three approaches are used to test the sensitivity of investment to internal finance, an inventory investment model, a fundamental q-model, and Euler equations for machinery investment. The results suggest that the contrasting capital markets structures do induce differences in overall investment sensitivity to cash flow and its pattern across both farms with varying levels of collateral and between inventory and machinery investment. Copyright 2002, Oxford University Press.

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  • Catherine Benjamin & Euan Phimister, 2002. "Does Capital Market Structure Affect Farm Investment? A Comparison using French and British Farm-Level Panel Data," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 1115-1129.
  • Handle: RePEc:oup:ajagec:v:84:y:2002:i:4:p:1115-1129
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    File URL: http://hdl.handle.net/10.1111/1467-8276.00372
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