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Predicting Financial Stress in Farm Businesses

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  • Franks, Jeremy R

Abstract

This study uses a multinomial logit (MNL) model to examine financial strategies which may influence the likelihood of a farm becoming financially stressed in the next year. The model is operationalised by categorizing farms into one of three financial stress categories and accompanied by a comprehensive range of specification tests. The MNL model highlights the importance of industry and farm-specific factors on the incidence of financial stress. The model confirms the importance of increasing returns to equity as a strategy for reducing the likelihood of being classified as financially stressed. Copyright 1998 by Oxford University Press.

Suggested Citation

  • Franks, Jeremy R, 1998. "Predicting Financial Stress in Farm Businesses," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(1), pages 30-52.
  • Handle: RePEc:oup:erevae:v:25:y:1998:i:1:p:30-52
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    References listed on IDEAS

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    1. Christopher O’Donnell & Robert Chambers & John Quiggin, 2010. "Efficiency analysis in the presence of uncertainty," Journal of Productivity Analysis, Springer, pages 1-17.
    2. Christopher O’Donnell & Robert Chambers & John Quiggin, 2010. "Efficiency analysis in the presence of uncertainty," Journal of Productivity Analysis, Springer, pages 1-17.
    3. C. J. O'Donnell & W. E. Griffiths, 2006. "Estimating State-Contingent Production Frontiers," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 88(1), pages 249-266.
    4. Teresa Serra & Spiro Stefanou & Alfons Oude Lansink, 2010. "A dynamic dual model under state-contingent production uncertainty," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, pages 293-312.
    5. G. Battese & A. Rambaldi & G. Wan, 1997. "A Stochastic Frontier Production Function with Flexible Risk Properties," Journal of Productivity Analysis, Springer, pages 269-280.
    6. G. Karagiannis & V. Tzouvelekas & A. Xepapadeas, 2003. "Measuring Irrigation Water Efficiency with a Stochastic Production Frontier," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, pages 57-72.
    7. Jean-Paul Chavas, 2008. "A Cost Approach to Economic Analysis Under State-Contingent Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 435-466.
    8. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448, December.
    9. Subal C. Kumbhakar, 2002. "Specification and Estimation of Production Risk, Risk Preferences and Technical Efficiency," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(1), pages 8-22.
    10. Phoebe Koundouri & Marita Laukkanen & Sami Myyrä & Céline Nauges, 2009. "The effects of EU agricultural policy changes on farmers' risk attitudes," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, pages 53-77.
    11. Xing, Liu & Pietola, Kyosti, 2005. "Forward Hedging Under Price and Production Risk of Wheat," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24467, European Association of Agricultural Economists.
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    Cited by:

    1. Matthew Gorton & Barna Kovacs & Tamas Mizik & Sophia Davidova & Tomas Ratinger & Belen Iraizoz, 2003. "An Analysis of the Performance of Commercially Oriented Farms in Hungary," Post-Communist Economies, Taylor & Francis Journals, pages 401-416.
    2. Belen Iraizoz & Sophia Davidova & Matthew Gorton, 2003. "Cosmetic or Cutting? The impact of the modulation of EU direct payments on farm profitability in the Navarra region of Spain," Others 0310002, EconWPA.
    3. Iraizoz, Belen & Gorton, Matthew & Davidova, Sophia, 2007. "Segmenting farms for analysing agricultural trajectories: A case study of the Navarra region in Spain," Agricultural Systems, Elsevier, pages 143-169.
    4. D'Antoni, Jeremy M. & Mishra, Ashok K. & Chintawar, Sachin, 2009. "Predicting Financial Stress in Young and Beginning Farmers in the United States," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46861, Southern Agricultural Economics Association.

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