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Farm Capital Structure Choice under Credit Constraint: Theory and Application

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  • Wu, Feng
  • Guan, Zhengfei

Abstract

This study proposed a theoretical framework for analyzing farm capital structure choice. The theoretical model recognizes that the costs of debt are endogenously determined which in turn reflect the degree of credit constraint faced by individual borrowers. Based on the proposed model, we derived the impacts of different determinants on capital structure choice analytically. The theoretical inferences are further tested with empirical data. Methodologically, we proposed a fixed-effect quantile regression procedure to estimate the impacts of determinants at different ranges of leverage. The effects of determinants are discussed in the empirical application.

Suggested Citation

  • Wu, Feng & Guan, Zhengfei, 2008. "Farm Capital Structure Choice under Credit Constraint: Theory and Application," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6130, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea08:6130
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    File URL: http://purl.umn.edu/6130
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    References listed on IDEAS

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    Keywords

    Capital Structure; Cost of Debt; Credit Constraint; Quantile Regression; Agricultural Finance;

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