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The Efficiency Effects of Consolidation in the Farm Credit System

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  • Strine, Joshua
  • Fiechter, Chad
  • Kuethe, Todd

Abstract

Between 2002 and 2023, 37 mergers occurred among Farm Credit System (FCS) agricultural credit associations (ACAs). We examine the effect of these mergers on ACA technical efficiency and financial performance using a window data envelopment analysis followed by a second-stage stacked difference-in-differences framework. We find no significant improvement in technical efficiency following consolidation. However, mergers yield different benefits for the merging associations. The smaller ACAs in the mergers reduce their bank efficiency ratios by 9.8–9.9 percentage points, a 34 percent reduction in the average ACA bank efficiency ratio, indicating they have less non-interest expense per dollar of income. Larger ACAs in the mergers increase their net interest margin by 0.12 percentage points, a 4 percent increase relative to the average ACA net interest margin, indicating a greater interest margin relative to their earning assets.

Suggested Citation

  • Strine, Joshua & Fiechter, Chad & Kuethe, Todd, 2026. "The Efficiency Effects of Consolidation in the Farm Credit System," 2026 Annual Meeting, July 26 - 28, 2026, Kansas City, Missouri 404332, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea26:404332
    DOI: 10.22004/ag.econ.404332
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    References listed on IDEAS

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    3. Collender, Robert N. & Nehring, Richard & Somwaru, Agapi, 1991. "Profit Efficiency of Farm Credit System Associations," Staff Reports 278606, United States Department of Agriculture, Economic Research Service.
    4. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    5. Callaway, Brantly & Sant’Anna, Pedro H.C., 2021. "Difference-in-Differences with multiple time periods," Journal of Econometrics, Elsevier, vol. 225(2), pages 200-230.
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