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The Costs and Returns of Agricultural Credit Delivery

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  • Gloy, Brent A.
  • Gunderson, Michael A.
  • LaDue, Eddy L.

Abstract

Borrower-level data from 963 agricultural lending relationships are used to examine how several factors influence the costs and returns of extending agricultural credit. The results provide estimates of the costs and returns of agricultural lending and the extent to which these costs and returns are influenced by factors such as loan volume, lender/borrower relationship factors, and contract terms. The findings indicate that economies of size exist in agricultural credit delivery and that lenders pass most of these benefits on to borrowers through lower interest rates. In addition, the impacts of lender/borrower relationship factors were relatively small. Copyright 2005, Oxford University Press.
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Suggested Citation

  • Gloy, Brent A. & Gunderson, Michael A. & LaDue, Eddy L., 2004. "The Costs and Returns of Agricultural Credit Delivery," Working Papers 127134, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:127134
    DOI: 10.22004/ag.econ.127134
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    References listed on IDEAS

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    1. Elsas, Ralf & Krahnen, Jan Pieter, 1998. "Is relationship lending special? Evidence from credit-file data in Germany," Journal of Banking & Finance, Elsevier, vol. 22(10-11), pages 1283-1316, October.
    2. Allen M. Featherstone & Charles B. Moss, 1994. "Measuring Economies of Scale and Scope in Agricultural Banking," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 76(3), pages 655-661.
    3. Stanton, Kenneth R., 2002. "Trends in relationship lending and factors affecting relationship lending efficiency," Journal of Banking & Finance, Elsevier, vol. 26(1), pages 127-152, January.
    4. Berger, Allen N & Udell, Gregory F, 1995. "Relationship Lending and Lines of Credit in Small Firm Finance," The Journal of Business, University of Chicago Press, vol. 68(3), pages 351-381, July.
    5. Petersen, Mitchell A & Rajan, Raghuram G, 1994. "The Benefits of Lending Relationships: Evidence from Small Business Data," Journal of Finance, American Finance Association, vol. 49(1), pages 3-37, March.
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    Cited by:

    1. Gloy, Brent A. & LaDue, Eddy L. & Gunderson, Michael A., 2004. "Credit Risk Migration Experienced By Agricultural Lenders," 2004 Annual meeting, August 1-4, Denver, CO 19944, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Cadot, Julien, 2011. "Collaterals, Bank Monitoring and Performance: the Case of Newly Established Wine Farmers," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103414, Agricultural and Applied Economics Association.
    3. Gunderson, Michael A. & Gloy, Brent A. & LaDue, Eddy L., 2005. "Pricing Agricultural Loans to Account for Long-Term Default Risk," 2005 Agricultural and Rural Finance Markets in Transition, October 3-4, 2005, Minneapolis, Minnesota 132750, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    4. Fiechter, Chad M. & Miller, Noah J. & Ifft, Jennifer & Nelson, Blaine, 2024. "Farm Characteristics and Cost of Borrowing," 2024 Annual Meeting, July 28-30, New Orleans, LA 343924, Agricultural and Applied Economics Association.

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