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Financing Agriculture and Rural America: Issues of Policy, Structure and Technical Change: Farm Values and Financial Performance of Diversified Farms

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  • Katchova, Ani L.

Abstract

Theoretical arguments suggest that diversification has both value-enhancing and value-reducing effects. Several finance studies have found that the average diversified firm is worth less than a portfolio of comparable single-segment firms. In agriculture, farms have different characteristics and diversification incentives than publicly-traded firms. This study examines the farm diversification discount using data from Illinois and the methodology developed by Burger and Ofek. The results show that, on average, a diversified crop/livestock farm has a lower value and lower return on equity than a portfolio of a specialized crop and livestock farm. The regression results examine the impact of various farm and operator characteristics on the level of diversification discount.

Suggested Citation

  • Katchova, Ani L., 2002. "Financing Agriculture and Rural America: Issues of Policy, Structure and Technical Change: Farm Values and Financial Performance of Diversified Farms," Econ Pamphlets 298028, South Dakota State University, Department of Economics.
    • Handle: RePEc:ags:sdsuep:298028
    DOI: 10.22004/ag.econ.298028
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    Keywords

    Agricultural Finance;

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