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Financial Constraints and Farm Investment: A Bayesian Examination


  • Hart, Chad E.
  • Lence, Sergio H.


This study contributes to the q-based empirical investment literature by using a Bayesian approach to analyze the impact of internal financial variables on a q-based investment model, accounting specifically for variable selection and incorporating outliers explicitly within the advocated modeling framework. For the balanced panel analyzed, a farm's liquidity situation is found to affect its investment significantly. Incorporation of an outlier detection component changes the results drastically, in both the variables chosen and the parameter estimates. The results and the nature of most investment data suggest that not accounting for outliers may lead to inaccurate inference.

Suggested Citation

  • Hart, Chad E. & Lence, Sergio H., 2004. "Financial Constraints and Farm Investment: A Bayesian Examination," Staff General Research Papers Archive 11469, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:11469

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    References listed on IDEAS

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    Cited by:

    1. Lence, Sergio H., 2009. "Ajae Appendix For €Œjoint Estimation Of Risk Preferences And Technology: Flexible Utility Or Futility?€," American Journal of Agricultural Economics Appendices, Agricultural and Applied Economics Association, vol. 91(3), August.
    2. Han, Chaodong & Porterfield, Tobin & Li, Xiaolin, 2012. "Impact of industry competition on contract manufacturing: An empirical study of U.S. manufacturers," International Journal of Production Economics, Elsevier, vol. 138(1), pages 159-169.
    3. Kirwan, Barrett E., 2014. "The Crowd-out Effect of Crop Insurance on Farm Survival and Profitability," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170881, Agricultural and Applied Economics Association.
    4. Kandilov, Amy M.G. & Kandilov, Ivan T., 2013. "The Impact of Interstate Bank Branching Deregulations on the U.S. Agricultural Sector: From Better Access to Credit to Higher Farm Sales and Profits," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149820, Agricultural and Applied Economics Association.
    5. Stutzman, Sarah A., 2016. "U.S. Farm Capital Investment 1996-2013: Differences by Farm Size and Operator Primary Occupation," Dissertations-Doctoral 235179, AgEcon Search.
    6. Lence, Sergio H., 2008. "How Much Can We Learn About Producers' Utility Functions from Their Production Data?," Proceedings:2008 Agricultural and Rural Finance Markets in Transition, September 25-26, 2008, Kansas City, Missouri 119534, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    7. Olsen, Jakob Vesterlund & Pederson, Michael Friis, 2011. "An Empirical Analysis of Access to Finance for Danish Farms: Understanding Investment and the Absence of Risk Management," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114591, European Association of Agricultural Economists.

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