The role of fundamental Q and financing frictions in agricultural investment decisions: an analysis pre and post financial crisis
This paper uses a fundamental Q model of investment to consider the role played by financing frictions in agricultural investment decisions, controlling econometrically for censoring, heterogeneity and errors-in-variables. Our findings suggest that farmer's investment decisions are not driven by market fundamentals. We find some evidence that debt overhang restricts investment but investment is not dependent on liquidity or internal funds. The role of financing frictions in determining investment decisions changes in the post-financial crisis period when debt overhang becomes a significant impediment to farm investment. The evidence suggests that farmers increasingly rely on internal liquidity to drive investment. Finally, we find no evidence that farmers use off-farm capital to fund on-farm investment.
|Date of creation:||Feb 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Trinity College, Dublin 2|
Phone: (+ 353 1) 6081325
Web page: http://www.tcd.ie/Economics/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:tcd:tcduee:tep0311. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Patricia Hughes)
If references are entirely missing, you can add them using this form.