USING FINANCIAL RATIOS AND LENDER RELATIONSHIP THEORY TO ASSESS FARM CREDITWORTHINESS

Alan Reichert and Raymond Posey

Accounting & Taxation, 2011, vol. 3, issue 1, 45-56

Abstract: This study examines the determinants of farm loan delinquencies, and in particular, the influence of multiple loans and multiple lenders on delinquency. The number of lenders used by a borrower, the number of loans outstanding, and the interaction of the two factors are all positively related to loan delinquency rates. In fact, these factors are at least as significant as standard financial ratios in explaining farm loan delinquency. The most consistent finding is that borrowers who have been denied credit in the past five years are more likely to be delinquent. Furthermore, borrowers using multiple lenders appear to be able to bargain for lower interest rates.

Keywords: Credit scoring; lending relationships; farm credit (search for similar items in EconPapers)
JEL-codes: G2 M1 M4 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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