Predicting Financial Stress in Farm Businesses

Jeremy R Franks

European Review of Agricultural Economics, 1998, vol. 25, issue 1, 30-52

Abstract: This study uses a multinomial logit (MNL) model to examine financial strategies which may influence the likelihood of a farm becoming financially stressed in the next year. The model is operationalised by categorizing farms into one of three financial stress categories and accompanied by a comprehensive range of specification tests. The MNL model highlights the importance of industry and farm-specific factors on the incidence of financial stress. The model confirms the importance of increasing returns to equity as a strategy for reducing the likelihood of being classified as financially stressed. Copyright 1998 by Oxford University Press.

Date: 1998
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