Credit Scoring Models in Illinois by Farm Type: Hog, Dairy, Beef and Grain

Seda Durguner and Ani Katchova

No 9356, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Employing a logit model and farm-level data for Illinois from 1995 to 2004, this study explores the importance of farm-type differences in the development of credit scoring models. Apart from the conclusion that regional credit scoring models specific to each farm type are needed, the following are identified as the most pertinent factors for explaining creditworthiness: previous year's working capital to gross farm return, the debt-to-asset ratio, and return on farm assets. Furthermore, beef farms have a larger marginal effect compared to grain farms on the probability of the farmer being highly creditworthy. Hog farms differ from grain farms in how the following financial characteristics affect farmer creditworthiness: solvency, profitability, and financial efficiency. These separate credit scoring models result in increased expected profit for the lender, better capital management, less bankruptcy, and less burden on the government and tax payers.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Pages: 27
Date: 2007
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9356

DOI: 10.22004/ag.econ.9356

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