Evaluating the role of financial flexibility in farmers' investment decisions using latent class analysis
Friederike Anastassiadis and
Oliver Musshoff
No 158707, 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK from Agricultural Economics Society
Abstract:
The global structural change in the agricultural sector entails adaptation processes, which often involve leveraged investments resulting in decreasing equity ratios of farms. Lower equity ratios can be followed by a reduction in the financial flexibility of farms. If additional investments with debt capital are made, the financial flexibility may be further restricted. The question that arises is if farm managers already consider the financial flexibility when making investment decisions. In the present study, farmers are faced with hypothetical investment alternatives in a discrete choice experiment. The investment alternatives differ in their profitability, the risk involved and in their impact on the farm's financial flexibility. The estimation of a latent class model, with four classes, reveals that in all classes the amount of debt capital necessary for the investment is relevant for the farmers' decision. In three of the four classes, the farmers' utility of an investment alternative decreases cetris paribus if the amount of debt capital increases.
Keywords: Agricultural Finance; Farm Management (search for similar items in EconPapers)
Pages: 16
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://ageconsearch.umn.edu/record/158707/files/F ... aper_eingereicht.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ags:aesc13:158707
DOI: 10.22004/ag.econ.158707
Access Statistics for this paper
More papers in 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK from Agricultural Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().