In the paper, an econometric model is proposed to test the risk balancing hypothesis using farm level data. For the purpose, a constraint on expected utility maximization with respect to farm financial structure is given. Cluster method is applied to pick out the farms on the efficient frontier...

The 1996 Farm Bill and low commodity prices have regenerated interest in the impact of risk and farmers' risk attitudes on production agriculture. Previous research has used expected utility theory (EUT) and direct elicitation of utility functions (DEU) for eliciting risk attitudes. To overcome...

The study addresses problems in measuring credit risk under the structure model, and then proposes a seemingly unrelated regression model (SUR) to predict farms’ ability in meeting their current and anticipated obligations in the next 12 months. The empirical model accounts for both the...

Signaling is an important element in the lender-borrower relationship that influences the cost and availability of debt capital to agricultural borrowers. This paper analyzes the effects of signaling on farm capital structure in conjunction with the pecking order and trade-off theories. The...

This study provides farm-level empirical support to the Risk-Balancing Hypothesis using Illinois grain farm data. The econometric results indicate that risk-balancing farmers comprise more than half of the sample. These farmers tend to be older, have higher leasing ratios, are less financially...

Farm level risk analyses have used price and yield variability almost exclusively to represent risk. Results from a survey of 149 agricultural producers in 12 states indicate that producers consider a broader range of sources of variability in their operations. Significant differences exist...

The effect of risk on farmland values and returns is analyzed using a capitalization model. County-level models are estimated using spatial econometric techniques. Our results show that riskier regions and growing conditions have both lower land values and higher risk-adjusted rates of return to...