Agricultural Finance Review

volume 53, 1993

Blank / Effects of Farmland Cash-leasing Rates on Crop Selections: A Portfolio Analysis

Dixon, Ahrendsen, and Barry / Explaining Loan Pricing Differences Across Banks: Use of Incidentally Truncated Regression

Miller, Ellinger, Barry, and Lajili / Price and Nonprice Management of Agricultural Credit Risk

Royer / Patronage Refunds, Equity Retirement, and Growth in Farmer Cooperatives

Aguilera-Alfred and Gonzalez-Vega / A Multinomial Logit Analysis of Loan Targeting and Repayment at the Agricultural Development Bank of the Dominican Republic

Collender / An Estimate of the Efficiency Effects of Chapter 12 Bankruptcy

Ellinger and Neff / Issues and Approaches in Efficiency Analysis of Agricultural Banks

Weldon, Moss, and Erickson / The Distribution of Farm Wealth in the United States

Abstracts

Blank / Effects of Farmland Cash-leasing Rates on Crop Selections: A Portfolio Analysis <top>

This study uses portfolio theory to evaluate the effects of cash-leasing rates on the cropping decisions of two groups of producers: farmland owners and tenants. Differences in crop selection opportunities may prevent tenants from choosing the same risk-efficient crop portfolio that landowners can choose. Decision-making processes of owners and tenants are virtually identical, but not owning land will, ceteris paribus, result in lower returns and higher risk exposure.

Dixon, Ahrendsen, and Barry / Explaining Loan Pricing Differences Across Banks: Use of Incidentally Truncated Regression <top>

The phenomenon of different interest rats across banks in response to an identical loan request is investigated. Thirty-four commercial bank lenders in western Arkansas responded to four hypothetical agricultural loan requests. Observations on interest rates could only be obtained from lenders approving a loan. Hence an equation explaining interest rate variation could be incidentally truncated. Results show interest rates rise with the loan-to-deposit ratio. Incidental truncation is not likely an important consideration if a high proportion of requests are accepted.

Miller, Ellinger, Barry, and Lajili / Price and Nonprice Management of Agricultural Credit Risk <top>

Agency costs and asymmetric information concepts were used to survey agricultural banks about their use of price and nonprice methods of managing credit risk on agricultural loans. Results indicate the growing use of risk-adjusted and differential interest rates. Results also provide insight on the relative abilities of banks to distinguish between high- and low-risk borrowers. Hypothesis tests about the use of differential and risk adjusted pricing in a self-selection modeling approach indicate that complexity of pricing, a bank's capital position, banks size, and risk distinguishing ability generally are associated with the use of these pricing techniques.

Royer / Patronage Refunds, Equity Retirement, and Growth in Farmer Cooperatives <top>

The unique features of cooperative financing provide special problems for cooperatives and their patrons. This paper presents a model for analyzing the choices cooperatives must make regarding patronage refunds, equity retirement, and growth. The model also serves as the basis for simulation analysis of the effects on patron cash flows and the revolving period of changes in the proportion of patronage refunds paid in cash, the cooperative's rate of return and growth, and patron tax and discount rates. The model should be useful in evaluating policy proposals and examining the options available to cooperatives under the revolving-fund plan.

Aguilera-Alfred and Gonzalez-Vega / A Multinomial Logit Analysis of Loan Targeting and Repayment at the Agricultural Development Bank of the Dominican Republic <top>

This paper analyzes the repayment performance of loans disbursed by a typical developing-country specialized lender, the Agricultural Development Bank of the Dominican Republic. It claims that loans in default are one dimension on the problems faced by lenders and that rescheduling and payment with arrears should not be ignored. By following through time the status of loans disbursed in a particular period, the factors determining repayment may be better identified. Results from a multinomial logit analysis are used for analyzing the types of repayment problems encountered. Targeting practices mandated by governments and international donors are found to be significantly associated with default.

Collender / An Estimate of the Efficiency Effects of Chapter 12 Bankruptcy <top>

Chapter 12 bankruptcy, Adjustment of Debts of Family Farmer with Regular Annual Income, will expire on October 1, 1993, unless Congress intervenes. Chapter 12 imposes certain economic costs, referred to as bankruptcy costs and considered deadweight losses to the economy. The magnitude of these costs is an important element in the debate to renew Chapter 12 or extend its provisions to nonfarm small businesses. Based on White's model of indirect bankruptcy costs, total bankruptcy costs under Chapter 12 may be between 75% and 100% of the value of farm assets at the time of filling. This cost compares with estimates of 54% to 60% for farms and other businesses filing for reorganization under Chapter 11 of the U.S. Bankruptcy Code.

Ellinger and Neff / Issues and Approaches in Efficiency Analysis of Agricultural Banks <top>

Changes in the structure, regulation, and performance of financial institutions may alter the delivery of agricultural credit into the twenty-first century. Efficiency analyses may be used to examine these changes and guide future policy directions. However, the limitations, issues, and implications of efficiency research methods should be fully understood before results are interpreted. This study provides a survey of seven major issues associated with efficiency measurement of financial institutions. Empirically, three of these issues are examined using a sample of agricultural banks. The results indicate that efficiency measures can differ based on the empirical methodology and approaches to bank input and output measurement.

Weldon, Moss, and Erickson / The Distribution of Farm Wealth in the United States <top>

This research utilizes the Theil measure of inequality to examine the changes in United States farm wealth for the period 1960 to 1991. The entropy-based measure is used to quantify the inequality of farm equity by state for the U.S. The measure then decomposes the U.S. inequality into between-region differences and within-region differences. The results show that for the period 1960 through 1975, farm wealth in the U.S. became much more equally distributed relative to the number of farms per state. Only marginal convergence of the measure occurred from 1976 through 1991.