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Financial Structure of Farm Businesses under Imperfect Capital Markets
Author(s) -
Barry Peter J.,
Bierlen Ralph W.,
Sotomayor Narda L.
Publication year - 2000
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/0002-9092.00091
Subject(s) - pecking order , capital structure , imperfect , debt , pecking order theory , finance , equity (law) , order (exchange) , financial structure , economics , investment (military) , capital market , financial market , debt to equity ratio , business , monetary economics , population , linguistics , philosophy , demography , evolutionary biology , sociology , politics , political science , law , biology , nonprobability sampling
Recent finance studies have considered whether gaps between a firm's costs of internal and external sources of investment funds, arising from capital market imperfections, influence its investment behavior and funding preferences. This study tests the applicability of the pecking order and partial adjustment theories of financial structure to farm businesses by fitting a set of simultaneous financial equations with farm panel data from Illinois. Model results indicate that Illinois farms adjust to long‐run financial targets for equity, debt, and leasing, but that additional financing needs follow a pecking order that is stronger for farms with greater asymmetric information problems