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Assessing Cash Holdings in Agribusiness

Author

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  • Trejo-Pech, Carlos O.
  • Gunderson, Michael A.
  • Baker, Timothy G.
  • Gray, Allan W.
  • Boehlje, Michael D.

Abstract

By using fixed-effects panel regression, we model cash holdings for agribusiness firms during the 1970-2012 period. The results suggest that agribusiness firms manage cash in a manner consistent with the precautionary theory of caution management. Specifically, agribusiness firms hold cash to quickly execute growth opportunities and limit transaction costs of acquiring capital for growth. Furthermore, a subset of cash-rich agribusiness firms, which concentrates 78.5% of the aggregate cash and 49% of total revenues, is analyzed with a logit model. Results of cash-rich agribusiness deviate from predictions by the precautionary theory. This finding has potential implications for structural changes in this sector.

Suggested Citation

  • Trejo-Pech, Carlos O. & Gunderson, Michael A. & Baker, Timothy G. & Gray, Allan W. & Boehlje, Michael D., 2015. "Assessing Cash Holdings in Agribusiness," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 18(4), pages 1-20, November.
    • Handle: RePEc:ags:ifaamr:211655
    DOI: 10.22004/ag.econ.211655
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    References listed on IDEAS

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    Cited by:

    1. Carlos J. O. Trejo‐Pech & Michael A. Gunderson & Dayton M. Lambert, 2021. "Mergers and acquisitions in the U.S. agribusiness sector, 1990–2017," Agribusiness, John Wiley & Sons, Ltd., vol. 37(4), pages 713-730, October.
    2. Silva Manoel, Aviner Augusto & Moraes, Marcelo Botelho da Costa & Lopes Santos, David Ferreira & Fava Never, Marcos, 2018. "Determinants of corporate cash holdings in times of crisis: insights from Brazilian sugarcane industry private firms," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 21(2), March.
    3. Kuldeep Singh & Madhvendra Misra, 2019. "Financial determinants of cash holding levels: An analysis of Indian agricultural enterprises," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 65(5), pages 240-248.
    4. Carlos J. O. Trejo-Pech & Karen L. DeLong & Dayton M. Lambert & Vasileios Siokos, 2020. "The impact of US sugar prices on the financial performance of US sugar-using firms," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 8(1), pages 1-17, December.
    5. Abbasi, Kaleemullah & Alam, Ashraful & Du, Min (Anna) & Huynh, Toan Luu Duc, 2021. "FinTech, SME efficiency and national culture: Evidence from OECD countries," Technological Forecasting and Social Change, Elsevier, vol. 163(C).

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