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Using Financial Ratios And Lender Relationship Theory To Assess Farm Creditworthiness

Author

Listed:
  • Alan Reichert
  • Raymond Posey

Abstract

This study examines the determinants of farm loan delinquencies, and in particular, the influence of multiple loans and multiple lenders on delinquency. The number of lenders used by a borrower, the number of loans outstanding, and the interaction of the two factors are all positively related to loan delinquency rates. In fact, these factors are at least as significant as standard financial ratios in explaining farm loan delinquency. The most consistent finding is that borrowers who have been denied credit in the past five years are more likely to be delinquent. Furthermore, borrowers using multiple lenders appear to be able to bargain for lower interest rates.

Suggested Citation

  • Alan Reichert & Raymond Posey, 2011. "Using Financial Ratios And Lender Relationship Theory To Assess Farm Creditworthiness," Accounting & Taxation, The Institute for Business and Finance Research, vol. 3(1), pages 45-56.
    • Handle: RePEc:ibf:acttax:v:3:y:2011:i:1:p:45-56
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    File URL: http://www.theibfr2.com/RePEc/ibf/acttax/at-v3n1-2011/AT-V3N1-2011-4.pdf
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    References listed on IDEAS

    as
    1. Durguner, Seda & Katchova, Ani L., 2007. "Credit Scoring Models in Illinois by Farm Type: Hog, Dairy, Beef and Grain," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9356, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Hisham S. El-Osta, 2016. "Farmland Ownership and Its Impact on the Debt Servicing Capacity Among U.S. Married-Couple Farm Households," Applied Economics and Finance, Redfame publishing, vol. 3(4), pages 190-206, November.

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    More about this item

    Keywords

    Credit scoring; lending relationships; farm credit;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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