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Credit in the Production Organization of the Firm

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  • C. B. Baker

Abstract

It is argued that the equilibrium conditions traditionally used by economists must be modified to provide criteria for optima useful to the firm. Important modifications are associated with liquidity attributes of the firm organization. Credit, defined as borrowing capacity, constitutes an important source of liquidity. Accordingly, borrowing generates a cost from loss of liquidity as well as from interest charges on loans. Modifications are suggested in the relevant optimizing criteria relating to the firm to account for liquidity losses associated with borrowing. Finally, the modifications are reflected in models and observational techniques suggested to make the conceptual notions operationally useful.

Suggested Citation

  • C. B. Baker, 1968. "Credit in the Production Organization of the Firm," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 50(3), pages 507-520.
    • Handle: RePEc:oup:ajagec:v:50:y:1968:i:3:p:507-520.
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    File URL: http://hdl.handle.net/10.2307/1238256
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    Cited by:

    1. Baker, Chester B., 1974. "An Economic Alternative To Concessional Farm Interest Rates," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 18(3), pages 1-22, December.
    2. Brake, John R. & Melichar, Emanuel, 1977. "Agricultural Finance and Capital Markets," A Survey of Agricultural Economics Literature, Volume 1: Traditional Fields of Agricultural Economics 1940s to 1970s,, Agricultural and Applied Economics Association.
    3. Lambert, David K. & Bayda, Volodymyr V., 2005. "The Impacts of Farm Financial Structure on Production Efficiency," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 37(1), pages 277-289, April.
    4. Schnitkey, Gary D. & Taylor, C. Robert & Barry, Peter J., 1989. "Evaluating Farmland Investments Considering Dynamic Stochastic Returns And Farmland Prices," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 14(1), pages 1-14, July.
    5. Anastassiadis, Friederike & Mußhoff, Oliver, 2013. "Evaluating the role of financial flexibility in farmers' investment decisions using latent class analysis," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158707, Agricultural Economics Society.
    6. Anastassiadis, Friederike & Liebe, Ulf & Mußhoff, Oliver, 2015. "Financial Flexibility in agricultural investment decisions: A discrete choice experiment," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 16(1), pages 1-12.
    7. Miller, Katherine Sewall, 1978. "A risk-programming analysis of alternative coordination arrangements in beef packing," ISU General Staff Papers 1978010108000018016, Iowa State University, Department of Economics.
    8. Turvey, Calum G. & Ifft, Jennifer E. & Carduner, Amy, 2018. "The historical relationship between the U.S. Farm Credit System, Farm Service Agency and commercial bank lending," 2018 Annual Meeting, August 5-7, Washington, D.C. 274120, Agricultural and Applied Economics Association.
    9. Weerawardane, Gayatri C., 1993. "Rationing in agricultural credit markets: evidence from Iowa farm operators," ISU General Staff Papers 1993010108000018158, Iowa State University, Department of Economics.
    10. Zhao, Jianmei & Barry, Peter J. & Katchova, Ani L., 2008. "Signaling Credit Risk in Agriculture: Implications for Capital Structure Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(3), pages 1-16, December.
    11. Lowenberg-DeBoer, James & Boehlje, Michael, 1985. "Integration Of Production And Financial Theory In Analyzing Firm Behavior," 1985 Regional Committee NC-161, October 9-10, 1985, St. Louis, Missouri 140930, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    12. repec:phd:pjdevt:jpd_1997_vol__xxiv_no_2-d is not listed on IDEAS
    13. Vandeveer, Lonnie R., 1985. "Issues In Agricultural Land Markets: An Empirical Perspective," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 17(1), pages 1-10, July.
    14. Fiske, John Robery, 1983. "The impact of financial constraints on the local price of farm land," ISU General Staff Papers 198301010800008710, Iowa State University, Department of Economics.
    15. Jensen, Harald R., 1977. "PART I. Farm Management and Production Economics, 1946-70," AAEA Monographs, Agricultural and Applied Economics Association, number 337213, january.
    16. Anastassiadis, F. & Liebe, U. & Mußhoff, O., 2013. "Finanzielle Flexibilität in landwirtschaftlichen Investitionsentscheidungen: Ein Discrete Experiment," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 48, March.
    17. Harris, Kim & Baker, Chester B., 1985. "Eliciting Liquidity Preferences For Cash And Intermediate Credit Reserves From Central Illinois Farmers," 1985 Regional Committee NC-161, October 9-10, 1985, St. Louis, Missouri 140934, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    18. Barry, Peter J. & Hopkin, John A., 1972. "Financial Intermediation In Agriculture: A Suggested Analytical Model," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 4(1), pages 1-5, July.
    19. Sonka, Steven T. & Dixon, Bruce L., 1979. "Determinants Of Lender Response To Short-Term Credit Needs Of Small Commercial Farmers," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 11(1), pages 1-5, July.
    20. Johnson, James William, 1985. "Land prices: changes and variability: the effect on Iowa grain farms," ISU General Staff Papers 1985010108000017533, Iowa State University, Department of Economics.
    21. Ockwell, Anthony P. & Batterham, Robert L., 1982. "The Influence of Credit on Farm Growth," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 50(03), pages 1-18, December.
    22. Anastassiadis, Friederike & Liebe, Ulf & Musshoff, Oliver, 2012. "Finanzielle Flexibilität In Landwirtschaftlichen Investitionsentscheidungen: Ein Discrete Choice Experiment," 52nd Annual Conference, Stuttgart, Germany, September 26-28, 2012 137142, German Association of Agricultural Economists (GEWISOLA).
    23. Patrick, George F., 1979. "Effects Of Debt Levels And Loan Arrangements On Farm Firm Survival And Growth," Risk Management in Agriculture: Behavioral, Managerial, and Policy Issues, January 25-26, 1979, San Francisco, California 271464, Regional Research Projects > W-149: An Economic Evaluation of Managing Market Risks in Agriculture.
    24. Brake, John R. & Melichar, Emanuel, 1977. "PART VI. Agricultural Finance and Capital Markets," AAEA Monographs, Agricultural and Applied Economics Association, number 337218, january.
    25. Lowenberg-DeBoer, James M., 1985. "The impact of farmland price changes on farm size, financial structure enterprise choice," ISU General Staff Papers 198501010800009722, Iowa State University, Department of Economics.

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