Cost efficiency and capital structure in farms and cooperatives

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dc.contributor.author Russell, Levi Alan
dc.date.accessioned 2013-11-20T13:35:42Z
dc.date.available 2013-11-20T13:35:42Z
dc.date.issued 2013-11-20
dc.identifier.uri http://hdl.handle.net/2097/16860
dc.description.abstract U.S. farm profitability is near historic highs. This fact raises many questions related to the economics of production agriculture. Three questions are examined in this dissertation. First, should farmers use a different benchmark for farm profitability? To answer this question, a benchmark of farm profitability is developed that adds balance sheet information to an established benchmark which uses only income statement data. The second and third questions focus on cooperatives since farmers rely on efficient cooperative management to maximize their return on investment in the cooperative and their own farm profitability. How should cooperatives allocate earnings to farmers? To answer this question, a model is developed to inform boards of directors regarding optimal equity allocation decisions. Finally, do cooperatives face agency costs? To answer this question, a variable cost model is estimated to examine the indirect costs of leverage. The first essay used data from Kansas farms to determine the effects of the use of debt on cost efficiency. A nonparametric cost efficiency model was used to examine these effects. Results indicated that farms which were more specialized, had higher capital costs, and used more equity to finance assets experienced larger increases in efficiency when the use of debt was included in the analysis. The second essay used information on effective tax rates and empirically-estimated risk aversion coefficients in a portfolio model to determine the effects of different tax rates on the distribution of earnings. Results indicated that even a large deviation in current effective tax rates is not likely to affect the optimal share of allocated earnings. However, member risk preferences had an economically significant effect on the optimal share of allocated earnings, suggesting that board members focus on understanding member risk preferences. The third essay used data from U.S. agricultural cooperatives to determine the presence of agency costs due to the use of debt. A variable cost function was estimated to generate an index of variable cost efficiency which was used to determine the indirect costs of leverage. A negative relationship between debt and variable cost efficiency was found, indicating that agency costs were present for agricultural cooperatives. en_US
dc.language.iso en_US en_US
dc.publisher Kansas State University en
dc.subject Agricultural economics en_US
dc.subject Finance en_US
dc.title Cost efficiency and capital structure in farms and cooperatives en_US
dc.type Dissertation en_US
dc.description.degree Doctor of Philosophy en_US
dc.description.level Doctoral en_US
dc.description.department Department of Agricultural Economics en_US
dc.description.advisor Brian C. Briggeman en_US
dc.subject.umi Economics, Agricultural (0503) en_US
dc.subject.umi Economics, Finance (0508) en_US
dc.date.published 2013 en_US
dc.date.graduationmonth December en_US


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