Date of Award

2021

Publisher

North Dakota State University

Document Type

Thesis

Degree Awarded

Master of Science (MS)

Program

Agribusiness and Applied Economics

Department

Agribusiness and Applied Economics

College

Agriculture, Food Systems and Natural Resources

Faculty Advisor

Rao, Xudong

Description

Risk management is pivotal to agribusiness decision-making, and researchers have developed various models to disentangle factors underlying farmers’ risk decisions. This thesis argues that an appropriate model should consider farmers’ leverage decisions altogether with liquidity decisions given that liquidity is another major constraint facing farm businesses. We incorporate current ratio into the classical risk balancing model. Our theoretical derivations generate two propositions: (1) an increase in business risk will cause current assets to increase, and (2) an increase in the expected return to assets will cause current assets to decrease. Using five income categories and three panel data models, regression results provide evidence supportive of the first proposition, but contradictory to the second proposition. We concluded that contradictory results for the second proposition may stem from a poor proxy variable for the expected return to assets. Besides, we tested the traditional risk balancing hypothesis and found evidence for risk balancing.

Rights

NDSU policy 190.6.2

Rights Link

https://www.ndsu.edu/fileadmin/policy/190.pdf

Handle Identifier

https://hdl.handle.net/10365/32377

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