Using Financial Ratios and Lender Relationship Theory to Assess Farm Creditworthiness

Accounting & Taxation, Vol. 3, No. 1, pp. 45-56, 2011

12 Pages Posted: 30 Jun 2011

See all articles by Alan K. Reichert

Alan K. Reichert

Cleveland State University

Raymond L. Posey

Mount Union College

Date Written: 2011

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.

Keywords: Credit scoring, lending relationships, farm credit

JEL Classification: G2, M1, M4

Suggested Citation

Reichert, Alan K. and Posey, Raymond L., Using Financial Ratios and Lender Relationship Theory to Assess Farm Creditworthiness (2011). Accounting & Taxation, Vol. 3, No. 1, pp. 45-56, 2011. Available at SSRN: https://ssrn.com/abstract=1870405

Alan K. Reichert (Contact Author)

Cleveland State University ( email )

Cleveland, OH 44115
United States

Raymond L. Posey

Mount Union College ( email )

1972 Clark Avenue
Alliance, OH 44601
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
90
Abstract Views
549
rank
288,383
PlumX Metrics