Does Capital Market Structure Affect Farm Investment? A Comparison using French and British Farm-Level Panel Data
Catherine Benjamin
chargiée de recherche in the Département d'Economie et Sociologie Rurales
Institut National de la Recherche Agronomique (INRA), Rennes, France
The financial support of INRA and the permission of the Ministry of Agriculture Food and Fisheries and the ESRC Data Archive for access to the British data are gratefully acknowledged. The authors would also like to thank Hervé Guyomard, Deborah Roberts, and especially the two anonymous referees for their helpful comments and suggestions. All usual caveats apply.
Search for more papers by this authorEuan Phimister
senior lecturer in the Department of Economics and associate
Arkleton Centre of Rural Development Research, University of Aberdeen, Scotland, UK
Search for more papers by this authorCatherine Benjamin
chargiée de recherche in the Département d'Economie et Sociologie Rurales
Institut National de la Recherche Agronomique (INRA), Rennes, France
The financial support of INRA and the permission of the Ministry of Agriculture Food and Fisheries and the ESRC Data Archive for access to the British data are gratefully acknowledged. The authors would also like to thank Hervé Guyomard, Deborah Roberts, and especially the two anonymous referees for their helpful comments and suggestions. All usual caveats apply.
Search for more papers by this authorEuan Phimister
senior lecturer in the Department of Economics and associate
Arkleton Centre of Rural Development Research, University of Aberdeen, Scotland, UK
Search for more papers by this authorAbstract
This article considers whether differences in the structure of agriculture credit markets in France and the United Kingdom alters the investment sensitivity to financial variables particularly cash flow. Using two panel datasets of French and British farms, three approaches are used to test the sensitivity of investment to internal finance, an inventory investment model, a fundamental q-model, and Euler equations for machinery investment. The results suggest that the contrasting capital markets structures do induce differences in overall investment sensitivity to cash flow and its pattern across both farms with varying levels of collateral and between inventory and machinery investment.
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