External Equity Financing of Agrifood Firms

Ph.D. Dissertation, University of Missouri, Columbia, MO, EUA.

ABSTRACT: This dissertation investigates the determinants that influence a firm‘s decision to

use external private equity in agriculture. Scholars have recognized the benefits of

external equity finance for agricultural firms (i.e., capital derived from a source other

than retained earnings and existing owners) and the use of external equity in agriculture

has increased since 1990. This is important because this source of capital allows farms to

exploit business opportunity, particularly for companies that pose risks that discourage

debt capital, and because private equity has fostered entrepreneurial activity. However,

the literature addressing this phenomenon is limited. The asset specificity approach

(Williamson 1988) offers insightful contributions to understand the choice of financial

mechanisms. This approach brings additional insights and complements agency—the

dominant perspective in finance. The analysis focuses on the differential redeployability

of the assets involved in the production of different agricultural product. I construct an

international dataset of agricultural companies that receive external private equity finance

to test hypotheses about the determinants of using external equity finance. Results show

that the attributes of the assets involved in agriculture are important factors to explain

financing choices in agriculture. This research contributes to the understanding of the role

of asset specificity to explain financing decisions and to the identification of what types

of asset specificity play an important role in agriculture.


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