Financing Agriculture and Rural America: Issues of Policy, Structure and Technical Change: Farm Values and Financial Performance of Diversified Farms

Ani Katchova
2002 unpublished
Theoretical arguments suggest that diversification has both value-enhancing and value-reducing effects. Several finance studies have found that the average diversified firm is worth less than a portfolio of comparable single-segment firms. In agriculture, farms have different characteristics and diversification incentives than publicly-traded firms. This study examines the farm diversification discount using data from Illinois and the methodology developed by Burger and Ofek. The results show
more » ... at, on average, a diversified crop/livestock farm has a lower value and lower return on equity than a portfolio of a specialized crop and livestock farm. The regression results examine the impact of various farm and operator characteristics on the level of diversification discount.
doi:10.22004/ag.econ.298028 fatcat:yrybzoss3ffx3edusbgsrharx4