Business risk, financial risk and savings: does perceived higher business risk induce savings among small agricultural operations in the USA?

What is it about?

We presented theoretical synopsis of risk balancing hypothesis and estimated empirical models to assess determinants of the level of debt finance, savings finance, and debt to equity balancing among small U.S. farm operations. Using a primary survey data from Tennessee, our findings suggest that the perceived higher business risk significantly increases the extent of debt use, savings use, and debt-to-equity of small farmers. Moreover, results indicate that factors such as age and education of the operator, family involvement, incomes, land acreage, adoption of alternative on-farm enterprises, and farmers’ continuation plan significantly influence the financing decisions of small farm operations.

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