Centro de Investigaciones Económicas - CINVE

External Equity Financing of Agrifood Firms
    • Mario P. Mondelli
    • 11/2011

    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.