Farm Values and Financial Performance of Diversified Farms

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 that, 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.


Issue Date:
2002
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/132372
Total Pages:
9




 Record created 2017-04-01, last modified 2017-08-26

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