Characteristics of unsuccessful versus successful agribusiness loans

Abstract

Research on agribusiness loan success and failure has been limited, and has typically adopted the nonagricultural business approach of using financial ratios to predict loan success, with success rates generally ranging from 60 to 80%. This study uses primary loan data to test the financial and nonfinancial characteristic differences between unsuccessful and successful agribusiness loans. Previous work is augmented by accounting for nonfinancial characteristics, including lender and agribusiness manager experience that resulted in an improved model prediction success rate of 97.5%. A unique result is the identification of a significant combined experience variable comprised of the loan officer’s experience and the agribusiness manager’s experience. Findings further suggest that agribusiness lenders could benefit from incorporating experience into the loan portfolio management process.

Citation

Gallagher, R.L. (2001), "Characteristics of unsuccessful versus successful agribusiness loans", Agricultural Finance Review, Vol. 61 No. 1, pp. 20-35. https://doi.org/10.1108/00214730180001114