Private Equity and Asset Characteristics: The Case of Agricultural Production
Version of Record online: 24 SEP 2013
Copyright © 2013 John Wiley & Sons, Ltd.
Managerial and Decision Economics
Special Issue: The Effects of Alternative Investments on Entrepreneurship, Innovation, and Growth
Volume 35, Issue 2, pages 145–160, March 2014
How to Cite
Mondelli, M. P. and Klein, P. G. (2014), Private Equity and Asset Characteristics: The Case of Agricultural Production. Manage. Decis. Econ., 35: 145–160. doi: 10.1002/mde.2649
- Issue online: 13 FEB 2014
- Version of Record online: 24 SEP 2013
Unlike most other mature industries, family firms, partnerships, and cooperatives dominate the agricultural production sector, with few corporations and limited access to capital derived from a source other than retained earnings and existing owners. However, the use of external equity capital in agriculture has increased dramatically since 1990. This funding source allows farms to exploit entrepreneurial opportunities not easily financed by debt. Following O. Williamson, we view debt and equity as alternative governance structures and argue that transaction cost economics offers insights on firms' financial structure beyond those provided by agency theory. We relate capital structure to asset specificity, a particularly important attribute in agricultural production. We construct an international dataset of agricultural companies receiving external private equity and show that the attributes of the assets involved in production are important determinants of financial structure. Copyright © 2013 John Wiley & Sons, Ltd.