Estimation of a Backward-Bending Investment Demand Function for Agribusiness Firms

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dc.creatorKropp, Jaclyn D.
dc.creatorPower, Gabriel J.
dc.date2017-04-01T15:07:43Z
dc.date.accessioned2026-07-09T05:10:38Z
dc.descriptionWe investigate irreversible investment behavior under uncertainty of payoffs using U.S. firm-level panel data. We estimate the relationship between the firm’s investment to capital ratio and the interest rate, while controlling for investment opportunities, real option values, uncertainty and profitability. The results indicate the investment demand curve is a backward-bending function of the interest rate; at low interest rates, an increase in the interest rate leads to increased investment by increasing the cost of postponing investment. Firm investment behavior is also consistent with real options behavior. The investment behavior of agribusiness firms is significantly different from firms in other sectors.
dc.identifierdoi:10.22004/ag.econ.61293
dc.identifierhttps://ageconsearch.umn.edu/record/61293/files/11630_Kropp_Power.pdf
dc.identifierhttp://ageconsearch.umn.edu/record/61293
dc.identifier.urihttp://hdl.handle.net/123456789/560079
dc.languageeng
dc.publisher
dc.sourcehttp://ageconsearch.umn.edu/record/61293
dc.titleEstimation of a Backward-Bending Investment Demand Function for Agribusiness Firms
dc.typeText

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