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Title:Essays on persistent management skill
Author(s):Li, Xin
Director of Research:Paulson, Nicholas; Schnitkey, Gary
Doctoral Committee Chair(s):Paulson, Nicholas
Doctoral Committee Member(s):Mallory, Mindy; Miller, Nolan
Department / Program:Agr & Consumer Economics
Discipline:Agricultural & Applied Econ
Degree Granting Institution:University of Illinois at Urbana-Champaign
Subject(s):Persistent Performance
Management Skill
Abstract:This is a comprehensive study of farm management performance. The rapid growth of farm income and production costs has raised both new questions and warranted revising old questions; these include the existence of persistent management skill, the management strategies and profitability, farm growth and the land investing behavior associated with farm wealth. To address these questions, farm management performance is analyzed based on yearly Illinois Farm Business Farm Management (FBFM) panel data across 9,831 farms from 1996 through 2014. Agricultural producers operate in a volatile environment, facing a number of sources of risk. A key question is whether farmers who are more highly skilled can better mitigate these risks and consistently earn higher returns than their lower skilled peers. Two out-of-sample tests of skill persistence are used to analyze the ability of farm managers that consistently perform well over yearly and longer time horizons. The results suggest that the most skilled managers often generate better financial results and that management skills are consistent and predictable. Furthermore, the top 10% of farmers have substantial ability to persistently perform. The alpha scores (or skill estimates) for farm managers are analyzed to determine if most profitable farmers possess specific skills or knowledge against adverse events in a volatile environment. This study emphasizes the strategic and operations aspects of managing a farm. Farms are evaluated under different scenarios of management skill portfolios. Fundamental farm management basics are discussed in this study, including budgeting, production planning, financial analysis, financial management, investment analysis, and control management. Farm managers will want to consult it to improve the effectiveness, objectivity, and success of their decisions. For decades, the dominant trend in US agriculture at the farm level has been towards greater concentration. The study analyzes the factors underpinning this prominent trend. It has crucial policy implications because theory would suggest high profit farms should capture the resources over time. Two important hypotheses are derived and tested using dynamic growth model and choice behavior model: 1) farms that expand the most are more profitable; 2) returns have systemic influence on the rental and accumulation decision and hence upon the land tenure. Results suggest that high profit is often touted as a motivation factor for land investing. An innovative aspect of this study is that it brings together qualitative, quantitative, and institutional sources of information to paint a more complete picture of farm growth in the United States.
Issue Date:2016-07-14
Rights Information:Copyright 2016 Xin Li
Date Available in IDEALS:2016-11-10
Date Deposited:2016-08

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