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Abstract
This dissertation examines how the financial health of U.S. agricultural banks and nonagricultural banks is impacted by the two major economic recessionary episodes experienced in the last two decades, namely the late 2000s Great Recession and the current Covid-19 pandemic condition.
The first of three studies analyze the relationship between loan sectoral distribution and banks’ NPLs during different economic periods from 2004 to 2013, using a dynamic GMM model. Results suggest that, for non-agricultural banks, diversification in non-crisis years reduces NPLs, while specialization reduces NPLs during the financial crisis. The results also show that NPL levels in agricultural banks appear to be less responsive to the factors than non-agricultural banks. In particular, no impact from specialization was found for agricultural banks.
The second study employs a two-stage data envelopment analysis to study the impact of the current pandemic conditions on efficiencies of U.S. agricultural banks from the first quarter of 2017 to the second quarter of 2020. Three different sets of inputs and outputs are used: the intermediation approach, operating approach, and value-added approach. The empirical findings of this study suggest that U.S. agricultural banks are less than fully efficient under all three approaches of measuring inputs and outputs. Additionally, the results indicate that the shock from Covid-19 does have a significant and negative impact on all the technical efficiencies, pure technical efficiencies, and scale efficiencies, although the significance differs.
The third study utilizes a two-step stochastic frontier analysis to investigate the cost efficiency of US agricultural and non-agricultural banks, through the period of 2004 to 2020. The findings suggest that the 2008 financial crisis have different impacts on agricultural banks and nonagricultural banks. The 2008 financial crisis significantly decreases the cost efficiency of nonagricultural by 0.55%. However, the impact is not significant for agricultural banks. The results also show that the Covid-19 pandemic actually increases the cost efficiency levels of both US agricultural banks and non-agricultural banks.
The first of three studies analyze the relationship between loan sectoral distribution and banks’ NPLs during different economic periods from 2004 to 2013, using a dynamic GMM model. Results suggest that, for non-agricultural banks, diversification in non-crisis years reduces NPLs, while specialization reduces NPLs during the financial crisis. The results also show that NPL levels in agricultural banks appear to be less responsive to the factors than non-agricultural banks. In particular, no impact from specialization was found for agricultural banks.
The second study employs a two-stage data envelopment analysis to study the impact of the current pandemic conditions on efficiencies of U.S. agricultural banks from the first quarter of 2017 to the second quarter of 2020. Three different sets of inputs and outputs are used: the intermediation approach, operating approach, and value-added approach. The empirical findings of this study suggest that U.S. agricultural banks are less than fully efficient under all three approaches of measuring inputs and outputs. Additionally, the results indicate that the shock from Covid-19 does have a significant and negative impact on all the technical efficiencies, pure technical efficiencies, and scale efficiencies, although the significance differs.
The third study utilizes a two-step stochastic frontier analysis to investigate the cost efficiency of US agricultural and non-agricultural banks, through the period of 2004 to 2020. The findings suggest that the 2008 financial crisis have different impacts on agricultural banks and nonagricultural banks. The 2008 financial crisis significantly decreases the cost efficiency of nonagricultural by 0.55%. However, the impact is not significant for agricultural banks. The results also show that the Covid-19 pandemic actually increases the cost efficiency levels of both US agricultural banks and non-agricultural banks.