Determinants of Financial Capital Use: Review of theories and implications for rural businesses. Factor Markets Working Paper No. 19, February 2012

This paper presents a review of financial economics literature and offers a comprehensive discussion and systematisation of determinants of financial capital use. In congruence with modern financial literature, it is acknowledged here that real and financial capital decisions are interdependent. While the fundamental role of the (unconstrained) demand for real capital in the demand for finance is acknowledged, the deliverable focuses on three complementary categories of the determinants of financial capital use: i) capital market imperfections; ii) factors mitigating these imperfections or their impacts; and iii) firm- and sector-related factors, which alter the severity of financial constraints and their effects. To address the question of the optimal choice of financial instruments, theories of firm capital structure are reviewed. The deliverable concludes with theory-derived implications for agricultural and non-agricultural rural business’ finance.

Dexter (Mich.) businesses and residences, ca. 1874

Top: Res. of Bernard Keenan, Sec. 14 Northfield Tp. Mich. Bottom left: Frederick Jaeger, City Bakery ... Dexter, Mich. Bottom Center: Res of the Hon. C.S. Gregory, Dexter, Mich. and Evarts & Co. Propirs. of Dexter & Scio Mills ... Dexter, Mich. Bottom right: Res. and store of W.F. Schlanderer ... Dexter, Mich. Publication information: Chicago, Ill. : Everts & Stewart, 1874.

Ann Arbor (Mich.) residence and businesses, 1874

Left to right: Res. of Wm. P. Brown, Sec. 6, Ann Arbor, Mich.; J.G. Miller, Manufacturer of sash, doors, blinds, mouldings, scroll work &c. ... Ann Arbor, Mich.; Ann Arbor Steam Planing Mill , Bracket, Scroll & Fancy Sawing, cor. of North & Fifth Sts., Ann Arbor, Mich. (na8635); Marble Works & Res. of Anton Eisele, the largest marble works in Washtenaw Co. Mich.; City Market, G.F. Gwinner, cor. of Fourth & Washington Sts., Ann Arbor, Mich.; L.C. Risdon, 31 South Main St., Ann Arbor, Mich. (na8635; na6707). Publication information: Chicago, Ill. : Everts & Stewart, 1874.

Manchester, Mich. residences and businesses, ca. 1874

Left to right: Res. of Geo. W. Hoy, Manchester, Mich.; Res. of G.R. Palmer, Manchester, Mich.; Res. of J.D. Van Duyn, Exchange St. Mich.; Res. of W.H. Pottle, Exchange Place, Manchester, Mich., cash dealer in dry goods, small wares, gents furnishing goods &c.; Res. & brick yard of Wm S. Carr, Manchester, Mich.; C.Lehn, dealer in groceries, provisions, notions &c., Manchester, Mich.; Wm. Kirchgesser, prop'r of Manchester City Bakery & wholesale & retail dealer in crackers, fine ornamental cakes, confectionery &c., Manchester, Mich.; Store & Res., Bridgewater Station, by Henry Guthardt & Sons. Publication information: Chicago, Ill. : Everts & Stewart, 1874.