Intergenerational Transfers of Managerial Control in U.S. Family Farm Businesses

Aims: Sustaining a family farm business for multiple generations is a great concern for many farm families. The transfer of managerial control in family farm businesses often takes place separately from the transfer of farm ownership. This article identifies variables affecting the transfer of managerial control of family farms and determines the impact of these variables on the transfer decision.

Study Design: An intergenerational transfer model integrating both altruistic motivation and exchange motivation for family farm management intergenerational transfers is used to examine the motivations impacting the decision for a designated farm successor to participate in the management activities of a family farm business.

Methodology: A national farm-level dataset, the Agricultural Resource Management Survey (ARMS), was utilized. The total number of respondents who stated that a successor had been selected was 4090. Of those respondents who indicated that a successor had been selected, 750 specified that the successor participated in the management activities of the business. A binary logit model was estimated in order to examine the decision for a designated successor to participate in the management activities of the farm business.

Results: Results indicate that operator demographics, business planning practices, value of farm assets and inputs, and non-farm assets significantly impact the decision to transfer managerial control to a designated successor.

Conclusion: Business planning professionals and financial advisors must be aware of factors impacting farmer decisions to transfer farm businesses and subsequent management responsibilities to successors. Results presented will allow these consultants to better educate farm operators during the transfer planning process, thus improving the succession decisions that farm families make, and ultimately enhancing the opportunity for successful farm transfer