JEL classifcation: G31, G32, F34This paper uses a fundamental Q model of investment to consider the role played
by nancing frictions in agricultural investment decisions, controlling econometrically for
censoring, heterogeneity and errors-in-variables. Our ndings suggest that farmer's in-
vestment decisions are not driven by market fundamentals. We nd some evidence that
debt overhang restricts investment but investment is not dependent on liquidity or internal
funds. The role of nancing frictions in determining investment decisions changes in the
post- nancial crisis period when debt overhang becomes a signi cant impediment to farm
investment. The evidence suggests that farmers increasingly rely on internal liquidity to
drive investment. Finally, we nd no evidence that farmers use o -farm capital to fund
on-farm investment.Teagasc Walsh Fellowship Programm
