Asset Valuation and Strategic Analysis of Agribusiness Investment Activities
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abstract
Firms and entrepreneurs require access to funds so that their businesses can grow. When risks are not well understood, the capital markets may fail to efficiently allocate those investment funds. In this project, we study risks that relate to consumers' acceptance of foods having characteristics which cannot be verified by the consumers' direct observation. The U.S. food industry invests considerable resources in assuring foods are safe, consistent, delivered and packaged according to consumers' expectations. This project investigates the economic and financial implications of credibility about product innovations and the impact on firms in the distribution and marketing levels of the food system.The U.S. food industry invests considerable resources in assuring foods are safe, consistent, delivered and packaged according to consumers' expectations. In spite of these investments, it costs U.S. companies an estimated $US 7 billion per year for withdrawals, recalls, and rejections (according to an industry source, Food Safety Chain Management, webinar 5 June 2014). The balance of consumers' pressure and government regulators' actions is a fruitful avenue of study in a risk management and financial modeling context.Barriers to the efficient allocation of investment capital can occur when the benefits of a project are not clearly valued in the market, or when the risks associated with the investment project are not well understood. This research project will utilize research approaches from financial management theory and practice, and from risk assessment techniques. The outcome will be increased understanding of investment decision-making surrounding novel foods, differentiated products, and perishable foods management.
