Financial problems and psychological distress: Investigating reciprocal effects among business owners

Abstract: Building on conservation of resources theory and the dynamic equilibrium model, this threewave longitudinal study among 302 Dutch agricultural business owners (one-year time intervals) investigated reciprocal relationships between the financial situation of the business and psychological distress. Results of structural equation modeling analyses revealed a negative spiral of farm decline, in which psychological variables played a key role. Experiencing financial problems predicted psychological distress, and acted as a self-fulfilling prophecy by strengthening intentions to quit the business, which predicted a deterioration of the objective financial situation of the business one year later. Moreover, farmers experiencing more psychological distress were more likely to get caught in this negative spiral than business owners with better mental health, because they experienced more financial problems, irrespective of their objective financial situation. Long-term psychological distress rather than temporary fluctuations in distress levels accounted for this effect.