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<p>In a setting of economic and financial crisis, most companies experienced a reduction in their profitability. Thus, our study allows us to identify vertical integration strategies developed by companies to overcome the crisis. This paper is aimed at unveiling the determining factors of the profitability of Spanish agrifood firms, depending on whether they are backwards vertically integrated or not. In order to attain our objective, we implemented a first difference regression model. The main contributions of the article lie in the incorporation of a variable that distinguishes integrated firms from the rest and the separate analysis of the two groups of firms. The results suggest that firms that seek to differentiate themselves, either through offering a specific product or through providing higher quality with a view to maintaining their reputation, are more likely to adopt vertical integration due to the higher transaction costs of relations with suppliers. The grouping carried out in this study is shown to be highly relevant as asset structure implies different strategies for actions aimed at increasing profitability.</p>

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Aim of study: To analyse the effect that operating leverage exerts on the cost of debt of agri-food firms in Europe, both in isolation and indirectly through its other risk factors.Area of study: We used panel data made up of 18,360 European firms from 2009 to 2016 (146,880 observations).Material and methods: The data were extracted from the ORBIS database and EUROSTAT. The econometric approach was estimated by the Generalized Method of Moments.Main results: The results obtained confirm that operating leverage or cost structure, in addition to affecting the cost of debt, also affects the relationship between that cost and other sources of risk. More specifically, indebtedness, size, specificity and age all affect the cost of debt to a greater or lesser extent, depending on the level of operating leverage of the company.Research highlights: The main contribution was the study of the cost of external financing as a function of the cost structure, because this directly influences the competitiveness of companies in a key sector of the European economy. We also demonstrated the country effect, taking into account the different policies and practices regarding the assumption of risk by firms. The agri-food sector has been subject to special aid programs of research & development distributed unevenly across countries. If we add to this the national subsidy programs, the level of indebtedness is not a clear determinant of the cost of debt. The main determinant of that cost is the operating leverage.