The optimal capital structure of Swiss dairy farms

Abstract

Purpose The purpose of this paper is to propose a novel way of determining optimal capital structure, applied to sub-groups of Swiss dairy farms from 2003 to 2014. Optimization of capital structure is carried out with respect to two performance indicators from an economic value added perspective. Design/methodology/approach Optimal values of capital structure are obtained based on a minimization of correlation between economic performance indicators and a distance function of the debt-to-asset ratio distribution to its quantiles. The approach differs from existing approaches in relying solely on empirical data and in using fewer external parameters, which are difficult to estimate, such as risk aversion coefficients. An unbalanced panel data set from the Swiss Farm Accounting Network with almost 14,000 dairy farm observations serves as input data to the model. Findings Concise optimal values of capital structure result for regional and temporal sub-groups of Swiss dairy farms. Comparing the evolution of optimal values for these sub-groups with existing models of optimal capital structure, the authors infer that dairy farmers in the mountain region are less risk averse than their counterparts in the valley region and that falling interest rates increase the optimal value of debt-to-asset ratio. Originality/value The straightforward computation of optimal values for capital structure without intermediate parameters is useful and new. In addition, the authors’ model can be used as a tool for comparison and validation of previous models with the same aim, e.g. for comparison of risk aversion coefficients or qualitative behavior of optimal values for capital structure.

Corporate governance and firm performance within the Russian agri-food sector: does ownership structure matter?

“…With respect to firm-level characteristics, we control for firm size (FSIZE), measured by the natural logarithm of the total assets (Marinova et al, 2016); firm age (FAGE), measured by the number of years since the company was first officially registered by the state (Reddy et al, 2008); and leverage (LEVERAGE), measured as a ratio of total debts to total assets (Schorr and Lips, 2019).…”

What determines the capital structure of farms? Empirical evidence from Poland

“…Howley and Dillon (2012) perform a similar analysis in Ireland, while Tian (2013) and Aderajew et al (2019) investigate the capital structure of Dutch farms. Schorr and Lips (2019) consider Swiss farm capital structure with respect to performance indicators such as economic value added (EVA). These studies consider individual farm data and generally focus on only one country or one sector at a time.…”

“…By contrast, in the agricultural sector, few studies have investigated the financial structure and policy of farms. Most empirical studies in this area have concerned the US agricultural market (Barry et al, 2000;Katchova, 2005;Zhao et al, 2008), while some notable exceptions have examined Dutch, Irish and Swiss farms (Aderajew et al, 2019;Schorr & Lips, 2019;Tian, 2013;Wu et al, 2014). Although the issue of access to credit has been tackled in some studies (Petrick, 2004a(Petrick, , 2004bPetrick & Latruffe, 2006), to the best of our knowledge, no study on capital structure has previously considered Eastern European countries.…”

Leverage dan Market Share sebagai Faktor Penentu Posisi Persaingan Pasar Perusahaan Manufaktur di Indonesia

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