Predicting farm performance: do indicators of farm economic viability and efficiency signify of probability of bankruptcy?
Vytautas Magnus University Agriculture Academy, Faculty of Bioeconomy
Development, Research Institute for Bioeconomy, Universiteto Str. 10-321,
LT-53361 Akademija, Kauno r., Lithuania
*Correspondence: jurate.savickiene@vdu.lt
Abstract:
Following the analysis of the indicators characterising the economic viability, efficiency and bankruptcy probability of farms proposed by researchers and employed in practice, the relationships between the indicators and their capacity to predict the prospects of farm activities as well to assess whether or not the indicators are indicative of the same patterns of farm activity, several different researchers’ approaches have been identified. Certain researchers have been claiming that all of the indicators provide the same farm performance prospects, while others consider economic viability and efficiency to provide long-term farm performance prospects, while bankruptcy probability-negative profitability in the short term. The methods of convergent and discriminant validation employed allowed for analysis of the risk of potential overlap between the index of economic viability of a family farm and farm economic efficiency coefficient with the already available bankruptcy probability prediction models. For this purpose, categorical regression analysis was employed. This enabled the authors to determine that the index of economic viability of a family farm and coefficient of farm economic efficiency did not repeat the already available and used bankruptcy probability prediction models. Summarizing the results, it could be claimed that the index of economic viability of a family farm and coefficient of farm economic efficiency are not suitable as an alternative for assessment of the bankruptcy probability.
Key words:
farm economic viability; farm economic efficiency; bankruptcy prediction models; family farms