Determinants of the Financial Situation of Farms in European Union Countries Grouped by Economic Size

Abstract

The main purpose of this paper was to identify the determinants of the financial situation of farms of different economic size in CEE and EU-15 countries. The FADN database served as the basic source of data. The study covered farms located in FADN regions in the period 2014–2016. The analyses focused on the determinants of the farms’ financial situation measured with a synthetic indicator. The first step of the research procedure was the construction of the synthetic indicator of the financial condition of farms. Following this, the calculated values of the synthetic characteristic were used as explained variables in multiple regression models. The study suggests that the production potential and operating subsidies have a key impact on the financial standing of EU farms. As regards the production potential of CEE farms, it would be beneficial for their financial position to reduce their labor input. In turn, a reduction in the assets-to-land ratio would have a favorable impact on the financial situation of operators based in the EU-15. This could be indicative of overinvestment in these farms. Differences were observed in ratios of productive input and in production intensity between economic size classes; this suggests that it would be reasonable for farms of different classes to implement different farming strategies. The models developed in this study revealed that the use efficiency of productive input (measured with income performance) proved to be of relatively minor importance.