Socio-demographic drivers of the risk-taking propensity of micro farmers

Abstract

Purpose Risk attitude is an elementary attribute of entrepreneurial behaviour. Determinants of risk-taking propensity have been widely investigated in the group of entrepreneurs and non-entrepreneurs so far. There is a lack of evidence on determinants of risk-taking propensity in the farming business, which is considered as risky business because of the ongoing climate change and epidemic outbreaks. Alternatively, the risk of lower European Union budget raised the question, how to implement publicly supported financial instruments for micro and small farmers which have lower credit rating. The purpose of this study is to find socio-demographic determinants of the risk-taking propensity of the Czech micro farms, controlling for the type of farming. Design/methodology/approach The survey of 747 micro farmers was processed through ordinal logistic regression. The study is based on the subjective self-assessment of the risk-taking behaviour which is frequently used to measure risk-taking attitude. The results are representative from the type of farming point of view. Findings The model provided clear evidence that age, household size, living with the partner/wife/husband and level of education have a significant relationship with risk-taking propensity. The most risk-tolerant farmers are young with less formal education and living in small households. The risk-taking propensity varies by the type of farming. Specialized crop farms have significantly higher risk-taking propensity than farms with a substantial share of livestock production. Alternatively, gender, feeling about household income and religion are not significantly related to the risk-taking propensity of the Czech micro farms. Research limitations/implications The main limitation of the study is the number of explanatory variables and the use of self-assessment of risk-taking attitude. The risk attitude can be explained by other variables which require in-depth qualitative research, such as past risk experience, the structure of decision problems, market orientation and operation under subsistence conditions. Practical implications The significant determinants of risk-taking attitude of micro farmers are important for banks, the Czech Support and Guarantee Fund for Farmers and Forestry and for policymakers who design the rules for post-2020 common agricultural policy. The study is original and valuable for the Central and Eastern European countries’ implementation of financial instruments as new rules for investment support are being prepared and research on the risk-taking attitude of the most vulnerable segment of farmers has not been conducted. Originality/value The originality of this study is from the perspective of agricultural sector as well as from the micro farms point of view. The results have commercial and political implications. Younger farmers, singles and lower-educated farmers have significantly higher risk-taking propensity and can be potentially risky clients for banks. Such farmers represent the financial gap in the credit market, and their viable development projects could be subject for implementation of financial instruments co-financed by the European Agricultural Fund for Rural Development in the forthcoming programming period past 2020.

The Need For Achievement, Risk-Taking Propensity, And Entrepreneurial Intention Of The Generation Z

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Examining Perceived Entrepreneurial Stress: A Causal Interpretation through Cross-Lagged Panel Study

“…Another significant characteristic of an entrepreneurial job is the imperativeness of risktaking [68,69]. Risk-taking is often more intense for entrepreneurs than salaried employees, where the risk is mostly the organization's onus.…”

Disparities in the Perception of Business Risks in Connection With the Achieved Education of the Owner/Manager and Doing Business

“…Jung (2015) argues that individuals with higher education are less risk-averse compared to those with lower education. In the farmer's case, the higher their education is, the higher is the risk aversion level (Spicka, 2020). That is because higher educated farmers are more aware of risk sources and risk management tools; therefore, they do not take risky projects.…”