State regulation of investment in agriculture

Abstract

An important task of state regulation of investment in the agricultural sector of the economy is to attract investors who are able to increase the efficiency of the functioning of agricultural enterprises. The success of the functioning of this enterprise depends on how quickly an agricultural enterprise is able to adapt to changes in the external environment. This is achievable under the condition of the most optimal use of the enterprise’s resource potential. Small agricultural enterprises are usually deprived of the possibility of using highly productive innovative agricultural technologies in their activities due to their high cost. Farm enterprises are also experiencing difficulties with insurance and attracting bank loans. In the competition with large agricultural enterprises, small farms survive mainly thanks to state subsidies. Large agricultural holdings are more financially stable, their economic activities are more diversified compared to farms. At large agricultural enterprises, labor productivity is higher and the cost of production is lower. The main task of the state for ensuring food security is to facilitate the process of consolidation of agricultural enterprises. The liquidation of small farming enterprises is an objective process that results from free market competition. The consolidation of agricultural enterprises will allow more efficient use of agricultural land in agricultural production.

Competitiveness of the enterprise from the investor's point of view based on the utility function

“…With the same utility function for a more conservative investor , the value of the return and risk R will be less than the value of the risk propensity of a more risk -prone investor . Therefore, according to (5), for a conservative investor, 𝑒 − 𝑅 * 𝑥 𝛼 2 will be more than for an investor more prone to risk. Thus, a more conservative investor perceives an investment in this enterprise as more profitable than a riskier investor.…”

“…Thus, a more conservative investor perceives an investment in this enterprise as more profitable than a riskier investor. In addition, taking into account (5), it can be concluded that if the utility functions coincide, then the competitiveness of the enterprise seems to be higher to a conservative investor than it would seem to a riskier investor.…”