Debt as a Source of Financial Energy of the Farm—What Causes the Use of External Capital in Financing Agricultural Activity? A Model Approach

Danuta Zawadzka, Agnieszka Strzelecka and Ewa Szafraniec-Siluta
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Danuta Zawadzka: Department of Finance, Faculty of Economics, Koszalin University of Technology, Kwiatkowskiego 6e, 75-343 Koszalin, Poland
Agnieszka Strzelecka: Department of Finance, Faculty of Economics, Koszalin University of Technology, Kwiatkowskiego 6e, 75-343 Koszalin, Poland
Ewa Szafraniec-Siluta: Department of Finance, Faculty of Economics, Koszalin University of Technology, Kwiatkowskiego 6e, 75-343 Koszalin, Poland

Energies, 2021, vol. 14, issue 14, 1-17

Abstract: The aim of this study was to identify and assess the factors influencing the increase in the financial energy of a farm through the use of external capital, taking into account the farmer’s and farm characteristics. For its implementation, a logistic regression model and a classification-regression tree analysis (CRT) were used. The study was conducted on a group of farms in Central Pomerania (Poland) participating in the system of collecting and using data from farms (Farm Accountancy Data Network—FADN). Data on 348 farms were used for the analyses, obtained through a survey conducted in 2020 with the use of a questionnaire. Based on the analysis of the research results presented in the literature to date, it was established that the use of external capital in a farm as a factor increasing financial energy is determined, on the one hand, by the socio-demographic characteristics of the farmer and the characteristics of the farm, and on the other hand, by the availability of external financing sources. Factors relating to the first of these aspects were taken into account in the study. Using the logistic regression model, it was established that the propensity to indebtedness of farms is promoted by the following factors: gender of the head of the household (male, GEND), younger age of the head of the household (AGE), having a successor who will take over the farm in the future (SUC), higher value of generated production (PROD_VALUE), larger farm area (AREA) and multi-directional production of the farm (production diversification), as opposed to targeting plant or animal production only (farm specialization—SPEC). The results of the analysis carried out with the use of classification and regression trees (CRT) showed that the key factors influencing the use of outside capital as a source of financial energy in the agricultural production process are, first of all, features relating to an agricultural holding: the value of generated production (PROD_VALUE), agricultural area (AREA) and production direction (SPEC). The age of the farm manager (AGE) turned out to be of key importance among the farmer’s features favoring the tendency to take debt in order to finance agricultural activity.

Keywords: financial energy; farms; factors determining the propensity to use external capital; logistic regression; classification and regression trees (CRT); Central Pomerania; Poland (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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