Vegetative cycle and bankruptcy predictors of agricultural firms

Mário Santiago Céu and Raquel Medeiros Gaspar
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Mário Santiago Céu: Advance/Research in Social Sciences and Management and ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Lisboa, Portugal
Raquel Medeiros Gaspar: Cemapre/Research in Economics and Mathematics and ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Lisboa, Portugal

Agricultural Economics, 2022, vol. 68, issue 12, 445-454

Abstract: The characterisation of agricultural activity depends on what firms produce. In this article, we introduce the importance of the vegetative cycle in the prediction of bankruptcy of agricultural firms, analysing the financial ratios proposed by the classical models of Altman (1983), Ohlson (1980) and Zmijewski (1984). We consider a total of 2 228 Portuguese firms, with 83 failing between 2015 and 2019. The findings confirm that the differences between healthy and bankrupt firms depend on their vegetative cycle. Although predictors based on liquidity are helpful only in predicting the bankruptcy of non-perennial crop firms, activity predictors are better in identifying healthy perennial crop firms. In addition, we show substantial statistical differences in terms of liquidity and profitability, but only in healthy firms. The results encourage the topic of the vegetative cycle to be more present in the construction of more accurate bankruptcy prediction models.

Keywords: agriculture; bankruptcy prediction; financial ratios; non-perennial; perennial (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:caa:jnlage:v:68:y:2022:i:12:id:206-2022-agricecon

DOI: 10.17221/206/2022-AGRICECON

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