Does Biological Assets´ Tangibility Matter from the Profitability and Cost of Debt Perspective for Agricultural Firms?

Zdeněk ToušekJana HinkeBarbora GregorMartin Prokop

DOI 10.7160/aol.2025.170207
No 2/2025, June
pp. 95-106

Toušek, Z., Hinke, J., Gregor, B. and Prokop, M. (2025) "Does Biological Assets´ Tangibility Matter from the Profitability and Cost of Debt Perspective For Agricultural Firms?", AGRIS on-line Papers in Economics and Informatics, Vol. 17, No. 2, pp. 95-106. ISSN 1804-1930 DOI 10.7160/aol.2025.170207.

Abstract

The research aim is to identify specific production factors (biological assets) and target potential profitability and cost of external debt dependency on these biological assets (as an anticipated essential driving forces) due to relative scarcity of this topic coverage. Underlying unbalanced data set consist of 229 agricultural firms managing their business operations from 2011 till 2019 in the Czech Republic. The paper is innovative based on its combination of several different factors including incorporation of biological assets’ variables influencing firm’s profitability and by assessing determinants concerning cost of external debt using a panel regression analysis with fixed effects. Biological assets tangibility is relatively low with declining trend. Contrary to it land tangibility experienced exactly opposite development caused by "skyrocket" land price appreciation. It has been proven that cost of debt is depending only on the short/long-term leverage levels, thus primarily the total indebtedness is essential and relevant driving force.

Keywords

Cost of debt, leverage, return on assets, tangibility, variables

References

  1. Almeida, H. and Campello, M. (2007) "Financial constraints, asset tangibility, and corporate investment", The Review of Financial Studies, Vol. 20, No. 5, pp. 1429-1460. ISSN 0893-9454. DOI 10.1093/rfs/hhm019.
  2. Beck, N. and Katz, J. N. (1995) "What to do (and not to do) with time-series cross-section data", American Political Science Review, Vol. 89, No. 3, pp. 634-647. ISSN 0003-0554 DOI 10.2307/2082979.
  3. Bernanke, B., S., Gertler, M. and Gilchrist, S. (1999) "Chapter 21 The Financial Accelerator in a Quantitative Business Cycle Framework", Handbook of Macroeconomics, Vol. 1, Part C, pp. 1341-1393. ISSN 1574-0048
  4. Beyer, D. and Hinke, J. (2020) "European benchmarking of determinants of profitability for companies with accrual accounting in the agricultural sector", Agricultural Economics, Vol. 66, No. 11, pp. 477-488. ISSN 0139-570X DOI 10.17221/128/2020-AGRICECON.
  5. Bena, J. and Ondko, P. (2012) "Financial Development and the Allocation of External Finance", Journal of Empirical Finance, Vol. 19, No. 1, pp. 1-25. ISSN ISSN 0927-5398 DOI 10.1016/j.jempfin.2011.11.002.
  6. Bielik, P., Smutka, L, Svatoš, M. and Hupková, D. (2013) "Czech and Slovak agricultural foreign trade - two decades after the dissolution", Agricultural Economics, Vol. 59, No. 10, pp. 441-453. ISSN 0139-570X DOI 10.17221/26/2013-AGRICECON.
  7. Boadi, E. K., Antwi, S. and Lartey, V. C. (2013) "Determinants of profitability of insurance firms in Ghana", International Journal of Business and Social Research, Vol. 3, No. 3, pp. 43-50. ISSN 2319-7064
  8. Bohušová, H. and Svoboda, P. (2017) "Will the amendments to the IAS 16 and IAS 41 influence the value of biological assets?", Agricultural Economics, Vol. 63, No. 2, pp. 53-64. ISSN 0139-570X DOI 10.17221/314/2015-AGRICECON.
  9. Coricelli, F., Driffield, N., Pal, S. and Roland, I. (2012) "When does leverage hurt productivity growth? A firm-level analysis", Journal of International Money and Finance, Vol. 31, No. 6, pp. 1674-1694. ISSN 0261-5606 DOI 10.1016/j.jimonfin.2012.03.006.
  10. Čermáková, H. (2013) "Comparison Reporting of Forest Stands in the Enterprise Information System according to the Legal Standards of the Czech Republic and International Financial Reporting Standards – IFRS", Reports of Forestry Research, Vol. 58, No. 1, pp. 78-84. ISSN 0322-9688. (In Czech)
  11. Derbali, A. (2014) "Determinants of performance of insurance companies in Tunisia: the case of life insurance", International Journal of Innovation and Applied Studies, Vol. 6, No. 1, pp. 90-96. ISSN 2028-9324
  12. Du, J. J. and Li, Y. K. (2018) "The impact and spatial difference of agricultural producer services industry on agricultural development: an empirical analysis based on provincial panel data", International Journal of Services Technology and Management, Vol. 24, No. 3, pp. 173-194. ISSN 1460-6720 DOI 10.1504/IJSTM.2018.090351.
  13. Hinke, J. and Stárová, M. (2014) "The Fair Value Model for the Measurement of Biological Assets and Agricultural Produce in the Czech Republic", Proceedings of 17th International Conference Enterprise and Competitive Environment, Vol. 12, pp. 213-220. ISSN 2212-5671 DOI S2212-5671(14)00338-4.
  14. Korneta, P. (2019) "Determinants of sales profitability for Polish agricultural distributors", International Journal of Management and Economics, Vol. 55, No. 1, pp. 40-51. ISSN 2299-9701 DOI 10.2478/ijme-2019-0006.
  15. Kotsina, S. and Hazak, A. (2012)"Does investment intensity impact company profitability? A cross-country empirical study", Proceedings from the 2nd International Conference on Economics, Trade and Development, IPEDR, Vol. 36, IACSIT Press, Singapore. [Online]. Available: https://www.researchgate.net/profile/Aaro-Hazak/publication/ 266415846_Does_Investment_Intensity_Impact_Company_Profitability_A_Cross-Country_Empirical_Study/links/55eac7d808ae65b6389c68de/Does-Investment-Intensity-Impact-Company-Profitability-A-Cross-Country-Empirical-Study.pdf [Accessed: 23 June. 2024]
  16. Kiyotaki, N. (2011) "A perspective on modern business cycle theory", FRB Richmond Economic Quarterly, Vol. 97, No. 3, pp.195-208. ISSN 1069-7225
  17. Lyandres, E. and Palazzo, B. (2016) "Cash holdings, competition, and innovation", Journal of Financial and Quantitative Analysis, Vol. 51, No. 6, pp.1823-1861. ISSN 0022-1090 DOI 10.1017/S0022109016000697.
  18. Mijic, K. and Jaksic, D. (2017) "The determinants of agricultural industry profitability: evidence from southeast Europe", Custos e Agronegocio on line, Vol. 13, No. 1, pp. 154-173. ISSN 1808-2882
  19. Mukaila, R. (2022) "Agricultural entrepreneurship among the youth: The case of youth involvement in rabbit production in Nigeria", International Entrepreneurship Review, Vol. 8, No. 1, pp. 35-46. E-ISSN 2658-1841 DOI 10.15678/IER.2022.0801.03.
  20. Okwo, I. M., Okelue, U. D. and Nweze, A. U. (2012) "Investment in fixed assets and firm profitability: Evidence from the Nigerian brewery industry", European Journal of Business and Management, Vol. 4, No. 20, pp.10-17. E-ISSN 2222-2839
  21. Pokharel, K. P., Regmi, M., Featherstone, A. M. and Archer, D. W. (2019) "Examining the financial performance of agricultural cooperatives in the USA", Agricultural Finance Review, Vol. 79, No. 2, pp. 271-282. ISSN 0002-1466 DOI 10.1108/AFR-11-2017-0103.
  22. Pratheepan, T. (2014) "A panel data analysis of profitability determinants: empirical results from Sri Lankan manufacturing companies", International Journal of Economics, Commerce and Management, Vol. 2, No. 12, pp.1-9. ISSN 2348-0386
  23. Sedláček, J. (2010) "The methods of valuation in agricultural accounting", Agricultural Economics, Vol. 56, No. 2, pp. 59-66. ISSN 0139-570X DOI 10.17221/1487-AGRICECON.
  24. Setianto, R. H., Sipayung, R. S. and Azman-Saini, W. N. W. (2022) "Working capital financing and corporate profit-ability in the ASEAN region: The role of financial development", Entrepreneurial Business and Economics Review, Vol. 10, No. 1, pp. 51-64. E-ISSN 2353-8821 DOI 10.15678/EBER.2022.100104.
  25. Simtion, D. (2020) "How to Use Production Functions Characteristics of Economic Processes in Agriculture. Physical (Technical) Functions", Scientific Papers-Series Management Economic Engineering in Agriculture and Rural Development, Vol. 20, No. 4, pp. 487-489. ISSN 2284-7995
  26. Takac, I., Lazikova, J., Rumanovska, L., Bandlerova, A. and Lazikova, Z. (2020) "The Factors Affecting Farmland Rental Prices in Slovakia", Land, Vol. 9, No. 3, pp. 96. E-ISSN 2073-445X DOI 10.3390/land9030096.
  27. Toušek, Z., Hinke, J., Malinská, B. and Prokop, M. (2021) "The Performance Determinants of Trading Companies: A Stakeholder Perspective", Journal of Competitiveness, Vol. 13, No. 2, pp. 152-170. E-ISSN 2073-445X DOI 10.7441/joc.2021.02.09.
  28. Vintila, G. and Nenu, E. A. (2015) "An analysis of determinants of corporate financial performance: Evidence from the Budapest stock exchange listed companies", International Journal of Economics and Financial Issues, Vol. 5, No. 3, pp. 732-739. ISSN 2146-4138
  29. Vithessonthi, C. and Tongurai, J. (2015) "The effect of firm size on the leverage–performance relationship during the financial crisis of 2007–2009", Journal of Multinational Financial Management, Vol. 29, pp. 1-29. ISSN 1042-444X DOI 10.2139/ssrn.2285980.
  30. Xie, B., Wang, G. and Wang, S. (2019) "Does biological assets affect the firms' cost of debt Capital? Evidence from chinese listed agriculture firms", Custos e Agronegocio on line, Vol. 15, No. 2, pp. 22-47. ISSN 1808-2882
  31. Yakubu, B. N., Salamzadeh, A., Bouzari, P., Ebrahimi, P. and Fekete-Farkas, M. (2022) "Identifying key factors of sustainable entrepreneurship in Nigeria food industry: The role of media availability", Entrepreneurial Business and Economics Review, Vol. 10, No. 2, pp. 147-162. ISSN 2353-8821 DOI 10.15678/EBER.2022.100209.
  32. Zdenek, R., Lososova, J. and Mrkvicka, T. (2019) "Determinants of agricultural land rent and its development in Czechia", Bulgarian Journal of Agricultural Science, Vol. 25, No. 6, pp. 1114-1121. ISSN 1310-0351

Full paper

  Full paper (.pdf, 488.5 KB).