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1 – 10 of 387Ani L. Katchova and Sierra J. Enlow
Agribusinesses represent a fundamental link in connecting farmers with retailers and consumers, yet little research has been done to examine the historical financial performance…
Abstract
Purpose
Agribusinesses represent a fundamental link in connecting farmers with retailers and consumers, yet little research has been done to examine the historical financial performance of these food processing firms. This paper aims to address this issue.
Design/methodology/approach
The authors' research examines how publicly‐traded agribusinesses perform financially compared to all firms over the period from 1961 to 2011. The authors utilize several indicators of company success, including financial ratios and balance sheet/income statement items, to compare agribusiness firms to all firms in the market. The authors perform the analysis over time and also for companies with low, median, and high performance. They also perform Du Pont analysis to compare return on equity components between agribusinesses and all firms.
Findings
The authors find that agribusinesses outperform at the median the sample of all firms in terms of financial ratios related to profitability, liquidity, and market ratios, but have slightly lower liquidity and debt ratios. The Du Pont analysis shows that the higher return on equity for agribusinesses is mostly due to higher asset turnover ratios, indicating higher operating efficiency of agribusinesses. The strong financial performance of food manufacturing agribusinesses makes them valuable companies in an investment portfolio.
Originality/value
This study provides a basic overview of financial ratios used to examine the financial performance of publicly‐traded agribusinesses. The authors' findings show that agribusinesses outperform all firms in terms of key financial indicators.
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Brandon Schaufele and David Sparling
The purpose of this paper is to investigate the relationships between regulatory changes, returns on equity and stock market valuations for Canadian food and non‐food…
Abstract
Purpose
The purpose of this paper is to investigate the relationships between regulatory changes, returns on equity and stock market valuations for Canadian food and non‐food agribusinesses.
Design/methodology/approach
Two empirical approaches are employed. First, an event study is used to evaluate the impact of official regulatory announcements on the stock market valuations of selected Canadian agribusinesses. Next, an approach introduced by Mishra et al. using the Du Pont expansion is applied to investigate the effect of regulations on firms' accounting profits. Data on Canadian food and non‐food agribusinesses are collected from Bloomberg, Thompson One Banker and SEDAR.
Findings
The event study demonstrates that official regulatory announcement dates do not correspond with abnormal stock market returns for Canadian firms, while the Du Pont model yields mixed evidence with respect to their accounting profits.
Research limitations/implications
This paper only considers publicly traded companies. As a result, survivorship bias may exist. Future research should include privately held and cooperative firms.
Social implications
Food regulations can influence firm profits and shareholder wealth, so understanding how government actions influence agribusiness is important when considering the total costs of current and future food policy.
Originality/value
The interaction between policy and the financial performance of Canada's publicly traded agribusinesses is an under‐researched area and no studies have examined Canadian data. The results of this study are valuable to both policy makers and researchers.
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Carlos J.O. Trejo-Pech, Karen L. DeLong and Robert Johansson
The United States (US) sugar program protects domestic sugar farmers from unrestricted imports of heavily-subsidized global sugar. Sugar-using firms (SUFs) criticize that program…
Abstract
Purpose
The United States (US) sugar program protects domestic sugar farmers from unrestricted imports of heavily-subsidized global sugar. Sugar-using firms (SUFs) criticize that program for causing US sugar prices to be higher than world sugar prices. This study examines the financial performance of publicly traded SUFs to determine if they are performing at an economic disadvantage in terms of accounting profitability, risk and economic profitability compared to other industries.
Design/methodology/approach
Firm-level financial accounting and market data from 2010 to 2019 were utilized to construct financial metrics for publicly traded SUFs, agribusinesses and general US firms. These financial metrics were analyzed to determine how SUFs compare to their agribusiness peer group and general US companies. The comprehensive financial analysis in this study covers: (1) accounting profit rates, (2) drivers of profitability, (3) economic profit rates, (4) trend analysis and (5) peer comparisons. Quantile regression analysis and Wilcoxon–Mann–Whitney statistics are employed for statistical comparisons.
Findings
Regarding various profitability and risk measures, SUFs outperform their agribusiness peers and the general benchmark of all US firms in terms of accounting profit rates, risk levels and economic profit rates. Furthermore, compared to other US industries using the 17 French and Fama classifications, SUFs have the highest return on investment and economic profit rate―measured by the Economic Value Added® margin―and the second-lowest opportunity cost of capital, measured by the weighted average cost of capital.
Originality/value
This study finds nothing to suggest that the US sugar program hinders the financial success of SUFs, contrary to recent claims by sugar-using firms. Notably in this analysis is the evaluation of economic profit rates and a series of robustness techniques.
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Benjamin M. Clark, Joshua D. Detre, Jeremy D'Antoni and Hector Zapata
The purpose of this research is to develop a composite agribusiness stock index and then compare the returns and volatility to other broad‐based market indices. The paper then…
Abstract
Purpose
The purpose of this research is to develop a composite agribusiness stock index and then compare the returns and volatility to other broad‐based market indices. The paper then evaluates the diversification potential of agribusiness stocks in the context of an investment portfolio.
Design/methodology/approach
This agribusiness index (AGB Index) is market‐capitalization weighted. Only firms traded on the NYSE, AMEX, or NASDAQ and meeting ERS SIC classification for industries related to agriculture are included in the index. The paper then uses standard financial metrics to measure the historical risk, return, and correlation.
Findings
Until recent years, the AGB Index has historically exhibited lower returns than the market indices. The AGB Index has also exhibited lower risk and correlation with treasury securities than broad market indices.
Practical implications
In recent years, portfolio managers and large investors have invested considerably in asset classes like farmland for stable returns, an inflation hedge, and diversification tool. This agribusiness index may further this trend and lead to the development of an alternative Exchange Traded Fund (ETF). This product would make investment in agriculture possible for virtually all investors.
Originality/value
Despite increasing popularity, very little research exists on the performance of agricultural stocks in an investment portfolio. This study develops a large‐cap agribusiness stock price index to help fill this void in the literature.
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Jeremy M. D’Antoni and Joshua Dean Detre
– The purpose of this paper is to determine how an index of agribusiness stocks performs relative to the S&P 500 particularly in times of recession.
Abstract
Purpose
The purpose of this paper is to determine how an index of agribusiness stocks performs relative to the S&P 500 particularly in times of recession.
Design/methodology/approach
Using value-weighted indexes of agribusiness stocks, large cap US stocks, and copula estimation, the paper quantifies the correlation in potential investment portfolios. The information obtained from the copula estimated dependence measures and Value at Risk (VaR) allows to examine the diversification benefits of holding agribusiness stocks in the portfolio relative to the S&P 500.
Findings
The results provide limited evidence that the addition of agribusiness stocks to a portfolio are able to provide significant diversification benefits to a portfolio of domestic equities, as represented by the S&P 500 index. The VaR analysis also indicates the risk of extreme losses remained relatively stable both across time and portfolio weightings.
Research limitations/implications
While this research examines a broad-based agribusiness stock index, there exists a number of sub-assets classes within the analyzed index that should be analyzed to see if the offer benefits to investors. In addition, only stocks traded on US-based stock indexes are included in this analysis; as such, the authors would like to extend the research to have a more global approach.
Practical implications
The findings suggest that investors who are looking to a broad-based agribusiness stock index to provide more diversification in their portfolio, may find it unattractive from a both a risk management and profit maximizing perspective. However, that does not mean that the agribusiness stock index might be an affective complement to a portfolio that contains multiple other assets classes.
Originality/value
The issue of correlation convergence during financial crises is one of great concern to investors. To the authors’ knowledge, this is the first paper that uses copulas to evaluate the role of agribusiness stocks in an investor's portfolio.
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Pedro Piccoli, Nilton Bianchini Junior, Jeferson Coser and Vilmar R. Moreira
From 2006 to 2016, Brazilian agricultural cooperatives exhibited a sharp increase in sales. Since the operational cycle of these organizations demands a positive net working…
Abstract
Purpose
From 2006 to 2016, Brazilian agricultural cooperatives exhibited a sharp increase in sales. Since the operational cycle of these organizations demands a positive net working capital that is usually funded by debt, the authors examine whether this rise in sales was obtained at the cost of the short-term financial sustainability. As a matter of comparison, the authors conduct the same analysis for Brazilian agricultural public traded companies.
Design/methodology/approach
The authors employ the dynamic analysis of working capital method to measure the short-term financial sustainability of these organizations.
Findings
The authors find that the expansion of net working capital caused by the growth of the revenues of the sampled cooperatives was mostly funded by short-term debt, which rose by 31% in annualized terms. The authors also document that around 60% of these firms displayed a current capital structure that can be considered risky in terms of indebtedness, and that the majority of firms exhibited a non-sustainable growth in the period, what contrasts with the performance presented by Brazilian agricultural publicly traded companies, since only 16% of the firms from this group have shown a non-sustainable growth. This distinction seems to be explained by the lower capacity of agricultural cooperatives to provide resources from their operations.
Originality/value
The authors investigate the short-term financial sustainability of a unique dataset of 65 Brazilian agricultural cooperatives and provide insight for researchers analyzing the dual nature of these firms.
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Nigel Purves, Scott James Niblock and Keith Sloan
The purpose of this paper is to explore the relationship of non-financial and financial factors to firm survival, provide evidence of factors related to financial success and…
Abstract
Purpose
The purpose of this paper is to explore the relationship of non-financial and financial factors to firm survival, provide evidence of factors related to financial success and distress for prominent Australian agricultural firms, and improve the predictive capacity of financial failure models.
Design/methodology/approach
The paper utilizes mixed method exploratory case studies across four Australian agricultural firms (two successful and two failed) listed on the Australian Securities Exchange.
Findings
The authors found that the use of an Integrated Multi-Measured approach provided a higher classification rate for the failed group than those provided by an individual measure. We also discovered that non-financial factors associated with the agricultural organizations studied impacted their success or failure. These factors included managements’ involvement in organizational strategy and the composition of the board of directors. It was also apparent that management decision-making approaches may become frozen, or at best restricted, in the face of impending failure, dependent upon the stress level within the organization and the management skill base.
Practical implications
The cases studied indicated that non-financial factors of failure occurred prior to any financial predictors, intuitively indicating a relationship between non-financial and financial factors in Australian agricultural firms.
Originality/value
The identification of financial and non-financial factors and sound internal processes which distinguish successful and failing firms can be utilized for the development of an early warning predictor of organizational success or failure.
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This study aims to explore the role of corporate governance (CG) characteristics on the financial performance of large agricultural companies in New Zealand. External auditor…
Abstract
Purpose
This study aims to explore the role of corporate governance (CG) characteristics on the financial performance of large agricultural companies in New Zealand. External auditor remuneration and board characteristics, such as board ownership, board compensation, board independence and board gender diversity, are addressed in the context of New Zealand’s agricultural companies by applying agency theory.
Design/methodology/approach
This paper uses a balanced panel data generalised least square regression analysis on 80 firm-years of observations over the period from 2012 to 2015.
Findings
Empirical analysis revealed that external auditors’ remuneration and board characteristics, such as board compensation and board independence, except for board ownership and board gender diversity, held no association with the agricultural companies’ performance. While board ownership and board gender diversity were negatively, but significantly, associated with firm performance, these results were pronounced in the listed agricultural companies rather than in the non-listed companies.
Research limitations/implications
This study encountered limitations commonly associated with the majority of industry-specific studies, i.e. small sample size and lack of published financial information from databases. Therefore, for generalisation, these limitations were considered relevant.
Practical implications
The results of this research project are beneficial for authorities and agricultural company directors in implementing CG principles and guidelines to empower such companies in international competition. Encouraging agricultural companies to maintain a high level of transparency in financial reporting is of central interest for the government’s economic development, and stock market investors achieve a high level of transparency in non-financial disclosures, the chief objective of this study. Finally, the results of this paper may encourage auditors to scrutinise CG disclosures by agricultural companies in more detail, looking for undisclosed information.
Social implications
The results of this paper may encourage managerial transparency by providing appropriate disclosures for the public benefit. Investors may benefit from the disclosure provided in their economic decision-making and the public may expand on the information disclosed in facilitating development through exports, expansion of foreign investments and the indigenous economy.
Originality/value
The findings contribute to the literature by providing novel and original insights into using a sample of listed and non-listed agricultural companies to extend the current understanding of the governance-performance nexus.
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Guido Migliaccio and Pietro Pavone
This paper investigates the income dynamics of Italian primary sector, during and after the international economic crisis. It focuses on three research questions: what has been…
Abstract
Purpose
This paper investigates the income dynamics of Italian primary sector, during and after the international economic crisis. It focuses on three research questions: what has been the evolution of the main profitability ratios of agricultural enterprises in recent years? After the crisis, have the surviving farms increased their profitability? Has the profitability been different also in relation to the geographic location?
Design/methodology/approach
Income dynamics of a sample of companies have been analyzed, obtaining the 10-year evolution of the average value of three income indices (return on equity [ROE], return on assets [ROA] and return on sales [ROS]). Statistical elaborations and the analysis of variance (ANOVA) method have been used.
Findings
The years of the international economic crisis are often characterized by higher incomes than the following ones. The descending trend involves all three national macroareas of Italy, although characterized by considerable socioeconomic differences.
Research limitations/implications
The study considers only the society that survived the crisis, so, presumably, the strongest. Moreover, other ratios should be considered in order to have a more complete view.
Practical implications
Public policymakers could use this study for a better intervention in support of agricultural and agro-industrial activities.
Social implications
The careful economic and financial analysis of the sector favors the relaunching strategies of the Italian primary sector in which many employees work.
Originality/value
The research contributes to the literature by providing a quantitative analysis of the dynamics of the sector, through the comparative information that may be derived from financial statements.
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