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Impact of debt structure on production efficiency and financial performance of B roadacre farms in W estern A ustralia
Author(s) -
Mugera Amin W.,
Nyambane Gerald G.
Publication year - 2015
Publication title -
australian journal of agricultural and resource economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.683
H-Index - 49
eISSN - 1467-8489
pISSN - 1364-985X
DOI - 10.1111/1467-8489.12075
Subject(s) - debt , liability , capital structure , business , production (economics) , monetary economics , debt ratio , panel data , investment (military) , economics , finance , econometrics , microeconomics , politics , political science , law
Farming activities are often financed using debt, yet empirical studies investigating the relationship between farm debt structure and performance are still rare. Using a 10 year unbalanced panel of Broadacre farms in Western Australia, we relate the impact of long‐term debt, short‐term debt and tax liability on farm performance measured by input‐oriented technical efficiency and return on assets. We find farm technical efficiency is positively related to short‐term debt, tax liability and capital investment, but negatively related to off‐farm income generating activities. Long‐term debt has no effect on production efficiency and return on assets. These results are robust to both parametric and nonparametric methods of estimation.