IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v13y2021i14p7639-d590712.html
   My bibliography  Save this article

Economic Sustainability of Pig Slaughtering Firms in the Production Chain of Denomination of Origin Hams in Italy

Author

Listed:
  • Giuseppe Bonazzi

    (Department of Veterinary Science, University of Parma, 43126 Parma, Italy)

  • Paolo Camanzi

    (Analisiaziendale.it Srl, 40121 Bologna, Italy)

  • Giovanni Ferri

    (Department of Veterinary Science, University of Parma, 43126 Parma, Italy)

  • Elisa Manghi

    (Department of Veterinary Science, University of Parma, 43126 Parma, Italy)

  • Mattia Iotti

    (Department of Engineering and Architecture, University of Parma, 43124 Parma, Italy)

Abstract

Pork meat in Italy is one of the largest agri-food chains in Italy. In the swine production chain, slaughter plays an important role, because it has an impact on animal welfare, food safety and the sustainability of the agri-food chain. These companies also deal with pigs destined for typical Denomination of Origin products and therefore play an important role in the production chain of typical products and in the field of EU agricultural policy. In this context, the research aims to analyze the economic sustainability of the major pig slaughter firms in Italy, through data analysis of the annual account statement (AAS) on a sample of eight companies analyzed over a ten-year historical series. Financial ratios and margins (FRM) analysis is applied in the research. FRM analysis shows that firms have the largest absorption of financial resources in the net working capital cycle. The research highlights the high incidence of raw materials in companies in the sector. Consequently, the profit margins of the companies in the sample are modest and in some cases are lower than the cost of debt, suggesting a moderate capacity to attract capital. This result appears as a negative signal of the economic sustainability of the companies in the sector. The research, now limited to a small number of large companies, opens a line of research that can be developed by expanding the sample to small and medium-sized enterprises of the chain of Denomination of Origin hams in Italy to suggest improvement interventions, in particular for rural or marginal areas of production.

Suggested Citation

  • Giuseppe Bonazzi & Paolo Camanzi & Giovanni Ferri & Elisa Manghi & Mattia Iotti, 2021. "Economic Sustainability of Pig Slaughtering Firms in the Production Chain of Denomination of Origin Hams in Italy," Sustainability, MDPI, vol. 13(14), pages 1-18, July.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:14:p:7639-:d:590712
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/13/14/7639/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/13/14/7639/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jaka Cepec & Peter Grajzl, 0. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 0, pages 1-27.
    2. Koert Van Ittersum & Matthew T. G. Meulenberg & Hans C. M. Van Trijp & Math J. J. M. Candel, 2007. "Consumers’ Appreciation of Regional Certification Labels: A Pan-European Study," Journal of Agricultural Economics, Wiley Blackwell, vol. 58(1), pages 1-23, February.
    3. Yan Jin, 2017. "DuPont Analysis, Earnings Persistence, and Return on Equity: Evidence from Mandatory IFRS Adoption in Canada," Accounting Perspectives, John Wiley & Sons, vol. 16(3), pages 205-235, September.
    4. Johnson, R. Bruce & Hagan, Albert R., 1973. "Agricultural Loan Evaluation with Discriminant Analysis," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 5(2), pages 57-62, December.
    5. Boyd, Scott & Boland, Michael A. & Dhuyvetter, Kevin C. & Barton, David G., 2007. "Determinants of Return on Equity in U.S. Local Farm Supply and Grain Marketing Cooperatives," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 39(1), pages 1-10, April.
    6. G. Grossi & M. Soverchia, 2011. "European Commission Adoption of IPSAS to Reform Financial Reporting," Abacus, Accounting Foundation, University of Sydney, vol. 47(4), pages 525-552, December.
    7. Jasper Grashuis, 2017. "A quantile regression analysis of farmer cooperative performance," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 78(1), pages 65-82, November.
    8. Teodora Stillitano & Emanuele Spada & Nathalie Iofrida & Giacomo Falcone & Anna Irene De Luca, 2021. "Sustainable Agri-Food Processes and Circular Economy Pathways in a Life Cycle Perspective: State of the Art of Applicative Research," Sustainability, MDPI, vol. 13(5), pages 1-28, February.
    9. Josep Argilés & E. Slof, 2003. "The use of financial accounting information and firm performance: an empirical quantification for farms," Accounting and Business Research, Taylor & Francis Journals, vol. 33(4), pages 251-273.
    10. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3-4), pages 573-588.
    11. Edward I. Altman, 1968. "The Prediction Of Corporate Bankruptcy: A Discriminant Analysis," Journal of Finance, American Finance Association, vol. 23(1), pages 193-194, March.
    12. Ashok K. Mishra & J. Michael Harris & Kenneth W. Erickson & Charlie Hallahan & Joshua D. Detre, 2012. "Drivers of agricultural profitability in the USA," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(3), pages 325-340, November.
    13. Rebecca Buttinelli & Raffaele Cortignani & Gabriele Dono, 2021. "Financial sustainability in Italian Organic Farms: An analysis of the FADN Sample," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(3), pages 1-32.
    14. Love, Inessa & Preve, Lorenzo A. & Sarria-Allende, Virginia, 2007. "Trade credit and bank credit: Evidence from recent financial crises," Journal of Financial Economics, Elsevier, vol. 83(2), pages 453-469, February.
    15. Mattia Iotti & Giuseppe Bonazzi, 2018. "Analysis of the Risk of Bankruptcy of Tomato Processing Companies Operating in the Inter-Regional Interprofessional Organization “OI Pomodoro da Industria Nord Italia”," Sustainability, MDPI, vol. 10(4), pages 1-23, March.
    16. Lucia Svabova & Lucia Michalkova & Marek Durica & Elvira Nica, 2020. "Business Failure Prediction for Slovak Small and Medium-Sized Companies," Sustainability, MDPI, vol. 12(11), pages 1-14, June.
    17. Felice Adinolfi & Fabian Capitanio & Filippo Sgroi, 2012. "Misura delle performance finanziarie e patrimoniali delle aziende agricole: proposta operativa per un nuovo modello di rating per le aziende agricole," RIVISTA DI ECONOMIA AGRARIA, FrancoAngeli Editore, vol. 0(1), pages 27-44.
    18. Zvi Lerman & Claudia Parliament, 1990. "Comparative performance of cooperatives and investor-owned firms in US food industries," Agribusiness, John Wiley & Sons, Ltd., vol. 6(6), pages 527-540.
    19. Godfred Adjapong Afrifa, 2016. "Net working capital, cash flow and performance of UK SMEs," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 15(1), pages 21-44, February.
    20. Anna Irene De Luca & Giacomo Falcone & Nathalie Iofrida & Teodora Stillitano & Alfio Strano & Giovanni Gulisano, 2015. "Life Cycle Methodologies to Improve Agri-Food Systems Sustainability," RIVISTA DI STUDI SULLA SOSTENIBILITA', FrancoAngeli Editore, vol. 2015(1), pages 135-150.
    21. Beaver, Wh, 1966. "Financial Ratios As Predictors Of Failure," Journal of Accounting Research, Wiley Blackwell, vol. 4, pages 71-111.
    22. Lerman, Zvi & Parliament, Claudia, 1990. "Comparative Performance of Food-Processing Cooperatives and Investor-Owned Firms in the U.S," Working Papers 232668, Hebrew University of Jerusalem, Center for Agricultural Economic Research.
    23. Mark P. Bauman, 2014. "Forecasting operating profitability with DuPont analysis," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 13(2), pages 191-205, May.
    24. Johnson, R. Bruce & Hagan, Albert R., 1973. "Agricultural Loan Evaluation With Discriminant Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(2), pages 1-6, December.
    25. Sara Fernández‐López & David Rodeiro‐Pazos & Lucía Rey‐Ares, 2020. "Effects of working capital management on firms' profitability: evidence from cheese‐producing companies," Agribusiness, John Wiley & Sons, Ltd., vol. 36(4), pages 770-791, October.
    26. Boisjoly, Russell P. & Conine, Thomas E. & McDonald, Michael B., 2020. "Working capital management: Financial and valuation impacts," Journal of Business Research, Elsevier, vol. 108(C), pages 1-8.
    27. Christian Garavaglia & Paolo Mariani, 2017. "How Much Do Consumers Value Protected Designation of Origin Certifications? Estimates of willingness to Pay for PDO Dry‐Cured Ham in Italy," Agribusiness, John Wiley & Sons, Ltd., vol. 33(3), pages 403-423, June.
    28. Cesar L. Escalante & Calum G. Turvey & Peter J. Barry, 2009. "Farm business decisions and the sustainable growth challenge paradigm," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 69(2), pages 228-247, July.
    29. Dechow, Patricia M., 1994. "Accounting earnings and cash flows as measures of firm performance : The role of accounting accruals," Journal of Accounting and Economics, Elsevier, vol. 18(1), pages 3-42, July.
    30. Carlos A. Molina & Lorenzo A. Preve, 2009. "Trade Receivables Policy of Distressed Firms and Its Effect on the Costs of Financial Distress," Financial Management, Financial Management Association International, vol. 38(3), pages 663-686, September.
    31. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    32. Marc Deloof, 2003. "Does Working Capital Management Affect Profitability of Belgian Firms?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 30(3‐4), pages 573-588, April.
    33. Ohlson, Ja, 1980. "Financial Ratios And The Probabilistic Prediction Of Bankruptcy," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 109-131.
    34. Ana Paula Matias Gama & Helena Susana Amaral Geraldes, 2012. "Credit risk assessment and the impact of the New Basel Capital Accord on small and medium‐sized enterprises," Management Research Review, Emerald Group Publishing Limited, vol. 35(8), pages 727-749, July.
    35. Aktas, Nihat & Croci, Ettore & Petmezas, Dimitris, 2015. "Is working capital management value-enhancing? Evidence from firm performance and investments," Journal of Corporate Finance, Elsevier, vol. 30(C), pages 98-113.
    36. Jaka Cepec & Peter Grajzl, 2021. "Management turnover, ownership change, and post-bankruptcy failure of small businesses," Small Business Economics, Springer, vol. 57(1), pages 555-581, June.
    37. Sonia Baños-Caballero & Pedro J. García-Teruel & Pedro Martínez-Solano, 2016. "Financing of working capital requirement, financial flexibility and SME performance," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 17(6), pages 1189-1204, November.
    38. Matthew D. Hill & G. Wayne Kelly & Michael J. Highfield, 2010. "Net Operating Working Capital Behavior: A First Look," Financial Management, Financial Management Association International, vol. 39(2), pages 783-805, June.
    39. Buttinelli, Rebecca & Cortignani, Raffaele & Dono , Gabriele, 2021. "Financial sustainability in Italian Organic Farms: An analysis of the FADN Sample," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 23(3), December.
    40. Paolo Cupo & Michele Di Domenico, 2012. "I fattori che influiscono sul merito creditizio delle aziende agricole: un?applicazione in Campania," RIVISTA DI ECONOMIA AGRARIA, FrancoAngeli Editore, vol. 0(1), pages 45-67.
    41. Sonia Baños-Caballero & Pedro García-Teruel & Pedro Martínez-Solano, 2012. "How does working capital management affect the profitability of Spanish SMEs?," Small Business Economics, Springer, vol. 39(2), pages 517-529, September.
    42. Sang V. Nguyen & Michael Ollinger, 2009. "Mergers and acquisitions, employment, wages, and plant closures in the U.S. meat product industries," Agribusiness, John Wiley & Sons, Ltd., vol. 25(1), pages 70-89.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mattia Iotti & Giuseppe Bonazzi, 2023. "Financial Sustainability in Agri-Food Companies: The Case of Members of the PDO Parma Ham Consortium," Sustainability, MDPI, vol. 15(5), pages 1-31, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mattia Iotti & Giuseppe Bonazzi, 2023. "Financial Sustainability in Agri-Food Companies: The Case of Members of the PDO Parma Ham Consortium," Sustainability, MDPI, vol. 15(5), pages 1-31, February.
    2. Mattia Iotti & Giuseppe Bonazzi, 2018. "Analysis of the Risk of Bankruptcy of Tomato Processing Companies Operating in the Inter-Regional Interprofessional Organization “OI Pomodoro da Industria Nord Italia”," Sustainability, MDPI, vol. 10(4), pages 1-23, March.
    3. Banerjee, Pradip & Dutta, Shantanu & Zhu, Pengcheng, 2021. "Multidimensionality of text based financial constraints and working capital management," International Review of Financial Analysis, Elsevier, vol. 77(C).
    4. Afrifa, Godfred Adjapong & Tingbani, Ishmael & Adesina, Oluseyi Oluseun, 2022. "Stochastic frontier modelling of working capital efficiency across Europe," Technological Forecasting and Social Change, Elsevier, vol. 184(C).
    5. Ben-Nasr, Hamdi, 2016. "State and foreign ownership and the value of working capital management," Journal of Corporate Finance, Elsevier, vol. 41(C), pages 217-240.
    6. Afrifa, Godfred Adjapong & Gyapong, Ernest & Monem, Reza M., 2018. "Product differentiation, market dynamics and the value relevance of trade payables: Evidence from UK listed firms," Journal of Contemporary Accounting and Economics, Elsevier, vol. 14(3), pages 235-253.
    7. Markus Mättö & Mervi Niskanen, 2021. "Role of the legal and financial environments in determining the efficiency of working capital management in European SMEs," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5197-5216, October.
    8. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    9. Oz, Ibrahim Onur & Yelkenci, Tezer & Meral, Gorkem, 2021. "The role of earnings components and machine learning on the revelation of deteriorating firm performance," International Review of Financial Analysis, Elsevier, vol. 77(C).
    10. Tarek Ibrahim Eldomiaty & Mohamed Hashem Rashwan & Mohamed Bahaa El Din & Waleed Tayel, 2016. "Firm, industry and economic determinants of working capital at risk," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 3(04), pages 1-29, December.
    11. M. A. Lagesh & Maram Srikanth & Debashis Acharya, 2018. "Corporate Performance during Business Cycles: Evidence from Indian Manufacturing Firms," Global Business Review, International Management Institute, vol. 19(5), pages 1261-1274, October.
    12. Iotti, Mattia, 2023. "Financial evaluation and credit access of agricultural firms," Economia agro-alimentare / Food Economy, Italian Society of Agri-food Economics/Società Italiana di Economia Agro-Alimentare (SIEA), vol. 25(2), October.
    13. Josep M. Argilés, 1998. "Accounting information and the prediction of farm viability," Economics Working Papers 277, Department of Economics and Business, Universitat Pompeu Fabra.
    14. Alaa Adden A. Abuhommous, 2017. "Net Working Capital and Firm Growth," International Review of Management and Marketing, Econjournals, vol. 7(4), pages 131-137.
    15. Tsuruta, Daisuke, 2019. "Working capital management during the global financial crisis: Evidence from Japan," Japan and the World Economy, Elsevier, vol. 49(C), pages 206-219.
    16. Mattia Iotti, 2023. "Financial evaluation and credit access of agricultural firms," Economia agro-alimentare, FrancoAngeli Editore, vol. 25(2), pages 31-67.
    17. Afrifa, Godfred & Tingbani, Ishmael, 2017. "Working Capital Management, Cash Flow and SMEs’ Performance," MPRA Paper 82894, University Library of Munich, Germany, revised Oct 2017.
    18. Ahsan Habib & Mabel D' Costa & Hedy Jiaying Huang & Md. Borhan Uddin Bhuiyan & Li Sun, 2020. "Determinants and consequences of financial distress: review of the empirical literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(S1), pages 1023-1075, April.
    19. Godfred Adjapong Afrifa & Ahmad Alshehabi & Ishmael Tingbani & Hussein Halabi, 2021. "Abnormal inventory and performance in manufacturing companies: evidence from the trade credit channel," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 581-617, February.
    20. Ahmed Mohamed Habib & Nahia Mourad, 2022. "Analyzing the Efficiency of Working Capital Management: a New Approach Based on DEA-Malmquist Technology," SN Operations Research Forum, Springer, vol. 3(3), pages 1-20, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:13:y:2021:i:14:p:7639-:d:590712. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.