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Accounting information and the prediction of farm viability

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  • Josep M. Argilés
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    Abstract

    Until recently farm management made little use of accounting and agriculture has been largely excluded from the scope of accounting standards. This article examines the current use of accounting in agriculture and points the need to establish accounting standards for agriculture. Empirical evidence shows that accounting can make a significant contribution to agricultural management and farm viability and could also be important for other agents involved in agricultural decision making. Existing literature on failure prediction models and farm viability prediction studies provide the starting point for our research, in which two dichotomous logit models were applied to subsamples of viable and unviable farms in Catalonia, Spain. The first model considered only non-financial variables, while the other also considered financial ones. When accounting variables were added to the model, a significant reduction in deviance was observed.

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    File URL: http://www.econ.upf.edu/docs/papers/downloads/277.pdf
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    Bibliographic Info

    Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 277.

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    Date of creation: Mar 1998
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    Handle: RePEc:upf:upfgen:277

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    Web page: http://www.econ.upf.edu/

    Related research

    Keywords: Accounting; agriculture; farm distress; viability; prediction;

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    References

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    1. Frydman, Halina & Altman, Edward I & Kao, Duen-Li, 1985. " Introducing Recursive Partitioning for Financial Classification: The Case of Financial Distress," Journal of Finance, American Finance Association, vol. 40(1), pages 269-91, March.
    2. Altman, Edward I. & Haldeman, Robert G. & Narayanan, P., 1977. "ZETATM analysis A new model to identify bankruptcy risk of corporations," Journal of Banking & Finance, Elsevier, vol. 1(1), pages 29-54, June.
    3. Phimister, Euan, 1995. "The Impact of Borrowing Constraints on Farm Households: A Life-Cycle Approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(1), pages 61-86.
    4. Bernard Pineau & François Colson, 1991. "Les indicateurs de détection de la difficulté financière des exploitations en période d'installation," Économie rurale, Programme National Persée, vol. 206(1), pages 57-63.
    5. Foster, William E. & Rausser, Gordon C., 1990. "Farmer behavior under risk of failure," CUDARE Working Paper Series 488R, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
    6. Lo, Andrew W., 1986. "Logit versus discriminant analysis : A specification test and application to corporate bankruptcies," Journal of Econometrics, Elsevier, vol. 31(2), pages 151-178, March.
    7. Frederick M. Richardson & Gregory D. Kane & Patricia Lobingier, 1998. "The Impact of Recession on the Prediction of Corporate Failure," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(1&2), pages 167-186.
    8. F. André, 1987. "Vers un renouveau de la formation économique des agriculteurs ?," Économie rurale, Programme National Persée, vol. 177(1), pages 53-56.
    9. J.-C. Kroll, 1987. "Le Nouveau Plan Comptable : les occasions perdues," Économie rurale, Programme National Persée, vol. 180(1), pages 20-25.
    10. Smale, Melinda & Saupe, William E. & Salant, Priscilla, 1986. "Farm Family Characteristics and the Viability of Farm Households in Wisconsin, Mississippi, and Tennessee," Agricultural Economics Research, United States Department of Agriculture, Economic Research Service, issue 2.
    11. Palepu, Krishna G., 1986. "Predicting takeover targets : A methodological and empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 8(1), pages 3-35, March.
    12. Johnson, R. Bruce & Hagan, Albert R., 1973. "Agricultural Loan Evaluation With Discriminant Analysis," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 5(02), December.
    13. Olsson, Rolf, 1988. "Management for Success in Modern Agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 15(2/3), pages 239-59.
    14. Laurence M. Crane & David J. Leatham, 1995. "External equity financing in agriculture via profit and loss sharing contracts: A proposed financial innovation," Agribusiness, John Wiley & Sons, Ltd., vol. 11(3), pages 223-233.
    15. Schmitt, Gunther, 1991. "Why Is the Agriculture of Advanced Western Economies Still Organized by Family Farms? Will This Continue to Be So in the Future?," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 18(3-4), pages 443-58.
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    Cited by:
    1. Eric J. Slof & Josep M. Argilés, 1998. "An analysis of the accounting principles applied by the European Farm Accountancy Data Network," Economics Working Papers 342, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 1998.
    2. Josep M. Argilés & Eric J. Slof, 2000. "New opportunities for farm accounting," Economics Working Papers 497, Department of Economics and Business, Universitat Pompeu Fabra.

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