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Operating and financial leverage as risk measures in agricultural companies

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  • Zabolotnyy, Serihiy
  • Wasilewski, Mirosław

Abstract

The goal of the research is to estimate the level of risk of agricultural companies according to degree of operating and financial leverage, and to define relations between these measures and ratios of financial efficiency. The research involved companies from the database of the Institute of Agricultural and Food Economics – National Research Institute in 2005-2013. The greatest impact on risk of agricultural companies had the degree of operating leverage characterizing sensitivity of operating profit on volatility of operating revenue, regarding to cost structure. The degree of financial leverage showing the level of debt and interest paid influenced the risk of agricultural companies to a lesser extent. Agricultural companies with a high degree of total leverage had lower financial efficiency, arising from a low ability to generate operating profit.

Suggested Citation

  • Zabolotnyy, Serihiy & Wasilewski, Mirosław, 2018. "Operating and financial leverage as risk measures in agricultural companies," Problems of Agricultural Economics 276377, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).
  • Handle: RePEc:ags:iafepa:276377
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    References listed on IDEAS

    as
    1. William F. Sharpe, 1964. "Capital Asset Prices: A Theory Of Market Equilibrium Under Conditions Of Risk," Journal of Finance, American Finance Association, vol. 19(3), pages 425-442, September.
    2. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter.
    3. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
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    Keywords

    Agricultural Finance; Research Methods/ Statistical Methods; Risk and Uncertainty;

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