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Firm Size and Financial Performance: Intermediate Effects of Indebtedness

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  • Ernesto Lopez‐Valeiras
  • Jacobo Gomez‐Conde
  • Teresa Fernandez‐Rodriguez

Abstract

ABSTRACT This paper offers a new perspective for the agricultural economics literature on the relationship between firm size and financial performance. We contribute to the literature by exploring the role of indebtedness in this relationship. Using archival data collected from 83 companies belonging to livestock industries, the empirical findings confirm the hypothesis that indebtedness leverages the effect of size on financial performance. That is to say, indebtedness can enhance the realization of the potential benefits of a larger organizational size. Contrary to expectations, these results reveal that the relationship between size and financial performance is negatively mediated by indebtedness. [EconLit citations: D23; M00; Q13].

Suggested Citation

  • Ernesto Lopez‐Valeiras & Jacobo Gomez‐Conde & Teresa Fernandez‐Rodriguez, 2016. "Firm Size and Financial Performance: Intermediate Effects of Indebtedness," Agribusiness, John Wiley & Sons, Ltd., vol. 32(4), pages 454-465, November.
    • Handle: RePEc:wly:agribz:v:32:y:2016:i:4:p:454-465
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    File URL: http://hdl.handle.net/10.1002/agr.21458
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    2. Alfredo Grau & Araceli Reig, 2021. "Operating leverage and profitability of SMEs: agri-food industry in Europe," Small Business Economics, Springer, vol. 57(1), pages 221-242, June.
    3. Mariia A. Molodchik & Carlos Jardon & Angel Barajas, 2015. "The Firm Size Effect On Performance Due To Intangible Resources," HSE Working papers WP BRP 35/MAN/2015, National Research University Higher School of Economics.
    4. Roman Vavrek & Ivana Kravčáková Vozárová & Rastislav Kotulič, 2021. "Evaluating the Financial Health of Agricultural Enterprises in the Conditions of the Slovak Republic Using Bankruptcy Models," Agriculture, MDPI, vol. 11(3), pages 1-19, March.
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