The determinants of agricultural industry profitability: Evidence from southeast Europe

Abstract

© Universidade Federal Rural de Pernambuco 2017. All rights reserved. In this paper, the profitability determinants of the agricultural industry in countries of CEE region, such as Hungary, Romania, Bosnia and Herzegovina, and Serbia, were analyzed. The research results for the period 2011-2014 show that profitability of agricultural industry in all countries is positive but below the reference value. Estimation of the influence of independent variables on the profitability in agricultural industries was realized by panel data technique. The results show that the profitability determinants of agricultural enterprises in Hungary and Romania are the same. In these countries, the profitability of agricultural enterprises are positively affected by leverage, quick ratio, growth, and lagged profitability. Furthermore, size and fixed assets to total assets ratios are negatively related to the profitability in these countries. On the other side, significant profitability determinants in Serbia, Bosnia and Herzegovina have only positive influence. In both of these countries, the profitability of agricultural enterprises are affected positively by quick ratio, lagged profitability and growth, while in Bosnia and Herzegovina, one more determinant, leverage, is significant. The results are of interest to various stakeholders, including managers, investors, debt holders, and other users of financial statements, since it makes a profile of agricultural enterprises by associating firm internal characteristics with intensity and direction of profitability ratio in countries in SEE region.