IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vxxivy2021i1p173-187.html
   My bibliography  Save this article

Working Capital Management vs Profitability in Agricultural Holdings (in the Context of Integration for “Old” and “New” EU Members)

Author

Listed:
  • Roma Rys-Jurek

Abstract

Purpose: The aim of this article is the analysis of the relation among the net working capital and the profitability (ROA, ROS) of agricultural holdings in the European Union (EU) taking into consideration the difference between “old” and “new” EU members. Approach/Methodology: The source of data on the production and economic situation of approximately 8400 agricultural holdings is Farm Accountancy Data Network (FADN). Analysed objects are divided into four classes considering the length of the net working capital (NWC) cycle (less than a year, more than a year) and of the date of accession to the European Union. The centres of gravity in each class are estimated with the use of the Gretl program. The relationship between the NWC to assets and profitability is also estimated. Findings: A statistically significant and positive relationship between these categories is revealed in all four analysed classes. Therefore, the relation of the NWC to assets affects the profitability of agricultural holding. The factor differentiating the strength of this impact is the length of the NWC cycle. It allows formulating concluding remark that most holdings maintain it up to 1 year, therefore the situation of agricultural holdings in this respect is safe. Practical Implications: The study examines the current situation of agricultural holdings in the EU. The research may serve as a unique source of information on the financial situation of European agricultural holdings. Achieved results may be useful to agriculture managers, politicians and managers of companies cooperating with agricultural holdings. Originality/Value: The capital management framework is similar in both groups of countries – “old” 15 EU countries and “new” 13 EU countries. It appears that agricultural holdings of working capital period up to achieve more favourable results concerning the NWC 1 year, production factors and profitability. The longer the cycle, the less favourable the conditions. However, the working capital practices appear to be relatively stable over the analysed period.

Suggested Citation

  • Roma Rys-Jurek, 2021. "Working Capital Management vs Profitability in Agricultural Holdings (in the Context of Integration for “Old” and “New” EU Members)," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 173-187.
    • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:1:p:173-187
    as

    Download full text from publisher

    File URL: https://ersj.eu/journal/2326/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Campos, Nauro F. & Coricelli, Fabrizio & Moretti, Luigi, 2019. "Institutional integration and economic growth in Europe," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 88-104.
    2. Opler, Tim & Pinkowitz, Lee & Stulz, Rene & Williamson, Rohan, 1999. "The determinants and implications of corporate cash holdings," Journal of Financial Economics, Elsevier, vol. 52(1), pages 3-46, April.
    3. 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.
    4. Mark Baimbridge & Jeffrey Harrop & George Philippidis, 2004. "Current Economic Issues in EU Integration," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-59816-4, December.
    5. Mark Baimbridge & Jeffrey Harrop & George Philippidis, 2004. "Current Issues in EU Integration," Palgrave Macmillan Books, in: Current Economic Issues in EU Integration, chapter 1, pages 1-14, Palgrave Macmillan.
    6. André Luiz de Souza Guimarães & Valcemiro Nossa, 2010. "Working capital, profitability, liquidity and solvency of healthcare insurance companies," Brazilian Business Review, Fucape Business School, vol. 7(2), pages 37-59, May.
    7. Gamze VURAL & Ahmet G khan S KMEN & Emin H seyin CETENAK, 2012. "Affects of Working Capital Management on Firm's Performance: Evidence from Turkey," International Journal of Economics and Financial Issues, Econjournals, vol. 2(4), pages 488-495.
    8. Tamer Bahjat Sabri, 2012. "The impact of working capital on the value of the company in light of differing size, growth, and debt," Business and Economic Horizons (BEH), Prague Development Center, vol. 7(1), pages 27-41, June.
    9. 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.
    10. Thorsten Knauer & Arnt Wöhrmann, 2013. "Working capital management and firm profitability," Metrika: International Journal for Theoretical and Applied Statistics, Springer, vol. 24(1), pages 77-87, May.
    11. Maria Amélia Pais & Paulo Miguel Gama, 2015. "Working capital management and SMEs profitability: Portuguese evidence," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 11(3), pages 341-358, June.
    12. Artor Nuhiu & Arben Dërmaku, 2017. "A Theoretical Review on the Relationship between Working Capital Management and Company's Performance," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(3), pages 56-69, JUNE.
    13. Sabri, Tamer Bahjat, 2012. "The impact of working capital on the value of the company in light of differing size, growth, and debt," Business and Economic Horizons (BEH), Prague Development Center (PRADEC), vol. 7(1), pages 1-15, June.
    14. Wilhelm Kohler, 2014. "European Economic Integration, WTO Membership, Immigration and Offshoring," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 8662, August.
    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. Oana Coca & Diana Creangă & Ștefan Viziteu & Ioan Sebastian Brumă & Gavril Ștefan, 2023. "Analysis of the Determinants of Agriculture Performance at the European Union Level," Agriculture, MDPI, vol. 13(3), pages 1-23, March.

    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. Zanxin Wang & Minhas Akbar & Ahsan Akbar, 2020. "The Interplay between Working Capital Management and a Firm’s Financial Performance across the Corporate Life Cycle," Sustainability, MDPI, vol. 12(4), pages 1-16, February.
    2. Hakim Lyngstadaas, 2020. "Packages or systems? Working capital management and financial performance among listed U.S. manufacturing firms," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(4), pages 403-450, December.
    3. Paweł Mielcarz & Dmytro Osiichuk & Paweł Wnuczak, 2018. "Working Capital Management through the Business Cycle: Evidence from the Corporate Sector in Poland," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 12(2), June.
    4. Nguyen An Thanh Hong & Nguyen Tuan Van, 2018. "Working Capital Management and Corporate Profitability: Empirical Evidence from Vietnam," Foundations of Management, Sciendo, vol. 10(1), pages 195-206, September.
    5. Rubens Correa Junior & Augusto Hauber Gameiro, 2020. "Cash Flow in an Agribusiness Restructuring Process," Journal of Agricultural Studies, Macrothink Institute, vol. 8(4), pages 589-609, December.
    6. Mai, Nhat Chi, 2022. "Capital Raising and Management of Vietnamese Small and Medium Sized Enterprises after Integrating into Global Economy," OSF Preprints dv68m, Center for Open Science.
    7. Fan, Chenguang & Bae, Seongho & Liu, Yu, 2024. "Can FinTech transform corporate liquidity? Evidence from China," Innovation and Green Development, Elsevier, vol. 3(2).
    8. Duo Xu & Christopher Gan & Zhaohua Li & Pengcheng Wang, 2021. "Earnings, Working Capital and Dividend Payout: Evidence from the London Stock Exchange," Annals of Economics and Finance, Society for AEF, vol. 22(2), pages 421-449, November.
    9. Afrifa, Godfred & Tingbani, Ishmael, 2017. "Working Capital Management, Cash Flow and SMEs’ Performance," MPRA Paper 82894, University Library of Munich, Germany, revised Oct 2017.
    10. Grzegorz Zimon, 2020. "Financial Liquidity Management Strategies in Polish Energy Companies," International Journal of Energy Economics and Policy, Econjournals, vol. 10(3), pages 365-368.
    11. Muhammad Amin Hasan & Ali Sajid & Aman Abbas Ghouri & Talal Ahmed Khan, 2023. "Re-Examining Working Capital Management and Firm Performance Nexus: Does Investment Policy Matter?," Journal of Economic Impact, Science Impact Publishers, vol. 5(3), pages 269-278.
    12. Sumathi Kumaraswamy, 2016. "Impact of Working Capital on Financial Performance of Gulf Cooperation Council Firms," International Journal of Economics and Financial Issues, Econjournals, vol. 6(3), pages 1136-1142.
    13. Abdul Rashid & Maryam Ashfaq, 2017. "Financial Constraints And Corporate Cash Holdings: An Empirical Analysis Using Firm Level Data," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 1-26, June.
    14. Kwadwo Boateng Prempeh Godfred Peprah-Amankona, 2020. "Does Working Capital Management Affect Profitability of Ghanaian Manufacturing Firms?," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 23(1), pages 1-18, May.
    15. Olaoye & Clement Olatunji & Adeboboye & Roseline, 2019. "Working Capital Management and Performance of Industrial and Consumer Goods Firms in Nigeria: A Comparative Analysis," Information Management and Business Review, AMH International, vol. 11(3), pages 35-45.
    16. Ran An & Wentao Li & Di Wang & Yanyan Wang & Lisheng Yu, 2023. "Do Key Audit Matters Affect Operating Activities? Evidence from Inventory Management," Abacus, Accounting Foundation, University of Sydney, vol. 59(1), pages 300-339, March.
    17. Hakan Özkaya & Şebnem Yaşar, 2023. "Working capital management in the food and beverage industry: Evidence from listed European companies," Agricultural Economics, Czech Academy of Agricultural Sciences, vol. 69(2), pages 78-88.
    18. Stanić Milan & Cita Melita & Šulentić Marina Stanić, 2023. "The Influence of Working Capital Management on the Profitability of Manufacturing Enterprises - The Case of Croatia," South East European Journal of Economics and Business, Sciendo, vol. 18(2), pages 126-139, December.
    19. E. Louw & John H. Hall & Rudra P. Pradhan, 2022. "The Relationship Between Working Capital Management and Profitability: Evidence from South African Retail and Construction Firms," Global Business Review, International Management Institute, vol. 23(2), pages 313-333, April.
    20. Zeidan, Rodrigo & Shapir, Offer Moshe, 2017. "Cash conversion cycle and value-enhancing operations: Theory and evidence for a free lunch," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 203-219.

    More about this item

    Keywords

    Agricultural holding; assets; European integration; FADN; net working capital; profitability.;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • F15 - International Economics - - Trade - - - Economic Integration
    • G50 - Financial Economics - - Household Finance - - - General
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

    Statistics

    Access and download statistics

    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:ers:journl:v:xxiv:y:2021:i:1:p:173-187. 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: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    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.