WHY AND HOW AGRICULTURAL FIRMS FAIL: EVIDENCE FROM ESTONIA

O. Lukason

Abstract: This paper is focused on a domain in literature that has received very low attention, namely firm failure causes and failure processes in agricultural sector. The two objectives of the paper are to determine the main reasons of firm failure in agricultural sector and find out whether failed firms go through different failure processes. The empirical part uses various data of bankrupt Estonian agricultural firms. Based on the failure reasons outlined in court judgments about bankruptcies, it is established that half of the firms fail because of factors from both, internal and external environment. The other half of the firms collapse because of reasons from only one environment, either internal or external. Based on the financial data from the annual reports of firms, three distinct failure processes are found by using factor analysis. Established failure processes have both, similarities and differences with those established in literature before.

Keywords: agricultural firms; bankruptcy; failure processes; failure reasons

Date published: 2017-10-25