Dalia Streimikiene

Vilnius University, Kaunas, Lithuania,

dalia.streimikiene@khf.vu.lt

BENEFIT OF THE DOUBT MODEL FOR FINANCIAL RISK ANALYSIS OF LITHUANIAN FAMILY FARMS

Tomas Baležentis

Lithuanian Institute of Agrarian Economics,

Vilnius, Lithuania,

tomas@laei.lt

Irena Kriščiukaitienė

Lithuanian Institute of Agrarian Economics,

Vilnius, Lithuania

Abstract. The aim of this research is to propose a methodology for integrated assessment of financial risks of family farms in Lithuania. The methodology is based on the benefit of the doubt model. The research relies on the farm-level data from Farm Accountancy Data Network and covers the  period of 2004-2011. Multiple financial indicators are included in the model to encompass such features as returns, capital structure, cost of capital, and cash flows. The research focuses on the four main types of farming prevailing in Lithuania, viz. cereal farming, general field cropping, dairying, and mixed field crops – grazing livestock farming. The results show that the financial risk generally increased in Lithuanian family farms during 2004-2011. However, a rebound has been observed in the period since 2009. This might be related to investment decisions and subsequent modernisation. Cereal farms face the highest financial risk, whereas dairy farms are the least exposed to them.

Received: December, 2015

1st Revision: January, 2016

Accepted: February, 2016

DOI: 10.14254/2071- 789X.2016/9-1/4

JEL Classification: C44, Q12

Keywords: family farms, financial risk, benefit of the doubt model, Lithuania.