Investments play a pivotal role in the development of all farms, irrespective of their type. This role is particularly pronounced in the case of dairy farms, given the specialized nature of animal production, which involves buildings and structures equipped with sophisticated technical facilities. The intensification of investment processes serves as the foundation for augmenting production potential, a phenomenon that should culminate in the development of financial resilience through the generation of greater returns over an extended timeframe. However, financing asset expansion through long-term liabilities may influence farms' financial exposure and affect their ability to maintain financial resilience. Therefore, the primary objective of this paper is to examine how dairy farms with different levels of investment comprehensiveness differ in financial indicators such as solvency, profitability, and cost efficiency, and to analyze the association between leverage and production performance across these investment groups. To this end, a comprehensive examination was conducted on 689 dairy farms that maintained continuous accounting records between 2007 and 2019. The study was based on unpublished data from the Farm Accountancy Data Network (FADN). A thorough investigation into the investment risk (the relationship between leverage and performance across different levels of investment complexity) and financial resilience of farms of varying investment scales was conducted, yielding 4 distinct groups of farms, each categorized based on the comprehensiveness of their investments. They were then subjected to a quantitative analysis at 2 distinct levels. In the first section, a ratio-based analysis was carried out, which enabled a comparative assessment of the farms' financial records. In the second section analyzed the possible relationship between long-term liabilities on the production level of dairy farms was analyzed using a linear regression model with Panel Corrected Standard Errors (PCSE). The regression results indicate a significant relationship between long-term liabilities and total output for farms in most cases. However, in the case of farms where the total value of investments ranged from 0 to 50% of their assets value, each unit increase in long-term liabilities caused a decrease in production, rendering these operators less efficient than farms that invest more intensively.
Zmyślona et al. (Mon,) studied this question.