Abstract/Summary

The aim of this research was to assess the impact of management practices on the financial performance of farm businesses in England. In addition, it sought to provide insight into the financial performance of the sector. Four farm types (Cereal farms, Dairy farms, Less-favoured Areas Grazing Livestock farms and Lowland Grazing Livestock farms) were selected for this research. First, using the ratios from the DuPont Expansion model (Return on Sales, Asset Turnover, Compound Leverage Factor, Return on Assets and Return on Equity), the results show that Cereal farms consistently perform better than Dairy farms, LFA Grazing Livestock farms and Lowland Grazing Livestock farms, both for the period 2008 to 2013 and in 2011/12, with the exception of Asset Turnover, where Dairy farms achieved the highest performance due to stock management practices, and the duration of the production cycle. Farming does not seem to have issues with liquidity, and the level of indebtedness is low overall. However, low profitability is an issue, which is not necessarily due to cost control, but to falling revenue. Second, management practices, defined as planning, organising, leading and controlling, taking into account the environment to achieve organisational goals, was found to have positive effects on individual farm financial performance, both for all farm types as well as per farm type. In particular, formal planning and benchmarking have positive, statistically significant effects. Highly performing farms (in financial terms) apply management practices more on the farm compared with the lowest 25 percentile of farm businesses. In addition, regression models were estimated to assess the effects of these practices in relation to financial performance. The results showed that increasing in size will also lead to better financial performance for all farm types.