SOURCES AND DETERMINANTS OF CASH HOLDINGS IN THE AGRICULTURE OF CENTRAL AND EASTERN EUROPE COUNTRIES AND THE PERSPECTIVE OF THE FINANCIAL SECURITY OF POLISH FARMS

Abstract

Ensuring business continuity requires maintaining financial liquidity and a certain level of cashholdings. This also applies to farms whose owners obtain funds from various sources, includingforeign capital. For this reason, the study aimed to identify sources and determine cash resourcesin farms in Central and Eastern European countries that are in the EU. Additionally, based ondetailed data from Polish farms, we assessed and compared the importance of cash holdings infarms characterised by a high level of financial security and those for which we identify thebankruptcy risk. Data for the research is from the Farm Accounting Data Network (FADN) databasefor 2013-2018 (for all the EU countries we consider). In the analysis touching upon bankruptcy riskin Polish farms, we used data from FADN-PL for 2010-2018. In the study, we used the panel method– weighted least squares method (WLS). We applied the dynamic approach to calculate the cashholdings. Inferences from our study indicate that budget support for farmers and sales value perfarm are the main sources and determinants of cash holdings in farms in New Member State of theEU. It should be underlined that the influence of budget support on cash holdings in Polish farmswas weaker than in other surveyed countries. Moreover, it was found that the level of indebtednesswas also an important factor that impacted cash holdings. On Polish farms, the impact of the debtlevel on cash holdings was negative, and in other countries – positive.The added value of work is identifying factors that affect cash holdings changes, so it is a dynamicapproach to cash holdings.