Journal of Agriculture and Food Research (Jun 2024)
Financial ratios, credit risk and business strategy: Application to the PDO Parma ham sector in single production and non-single production firms
Abstract
Food geographical indications (GIs) protected by the European Union collective protection mark (CPM) have been the subject of a growing interest. Several research has analyzed the economic, social and environmental role of CPM, which require Production Specifications (PS), imposing constraints to food production, with side effects on performance and corporate strategy.The research has the aim to analyze, through financial ratios (FRs), the performance of firms in the PDO Parma ham (PrH_PDO) sector; PrH_PDO is the third geographical indication (GI) in Italy among those protected by CPM of the European Union (PDO, PGI, TSG). The research considers, for firms associated with the PrH_PDO Consortium, a series of 10-year annual report, 739 observations, divided into two groups, first of 103 of 11 firms that sell only PrH_PDO and second of 636 of 78 firms that sell not only PrH_PDO. This categorization allows us to highlight and compare the effects of adopting PS in terms of FRs, credit scoring and firms’ strategy.Research highlights that PrH_PDO_Only firms perform slightly better, with less variable results. Research shows that the PS of Prosciutto di Parma PDO, determines reduction in turnover (T) and a longer duration of the INV_DAYS and, consequently, of the conversion cycle (CCC_DAYS). Research highlights that PrH_PDO_Only firms have a strategy based on higher margins (ROS) which compensates low T; research highlights that credit risk (EM-Score) is higher for PrH_PDO_Only firms.The research can be replicated in other GI sectors, where there are few studies that have compared firms that produce only GIs and firms that produce not only GIs. The research can be useful to operators in the sector, to financial intermediaries and to policy makers. Lines of applied action may include development of financial instruments to assist maturation period and establishment to assess creditworthiness, tailored to PrH_PDO firms’ characteristics.
