Proceedings

from

IX. International Conference on

Applied Business Research

ICABR 2014

October 6 – October 10, 2014

In Talca, Chile

www.icabr.com

Organised by:

Mendel University in Brno - Czech Republic

Universidad Catolica del Maule - Chile

Slovak University of Agriculture in Nitra - Slovak Republic

and Kasetsart University - Thailand

Publisher: Mendel University in Brno, Zemedelska 1, 613 00 Brno, Czech Republic Title: Proceedings from IX International Conference on Applied Business Research

ICABR 2014

All papers published in this proceedings have been peer reviewed

ISBN 978-80-7509-223-6

Published 2015

CONTENTS: Alvarez Von Bennewitz Eduardo, Diaz Quinones Ximena, Bravo Hernandez Juan Pablo, Madariga Moaya Victor Manuel / “Vitrina Campesina”: Contribution of ICT to rural development in the Maule Region, Chile ......................................................................................................... 7 Bajusova Zuzana, Zentkova Iveta, Findura Pavol / The area of oilseed rape needed in cultivation conditions of Slovak republic by the variable percentage of FAME in diesel ............. 14 Becvarova Vera, Zdrahal Ivo / Agriculture production of member states in the context of development of the EU common market ................................................................................... 25 Bittner Patrik, Pomazalova Nataša / Assessment of the satisfactory level of education in the individual municipalities ............................................................................................................ 31 Blazkova Ivana / The effect of the enterprises’ size structure development on the food industry performance – example of the Czech beverages sector ........................................................... 37 Borja Oscar Rodrigo Pessoa, Caldas Ricardo Wahrendorf / Risk Society, Environmental Hazardous and Social Capital .................................................................................................. 45 Braha Kushtrim, Qineti Artan, Rajcaniova Miroslava / Evidence of the food security risk in the case of Kosovo ......................................................................................................................... 54 Caputa Wieslawa, Skorecova Emilia / Customer value estimation in the channels of value distribution on the example of brewing industry ................................................................ 64 Cenek Jiri, Horak Miroslav / Czech citizens in Zambia: Preliminary research on the process of adaptation ................................................................................................................................ 70 Ciaian Pavel, Nurmetov Kudrat, Pokrivcak Jan, Pulatov Alim / Water use and sustainability of agriculture in Uzbekistan ...................................................................................................... 83 Corejova Andrea, Jarosova Jana / Database as an Object of Intellectual Property: Company and University Perspective ..................................................................................................... 104 Corejova Tatiana, Rostasova Maria / Regional Development, Innovation and Creativity ..... 114 Cupak Andrej, Pokrivcak Jan, Rizov Marian, Alexandri Cecilia, Luca Lucian / Food Demand in Romania: Estimating an Almost Ideal Demand System ....................................................... 128 Czegledi Csilla, Juhasz Timea /Entrants’ success factors on labour market from the aspect of employers .............................................................................................................................. 145 Darkwah Antwi Samuel, Minařík Bohumil, Verter Nahanga / Human Development in the ECOWAS Member States in the Period from 1994-2012 ....................................................... 153 Dobak Dusan, Serences Roman, Svoradova Lucia, Holubek Ivan / Wheat production in the Slovak republic with relevance to production technologies, external environment factors and economic conditions ............................................................................................................... 161 Dufek Jaroslav, Somerlikova Kristina, Sapakova Eva / The education development of population and its effect on the unemployment level in the EU ............................................... 175 Dvorakova Sarka, Palat Milan / Cooperation as a competitive advantage: Public private partnership in R&D ................................................................................................................. 186 Fajkus Martin / IT-supported teaching of Microeconomics ..................................................... 195 Ferenczi Vanova Alexandra, Hornyak Greganova Radomira, Varyova Ivana, Kosovska Iveta / Analysis of motivation factors of students in a selected subject at the Faculty of Economics and Management, Slovak University of Agriculture in Nitra .................................................... 202 Fortini J., Lopez J.L., Villa A., Caldazilla J. /Social Capital as a Measure of Performance for regional Development Projects ............................................................................................... 212 Gurcik Lubomir, Porhajas Viktor, Gurcikova Katarina / Indebtedness and prosperity determinants of agricultural companies in Slovakia ................................................................ 231

Hallova Marcela, Hennyeyova Klara / Solving the Economic Models by Using the Tools of Excel and VBA Language ................................................................................................................. 243 Hamza Pavel, Schneider Jiri / Drinking Water in the Amathole District, Republic of South Africa ............................................................................................................................................... 249 Heczkova Marketa / Multicriterial macroeconomic evaluation of Chinese and Japanese economic levels in connection to resolving their territorial dispute .......................................... 259 Holubek Ivan, Serences Roman / Production, quality and cost ratio of meadow´s hay production ............................................................................................................................................... 272 Horska Elena, Mehl Horst, Bercik Jakub / Review of Classical and Neuroscience Insights on Visual Merchandising Elements and Store Atmosphere ......................................................... 284 Hrabalek Martin, Pavlik Ivo / Serious infectious diseases of humans and animals in Nicaragua ............................................................................................................................................... 293 Hrabalek Martin, Sasinkova Iva / European Union and Latin America: A European Perspective ............................................................................................................................................... 302 Hubelova Dana, Machalkova Katerina /Selected characteristics of personal capital as a determinant of human capital .................................................................................................. 309 Hurnakova Jaroslava, Bartova Lubica, Fandel Peter / Investment Support and Farm Performance in the Slovak Republic ....................................................................................... 316 Chalupova Martina, Prokop Martin / “Regional Labels In Vysocina Region – Do Consumers See Differences?” .................................................................................................................. 327 Chuaybamrung Lanlalit, Leeamornsiri Nantawut, Sudharatna Yuraporn / The effect of learning organization on organizational performance: a case study of Toyota Motor Thailand Co., Ltd. ......................................................................................................................................... 338 Jadczakova Veronika, Cermakova Denisa / Analysis of Tourism in Selected Latin America Countries ................................................................................................................................ 354 Janalova Karolina, Schneider Jiri, Immerzeel H. M. Willem / Economic, Social and Ecological Strengthening of the District of Ccapi, Cusco Region, Peru .................................................... 362 Kajanova Jana / Performance Analysis in SMEs through the Usage of Accounting Information Systems ................................................................................................................................. 372 Kapsdorferova Zuzana, Filo Michal, Kadlecikova Maria / The Enablers and Drivers for Sustainable Rural Development and Income Diversification in New European Union Countries ............................................................................................................................................... 381 Kasparova Katerina, Svoboda Roman / Private Universities and Education of Their Graduates for Companies in the CR ........................................................................................................ 389 Kasprikova Nikola, Klufa Jindrich / On association of Internet usage in country and learning outcomes test scores ............................................................................................................. 396 Kazmierczyk Jerzy / How do banks really recruit job candidates? “The Sieve Model” in the context of recruitment and dismissal strategies in banks in Poland A new tool to measure it - the Integrated Sieve Model Index ................................................................................................. 404 Kimbara Tatsuo, Murakami Kazuma, Tapachai Nirundon / Environmental Management Transfer and Environmental Performance by Japanese Firms in Thailand ............................. 415 Klimsza Lucjan, Lokaj Ales / The Global Culture and Economical Values: The Corporation Responsibility in the Fragmentary Global Culture ................................................................... 426 Konecny Ondrej / Factors of Development of Agriculture on the Farm Level: Case study from the Czech Republic ................................................................................................................ 436 Kongthong Lalita, Sudharatna Yuraporn, Apinuyopas Preeyanuch / Marketing Factors Affecting Fresh Coffee Buying Decision .................................................................................. 444

Konyova Veronika, Bartova Lubica / Regional Economy Specialisation and Industry Concentration in the Slovak Republic ..................................................................................... 459 Kopeckova Martina / PMI versus IPMA: use of standards in the business practice .............. 468 Kosiciarova Ingrida, Nagyova Ludmila / Private label: the chance how to increase the consumer´s interest in a proper retail chain131F .................................................................... 482 Kozakova Jana / Organic Farming in Slovakia: Twenty Years of Progress and Development ............................................................................................................................................... 498 Krajcirova Renata, Ferenczi-Vaňová Alexandra / Merger control transactions and implementation of Merger Regulation and European Union Merger Directive into the Slovak legal and tax legislation ................................................................................................................... 509 Kral Bohumil, Soljakova Libuse / Professional competence of controllers in the Czech Republic: Research Empirical Study ...................................................................................... 515 Kucera Milan, Lateckova Anna / Management information systems in the process of globalization ........................................................................................................................... 531 Labra Lillo Romilio, Alvarez Isabel, Rock Antonio Juan / Identifying the keys of growth in natural resource-driven countries in the knowledge economy ................................................ 538 Lajdova Zuzana, Bielik Peter, Turcekova Natalia /NewEvidence of Price Transmission: The Case of Edam Cheese ........................................................................................................... 559 Lancaric Drahoslav, Kozakova Jana, Toth Marian, Savov Radovan / Comparison of Production factors in Organic and Conventional Farming in Slovakia ..................................... 569 Lateckova Anna, Stuchly Peter, Galisova Veronika / Improving process management by identifying excessive costs ..................................................................................................... 582 Lazikova Jarmila, Bartova Lubica, Bandlerova Anna /Agricultural Marketing Cooperatives in the Slovak Republic. A case study ......................................................................................... 588 Lee Veronica / An Empirical Analysis on Users’ Usage Intention of Enterprise Smart Application Influencing Users’ Job Performance ....................................................................................... 600 Lopez J.L., Villa A., Caldazilla J. / Framework for Food Security Analysis at national Level 609 Lorencova Helena, Slezackova Tereza, Schneider Jiri / Profile of visitors to the Moravian Karst PLA as a basis for solving visitors’ impacts on nature protection ............................................ 621 Machal Pavel / Professional project management as a prerequisite for effective management of regional projects ..................................................................................................................... 631 Malatinec Tomas, Marisova Eleonora, Fandel Peter /State Administration Efficiency in the Field of Trade Licensing – case of Slovakia ............................................................................ 635 Matusinska Katerina, Klepek Martin / The Product Policy Perception by the Specific Segment “Singles” in the Czech Republic .............................................................................................. 654 Matysik-Pejas Renata, Krasnodebski Andrzej, Satola Lukasz / Regional diversification of innovation activity of food industry in Poland .......................................................................... 663 Melo Daniel, Moravcikova Kamila / Interconnections of Regional Disparities between Innovation and Agricultural Productivity and Development within Slovak Regions .................. 674 Mishra Kumar Ashok, Tapachai Nirundon, Punpugdee Nuttapon / Business Start-up Motivation of Indian Entrepreneurs in Bangkok, Thailand........................................................ 684 Miskolci Simona / Perceived Embeddedness by Shoppers at Farmers’ Markets in the Czech Republic ................................................................................................................................. 692 Moravcikova Danka, Adamickova Izabela / Innovation as a key factor in sustainable rural and agricultural development168F ......................................................................................... 701 Mravcova Anna / The issue of global citizenship and the ways of its implementation into the educational process at the universities in the preparation of future economists ...................... 718

Nambuge Dimuth, Bielik Peter / Driving growth and employment through business clusters- in the case of Slovakia ............................................................................................................... 730 Nurmetov Kudrat, Pokrivcak Jan, Ciaian Pavel, Pulatov Alim / Rural reforms and agricultural productivity growth in Uzbekistan183F ................................................................................... 741 Palat Milan / Modelling of natural water retention using stepwise regression in the catchment basin of a river ........................................................................................................................ 763 Palat Milan / Turkey’s integration prospects into European structures and Turkish immigration ............................................................................................................................................... 769 Palkechova Lucia, Svoradova Lucia, Viragh Roderik / Analysis of Vacation Behaviour in Rural Tourism and Agrotourism in the Slovak Republic Conditions .................................................. 782 Palkovic Jozef, Ulicna Martina, Sojkova Zlata / Efficiency of agriculture in European FADN regions ................................................................................................................................... 793 Papcunova Viera, Hornyak-Greganova Radomira, Orszaghova Dana / Evaluating of the financial management of the municipalities via parameters of data matrix in the Slovak Republic conditions ............................................................................................................................... 803 Pavlakova Stanislava, Zentkova Iveta / Competitiveness of Pig farming on the Level of primary Production of Slaughter Animals in the Slovak Republic ........................................................ 815 Pavlik Ivo, Niebauerova Daniela / Bovine tuberculosis in cattle in Central American continental countries during the years 2003-2012 .................................................................................... 825 Peinador Dan, Alberola Ramon Jose, Lopez Luis Jose, Mariottoni Alberto Carlos / TURSALUD: Health & Tourism in a BOX ............................................................................... 832 Piorkowska Katatrzyna, Stanczyk Sylwia / Methodology of researching organizational routines206F .......................................................................................................................... 841 Piterkova Andrea, Toth Marian, Serences Peter / The Impact of Non-financial factors on Prosperity of Slovak agriculture sector .................................................................................... 851 Pomazalova Natasa, Horackova Eva / Utilisation of social innovations in small and medium enterprises ............................................................................................................................. 861 Popelka Vladimir, Neomani Juraj / Implementation of cloud computing into the dairy enterprise in Slovakia .............................................................................................................................. 868 Presova Radmila / Adams' theory on equity between costs and benefits .............................. 878 Rasovska Adriana / The Reflexion of the Common Agricultural Policy’s reform on Agriculture in Slovakia ................................................................................................................................. 886 Rehor Petr / Internal managerial communication process in small and medium sized businesses ............................................................................................................................................... 903 Repisky Jozef, Letko Anton / Evaluation investment of electricity generation and heat with exploitation biomass ............................................................................................................... 909 Richterova Lucia, Hoskova Elena, Zentkova Iveta / Trends in development of youth unemployment in the Slovak Republic .................................................................................... 919 Rybansky Lubomir, Lancaric Drahoslav, Maros MIlan / Selected Factors Influencing Enterprise Planning Horizonts:Evidence from Slovakia. ......................................................... 928 Sajbidorova Maria, Lusnakova Zuzana, Hrda Veronika / Application of time management key principles at managers´ work .................................................................................................. 937 Satola Lukasz, Matysik-Pejas Renata, Krasnodebski Andrzej / The diversification of municipal infrastructure in Poland........................................................................................... 948 Sapakova Eva, Svobodova Zuzana, Sefrova Hana, Hasikova Lea / Infestation by Aceria tulipae (Keifer) (Acari:Eriophyidae),Economy and Marketing of Growing Garlic in Regional Agricultural Areas ................................................................................................................... 958

Savov Radovan, Toth Marian, Lancaric Drahoslav, Pokrivcak Jan / Selected Economic and Managerial Aspects of Beer Production in Slovakia with Focus on Microbreweries ................ 969 Seben Zatkova Timea / The new VET Professionals - Entrepreneurship Trainers for VET ... 977 Serences Peter, Toth Marian, Rabek Tomas, Cierna Zuzana, Rasovska Adriana / Subsidies and profitability of Slovak farms236F ...................................................................................... 989 Severova Lucie, Svoboda Roman / Competition of Companies in International Tourism Sector in the Czech Republic ............................................................................................................ 998 Schneider Jiri, Vyskot Ilja, Lorencova Helena, Lampartova Ivana / A background of forests functions as a part of ecosystem services systems .............................................................. 1015 Skoludova Jana / The enterprise social network: a psycho-social approach to human resource management? ...................................................................................................................... 1024 Smolik Josef / Global terrorism: its causes and consequences ........................................... 1033 Sobrinho de Morais Neto Arnaldo / Brazilian consumer protection in the international ecommerce and gaps in the legal system ............................................................................. 1044 Sojkova Zlata, Citaryova Eva, Palkovic Jozef / Competitiveness of regions based on comparative advantage ........................................................................................................ 1055 Somerlikova Kristina, Vykoukalova Zdenka, Kesidisova Alexandra / Analysis of Taiwanese population and its age structure ........................................................................................... 1064 Sredl Karel, Mikhalkina Ekaterina, Kopecka Lenka / Lifelong Learning and Its Impact on Job Position of Workers in Firms ................................................................................................ 1073 Svatosova Veronika / The Proposal of Process Model for Strategic Management in Electronic Commerce ........................................................................................................................... 1079 Svoboda Roman, Severova Lucie /Education of Qualified Workers for Companies in the Czech Economy ................................................................................................................... 1090 Svobodova Zuzana / Business Valuation of Telefónica Czech Republic, a.s. ..................... 1096 Tamas Vojtech / The changing position of EU canola producers on the global market ........ 1105 Taterova Eva, Valka Ivo / New Cleavages in post-apartheid South Africa .......................... 1110 Tvrdon Michal / Beveridge Curve as an Indicator of Labour Market Performance ............... 1119 Ubreziova Iveta, Hotzinger Franz Felix / Internationalization of small and medium sized enterprises in selected regions of Germany ......................................................................... 1127 Vargova Ivana, Purma Marcel, Pokrivcak Jan / The development of macronutrient consumption and the impact of macroeconomics indicators on their consumption in years 2004 - 2011 in the Slovak republic .................................................................................................. 1140 Verter Nahanga, Horak Miroslav, Darkwah Antwi Samuel / UN Millennium Development Goals and Social Development in Nigeria ....................................................................................... 1151 Wongavanakit Ploy, Sookumarn Suparerk, Apibunyopas Preeyanuch / Business Model of private tutoring for Armed Forces Academics Preparatory School (AFAPS) entrance .......... 1163 Zahorec Jan, Hallova Marcela / Innovations of Professional Training in the Field of Informatics of Non-informatics Study Profiling ......................................................................................... 1179 Zdrahal Ivo, Dudova Barbora, Becvarova Vera / Development of the Czech dairy industry after entrance into the European Union ........................................................................................ 1190 Zeithamer R. Tomas /Methodology of Theoretical Physics in Economics: The Principle of Correspondence between Economic Variables and Kinematic Variables of Nonrelativistic Mechanics ............................................................................................................................ 1190 Zentkova Iveta, Hoskova Elena / Income Inequality in the Slovak Republic ....................... 1207 Zivelova Iva / Investments into education in the Czech Republic......................................... 1215

851

The Impact of Non-financial factors on Prosperity of Slovak agriculture sector

Andrea PITERKOVÁ209F

1

Marián TÓTH1

Peter SERENČÉŠ1

Abstract Slovak agriculture sector passed during the last decade a period of substantial changes

and dynamics, caused by the Common Agriculture Policy assessment in 2004, new political regulations and quotas, unstable market and climate conditions, or crisis influence in 2009. These events have undoubtedly influenced the overall financial and economic situation of Slovak agriculture producers, as well as their ability to lead prosperous businesses. Generally, the Slovak agriculture tends to be low profitable, unstable and risky sector. It can be subjected to several reasons and factors affecting the production, income, and welfare.

In the previous studies several authors focused on identification of financial ratios that decide about successful performance of businesses, and determined their critical values. Moreover, there were constructed classification and prediction models of financial distress. The financial factors´ impact on the financial distress in the case of Slovak agriculture companies has been analysed in the scientific papers of Chrastinová (1998), Gurčík (2002), Bieliková et al. (2014), and others.

However, only a few authors paid attention to the non-financial factors. Therefore, the sufficient evidence of their impact on agriculture companies´ prosperity is missing. There are factors in the agriculture that may not be influenced by the producers themselves, such as climate conditions and weather. However, we assume that number of decisions made by farmers can lead to more effective production, profitability and risk elimination. In the previous studies was investigated mainly the impact of legal form, organisational and size structure on the performance of farms (Lančárič et al., 2013; Ciaian et al., 2009; Kopta, 2013). Generally, the non-financial factors impact on different businesses was emphasised in the works of Cumby and Condor (2001), Khizer et al. (2011) and others.

We decided to extend the previous studies and investigate, what are the key factors of prosperity, except of the financial results and ratios. The analysis will be applied on the 842 farms operating during each year of the period 2009 – 2012 in all regions of Slovakia. We will create sample of prosperous and unprosperous companies and analyses them according to their legal form, production orientation, size of utilized agriculture area UAA (LPIS) and number of owners and employees. With the use the linear discriminant analysis and decision trees we will try to find the non-financial factors, which determine the successful performance of farms in agriculture primary sector. The main objective of the paper is to examine and evaluate the non-financial factors´ impact on prosperity of Slovak agriculture companies.

Keywords: Agriculture sector, prosperity, legal form, production orientation, utilized agriculture area,

employees, owners, multivariate statistical methods.

1 Department of Finance, Faculty of Economics and Management, Slovak University of Agriculture

in Nitra, Tr. A. Hlinku 2, 949 76 Nitra, email: andreapiterkova@gmail.com, marian.toth@uniag.sk, peter.serences@uniag.sk

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Introduction Prosperous, successful and productionally strong agriculture sector has been, generally,

a long term objective of Slovak agriculture producers. However, the average economic results of businesses in agriculture sector show very high level of volatility of financial indicators such as ROE, 4.39% in 2007, 0.4% in 2009, 2.84% in 2011 or ROA, 1.76% in 2007, 0.04% in 2009, 1.11% in 2011, (Serenčéš et al. 2014). This low profitable, unstable and risky development of Slovak agriculture can be subjected to strong variability due to several reasons and factors affecting the production, income, and welfare. It is important to pay attention to identification of these factors as well as their elimination.

The division of farms into prosperous and unprosperous can be determined using several different criteria. In the previous analyses of Chrastinová (1998) or Gurčík (2002), were examined impacts of financial factors on prosperity of Slovak farms. CH – indexes criteria of prosperous companies were constrained by more than 5 % ROS and Current ratio in the range between 1.5 and 5. The unprosperous remained those achieving negative ROS and the value of Current ratio out of the range. G-index determined different criteria of prosperity, namely ROE more than 8 % and positive profit in last 3 years. Otherwise, the company with loss during 3 consecutive years is unprosperous.

We assume that not only financial factors play a key role in the prosperity issue. Therefore, we will continue in the works of Lančárič et al. (2013), Ciaian et al. (2009), Krechovská and Taušl-Prochádzková (2014) and extend study by finding the non-financial factors´ impact on the prosperity of Slovak farms.

Data and Methods The following part provides overview of data and methods applied, in order to meet the

objective of the paper and find the non-financial factors, which determine the successful performance of Slovak agriculture firms.

Data

The data used for the analysis was obtained from the Ministry of Agriculture and Rural Development of the Slovak Republic, processed in the internal dataset of the Slovak Agricultural University in Nitra. The dataset consists of financial statements of all agricultural farms operating in the Slovak Republic during the period 1993 - 2012. However, for the analysis were selected only information from balance sheets and profit and loss statement of farms operating during each year of the period 2009 – 2012, with legal form of cooperatives or capital companies. After outlier detection and classification criteria establishment, 240 farms created a sample for our analysis.

Methods

The fundamental tool for examination the financial prosperity of enterprise, regarding different factors, represents the discriminant analysis. Discriminant analysis methods are divided into one-dimensional model, that predicts financial distress of company by using a single indicator (Beaver model, Zmijevsky model, and others) and multivariate discriminant analysis using a set of several weighted indicators (Bonity index, Altman Z – score, Fulmer model, Taffler model and others).

For constructing the classification model, using the discriminant analysis, is required to define relevant criteria of prosperous and unprosperous company. The unprosperous farms are considered to be those, generating loss (negative ROE) in each of years 2009 – 2012. Oppositely, the prosperous farms were considered to be all generating profit during observed period. Because very large sample of prosperous farms remained for the analysis we added the prosperous criterion with ROE greater than 5 %. We did not use the balance sample approach, to select the same number of prosperous and unprosperous farms, in order not to influence and deteriorate the results and include all firms meeting our conditions of prosperity. The particular samples consisted of 82 unprosperous and 158 prosperous farms.

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The model was developed using the stepwise discriminant analysis. According to Stankovičová and Vojtková (2007), in the stepwise approach the examined variables are evaluated separately, and those with the best discriminant ability are chosen to become variables in the final equation. The results of stepwise selection process are determined by considering the statistically significant correlation between ratios. The condition for excluding some variable from analysis depends on the discriminant ability, described by the partial determination coefficient. To construct the equations the descriptives such as Univariate Anova’s, Fisher´s, Box’s M and unstandardized function coefficients are requested. More detailed characteristic of the method can be found in Stankovičová and Vojtková (2007), or Kráľ et al. (2009).

To confirm the factors, which classify the businesses with respect to their prosperity, we decided to use the second method – decision tree analysis. Data mining technique decision trees create a model of hierarchical decision rules. It classifies cases into groups or predicts values of a dependent (target) variable based on values of independent (predictor) variables. The procedure provides validation tools for exploratory classification analysis. Determined decision rules ultimately allow us to classify the agriculture companies into prosperous and unprosperous. Theory of decision trees distinguishes several algorithms for creating the trees, however, in the paper the construction of decision tree is done interactively. The variables that were selected firstly, as the result of discriminant analysis, were later used as the inputs of our decision tree. The concrete aspects of the interactive tree creation, such as determination of criteria for classification are described in the next section.

Tab. 1 Input variables

Variable Calculation Variable Calculation

Y

Prosperity

X5 Crop production revenues

x100 Total revenues

X1

Legal form

X6 Animal production revenues

x100 Total revenues

X2

UAA size (LPIS)

X7 Other revenues

x100 Total revenues

X3 Employees

Land size (ha)

X8 Crop production revenues

Land size (ha)

X4

Owners

Land size (ha)

X9

Animal production revenues

Land size (ha)

Source: Authors The farms in prosperous sample were signed by number 1 and unprosperous by number 0. All the input variables are the quantitative character except for variable X1 Legal form. For this reason the legal form Cooperatives was signed by number 0 and capital companies by number 1. All the calculations and methods were applied using the Microsoft Excel and statistical software IBM SPSS Statistics 20. Results and Discussion

The following part provides the overview of results with the objective to identify prosperity classification criteria of Slovak farms.

Discriminant analysis

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One of the fundamental assumptions of discriminant analysis is the homogeneity of intragroup covariance matrixes within individual groups. The results of our Box´s M test Sig. are 0.00, which means we cannot consider the covariance matrixes to be equal. For this reason the quadratic discriminant analysis should be used, however, it is more sensitive to the failure of meeting the assumption of multivariate normality. Because, the analysed data do not have the character of a normal distribution, and we assume that the linear discriminant analysis is resistant to not meeting the normality distribution condition. When the sufficient number of observations is used, and the differences between covariance matrixes are not so big, we decided to apply the linear discriminant analysis. An eigenvalue in Fig. 1 indicates the proportion of variance explained, between-groups sums of squares divided by within-groups sums of squares. A large eigenvalue is associated with a strong function. The canonical relation is a correlation between the discriminant scores and the levels of the dependent variable. A high correlation indicates a function that discriminates well. In our case the results are more than satisfying with the value of Canonical correlation 0.902 which is extremely high, very close to 1. Wilks’ Lambda is the ratio of within-groups sums of squares to the total sums of squares. This is the proportion of the total variance in the discriminant scores not explained by differences among groups that is in our analysis only 0,187.

Pic. 1 Eigenvalues and Wilks´ Lambda results Source: Authors, Output of SPSS

The 9 input variables were in the discriminant analysis independently evaluated using the stepwise selection, with the result that only 4 variables to have significant impact in prosperity classification: Legal form, Animal production (%), Employees per ha and Owners per ha. The rest of variables are not considered to have significant discriminant ability. The Standardized Canonical Discriminant Function Coefficients evaluates the impact of each factor, as well as its ability to discriminate farms into prosperous and unprosperous group. The Unstandardized Canonical Discriminant Function Coefficients indicate the unstandardized scores concerning the independent variables. It is the list of coefficients of the unstandardized discriminant equation. Each subject’s discriminant score would be computed by entering variable values for each of the variables in the equation. The critical values for discriminant score from the final equation are stated by the results of Group Centroids, which give us the boundaries of scores for each farm, in order to decide about its classification into particular group.

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Tab. 2 Standardized and Unstandardized Canonical Discriminant Function Coefficients

Standardized Canonical Discriminant Function

Coefficients

Unstandardized Canonical Discriminant Function

Coefficients Function 1 Function 1 Legal form -0,693 -2,455 Animal production % 0,578 2,777 Employees per ha 0,137 2,395 Owners per ha 0,465 6,400 (Constant) - 0,120

Source: Authors, Output of SPSS

Y 0,120 2,455X 1 2,395X 3 6,400 X 4 2,777 X 6

Y ≥ 2.881 unprosperous

Y (2.881,-1.495) average/indifferent

Y ≤ -1.495 prosperous (1)

The equation (1) is constructed in the way that higher score than 2,881 reflects the unprosperous farm, the range between from 2,881 to -1,495 is the indifferent zone, and lower score than -1,495 classifies the farm as prosperous.

The variable X1 - Legal form is the only one entering the equation with mines sign, it means with the indirect impact. According to Standardised canonical coefficient is it the variable with the best discriminant ability. Previously, we assigned number 1 to Capital companies and 0 to Cooperatives. In this case the interpretation means to have legal form of Capital company decreases the score from equation and so decreases the possibility to be classified as unprosperous. Therefore, in the decision making of farmers in primary sector the legal form of Joint-Stock company, or Limited Liability company should be preferable.

The variable X3 – Employees per ha reached the lowest direct impact from the point of classification. The higher the ratio, the higher the score from equation what leads to the classification of farm into unprosperous group. It can be related to the efficiency of businesses and theory of economy of scale, when the lower portion of employees to the size of land could represent more efficiently used human capital in the company.

The variable X4 – Owners per ha achieved the highest unstandardized coefficient in the classification equation. The high portion of ratio Number of owners/Land size (ha) leads to the identification of farm as unprosperous. This result is corresponding with the fact that the agricultural firms with more owners are usually cooperatives.

The variable X6 – (Animal production revenues / Total revenues)*100 refers to the percentage of revenues from animal production to the total revenues of farm. The results of discriminant analysis show, the higher the share of animal production in the farm, the higher score from equation, it means higher possibility to be classify as unprosperous. The direct impact of variable in equation resulted from the fact that the companies oriented on animal production have more difficulties to become profitable than the crop oriented farm.

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Decision tree To verify the results and extend our analysis, the data mining method decision tree was

used. The dependant variable in our case, the prosperity, was evaluated by independent variables, the results of discriminant analysis – Legal form, (Animal production revenues / Total revenues)*100, Owners per ha and Employees per ha. To build the classification rules, the CHAID growing method was applied. Parameters determining the structure of the tree were chosen according to the nature of the dataset, in order to minimize the complexity and misclassification of the tree. Constructed tree is composed of 9 nodes, using the entropy as dividing criterion. The first classification variable on the highest level of the decision tree is the percentage share of animal production, (Animal production revenues / Total revenues)*100. This ratio divides the analysed observations into 4 intervals.

The Node 1 captured 96 cases (40 % of the total number of cases) %, which are all considered to be prosperous. If the share of animal production of the farm is less than or equal to 14.8 %, there is very high likelihood to be the prosperous farm.

In the interval (14.8 %, 43.7 %) of animal production revenues are included 37 prosperous companies, but also 11 unprosperous. Examining further split of this node helps us to understand the target variable. In this case the Legal form as the classification criteria was selected, and specified the 29 prosperous farms with legal form of capital companies and 11 unprosperous and 8 prosperous with the legal form of cooperatives.

The next interval of animal production revenues (43.7 %, 78.9 %) includes the majority of unprosperous companies 65.3 % of total unprosperous sample and 34.7 % of prosperous sample. The tree tries to remove the misclassification by using other criteria selected from the variables, Owners per ha. Based on this criteria, all the farms with less <= 0.012 Owners per ha are prosperous, otherwise are classified as unprosperous.

If we consider percentage share of animal production >= 78.9 %, only unprosperous companies are allocated in the node.

Simply concluded, as the % share of animal production revenues increases, the farms are more likely to be unprosperous. We assume that the farms with low % of animal production revenues are oppositely crop oriented farms. Deduction leads us to assumption that the higher % share of crop production revenues the farm has, the higher probability to be prosperous. Other two variables removing the misclassification are Legal form and Owners per ha. Generally, the farm with legal form of capital company, or farm with less owners per ha tends to be prosperous.

The complex evaluation of constructed models can be found in the table 3. The classification results are a simple summary of number and percent of subjects classified correctly and incorrectly. Type I error represents the percentage of the unprosperous companies that have been wrongly classified as prosperous.

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Percentage prosperous Type II error represents companies, which have been classified as unprosperous.

Pic. 2 Decision tree

Source: Authors, Output of SPSS

Based on the results, it is obvious that both constructed models are very accurate.

However, it is important to realise that this result is overvalued, because the basic disadvantage of these methods is that the model is tested on the same dataset from which was constructed (Kráľ et al., 2009).

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Tab. 3 Classification results

Method Number Percentage Correctly classified Discriminant analysis Type Error I 3 3.7 % 96.3 %

Type Error II 5 3.2 % 96.3 % Decision tree Type Error I 0 0 % 100 %

Type Error II 8 5.1 % 94.9 % Source: Authors, Output of SPSS

Conclusions The identification of factors that would enable to provide necessary steps to improve the

economic performance of the company, belong to the crucial point for each company management. Moreover, the importance of distress identification increases in such a low profitable sector as agriculture is. The number of studies emphasised the certain financial factors´ impact of profitability and riskiness of agriculture firms, however the sufficient evidence of non-financial factors is missing. The structure of farms in Slovakia is different compared to EU average. The majority of UAA is cultivated by large farms with over 500 hectares. This results from the historical development of agriculture in former Czechoslovakia before 1989. In EU the UAA per farm is much lower. Therefore also measures implemented through CAP result different in Slovakia.

The first part of the paper focused on identification of prosperity factors of agriculture companies. With the use of linear discriminant analysis were from 9 input variables selected by the stepwise method 4 variables having significant impact on prosperity. We conclude that the profitability of Slovak farms can be anticipated by non financial variables. These variables have the highest discriminant ability for classification of farms into prosperous and unprosperous: legal form, share of animal production (%), employees per ha and owners per ha.

In the next part, the decision tree analysis was used to verify and accurate our first results. Three of four variables were defined as decision criteria of prosperity: legal form, share of animal production (%). Only variable employees per ha has not been included. The results showed that as the percentage of animal production revenues was increasing, the probability of unprosperous classification increased as well. To more specify the prosperous group, the variable Legal form was selected. In this case the legal form of capital company refers to higher probability to be prosperous. To more specify the unprosperous group, the variable Owners per ha was selected. Higher share of owners per ha, led to higher likelihood to be unprosperous.

Simply explained, classification of farm into the group of not prosperous farms in Slovakia is the case if the farm has the legal form of cooperative, is oriented on animal production, has high number of employees per ha and owners per ha. These results are in line with the general opinion that cooperatives are ineffectively managed, because of their higher number of owners and incorrect use of excessive human capital. The results show that the increase of animal production share (%) leads to increased possibility for company to be identified as unprosperous is also corresponding the nowadays situation. It supports the recent development, when the animal producers rather change their business orientation into crop production, because they are not able to cover the cost by the revenues. The other reason might be high level of subsidies depending on the hectares of farms, which is generally higher in the case of crop producers. From this point of view is surprising that the variable utilized agriculture area size LPIS have not been considered to have significant impact and haven´t been selected in the final equation.

With respect to the legal form we can expect, that the number of cooperatives will decrease in future in favour of the more profitable cooperatives. This is the fact since 1989

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and will continue. The animal production in Slovakia is decreasing because of the low profitability and therefore policy measures in the future should be more focused on supporting animal production. The market revenues from animal production do not cover the cost and therefore it is not profitable. The negative aspect in Slovak agriculture is the sharply decreasing number of workforce in agriculture. This is due to economy of scale and because of the farm structure with large farms in Slovakia. The less employees, the lower the cost and the higher the profit. But supporting rural development means also that public funds in form of CAP subsidies should not be concentrated in a small group farm owners which is the case in Slovakia. Therefore, further public support should also be linked to the ability of farms to generate rural development through higher employability.

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Title: Proceedings ICABR 2014 Name of authors: Composite authors Publisher: Mendel University in Brno, Czech Republic Published edition: First edition, 2015 Number of pages: 1222 Format: PDF Quantity: 150 pcs