On the relationship between financial and non-financial factors: a case study analysis of financial failure predictors of agribusiness firms in Australia
Purves, N, Niblock, SJ & Sloan, K 2015, 'On the relationship between financial and non-financial factors', Agricultural Finance Review, vol. 75, no. 2, pp. 282-300.
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Purpose – The purpose of this paper is to explore the relationship of non-financial and financial factors to firm survival, provide evidence of factors related to financial success and distress for prominent Australian agricultural firms, and improve the predictive capacity of financial failure models.
Design/methodology/approach – The paper utilizes mixed method exploratory case studies across four Australian agricultural firms (two successful and two failed) listed on the Australian Securities Exchange.
Findings – The authors found that the use of an Integrated Multi-Measured approach provided a higher classification rate for the failed group than those provided by an individual measure. We also discovered that non-financial factors associated with the agricultural organizations studied impacted their success or failure. These factors included managements’ involvement in organizational strategy and the composition of the board of directors. It was also apparent that management decision-making approaches may become frozen, or at best restricted, in the face of impending failure, dependent upon the stress level within the organization and the management skill base.
Practical implications – The cases studied indicated that non-financial factors of failure occurred prior to any financial predictors, intuitively indicating a relationship between non-financial and financial factors in Australian agricultural firms.
Originality/value – The identification of financial and non-financial factors and sound internal processes which distinguish successful and failing firms can be utilized for the development of an early warning predictor of organizational success or failure.