Predicting financial distress in Iberian farms: unveiling the fragility of small-scale agriculture

Aim of study: Predict financial distress in agricultural firms, especially in small-scale agriculture, which dominates the agricultural sector. Area of study: Spain and Portugal. Material and methods: Analyzing 9,891 firms, six logistic regression models are estimated, adapted to different economic sizes. Models exhibit high predictive accuracy, aiding in forecasting farm financial health. Binary logistic regression identifies eight key financial variables related to liquidity, leverage, profitability, and activity, as effective predictors of distress. Main results: The conclusions expose the fragility of smaller firms through financial distress prediction models adapted to the agricultural sector and firms of different economic dimensions. Research highlights: The conclusions emphasize the significance of firm size in anticipating financial distress, guiding policymakers towards tailored interventions for different-sized agricultural firms.