Relationships between Technical Efficiency and Financial Management for Czech Republic Farms

This paper provides the first analysis of the relationship between farm financial structure and technical efficiency in Central and Eastern European farming during the transition to a market economy. First, technical efficiency scores for a sample of Czech farms are computed with data envelopment analysis, accounting for sampling variability by using the Simar and Wilson bootstrapping procedure. The confidence intervals show that corporate livestock farms are the most homogenous in terms of technical efficiency. Second, a Tobit model is applied for the investigation of factors, including financial considerations, which influence the variation in technical efficiency. The potential endogeneity of the financial variables in the explanation of efficiency is examined, following Smith and Blundell. The Amemiya estimator is used for those cases which are revealed as endogenous. The analysis indicates substantial differences in the way in which the different management structures are treated by lenders. De novo, individual farms are subject to stringent evaluation of their loan applications, which is not the case for the successors of the former collective and state farms. Copyright 2007 Blackwell Publishing Ltd.