The determinants and impact of farm-household financial interactions: a case-study from Flanders, Belgium

This paper reports on an investigation of the determinants and consequences of farm-household financial interactions, the intermingling of business finances with household finances in Flanders, Belgium. This is a largely uninvestigated phenomenon in Europe, partly because of data scarcity, as the main farm-level economic database, the FADN, does not include financial information at the household level. We develop a proxy indicator for farm-household financial interactions, and investigate its determinants and its impact on future performance. Our results show that, on average, Flemish farm households employ a substantial amount of farm-household financial interactions. The results further suggest that it should be understood as a deliberate risk management strategy, as it is more used by risk averse farmers and by farmers with high financial risk. Nevertheless, employing farm-household financial interactions seems to negatively affect future farm financial performance. Yet, questions relating to its effect on long-term survival and adaptive capacity remain.