Impact of financial variables on the production efficiency of Pangasius farms in An Giang province, Vietnam

Abstract

This research provides the first analysis of the relationship between farm financial exposure and technical efficiency in the Pangasius farming in An Giang province, in the Mekong Delta of Vietnam. A nonparametric DEA approach has been applied to estimate technical and scale efficiency scores of 61 Pangasius farms in An Giang province in the year 2008. The mean technical efficiencies under assumption of constant returns to scale and variable returns to scale and scale efficiency were measured to be 0.595, 1.058 and 0.58 respectively. The decomposition of the technical efficiency measure shows that scale inefficiency is the primary cause of technical inefficiency in the the case of Pangasius farming as about 92% of the sample Pangasius farms exhibits increasing returns to scale (IRS). Then, estimated technical efficiency (TE) scores under assumption of variable returns to scale are used in a regression analysis to investigate the relationship between the efficiency measures and different farm characteristics, including financial considerations. Research results suggest that technical efficiency is influenced by investment level of farms as well as by farm operator's experience. The farms are invested more will be more efficient. The experience measured as the years of operator in farming Pangasius also suggests that the farmers having more experience may have better decisions in farm operating and more efficient in using inputs, thus, their farms are more efficient. Technical efficiency is positively influenced by the debt-to-asset ratio and also by the debt-to-equity ratio, while no statistically significant relationship is found between technical efficiency and the bank debt-to asset ratio. The other factors (age and education levels of the houshlod head) are found to have no effects on the technical efficiency in the sample farms.