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The impact of the use of subsidies for agriculture on the performance of companies

The importance of agriculture is manifested in ensuring enough food and maintaining economic activity in rural areas. Beside of providing food, agriculture as a furnisher of industrial raw materials is an important contributor to the economic activity in many other sectors of economy. Agriculture also impacts global trade because it is tied to other sectors of the economy. Previous researches showed that countries with agricultural productivity growth have higher per capita incomes. For this reason, states subsidize the agricultural sector with different types of support. Subsidies to the agriculture and economy sector make up a large share of the total paid state subsidies in Croatia with a share of 40%. Therefore, this paper aims to investigate whether the use of subsidies improves the economic performance of companies in Croatia. In this paper we analyse subsidies paid from European Agricultural Fund for Rural Development (EAFRD), European Agricultural Guarantee Fund (EAGF), European Maritime and Fisheries Fund (EMFF) and national subsidies. The aim of this paper is to analyse the impact of the paid subsidies on the performance of companies that received subsidies in 2020 and 2021, given that data is available for that period. The analysis include companies that have received support of more than HRK 1 million (132, 723 EUR) and are registered as a limited liability company or a stock company, given that their financial statements are available in the Register of Annual Financial Statements. Performance of the company is observed through the analysis of financial indicators, then through the analysis of Pearson’s correlation between the received subsidies and the performance of the company, and through the sectoral analysis of the subsidies paid. The share of subsidies given to companies included in our sample is around 16 % of all subsidies given by state. Out of the total companies in the sample, most companies are dealing with agriculture, 69 % of them, about 17 % of companies are companies from the manufacture industry, 7 % are companies dealing with water supply and 7 % companies are from other sectors. Sectoral analysis of the subsidies paid showed that the largest share of subsidies paid out is to the companies from the agricultural sector, which was expected considering that most of the subsidies are related to agriculture. Analysis of Pearson’s correlation coefficient showed that there is a weak positive correlation between the received subsidies and companies’ total assets and total revenue, while there is no statistically significant correlation between the received subsidies and profitability ratios.

The impact of the use of subsidies for agriculture on the performance of companies

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