Estimating the efficiency effects of farm mergers : an ex-ante application of data envelopment analysis

Van der Merwe, Johannes Stephanus (2019-12)

Thesis (MCom)--Stellenbosch University, 2019.

Thesis

ENGLISH SUMMARY : The main aim of this thesis is to measure the expected effects of farm level resource pooling mergers on the technical efficiency of farm businesses. The non-parametric efficiency measurement approach of Data Envelopment Analysis (DEA) is used to measure the slack-based efficiency of diversified crop-livestock farms in the North West province of South Africa. Since the non-parametric nature of DEA requires no assumption about the sample distribution, the bootstrap procedure is used to estimate the actual sampling distribution. Tenure and livestock diversification are identified as variables that may influence the efficiency level of these farms. Regression analysis is used to determine the statistical significance and the extent of the correlation between each of these two factors and farm efficiency. Three independent merger cases are simulated that each involve pooling the production resources of two independent farm businesses. The merger analysis methodology allows the calculation of the potential efficiency gain or loss that a merger may bring about. It also enables us to distinguish between three effects that, when combined, produce the overall potential efficiency effect. The learning effect represents the effect that learning best practices from each other may have on the efficiency of a merged entity. The harmony effect represents the potential efficiency gain attainable through reallocating production processes to a division of another farm business that have a lower marginal cost associated with its production. The scale effect represents the potential efficiency advantages or dis-advantages that operating at a larger scale may bring to the table of a merged entity. The significance of this thesis lies in its ability to illustrate the adequacy of the merger analysis methodology to generate quantifiable estimates of the expected efficiency effects of farm level resource pooling mergers without the need to actually take place.

AFRIKAANSE OPSOMMING : Die hoof doelstelling van die navorsing is om die verwagte invloed van plaasvlak hulpbron samesmeltingsooreenkomste op die effektiwiteit van ‘n boerdery te bepaal. Die nieparametriese benadering tot effektiwiteitsbepaling, “Data Envelopment Analysis (DEA)” word gebruik om die effektiwiteit van gediversifiseerde saai- en vee boerderye in die Noord Wes provinsie van Suid Afrika te bepaal. Omrede DEA nie ‘n aanname vereis oor die steekproefverdeling van die data nie, word die skoenlusmetode gebruik om die werklike steekproefverdeling te benader. Die metode suiwer ook die effektiwiteitsyfers aan vir die inhirente opwaartse bevooroordeling wat in die effektiwiteitsyfers vervat is. Grondeienaarskap en inkomste diversifikasie is geidentifiseer as faktore wat ‘n uitwerking kan hê op die effektiwiteit van ‘n boerdery. Die invloed van beide die faktore op boerderyeffektiwiteit word bepaal deur regressie analiese. Drie onafhanklike gevallestudies word gebruik, om elkeen ‘n samesmelting voor te stel tussen twee boerdery eenhede. ‘n Samesmeltingsanalise word gebruik om die potensiële effektiwiteitsvoordele van elke geval te bepaal. Die metode tref onderskeid tussen drie verskillende bonne waaruit voordele kan spruit. Die leereffek verteenwoordig die effektiwiteitsvoordele wat daaruit spruit dat die twee boerderye van mekaar se praktyke leer om die beste praktyke te behou en van swak praktyke ontslae te raak. Die harmonie-effek verteenwoordig die effektiwiteitsvoordele wat spruit uit die hertoedeling van produksieprosesse na afdelings in die boerdery wat dit teen die laagste marginale koste kan handhaaf. Die skaaleffek verteenwoordig die effektiwiteitsvoordele wat daaruit spruit deur die skaal van die twee individuele boerderye aan te pas tot een saamgesmelte boerdery. Wat die tesis uniek maak is dat dit verder gaan as die gemiddelde effektiwiteitsanaliese navorsing deur die samesmeltingsanalise by te voeg. Dit gee aan die model die vermoë om kwantifiseerbare waardes te heg aan die onderskeie effekte wat ‘n samesmelting tussen twee boerderye op die effektiwiteit van die saamgesmelte boerdery tot gevolg mag hê.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/107303
This item appears in the following collections: