From financial fragility to business discontinuation in crop agriculture: evidence from Spanish firm-level data

Purpose This study examines whether business discontinuation in crop agriculture is better explained by one-period accounting weakness or by cumulative financial fragility, focussing on profitability persistence, internal cash-flow generation and balance-sheet resilience. Design/methodology/approach The analysis uses longitudinal accounting data for 438 Spanish crop-agriculture firms over 2014–2024, including 97 discontinuation events. Discrete-time hazard models, two-year lead logit models and three-year trajectory models distinguish contemporaneous weakness from accumulated deterioration. The discontinuation measure is validated against the legal status recorded in the Spanish Mercantile Register, and all core results are re-estimated under a register-validated event definition, within a single nested specification, and with out-of-sample evaluation. Findings One-year negative profitability is not a robust predictor once broader financial conditions are considered. Weaker cash-flow generation predicts near-term discontinuation and higher tangible asset intensity is associated with lower discontinuation risk; both signals strengthen materially when the event is restricted to firms with a non-active register status. Repeated profitability weakness raises discontinuation probability in the final three-year window, although it does not dominate contemporaneous weakness as a strictly pre-event predictor. Research limitations/implications Discontinuation is proxied by the termination of the firm's accounting sequence; register-status validation shows that this proxy captures register closure and dissolution together with cessation of filing, rather than formal insolvency alone. Future research should incorporate legal failure events, credit conditions, policy exposure and production shocks. Practical implications Accounting data can support screening indicators for lenders, advisors and policymakers. Out-of-sample discrimination is modest (cross-validated AUC of 0.67 under the register-validated event), so the indicators are proposed as screening devices rather than as operational early-warning classifiers. Monitoring cash-flow sufficiency and tangible asset intensity may help identify firms at risk before discontinuation becomes irreversible. Social implications Earlier detection of financial fragility can help preserve viable crop-production capacity and support targeted interventions in agricultural regions exposed to recurrent economic and climatic pressures. Originality/value The study integrates agricultural exit, viability and financial-distress perspectives within a dynamic firm-level framework, showing that discontinuation in crop agriculture reflects accumulated financial fragility, namely weak internal financing capacity and a weaker tangible asset base, rather than isolated accounting weakness.