Journal of Forest Economics > Vol 14 > Issue 4

Financial performance in Finnish large- and medium-sized sawmills: The effects of value-added creation and cost-efficiency seeking

Katja Lähtinen, , katja.lahtinen@metla.fi Anne Toppinen, , anne.toppinen@helsinki.fi
 
Suggested Citation
Katja Lähtinen and Anne Toppinen (2008), "Financial performance in Finnish large- and medium-sized sawmills: The effects of value-added creation and cost-efficiency seeking", Journal of Forest Economics: Vol. 14: No. 4, pp 289-305. http://dx.doi.org/10.1016/j.jfe.2008.02.001

Published: 0/11/2008
© 0 2008 Katja Lähtinen, Anne Toppinen
 
Subjects
 
Keywords
JEL Codes:M21
Value-addedCost-efficiencyStrategyLarge- and medium-sized sawmillsFinancial performance
 

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In this article:
Introduction
Background
Hypotheses testing
Materials and methods
Results
Discussion and conclusions

Abstract

The business environment of Finnish sawmill industry has changed notably since the 1990s. As a result of these changes, maintaining competitiveness and acceptable business success in sawmilling is more challenging than before. Manufacturing higher-priced value-added timber products has been highlighted as the main option for achieving sustainable financial performance, but its outcome has not been studied previously. In this paper, the effects of cost- and value-added components on the firm-level financial performance of 27 large- and medium-sized Finnish sawmills in 2000–2004 are evaluated by using regression analysis. The proportions of material and salary expenses of turnover are applied as measures of relative cost-efficiency. The commitment to value-added creation is assessed by the share of investments and value-added of the turnover. The results indicate that cost-efficiency indicators explain shorter-term financial performance better, than value-added creation, which affects longer-term financial performance and future turnover growth. Thus, from the managerial point of view, in the short term, cost-efficiency is a prerequisite for the business, while in the long term, value-added creation is also needed to support the economic sustainability of the business.

DOI:10.1016/j.jfe.2008.02.001