Profit persistence in globalizing forest industry companies

Abstract

SUMMARY This study analyzes profit persistence and scale economies of globalizing forest industry using panel data from 49 companies in the US, Canada, Europe and the group of emerging countries between years 1996–2005. Size and profitability of forest industry companies were found to be only weakly related, and there were clear geographical and period specific differences in the data. Time series-cross section unit root tests indicated that on the global scale there were no persistent firm-specific profits among the largest forest industry companies. However, there was some evidence of geographical differences as for the Canadian companies some indication of profit persistence was found, but this could not be fully confirmed as it could be also derived from this sample. The main policy implication of this study is that in the absence of profit persistence, streamlining of operations and cutting down smaller and less profitable production units will likely continue in the forest industry with investors an...