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Forest Products Society

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Publication: Journal of Forest Products Business Research
Authors: 0
Reference ID: Volume 3, Article No. 2
Publish Year: 2006
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Title: Financial Performance and Internationalization of Operations: Evidence from Finnish Forest Industry Companies
Description:
Deepening international integration ofmarkets and consolidation of industries have been major phenomenon in forest-based industry during the previous decade. However, empirical research on the effect of internationalization on financial performance in forest industry companies is still very limited. In this study , we first survey the recent literature on the relationship between internationalization and performance. Second, using panel data we analy ze whether several common
firm level financial performance indicators differ between internationalized and non-internationalized forest industry companies headquartered in Finland. Results indicate that internationalized companies outperformed non-internationalized companies during 1996–2003 in terms of solvency (according to Equity Ratio-%). Depending on the business cy cle, internationalized firms outperformed non-internationalized firms with respect to short-term measures such as Quick Ratio, while the converse was true for profitability measures such as ROI-%. Degree of internationalization, as measured by share of foreign employment, was found to have a positive impact on liquidity and profitability of firms. Overall, our results elaborate how becoming a multinational provides a possibility for risk sharing via market differentiation, but at the same time it brings additional costs caused by investments required, management sy stems needed, and risks connected to the new business environment.

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