Analysis of economic diversification and financial liquidity effects in sustainably managed forest enterprises
by Johannes Carl Wildberg
Date of Examination:2021-08-19
Date of issue:2021-09-16
Advisor:Prof. Dr. Bernhard Möhring
Referee:Prof. Dr. Bernhard Möhring
Referee:Prof. Dr. Carola Paul
Files in this item
Name:Dissertation_Johannes_Wildberg.pdf
Size:6.25Mb
Format:PDF
Abstract
English
Sustainably managed forest enterprises are required to apply and adapt strategies to be able to distribute economic risk and secure financial liquidity. In this context, this thesis analyzes the possibilities of economic effects of tree species diversity in forest enterprises using empirical data. Furthermore, this thesis addresses the current issues of financial liquidity in forest enterprises and subsequently examines the importance of continuity and even flow of income to sustain forest operations. Part of the empirical analysis of the thesis is based on the data of a forest accountancy data network. First, the possibilities in evaluating and analyzing operational forest enterprise data is illustrated with examples from the tasks in accounting and examples in benchmarking. Then, the time series data of the forest accountancy data network is analyzed in regard to diversification effects of tree species diversity. An indicated correlation between tree species diversity in forest enterprises and decreased volatility of annual net return from timber production is found. Regarding the diversification effect, the time series data show, that the volatility of net return from timber production was decreased in all forest enterprise compared to the sum of the weighted net return from the underlying tree species groups. This effect was highest in the forest enterprises that also generated the lowest enterprise net return. Furthermore, it is shown, that non-stationary development of the time series data needs to be considered in the interpretation of diversification effects. Furthermore, this thesis addresses the topic of financial liquidity in forestry, initially from the perspective of private forest enterprises following recent calamity events. It is shown that forest enterprises were heavily impacted by calamities resulting in losses of income from timber production. Subsequently possibilities to avoid costs, increase revenue and secure liquidity are identified. Lastly, the question of the optimal rotation age is analyzed under the influence of different capital market assumptions. It is shown that the profitability of irregular timber income is a consequence of the assumption of constant interest rates in a perfect capital market. By shifting the perspective of a perfect capital market to an imperfect capital market with differing borrowing and lending rates, the common preference of forest enterprises for sustainability in the sense of a steady flow of income can be explained.
Keywords: Diversification effect; Forest accountancy data network; Imperfect capital market; Financial liquidity; Sustainability