Industrial Timberland Ownership and Financial Performance of US Forest Products Companies

This study presents an empirical analysis of the relationship between industrial timberland ownership and financial performance of forest products companies in the United States. Based on the structure-conduct-performance model of the industrial organization theory, we develop and estimate a three-stage least squares model system that links timberland ownership with performance. Our results show that holding timberland improves a forest products company’s profitability and lowers its systematic risk. Still, these benefits cannot overcome the costs induced by institutional arrangements, leading most forest products companies to divest their timberlands.