Social and Economic Importance of Forest Companies in Asian Russia: Evidence from Corporate Financial Reporting

Abstract

In contrast with many other sectors of the Russian economy, there is low market concentration in the forest industry and, consequently, a large number of relatively small enterprises scattered throughout the world’s largest country. In many cases, logging or woodworking companies are the only or key employers in sparsely populated areas, making them important sources of the social and economic stability of small towns and rural settlements. In 2022, Russian forest companies faced dramatic barriers to international trade, which led to the suspension of production with the risk of further layoffs. Thus, the issue of social and economic importance of the forest business in Russia has gained additional sounding. This paper aims to estimate the decline in revenues and the number of employees in forestry companies in Asian Russia because of sanctions. Based on corporate accounting reports, we have generated a dataset covering 4675 forest industry companies in Asian Russia. We use quantile regression to estimate the impact of the number of employees on revenue. All companies were divided into quartiles by revenue and into 6 groups by type of economic activity. A significant differentiation of the return on the number of employees depending on the type of activity and the volume of firms’ revenues was found. Estimates of potential losses of companies during labor force reduction were obtained, which would be 1.2%–3.6% of revenue for a company from Q1, 2.2%–6.6% of revenue for Q2 and 2.7%–8.1% of revenue for Q3. The results clearly demonstrate that forest companies might be very interested in retaining a workforce, even if an opportunistic drop in product demand creates a financial shortfall. Policy makers should take this into account when shaping instruments to support the industry.

Impact of Trade Restrictions on the Russian Forest Industry: Evidence from Siberian Timber Producers

“…Most forest companies in Russia are micro-enterprises with revenue of less than 120 million rubles (Table 1). Despite the small revenue, they serve an important social function, often being the only employers in small rural communities [16]. The dependence of the dynamics of financial indicators on the scale of the company was found for both net income and revenue growth rates.…”

“…The economic crisis of 2022 has significantly affected the activities of forest companies, which underlines the relevance of research at the micro level. Previously, we assessed the social importance of forest companies in the Asian part of Russia for local labor markets [16]. It has been shown that even during the recession of 2022, companies had incentives to retain employees and even recruit new ones.…”

Financial Literacy and Understanding for Individuals or Small Business Owners in the Framework of Financial Accounting

“…The financial accounting process is inherently complex, involving a multitude of transactions and intricate calculations (Gordeev & Pyzhev, 2022). The flowchart effectually filters this complexity into a visual and coherent format.…”

“…It offers insights into revenue, expenses, profits, and losses. Armed with this data, business owners can make informed decisions regarding investments, expansions, cost-cutting measures, and pricing strategies (Gordeev & Pyzhev, 2022). Without a grasp of financial accounting, decisions would be based on guesswork, which can lead to costly mistakes.…”