Evaluation of Investment Management and Business Performance in Wood Processing Industry in Slovakia

The aim of this paper was to analyze certain parameters of investment measurement and management of companies in Slovakia, especially in wood processing industry compared with other industrial sectors. Statistical analysis was made of relationships between investment trends and performance given by the indicator Return on Equity. The goal was to identify differences in investment management of analyzed industries and consequently defi ne relevant determinants as critical areas with the impact on performance of wood processing companies. In the results of research, special interest is focused on crucial investments with the emphasis on the preparation of investment projects.


INTRODUCTION
1. UVOD Also due to the signifi cant factors in the context of global economic crisis, the wood processing industry (WPI) has to face the fall in demand for timber and timber products not only in Slovakia.Consequently, many small businesses were lost.If demand is not stimulated in the short term, the performance of WPI as a whole will clearly decrease, which will of course adversely affect the WPI share in the GDP of Slovakia in future (min.5 years), as well as balanced regional development (availability of raw materials), with negative impact on social stability of individual regions in Slovakia (Merková and Drábek, 2011).
Slovakia currently exports large quantities of raw wood, much of which is renewable raw material, this being a signifi cant comparative advantage for the WPI of SR.The wood stock in Slovak forests has been continuously increasing.Wood harvesting in Slovakia is also growing.The maximum annual volume of wood harvest was reached in 2005 as the result of unusually strong wind storm in 2004.The increase of harvest increases also the economic potential of Slovak forests (Moravčík, 2007, SARIO).In case of foreign capital invested in new technologies for processing of domestic raw materials, potential effects from foreign direct investment would especially result in a higher value added in the WPI, and in the growth of the WPI share in the GDP of Slovakia.
Woodworking and furniture industry is developed in Slovakia and it is more than necessary.Forests and sophistically used wood constantly produced by forests are the basis for the development of WPI, which may be a strategic issue for the Slovak economy.Increased consumption of wood in the Slovak Republic and focus on domestic production can best help companies to fi nd solutions in a currently diffi cult situation.
Recent development in most enterprises suggests that the effects of the global economic crisis have a signifi cant impact on the performance of enterprises, with direct impact on the level of economy as well as the level of investment.The development of each sector or company requires appropriate investment.Without investment, economic objectives of the business cannot fully be met (Merková et al., 2011).
Investment decision-making is one of fundamental parts in performance management of companies (Ojurović et al., 2013).However, to meet the strategic goals, a company needs to apply successful methods for management and measurement of business performance (Merková and Drábek, 2010;Merková and Drábek, 2013).The allocation of available fi nancial resources to fi xed assets or investments in modernization of production technologies are possible ways when a company can ensure its prosperity.Implementation of process principles into management brings a lot of changes with positive effects as higher competitiveness, productivity and performance (Sujová et al., 2014).
"A lively discussion on the relevance of the application of selected indicators for measuring the busi-nesses performance" is nowadays conducted between representatives of the theory, consulting fi rms and business.Different opinions and views are based on two facts as follows: • normal, so far commonly used performance indicators are related to the past and it is highly questionable whether they suffi ciently refl ect the company's future competitiveness, • used indicators do not suffi ciently refl ect the quality of customer relationships.
It can be concluded that the economic experience quite often results in fi nancial management based on the accounting profi t and common indicators such as profi tability or activity ratios.These indicators are presently considered as insuffi cient, which is also one of the reasons for the signifi cantly poor competitiveness of enterprises.Traditional methods of measuring business performance (for example in Knápková and Pavelková, 2010 or Kislingerová, 1999) are based primarily on maximizing profi ts (which is also in line with the objectives of business activity).Absolute and relative indicators are used for measuring the performance (Kislingerová, 2010).However, in recent years objections to the traditional performance measurement indicators, such as profi tability, can be seen.
In evaluating an investment, attention is focused on suitability, effi ciency and feasibility of a specifi c project.Moreover, the impact of the project on the total effectiveness, prosperity and fi nancial stability of the company is evaluated (Polách et al. 2012;Rajnoha et al., 2014 and others).Discounted cash-fl ow methods for investment valuation take time factor into consideration.In economic life, time factor makes things more serious, it enables the change of money evaluation.Based on a wrong change, a wrong decision can be made, which would have signifi cant infl uence on project effectiveness and enterprise stability (Drábek and Jelačić, 2007).Discounted cash-fl ow methods underlie two basic rules of fi nancing (see more in Brealey and Myers, 1999 or Brealey and Myers, 2003) considering time changes of money values.While discounted cash fl ow valuation is only one of the three ways of approaching valuation, it is the foundation on which all other valuation approaches are built (Damodaran, 2012).
Business performance was analyzed by our research team recently with the objective to determine the extent of the use of traditional and modern indicators, methods and models of performance management on a sample of randomly selected companies in various industries of Slovakia.Rajnoha et al. (2013) published the research results and demonstrated the impact of selected factors in the performance of surveyed companies.
There is the possibility to consider the prices.However, investors will not certainly decide for the lowest current price -such as low production costs and cheap labor or low tax cost -but primarily on the lowest cost throughout the life cycle of the investment (Merková et al., 2012).Apart from the quality of infrastructure, size of the domestic market or access to regional and international markets, foreign investors particularly take into account the factors such as energy ..........Merková, Drábek, Jelačić: Evaluation of Investment Management and Business... costs, availability of suppliers and customers, suffi cient qualifi ed and skilled workforce, predictability of economic development, stability of legislative conditions, security of companies and others.
The aim of this paper is to analyze the investment measurement and management of companies in Slovakia by investigating the investment trends and decisions such as routing, types, direction and objectives of investment activity, investment development and preparation of investment projects.
The research objective was to analyze certain parameters of investment measurement and management, and consequently statistically analyze the relationships and differences between investment trends and performance given by the indicator Return on Equity.The goal was to fi nd out relevant determinants as critical areas with the impact on performance of wood processing companies.The results were analyzed based of the questionnaire.
Selected results of the research presented in this paper analyze as follows: -Obtained business performance in research samples, -Share of development investment in companies, -Investing directions and crucial investments, -Emphasis on preparation of investment projects.
This paper gives a comparison of the current investment management in the wood processing industry of the Slovak Republic (WPI SR) and other industrial sectors.

METHODOLOGY OF RESEARCH 2. METODOLOGIJA ISTRAŽIVANJA
Methodologically, an on-line questionnaire was developed (more in Questionnaire Survey) through internet application to collect data from companies in Slovakia.Complete anonymity of participating fi rms was granted.The size of research sample was 164 counts.
The research was primarily focused on wood processing companies.Statistical classifi cation of Economic Activities (NACE Rev. 2) in the Statistical Offi ce of the Slovak Republic defi nes as follows: -Manufacture of wood (Wood industry -WI) -Manufacture of pulp and paper products (Pulp and paper industry -PPI) -Manufacture of furniture (Furniture industry -FI).
The aim was also to analyze specifi c sectors included in wood processing, e.g. the pulp and paper industry (2 companies), the furniture industry (11 companies) would cause low relevance of the results for the two-dimensional statistics, because these sectors were individually assessed only by means of univariate descriptive statistics.For two-dimensional statistics for qualitative (nominal) variables, the related sectors were put together.In this case, the sample included all sectors of the wood processing industry (WPI) covering 34 companies.Basic information about research samples used in this part of research is presented in Tab. 1.
Companies were initially analyzed according to the distribution of the achieved performance of 6 particular groups (group 0-5, group 0 -the worst performance with negative ROE, group 5 -the best performance with ROE over 10 %).
Mathematical and statistical methods were used in the research of interdependencies and impacts of individual factors on achieved performance of companies.
One-dimensional inductive statistics: In the research, selected descriptive statistics was analyzed for one variable -absolute and relative frequencies, cumulative frequency and cumulative relative frequency, mean, median and mode.The following statistical methods were used: frequency tables showing the frequency by categories, histograms, pie charts, bar and cumulative bar charts, time series and trends.

Two-dimensional inductive statistics between categorical variables
The research consisted of qualitative -nominal variables, their relationship cannot adequately describe the correlation analysis, so the association between variables was examined with contingency (fi rst used by Pearson, 1904).
Cumulative bar graph represents the best way to present graphically the relationship between a pair of categorical variables.In fact, it is a graphical representation of row or column percentages in contingency table (Rimarčík, 2007).
Pearson's contingency coeffi cient CC: ( Maximum contingency coeffi cient CC max : ( Adjusted contingency coeffi cient Adj.CC = CC/CC max ; while CCCC max (4) Where: -observed frequency in a fi eld of the table, -expected (theoretical) frequency in a fi eld of the table, k -number of cells in the table N -sample size q -number of rows or columns (in square tables).
MS Offi ce Excel and Statistic software from Stat Soft, Inc. was used for statistical analysis, and numeric and graphical presentation of the research results.1) that most enterprises in both presented samples implement development investment in the share of 25 % of the total investment in company (60 % of respondents in all enterprises and 62 % of WPI businesses).

REZULTATI ISTRAŽIVANJA
Low abundance (6 %) speaks in favor of WPI in the category with zero share of expansion investment, while a relatively high number of enterprises (21 %) was recorded with development investments in the range of 25-50 %.In all enterprises, more negative representation (12 %) of the category without development investments was evaluated.On the other hand, the highest category -massive expansion investments with a 75 % share was recorded in 7.32 % of all tested enterprises, but only in 2.94 % of WPI businesses.The observed frequencies and relative frequencies in different six performance groups are presented in Tab. 2 and 3.
The observed frequencies presented in both samples show that fi rms realizing a high share of expansion investments above 75 % reach lower performance (mostly in the performance group 0 with negative ROE indicator).At currently implemented investments, return and higher business performance are expected later in the long term.By applying statistical methods, no signifi cant relationship has been shown between the share of development investment and performance of businesses in any research sample.
The average performance was also analyzed in each category (Tab.4).The results revealed growing performance based on a higher percentage of expansion investments between categories of 25 %, 50 % and 75 % of all enterprises.It can, therefore, be stated that development investments proportionally infl uence the growth of business performance, but only to a certain extent.As companies invest in the development more than 75 %, they are ineffi cient in the initial period.The data averages, however, also showed that fi rms without development investments achieve the performance level of enterprises with 25 and 50 % share of development investments.This performance is probably only temporary and companies without investing in development in the coming years will be less powerful.Testing the differences in the averages of categories showed no statistically signifi cant relationship between the investments in the development and performance of businesses.In the analysis of investing direction, companies could choose any number of responses and identify one or more crucial approach to invest.For this reason, we did not analyze responses through cumulative values, but the relative frequencies via separate categories identifi ed for major investment direction.All categories of investments in all tested companies (N=164) compared with WPI companies (N=34) are presented in Tab. 5, and categories with the largest relative abundance are presented in Figure 2.
In the sample of all tested companies, 128 fi rms (78 %) identifi ed the category of manufacturing technology, machinery and equipment as crucial in directing of investments.The most mentioned category, however, does not mean statistically signifi cant effect on the performance of enterprises.This result was probably affected by the participation of relatively large amounts of non-manufacturing companies with-

Research and development istraživanje i razvoj
Financial investments investicije u fi nancije out technology investment but with higher business performance.The second most numerous category was intangible investment.Research was not interested in the volume of investments of a certain category.
Relatively more wood processing companies (97 % share compared with the sample of all tested companies with 78 % share, which also consisted of trade and service businesses without the need of technology) invest in production technology and machinery.However, a lot of companies realize only recovery, not development investment, so this category does not lead to higher performance.
We analyzed if an investing direction is more typical for some industry or specialization and whether the direction to intangible investment is statistically signifi cant.As demonstrated in the last research (Rajnoha et al., 2013), just intangible investment (in foreign ownership companies) causes higher performance.Category of intangibles as crucial investment is mostly typical for engineering industry, and not at all for wood processing industry, as shown by statistical analysis presented in Tab.6 and 7.

Investment project preparation 3.3. Priprema investicijskih projekata
Similarly as in the previous analysis, efforts were made to identify some differences in investment behavior, with the focus on the preparation of investment projects in specifi c industries.
From the statistical results (Tab.8 and 9), it can be stated that the preparation of investment projects is characteristic for the category of engineering and automotive industries, while the WPI industry and other sectors do not consider the preparation of investment projects as principal.
In relation to the achieved performance in these sectors (see more in Rajnoha et al., 2013), which follows the relationship of industry and preparation of investment projects, this means higher performance in the engineering and automotive industries, but lower performance in WPI and other industries.It can be said that preparation of investment projects affects the performance of enterprises.Unfortunately, direct evidence about the relationship between the preparation of investment projects and achieved business performance could not be statistically proven.

DISCUSSION AND CONCLUSIONS 4 DISKUSIJA I ZAKLJUČCI
Selected areas of investment management were analyzed in Slovak companies with the focus on companies of wood processing industry.The result of complex research shows lower performance in the mentioned industry compared with the average of all tested companies or some selected industries (automotive, engineering, etc.).In the present paper, efforts were made to identify crucial problems in investment behavior and trends in wood processing companies affecting low business performance.The main results in this part of research can be summarized as follows.
First, intangible investments, which are crucial for better performance, are not a typical investment activity of WPI companies.On the other hand, engineering industry, where intangibles are crucial investment, reached better performance than wood processing industry.
Second, preparation of investment projects is characteristic for the category of engineering and automotive industries, while the WPI industry and other sectors do not consider the preparation of investment projects as principal.The same trend is observed in achieved performance in separate categories of industry: Engineering and automotive with investment projects and higher performance, in contrast with absence of investment projects and lower performance in wood processing industry.The wood processing industry in Slovakia is currently in a diffi cult situation, but there are still possibilities for better investment management and potential of positive impact on performance of companies.

3. 1
Development investment 3.1.Razvojne investicije Development investments (expansion, starting of new production, etc.) were analyzed in contrast with recovery investments.Development investments were divided into 5 categories.It can be seen from the de-scriptive statistical results (Figure

INDUSTRIJA 66 (3) 241-249 (2015)
Chi-squared test was applied.It is commonly used for testing the independence between two categorical variables.Results of chi-squared tests describe selected statistics: Pearson's chi-square and significance p-value "p", Maximum-Likelihood chi-square and p-value, Pearson's Contingency Coeffi cient (CC), Adjusted Contingency Coeffi cient (Adj.CC) and degrees of freedom (df).