Using DEA to measure efficiency in forest and paper companies

This paper introduces the non-parametric method, data envelopment analysis (DEA), to measure the relative efficiency of 97 global forest and paper companies in 2001. One variable output (total sales) and two variable inputs (operating costs and expenses, and interest expenses) obtained from income statements were used. The average technical efficiency score under assumption of constant returns to scale (TE1CRS) of global companies was 0.753. The highest average relative TE1CRS score was found in Latin America; the lowest was in Canada; Most companies were operating in regions of decreasing returns to scale. Globally, relatively inefficient companies could reduce, on the average, total operating costs And expenses by 11.67 percent, and interest expenses by 13.12 percent to achieve the efficient production frontier.