Accting., Mgmt. & Info. Tech.

8 (1998) 191210

Managing complexity in large data bases using

self-organizing maps
Barbro Backa,*, Kaisa Sereb,1, Hannu Vanharantac,2
a

Turku School of Economics and Business Administration, Turku, Finland

b
bo Akademi University, Turku, Finland
c
Lappeenranta University of Technology, Lappeenranta, Finland

Received 1 March 1997; received in revised form 1 July 1998; accepted 13 July 1998

Abstract
The amount of financial information in todays sophisticated large data bases is substantial
and makes comparisons between company performanceespecially over timedifficult or at
least very time consuming. The aim of this paper is to investigate whether neural networks
in the form of self-organizing maps can be used to manage the complexity in large data bases.
We structure and analyze accounting numbers in a large data base over several time periods.
By using self-organizing maps, we overcome the problems associated with finding the appropriate underlying distribution and the functional form of the underlying data in the structuring
task that is often encountered, for example, when using cluster analysis. The method chosen
also offers a way of visualizing the results. The data base in this study consists of annual
reports of more than 120 world wide pulp and paper companies with data from a five year
time period. 1998 Elsevier Science Ltd. All rights reserved.
Keywords: Complexity; Adaptive systems; Self-organizing maps; Financial benchmarking; Financial performance; Strategic management

1. Introduction
Todays data bases hold a substantial amount of information about companies.
The trick is to find patterns in the data that reveal important information about com* Corresponding author. E-mail: bback@abo.fi
1
kaisa.sere@abo.fi
2
hannu.vanharanta@lut.fi
0959-8022/98/$19.00 1998 Elsevier Science Ltd. All rights reserved.
PII: S 0 9 5 9 - 8 0 2 2 ( 9 8 ) 0 0 0 0 9 - 5

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panies for different stakeholders, i.e., stockholders, creditors, auditors, financial analysts, and management. Finding patterns in financial performance can, for example,
be helpful in identifying internal problems, firm evaluation by investors, and for
benchmarking purposes.
In this paper, we focus on analysis of financial performance for benchmarking
purposes. Benchmarking is an important company-internal process, in which the
functions and performance of one company are compared with those of other companies. Financial competitive benchmarking uses financial informationmost often in
the form of ratiosto perform these comparisons. Financial competitive benchmarking is utilized, among other things, as a communication tool in strategic management, for example, in situations where company management must gain approval,
from internal and external interest groups alike, for new functional objectives for
the company.
Vanharanta (1995) has built a hyperknowledge-based system for financial benchmarking. The system contains a data base with financial data on more than 160 pulp
and paper companies worldwide. This data base is used as a basis for the present
study, too. The amount of financial information in this system is, however, so large
and the structure of it is so complex that it makes comparisons between companies
difficultor at least very time consuming.
Multivariate statistical methods, especially cluster analysis, has been used as a
tool of analysis of company performance although mostly in research contexts
(Ketchen & Shook, 1996). However, many problems have been reported concerning
these methods. The two most important problems are the assumption on normality
in the underlying distributions and difficulties in finding an appropriate functional
form for the distributions (Trigueiros, 1995), (Fernandes-Castro & Smith, 1994).
Moreover, results of analyses are difficult to visualize when there are several explanatory variables (Vermeulen et al., 1994).
Many researchers have addressed these problems: Trigueiros (1995) reports on
several studies that have shown the existence of positive or negative skewedness in
the ratios and on different remedies to overcome these difficulties. He also explains
the existence of symmetrical and negatively skewed ratios and offers guidelines for
achieving higher precision when using ratios in statistical context.
Fernandes-Castro & Smith (1994) used a non-parametric model of corporate performance to overcome the need for specification of statistical distribution or functional form. Vermeulen et al. (1994) presented a way to visualize the results with
interfirm comparison when the explanatory variable was explained by more than one
firm characteristic. Successful use of visual information depends substantially on its
acceptance by the user. Meyer (1997) states that visualized information makes the
transfer of information easier and thus a bottleneck in human information processing
is avoided.
Ketchen & Shook (1996) evaluate the past use of cluster analysis in strategic
management research. One concern has been the extensive reliance on researcher
judgment that is inherent in cluster analysis. As another concern they list that the
applications lack an underlying theoretical rationale and that clustering dimensions

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193

seem to be selected haphazardly. There has also been concern with the standardization of variables and problems with multicollinearity among variables.
Self-organizing maps, which are a form of artificial neural networks, are a promising new paradigm in information processing. One of the main features of neural
networks is their ability to learn from examples and adapt their behavior to new
situations. The theory of self-organizing maps facilitates a reduction and cluster
analysis of high dimensional feature spaces into two-dimensional arrays of representative weight vectors (Kohonen, 1997). The method does not need any specification
of an underlying distribution or of the functional form of the financial indicators.
Furthermore, one can visualize the results in a comprehensive way.
Neural networks have previously been suggested by Trigueiros (1995) for use with
computerized accounting reports data bases, and by Chen et al. (1995) to define
cluster structures in large data bases. Martin-del-Brio & Serrano-Cinca (1995) used
self-organizing maps for analyzing the financial state of Spanish companies.
In a previous study (Back et al., 1998) we investigated the potential of selforganizing maps to structure 76 companies financial data in our data base and
presented an approximated position of one companys financial performance compared to that of other companies. The study was explorative and limited to Nordic
and North-American companies. However, the results were very promising and that
study served as a basis for this paper.
We use the self-organizing maps to structure the financial information on more
than 120 companies, including now also Central-European companies, in our data
base into clusters based on the underlying weight vectors. Each cluster is then named
according to the financial characteristics of the cluster. We analyse the financial
performance of the companies year 1985 and take a closer look in these clusters
over the years 198589. Even though we focus only on specific companies, any
individual company or group of companies can be the focus of interest.
The rest of the paper is organized as follows: Section 2 describes the methodology
we have used, the network structure, the data base, the list of companies in the study
and the criteria for and the choice of financial ratios. Section 3 presents the construction of the self-organizing maps and Section 4 presents an analysis of the maps. The
conclusions of our study are presented in Section 5.

2. Methodology
2.1. Benchmarking
Competitive benchmarking is a company-internal process in which the activities
of a given company are measured against the best practices of other, best-in-class
companies (Geber, 1990). In the process of competitive benchmarking, internal functions are analyzed and measured using financial (i.e. quantitative) and/or non-financial (i.e. qualitative) yardsticks. Functions measured from one company are compared
with similar functions measured from leading competitors, or they are compared with
the best practices in other industries. The differences between compared functions

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are measured. The overall management goal of competitive benchmarking within a

given company is to close the measured gap by changing the companys characteristics in ways that will improve company performance.
The generic benchmarking process consists of a planning phase, an analysis phase
and an integration and action phase. The specific activity of financial competitive
benchmarking is an integral part of the generic benchmarking process. In financial
benchmarking, the aim is to compare the company with its competitors using available financial information, financial yardsticks. At the beginning of a benchmarking
process, in its planning phase, financial benchmarking plays an important role in the
identification and selection of the right competitors and/or good performers, those
that will act as the benchmarks in the non-financial benchmarking to be done later
in the generic process. Financial benchmarking is also important in the analysis phase
when performance gaps are being measured and future performance levels projected.
In the integration and action phase, financial benchmarking is useful for monitoring
and tracking progress and for re-calibrating the benchmarks. Financial benchmarking
achieves its greatest potential, however, as a communications tool at times when
company management must gain approval, from internal and external interest groups
alike, for new functional objectives for the company, i.e. in strategic management.
The financial information needed for financial benchmarking work is, however,
invariably available only from large commercial data bases or from specialized
reports and publications, from where it must be gleaned with difficulty. Such information is thus far removed from its active users. If the needed financial information
is to be brought closer to the active users, it must first be pre-processed, i.e. refined
and classified. The overall objective of the present study is to pre-process, with the
help of neural networks, the data and information needed for financial benchmarking
purposes. Thus pre-processed, the information can be used in computerized benchmarking systems and executive support systems, making the task of competitive
financial benchmarking easier and more effective.
2.2. Neural networks
A neural network is a computing device that is able to learn from examples. It
consists of a set of simple processing units, neurons, that are connected to each other
to form a network topology. A neural network compares input data with output data,
and tries to approximate some complicated, unknown functionality between the two.
When developing a neural network, the first step is to find a suitable topology for
the network and thereafter train it so that it gradually learns the desired input/output
functionality. There are two ways to train a network, supervised and unsupervised.
In supervised learning the network is presented with examples of known input-output
data pairs, after which it starts to mimic the presented input-output behavior. The
network is then tested to see whether it is able to produce correct output, when only
input is presented to it. In unsupervised learning, the output data is not available
and usually not even known beforehand. Instead, the network tries to find similarities
between input data samples. Similar samples form clusters that constitute the output
of the network. The user is responsible for giving an interpretation to each cluster.

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195

Since companies in the data base do not have predefined labels describing their
financial status, a network intended for structuring their data can have no pre-desired
outputs, i.e., the clustering is not known a priori. For this reason, we utilize an
unsupervised learning method. A Kohonen network (Kohonen, 1997), being the most
common network model based on unsupervised learning, is used in this study.
A Kohonen network usually consists of two layers of neurons: an input layer and
an output layer. The input layer neurons present an input pattern to each of the
output neurons. The neurons in the output layer are usually arranged in a grid, and
are influenced by their neighbors in this grid. The goal is to automatically cluster
the input patterns in such a way that similar patterns are represented by the same
output neuron, or by one of its neighbors. Every output neuron has an associated
weight vector. The neighborhood structure of the output layer will cause neighboring
neurons in it (the output layer) to have similar weight vectors. These vectors should
represent some subclass of the input patterns, thus forming a map of the input space,
a self-organizing map (SOM).
The network topology can be described by the number of output neurons present
in the network and by the way in which the output neurons are interconnected, i.e.
by describing which neurons in the output array are mutual neighbors. Usually, neurons on the output layer are arranged in either a rectangular or a hexagonal grid, see
Fig. 1. In a rectangular grid each neuron is connected to four neighbors, except for
the ones at the edge of the grid. In all the networks we use, the output neurons are
arranged in a hexagonal lattice structure. This means that every neuron is connected
to exactly six neighbors, except for the ones at the edge of the grid. This choice
was made following the guidelines of Kohonen (1997).
As mentioned above, a Kohonen network is trained using unsupervised learning.
During the training process the network has no knowledge of the desired outputs.
The training process is characterized by a competition between the output neurons.
The input patterns are presented to the network one by one, in random order. The
output neurons compete for each and every pattern. The output neuron with a weight
vector that is closest to the input vector is called the winner. For expressing the
distance (i.e. similarity) between two vectors, we use the Euclidean distance between
the two vectors. The weight vector of the winner is adjusted in the direction of the
input vector, and so are the weight vectors of the surrounding neurons in the output

Fig. 1.

Network topologies.

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array. The size of adjustment in the weight vectors of the neighboring neurons is
dependent on the distance of that neuron from the winner in the output array.
We use two learning parameters: the learning rate and the neighborhood width
parameter. The learning rate influences the size of the weight vector adjustments
after each training step, whereas the neighborhood width parameter determines to
what extent the surrounding neurons, the neighbors, are affected by the winner. An
additional parameter is the training length, which measures the processing time, i.e.
the number of iterations through the training data.
Our criterion for the quality of a good map was the average quantization error,
which is an average of the Euclidean distances of each input vector and its best
matching reference vector in the SOM.
The clusters are formed by identifying neurons on the output layer that are close
to each other using the weight vectors as a starting point. A tool called the U-matrix
(Kohonen, 1997) can be used to visualize the distances between neighboring neurons.
Hence, a set of neurons form a cluster, if they are sufficiently close to each other.
Moreover, it is the analyst who determines the clusters based on these distances,
they are not determined a priori.
The methodology used when applying the self-organizing map is as follows:
1. Choose the data material. It is often advisable to preprocess the input data so that
the learning task of the network becomes easier (Kohonen, 1997).
2. Choose the network topology, learning rate, and the neighborhood width.
3. Construct the network. The construction process takes place by showing the input
data to the network iteratively using the same input vector many times, the s.c.
training length. The process ends when the average quantization error is small
enough.
4. Choose the best map for further analysis. Identify the clusters using the U-matrix
and interprete the clusters (give labels to them) using the weight vectors. From
the weight vectors we can read per input variable per neuron the value of the
variable associated with each neuron.
2.3. Data base and selection of companies
The Green Gold Financial Reports data base (Salonen & Vanharanta, 1990a, b,
1991) is used as the experimental financial knowledge base for the neural network
tests. It consists of income statements, balance sheets and cash flow statements, that
have been corrected for different accounting principles, of 160 companies in the
international pulp and paper industry. The data base also consists of specific financial
ratios, calculated using information from the corrected reports as well as general
company information concerning products and production volumes. There are 47
different key ratios for each company. The companies are all based in one of three
regions: North America, Northern Europe or Central Europe. The financial data
covers a period of five years from 1985 to 1989. The companies are listed in Table
1 (with some companies omitted that did not have enough data available).
For our experiment we used some 120 companies from the data base. We have

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197

Table 1
The companies
Country

Company

Sweden

3
4
5
6
7
8
9
10
11
12
13
14
15
16
1
17
18
20
21
22
23
25
26
27
28
29
2
31
34
37
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54

Finland

Norway

USA

AVERAGE
AB Statens Skogsindustrier
Graningeverkens AB
Korsnas AB
Mo och Domsjo AB
Munkedals AB
Munksjo AB
Norrlands Skogsagarens Cellulosa AB
Norrsundets Bruks AB
Obbola Linerboard AB
Rottneros Bruk AB
Svenska Cellulosa AB (SCA)
Stora Kopparbergs Bergslags AB
Sodra Skogsagarna AB
AVERAGE
A. Ahlstrom Oy
Enso-Gutzeit Oy
Kemi Oy
Kymmene Oy
Oy Kyro Ab
Metsa-Serla Oy
Rauma-Repola Oy
Sunila Oy
Oy Tampella Ab
Oy Veitsiluoto Ab
Yhtyneet Paperitehtaat Oy
AVERAGE
Norske Skogindustrier A.S.
A/S Union
Boise Cascade Corporation
Champion International Corporation
Chesapeake Corporation
Consolidated Papers Inc.
Dennison Manufacturing Company
The Dexter Corporation
Federal Paper Board Company
Gaylord Container Corporation
Georgia-Pacific Corporation
P.H. Glatfelter Company
Great Northern Nekoosa Corporation
International Paper Company
James River Corporation
Kimberly-Clark Corporation
Longview Fibre Company
Louisiana-Pacific Corporation
Mead Corporation
Continued overleaf

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Table 1
(Continued)
Country

Canada

Austria

Germany

Company
55
56
57
58
59
60
61
62
63
65
66
67
68
69
71
72
73
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
91
92
93
113
114
115
94
95
96
97
98
99
100
123

Mosinee Paper Corporation

Pentair Inc.
Potlatch Corporation
The Procter and Gamble Company
Scott Paper Company
Sonoco Products Company
Stone Container Corporation
Tambrands Inc.
Temple-Inland Inc.
Union Camp Corporation
Wausau Paper Mills Company
Westvaco Corporation
Weyerhaeuser Company
WTD Industries Inc.
Abitibi-Price Inc.
Canfor Corporation
Cascades Inc.
Canadian Pacific Forest Products Ltd.
Crestbrook Forest Industries Ltd.
Doman Industries Ltd.
Domtar Inc.
Donohue Inc.
Fletcher Challenge Canada Ltd.
International Forest Products Ltd.
MacMillan Bloedel Ltd.
Noranda Inc.
Noranda Forest Inc.
Perkins Papers Ltd.
Repap Enterprises Corporation Inc.
Rolland Inc.
Scott Paper Ltd.
Tembec Inc.
Laakirchen
Nettingsdorfer
Zellstoff
Lenzig
Leykam
Steyrermuhl
Europa Carton
Feldmuhle
Haindl Papier
Hannover
Waldhof-A.
Schwabishe
Zanders
MD Papier
Continued opposite

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199

Table 1
(Continued)
Country

Company

Italy

101
124
102
103
104
105
106
107
108
109
125
126
127
110
111
112
135
136
116
117
118
119
120
121
122
128
129
130
131
132
133
134

Holland

Portugal

UK

France

Spain
Swiss

Saffa
Cartiera
Berghuizer
Buchmann
Crown van Gelder
Gelderse
N.V. Papierfabriek
Koninklijke
Parenco
Portucel-Empresa
Group Caima
Celbi
Soporcel
Associated
BPB Industries
David S. Smith
Bowater Industries
James Cropper
Arjomari
Aussedat
Beghin-Say
Kaysersberg
La Cellulose Du.
La Rochette
Sibylle
Empresa Nacion.
La Papelera
Attisholz
Biber Holding
Industrieholding
Holstoff
Papierfab. Perlen

also included the country averages of Finland, Norway and Sweden as three
additional companies.
2.4. Choice of ratios
The population consists of 47 financial ratios in the benchmarking system
organized in the benchmarking system into six groups under the headings:
1.
2.
3.
4.

Profitability
Indebtedness
Capital Structure
Liquidity

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B. Back et al. / Accting., Mgmt. & Info. Tech. 8 (1998) 191210

5. Working capital
6. Cash flow ratios
In selecting the variables for the study we used the cognitive approach (Ketchen &
Shook, 1996), i.e., we let experts choose the most important variables for the performance analysis task. We defend that policy in agreeing with Ketchen & Shook
(1996), who cite Meyer et al. (1993) and state that in strategy research the variables
should be chosen in a way that fosters rich description of a samples characteristics.
We ended up with nine variables. As experts for the task we used ten financial
analysts from a large Finnish bank (Vanharanta et al., 1995). The financial analysts
had all been in the field for at least 5 years.
In principle we could have chosen all 47 financial ratios as input variables. We
would not have had problems with multicollinearity, but we would probably have
run into problems because of the limited number of observations. Too many input
variables in combination with too few observations could have affected the neural
networks ability to learn.
The following nine ratios were selected.
-

Operating profit (% of sales) (1)

Profit after financial items (% of sales) (1)
Return on total assets (ROTA) (1)
Return on equity (ROE) (1)
Total liabilities (% of sales) (2)
Solidity (3)
Current ratio (4)
Funds from operations (% of sales) (6)
Investments (% of sales) (6)

The numbers in parentheses indicate the appropriate ratio group number shown
earlier.
We note that there are four profitability measures, one indebtedness measure, one
capital structure measures, one liquidity measure, no working capital measures and
two cash flow measures. It seems reasonable that the emphasis is on profitability in
a benchmarking situation.
3. Constructing the maps
In this section we give a description of the construction process followed in
developing the self-organizing maps. The actual construction work was performed
using The Self-Organizing Map Program Package version 3.1 prepared by the SOM
Programming Team of the Helsinki University of Technology (Kohonen, 1997).
We started by standardizing the ratios in the data base using histogram equalization
(Klimasauskas, 1991) in order to ease the SOMs learning process and to improve
its performance. Histogram equalization is a way of mapping rare figures to a small
part of the target range and spreading out frequent figures so that it becomes easier
for the neural network to discriminate among frequent figures.

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201

All the maps were constructed in two phases. The purpose of the first phase was
to order the randomly initialized weight vectors of the maps to approximately correct values. During the second phase the maps are fine-tuned, i.e. final ordering
of the reference vectors takes place.
The construction of maps is very fast due to the small amount of data available
(see next section). Such maps enable comparisons between the financial situations
of companies to be made. This approach does include the presumption that the input
space for each year contains an adequately comprehensive description of the whole
possible input space, i.e. all the realistically possible combinations of financial ratios.
We constructed maps separately for each of the years 1985, 1986, 1987, 1988,
and 1989. The network topology chosen was hexagonal with 15*10 neurons in each
map. This is the same network structure as in our previous study (Back et al., 1998).
The parameters of the best maps with respect to the average quantization error are
given in Table 2.

4. Analyzing the maps

In the construction process hundreds of maps were constructed. The best ones, in
respect of average quantization error (shown in Table 2), were more carefully
inspected, i.e. the locations of the companies and the values of weights
(corresponding to financial ratios) were visualized.
We proceeded as follows. We identified the clusters from the S.C. U-matrix for
year 1985 and determined if these clusters still existed in the years 198689. Alternatively we could have analysed the clustering per year, but in this paper we wanted
to study the behaviour of the companies within the fixed clusters.

Table 2
Network parameters
Year

Phase

Training
length

1985

1
2
1
2
1
2
1
2
1
2

1000
95,000
1000
115,000
1000
95,000
1000
120,000
1000
100,000

1986
1987
1988
1989

Learning rate

0.05
0.02
0.08
0.02
0.07
0.03
0.06
0.02
0.06
0.03

Neighborhood
width
10
3
10
3
10
3
11
3
12
3

Quantization
error

0.247267
0.261194
0.274494
0.257365
0.253538

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4.1. Identifying the clusters

Based on the U-matrix in Fig. 2 we identified eight (8) clusters, groups A to H
as follows. In the matrix, distances between neurons are given via gray-scaling. The
nodes in the matrix marked with a dot represent the neurons. The nodes without
dots represent the distances: the darker the node between two neurons the longer
the distance. The clusters are groups of neurons surrounded by dark bordering nodes.
The interpretation to the eight clusters is given by analysing the weight vectors,
the s.c. weight maps (Appendix B) where the weight for each neuron is visualized
by gray-level imaginglight shades representing high values and dark shades representing low values. We can look at each input variable separately. The value of
the variable operating profit for example is high for the neurons on the right hand
side of the map and low for the neurons on the left hand side. Hence, a company
that is mapped onto the neurons on the right hand side of a self-organizing map has
a higher operating profit than the companies on the left hand side. On the other hand
the variable total liabilities has a low value in the neurons in the lower part of the map
and a high value in the upper part of it. Therefore, a company with high liabilities is
mapped on the lower half of the self-organizing map and so on.
We give here the U-matrix as well as the weight maps for the year 1985 only. A
similar analysis is done for all the other years, too. Therefore a group that is physically placed in a certain spot on the self-organizing map for the year 1985 might
appear on a totally different place for the other years. However, as is shown below,
the eight groups do exist throughout the years even though during the final years of
our research period certain new clusters start to emerge. Moreover, the companies
mapped into the eight clusters might vary from year to year.
4.2. Financial performance within the groups
Our interpretation of the defined groups (see Appendix A) based on weight maps
for year 1985 is as follows:

Fig. 2.

U-matrix for the year 1995.

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203

- Group A is separated into subgroups A1 and A2. A1 can be considered as an

average group. The group is doing rather well regardless of which ratio is used
as an indicator. The A1 group consists solely of US companies except for one
Central European company. The A2 group is somewhat below average but very
close to the A1 group in every respect.
- Group B is separated into subgroups B1 and B2. Characteristic to group B are
high total liabilities and investments combined with small profitability and low
solvency. The difference between the subgroups is that B1 has slightly higher
values in liabilities and investments than does B2. Moreover, B1 has high
operating profit. The subgroup B1 consists mainly of Finnish and Canadian companies and B2 includes also US companies.
- Group C is best defined as slightly better than average. It consists mainly
of North-American and Central European companies.
- Group D represents the best companies in terms of high profitability, solidity
and cash flow. On the other hand it is a group of low investment companies. It
consists of mainly North-American companies and one Swedish company.
- Group E represents companies with high investments and relatively low solidity but, surprisingly at the same time, the highest liquidity. Profitability is above
average. It consists of two North-American, two Swedish and one Finnish company.
- Group F has a slightly lower profitability and liquidity than group E, but on
the other hand better solidity. If it were not for the extremely high current ratio
of group E, these two groups would probably have been defined as one. It consists
of Finnish and US companies.
- Group G is almost as good as group D. It probably would have been justified
to define also groups D and G as subgroups like B1 and B2. It consists of two
Swedish, two North-American and two Central European companies.
- Group H is undoubtedly the most solid group. It is a group of low investments,
cash flow and profitability, but high solidity and liquidity. It consists of mainly
North-American companies.
Because the groups were identified with data from year 1985, the companies in
these groups for the other years are not always identical though the groups clearly
exist. Furthermore, for every year we do not have data from the same companies
resulting in some companies missing in some maps and appearing in others. Related
to this we can notice that in the years 198889 a new group of companies, Group
X, starts to emerge showing an other side of the dynamics of the system.
4.3. Financial performance over time
In the following we focus only on the financial performance of the Finnish companies over time. As was stated previously, most of the Finnish companies can be
located to the group B for year 1985. Only two companies, namely 25 (RaumaRepola) and 29 (Yhtyneet) are outside this group. The same pattern continues during
the years 198689. Most of the Finnish companies are investing heavily with huge

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liabilities. They have a low solidity, a weak liquidity and a bad profitability based
on the ratios chosen for this study.
In the year 1986 company 25 has joined the group B and stays within this group
through the rest of the years in this study. Company 29 stays outside group B until
the last year of this study and joins the group B in 1989.
5. Conclusions
The objective of this study was to investigate the potential of self-organizing maps
to support in managing the complexity in a large data base by structuring the vast
amount of financial data available on companies. Our work bench consisted of a
hyperknowledge-based system for financial benchmarking. The data base contained
financial data on more than 120 pulp and paper companies worldwide. Using nine
different ratios as variablesfour measuring profitability, one indebtedness, one
capital structure, one liquidity, and two cash flowwe constructed different maps
for each of the years 1985, 1986, 1987, 1988, and 1989.
We anticipate that neural networks can be used in future for benchmarking purposes to help executives find company characteristics that will lead to sustainable
excellence of a company, in other words to help answer the question: Which are the
characteristics that lead a company towards long-lasting good performance? Some
company characteristics seem to produce and maintain good overall company performance, sustainable profitability, increasing productivity and continuous growth.
In this investigation we showed how to analyse Finnish pulp and paper companies
over time in a world-wide scale. Our study shows that self-organizing maps can be
useful for structuring large financial data bases in a meaningful way. We think that
this approach, although historically based, is a valuable starting point for benchmarking purposes. From the maps presented the managers can pick out different
companies for further and deeper analyses.
Acknowledgements
We like to thank Mikko Irjala for carrying out the practical work with training
the networks and Marko Gronroos for helping to get the paper into the final format.
We also want to thank the anonymous referees for their constructive comments. The
work reported here was carried out within the AnNet-project. The authors wish to
thank the Foundation for Economic Education and the Academy of Finland for providing financial support for this project.
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Appendix A
MAPS FOR THE YEARS 19851989

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Appendix B
WEIGHT MAPS FOR YEAR 1985

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