The Financial Performance of Global Information and Communication Technology Companies

Posted: 10 Mar 2016

See all articles by Tim Bauer

Tim Bauer

University of Waterloo - School of Accounting and Finance

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance

Date Written: June 1, 2012

Abstract

This study examines the cross-sectional financial performance among firms from the global information and communication technology (ICT) sector over the period 1998-2007. Using a pooled linear regression, the results show that U.S.-based ICT companies are on average underperforming the rest of the world after controlling for firm-specific variables known to affect firm financial performance. The results also show that characteristics of the firm's host country explain a statistically significant portion of the variation in firm performance, incremental to firm-level characteristics. More specifically, firms located in countries with attractive tax environments and high-government subsidies outperform their competitors in countries with less attractive tax environments and subsidies. Firms in financial markets that provide ICT firms with relatively favorable cost of capital underperform those in markets with a cost of capital less conducive to business development, which may suggest the cost of capital attracts new market competition that reduces overall profit. Countries with the best performing ICT firms are those with the highest industry focus, where a few industries dominate rather than an even distribution of firms across a broad range of industries. The findings have important implications for policymakers, business strategists, and investors.

Keywords: financial performance, tax environment, cost of capital, industry focus, information and communication technology industry

JEL Classification: M41

Suggested Citation

Bauer, Tim and Dehning, Bruce and Stratopoulos, Theophanis C., The Financial Performance of Global Information and Communication Technology Companies (June 1, 2012). 2012. Journal of Information Systems 26 (2): 119-152. Available at SSRN: https://ssrn.com/abstract=2745627

Tim Bauer (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1
Canada

Bruce Dehning

Chapman University - The George L. Argyros School of Business & Economics ( email )

333 N. Glassell
Orange, CA 92866
United States

Theophanis C. Stratopoulos

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada
519-888-4567 x35943 (Phone)

Register to save articles to
your library

Register

Paper statistics

Abstract Views
603
PlumX Metrics