The effects of the investment decisions of telecommunications firms on their financial performance during the COVID-19 pandemic

İlhan Çam (), Nisa Özge Önal Tuğrul (), Kevser Şimşek (), Kamil Karaçuha (), Ertuğrul Karaçuha () and Gökhan Özer ()
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İlhan Çam: Istanbul Technical University
Nisa Özge Önal Tuğrul: Istanbul Technical University
Kevser Şimşek: Istanbul Technical University
Kamil Karaçuha: Istanbul Technical University
Ertuğrul Karaçuha: Istanbul Technical University
Gökhan Özer: Gebze Technical University

Empirical Economics, 2024, vol. 66, issue 5, No 5, 2007-2047

Abstract: Abstract In this paper we examine how the financial performance of telecommunications firms is affected by the COVID-19 pandemic, and investigate the role of capital expenditures in this relationship. The full sample consists of 383 unique telecommunications firms from 72 countries. Empirical models are estimated using ordinary least squares regression with the Driscoll–Kraay standard errors method. We find that the financial performance of telecommunications firms, on average, decreased slightly during the pandemic period. However, firms with higher capital expenditures have increased their financial performance in the pandemic era. We attribute this evidence to fewer agency problems and managerial myopia, since managers investing to meet demand surge in uncertainty may prioritize the long-term sustainability of their firms. We further find that telecommunications firms that have been most adversely affected by the repercussions of COVID-19 are those with lower capital expenditures operating in countries with less economic development and weaker institutional environments. Our main findings are robust to potential endogeneity issues, reverse causality, and alternative dependent variables. The findings have implications for company managers, investors, regulatory bodies, and policymakers.

Keywords: Covid-19; Pandemic; Performance; Financial performance; Corporate investment; Telecommunications (search for similar items in EconPapers)
JEL-codes: C23 D22 G30 L96 (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s00181-023-02525-4

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