Contribution Of The New Economy To The Profitability Of Turkish Firms: A Sectoral Analysis

Authors : Prof. Arzdar KIRACI, Murad TİRYAKİOĞLU

Pages : 0-0

View : 17 | Download : 7

Publication Date : 2010-12-01

Article Type : Other Papers

Abstract :Advances in information and communication technologies have made it easy to store, transfer and analyze knowledge. Together with globalization, information and communication technologies have increased the quality of input/output products and hence increased the productivity and profitability of firms in this New Economy. Companies stock prices are a very strong proxy for profitability, therefore, it is expected the stock market prices will also reflect the increase in profit due to information and communication technologies. This paper tests the hypothesis of contribution of the information and communication technologies and globalization to the profitability of Turkish firms in Istanbul Stock Exchange Market using an econometric model for this purpose. Different time periods and different sectors are considered. In the econometric model, electricity sector is selected as reference sector, because this sector works for the domestic market only and is not or negligibly affected by the New Economy. This sector is adjusted for global business cycles and is used as a proxy for business cycles in Turkey. The stock price behavior of other sectors is compared with the electricity sector. Sector specific fluctuations are identified using robust regression. The hypothesis of contribution of the New Economy to the profitability of Turkish firms in Istanbul Stock Exchange Market (ISE) is tested and the amount of contribution is calculated. The results indicate that many sectors are significantly associated with profitability increase throughout selected the period. However, for some sectors no conclusion can be reached.
Keywords : Cost structure, New Economy, Istanbul Stock Exchange, Robust Regression