The Relationship between Capital Expenditures and Firm Performance

Student: Zemskov Gleb

Faculty: International College of Economics and Finance

Educational Programme: Double degree programme in Economics of the NRU HSE and the University of London (Bachelor)

Year of Graduation: 2016

The paper examines relationships between capital expenditures and performance of firms operating in three capital intensive industries, measured by different earnings reflecting parameters. Author investigates a panel of financial metrics for 807 public telecommunications, pharmaceutical and oil & gas companies for the years 2005-2015, collected via Bloomberg. Granger causalities between investment and earnings are examined for different parameters used as proxies for these concepts and general patterns are described. Several models explaining analyzed relationships are proposed in order to identify signs of relationships. Key words: Capital expenditures, earnings, telecommunications, Granger causality, panel data analysis, fixed effect model, Arellano-Bond model

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