Profitability determinants of companies in IT industry: case of Ukraine

Abstract

Purpose. To identify patterns of profitability of IT enterprises by quantitative evaluation of the relationship of profitability of enterprises with the structure of capital and assets, taking into account the level of business activity and the main economic activity, as well as the formation of appropriate recommendations. Methodology. The empirical basis of the study was the aggregate performance of enterprises whose main economic activity belongs to Chapter 62 of the NACE “Computer programming, consultancy and related activities” during 2013–2020. Correlation and regression analysis was used to build a multifactor model of linear regression, which describes the dependence of return on assets from the ratio of long-term and short-term liabilities and provisions to liabilities of the balance sheet, the ratio of current assets to balance sheet assets, total assets and main economic activity. Findings. It has been established that the capital structure of IT companies is unsatisfactory due to the dependence on external sources of funding, including current liabilities, which have a negative impact on return on assets. It has been found that the structure of assets is dominated by current assets, the growth of which has a positive impact on the profitability of enterprises in the industry. This indicates the need to optimize non-current assets, given the level of their involvement in the production process. It is proved that by expanding markets, it is possible to ensure further growth in profitability of enterprises in the industry, as business activity has a positive effect on return on assets. The return on assets varies depending on the main type of economic activity. Originality. The relationship is identified between the efficiency of IT companies and the structure of their capital and assets, business activity and type of economic activity. Practical value. The applied value of the study is the ability to predict the profitability of assets of IT companies depending on the structure of sources of funding for their activities and areas of asset placement, business activity and the main type of economic activity. The recommendations can be used to improve the state policy of digital economy in terms of justifying the need to encourage business owners to reinvest profits, to involve enterprises more actively in national digital projects and support the product business model.