Allocation determinants of institutional investments in venture capital and private equity limited partnerships in Central Eastern Europe

Growth expectations and institutional settings are favorable in CEE to establish a vibrant VC/PE market. However, there is lacking supply of risk capital. We address the obstacles for institutional investments in the region via a questionnaire addressed to (potential) Limited Partners worldwide. The respondents provide information about their criteria for international asset allocation. The protection of property rights is the dominant concern, followed by the need to find local quality General Partners and by the management quality and skills of local entrepreneurs. Further, the expected deal flow plays an important role for the allocation process, while the investors fear bribing and corruption. CEE is regarded as very attractive, especially the economic and entrepreneurial activity. However, the investors are not comfortable there with the protection of their claims.Venture capital; Private equity; International asset allocation; Institutional investors;

Will markets direct investments under the Kyoto Protocol ?

Under the Kyoto Protocol, countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere. Prior to ratification, treaty participants agreed to launch country-based pilot projects, referred to collectively as Activities Implemented Jointly (AIJ), to test novel aspects of the project-related provisions. Relying on a 10-year history of projects, the authors investigate the determinants of AIJ investment. Their findings suggest that national political objectives and possibly deeper cultural ties influenced project selection. This characterization differs from the market-based assumptions that underlie well-known estimates of cost-savings related to the Protocol's flexibility mechanisms. The authors conclude that if approaches developed under the AIJ programs to approve projects are retained, benefits from Kyoto's flexibility provisions will be less than those widely anticipated.Environmental Economics&Policies,Investment and Investment Climate,Non Bank Financial Institutions,Energy Production and Transportation,Economic Theory&Research

Direct investment and Belgium’s attractiveness

Belgium, which has long had direct investment links with other countries, is participating fully in the increasingly global economy. At the end of 2005, almost half of the equity capital invested in Belgian companies as a whole was owned directly or indirectly by foreign shareholders. The purpose of the article is to analyse Belgium’s foreign direct investment (FDI) and the incoming investment from abroad, and to view it in perspective, both over time and in relation to other developed countries, especially neighbouring countries. In addition, it aims to identify the main factors determining recent developments and Belgium’s relative position in 2005, the latest year for which data on FDI stocks are available. Although influenced by the same factors as those which determine the development of FDI on a global scale, direct investment links in Belgium differ from those in other developed economies in their magnitude. In fact, the ratio between FDI flows or stocks and GDP is significantly higher in Belgium than in the majority of other developed countries, for both incoming and outgoing FDI. The scale of Belgium’s direct investment links with foreign countries reflects both its function as a financial centre, particularly via the activities of the coordination centres, and its status as a small, open economy in a European Union where integration began earlier – and has progressed farther – than in other free trade areas. In the past ten years, Belgium’s FDI has expanded constantly and at a faster pace than domestic economic activity. While outgoing FDI has, like that of other developed countries, focused more on developing countries, driven by the search for new markets and lower costs, particularly for labourintensive activities, it is nevertheless still concentrated mainly on the developed countries, including the new EU members. The main protagonists in these capital transfers, effected partly via mergers and acquisitions, are Belgian firms active in the service sector. Over the same period, incoming FDI seems to have grown a little more slowly. In terms of stock, it actually stagnated in the early years of this century. However, the recent dynamism of FDI in Belgium has been at least as favourable as in the other European countries taken as a whole, and especially the neighbouring countries. Looking at greenfield investments, which actually lead to the creation or expansion of activities, the number of projects launched in Belgium has been rising, and at a similar rate to those developed in the EU as a whole. Belgium’s main strengths in terms of activity are chemicals – including life sciences – and transport and communications, particularly logistics and distribution. In general, the main motive for FDI projects in Belgium appears to be to serve the European market, or at least its most highly developed core, which includes Belgium. When a location is being selected for a project, Belgium is therefore competing with other EU countries and, more particularly, with neighbouring countries whose economic characteristics are comparable, notably in regard to their standard of living. Compared to other EU countries, especially the new members whose economies are less advanced, Belgium has a handicap in terms of hourly labour costs but, at the same time, it offers high productivity and various advantages as regards environmental and operational criteria, especially the quality of its infrastructures.foreign direct investment, attractiveness

From SRI to ESG: The Changing World of Responsible Investing

The terms socially-responsible investing (SRI), mission-related investing, impact investing and environmental, social and governance (ESG) investing -- all frequently grouped under the heading of responsible investing -- have become a familiar part of the vocabulary of institutional and retail investors. Just what these terms mean in practice, however, and how their practitioners' claims can be impartially assessed, has been less clear. Responsible investing can be broken into three main categories: Socially-responsible investing (SRI) A portfolio construction process that attempts to avoid investments in certain stocks or industries through negative screening according to defined ethical guidelines. Impact investing Investing in projects, companies, fund or organizations with the express goal of generating and measuring effecting mission-related social, environmental or economic change alongside financial returns. Environmental, social and governance (ESG) investing Integrating the three ESG factors into fundamental investment analysis to the extent that they are material to investment performance. While these terms may all be gathered under the term responsible investing, these approaches serve very different purposes. SRI and impact investing use funding and investment activities to express institutional values or advance the institution's mission. In contrast, ESG investing aims to improve investment performance, thereby making additional resources available for mission support. For a long time, SRI was by far the most widely-used of the three approaches. In recent years, however, it has been argued that, although negative screening can be a useful tool for institutions desiring to express ethical, religious or moral values through their investment portfolio, for many it may prove too restrictive. ESG analysis, on the other hand, takes a broader view, examining whether environmental, social and governance issues may be material to a company's performance, and therefore to the investment performance of a long-term portfolio. Thus, while not every institution will choose to engage in SRI or impact investing, fiduciaries of long-term institutional investors should seek to develop a well-reasoned view on their institution's approach to ES

Investments in Land Conservation in the Ethiopian Highlands: A Household Plot-Level Analysis of the Roles of Poverty, Tenure Security, and Market Inventives

Land degradation is a major problem undermining land productivity in the highlands of Ethiopia. This study explores the factors that affect farm households’ decisions at the plot level to invest in land conservation and how much to invest, focusing on the roles of poverty, land tenure security, and market access. Unlike most other studies, we used a double-hurdle model in the analysis with panel data collected in a household survey of 6,408 plots in the Amhara region of Ethiopia. The results suggest that the decisions to adopt land conservation investment and how much to invest appear to be explained by different processes. Poverty-related factors seem to have a mixed effect on both the adoption and intensity decisions. While a farmer’s adoption decision is influenced by whether or not the plot is owner-operated (a measure of risk for the immediate period), intensity of conservation is determined by expectation of the certainty of cultivating the land for the next five years (a measure of risk for the longer term), farmer’s belief of land ownership, and distance from plot to home.Ethiopia, land conservation, poverty, tenure security

Flow of Foreign Direct Investment to Hitherto Neglected Developing Countries

neglected developing countries, foreign direct investment, two-part econometric modelling, panel data analysis

A South African perspective on the investment performance of ethical funds compared to conventional funds and investor behavior as regards ethical funds

A thesis submitted to the Faculty of Commerce Law and Management, University of the Witwatersrand, Johannesburg, in fulfilment of the Degree of Doctor of PhilosophyEthical investing has become increasingly prevalent in recent years and mirrors a rise in shareholder activism, consumer ethics and corporate social responsibility. Shariah funds are a subset of ethical funds. The rise in popularity of ethical funds has raised questions as to whether ethical funds perform better than conventional funds, and whether ethical funds are riskier than conventional funds. A number of studies have been carried out in different countries utilising the traditional performance measures as well as factor models to determine the risk profile and returns of ethical funds compared to conventional funds. These studies have shown that the results are country specific and hence each country needs to be analysed separately. The aim of this study is to investigate ethical funds (incorporating Shariah funds) in the South African context. The study examines the performance and risk profile of ethical funds relative to conventional funds utilising traditional performance methods as well as the CAPM model and Fama French 3-factor model. Furthermore, the study determines the factors that influence investors to invest in ethical funds and to examine their investment preferences when choosing between conventional funds and ethical funds through a survey of Muslim investors. Finally, the study examines the role of advertising in ethical fund investment and investigates whether the marketing material of ethical funds is aligned to investor requirements by utilising content analysis to compare the fact sheets of various mutual funds for the presence of factors identified as important by investors. The empirical results show that conventional funds outperformed ethical funds with a greater variability of return over a truncated time period. Both ethical and conventional funds were driven primarily by the market return with no clear style bias. In fact, ethical funds had a stronger beta to the ALSI than to the JSE SRI index. The qualitative analysis showed that the sampled investors perceived conventional funds as offering better returns, but being more risky. The sampled investors were willing to undertake financial sacrifice in order to invest according to their faith. The most important source of information regarding investments was cited as professional advice, followed by word of mouth and advice from family and friends. Advertising came in behind these factors and was not an influential source of information for the sampled investors. The factors most important to investors when deciding to invest in a fund was the philosophy of the fund (i.e. it’s investment strategy or ideology) followed by the risk profile of the fund and past returns of the fund. The content analysis showed that the factsheets of South African mutual funds were aligned to the factors identified by the sample of investors as most important with influencing their decision to invest. Moreover, conventional funds focused more on returns than risk, with ethical funds focusing more on risk than return – thus funds tended to emphasise their strong points most in their factsheets.MB201

Corporate responsibility reporting in the UK and Japan

There is an increasing concern for the environment and society in today’s world. Stakeholders call for corporations to take responsibility for the impact that their organisational activities have on the environment and society by publicly disclosing such impacts and how they are being managed. Thus, the practice of corporate responsibility reporting (hereafter CRR) has been established. Unlike the provision of financial information in an annual report, CRR tends to be a voluntary reporting practice. As firms have the choice to provide CRR, logical economic thinking says that they will only do so if they derive some benefit from it. Therefore, the objective of this study is to investigate whether CRR is associated with firms’ market values in order to assess whether CRR provides incremental value relevant information to investors

Capital budgeting processes for public sector development projects in South Africa

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2015Each Organization should have a capital budgeting process in place regardless of whether it is a private entity or a public sector entity. The primary force on the public sector entities is the delivery of public goods and one way of achieving this is through the implementation of massive development projects. With the current South African public sector infrastructure projects in execution, there has been massive cost and time overruns experienced. One of the possible causes of these cost overruns may be due to lack of or inadequate cost and benefit projections and management of the overall investment from identification stage to post implementation stage. A qualitative research was done where interviews were held with key stakeholders involved with capital investment authorizations and management in the South African State Owned Entities (SOE) to find out what capital budgeting processes are followed by the SOEs. Despite the use of capital budgeting processes within the public sector entities, there are differences in the application for each stage of the process i.e., identification, selection, authorization, implementation & control and post audit stages. The problems range from political interference, lack of detailed planning of the project due to urgency of projects, implementation of project before the readiness assessments are done and poor monitoring by the public offices during implementation and post completion of capital investment projects. The lack of Supplier Management processes in the State Owned Entities was also highlighted as a gap where poor performing contractors find themselves back into the system while good performing contractors are not utilized more often and used to develop small and new contractors. This paper investigates the capital budgeting processes that are utilized by the State Owned Entities for the public sector development projects in South Africa

A composite measure to determine a host country's attractiveness for foreign direct investment

We contribute to the question of why some countries are more attractive for foreign direct investment (FDI) than others by constructing a composite measure that describes a host country's attractiveness for receiving FDI. This index considers all identified major, measurable and, for our scope, comparable aspects that affect FDI decisions. As a result, we can rank 127 countries with respect to their FDI attraction. The index provides the possibility of conducting detailed strength and weakness analyses for all of our sample countries and regions. These analyses provide support to policy-makers to improve their country's attractiveness for receiving inward FDI. They also enhance the discussion of why FDI flows still remain concentrated in advanced economies and, additionally, in which areas emerging and developing economies have to improve in order to narrow the existing gap. We provide correlation and sensitivity analyses to test the quality of our composite measure. Additionally, we benchmark our index with several alternative indices. Thereby, we show that no other index tracks actual FDI activity more closely.Country Comparison; Composite Measure; Index; FDI;