The Institutional Foundation of Foreign-Invested Enterprises (FIEs) in China

Foreign-invested enterprises (FIEs) are now an important component of the Chinese economy. Since 1992, the growth of FIEs has been exponential. However our understanding of the institutional factors driving the FIE growth remains limited. This paper uses data from 39 industries in China for a period of three years (1995-1997) to explore the institutional foundation of the FIE growth. Our findings suggest that the debt obligations on the part of the SOEs and the local control of the SOEs promote the growth of FIEs and that some of the foreign direct investment (FDI) inflows result in acquisition of existing assets and shift asset controls from SOEs to FIEs.http://deepblue.lib.umich.edu/bitstream/2027.42/39649/3/wp264.pd

Life-cycle theory and cash flow management issues in China

JEL Classification: G31; G35As Chinese market reform accelerated, many enterprises are growing and facing the increasingly fierce competition and unpredictable risks. Many companies experienced a decline in the amount of free cash flow. In the entire life cycle of an enterprise, free cash flow is always the essential foundation of its existence and development. Therefore, the conception of "cash is the king" is deeply rooted in people's heart. Our country's current downward economy is under pressure. Many companies are facing the pressure of rising labour cost, and a reducing external demand. The survival and development of enterprises become more difficult. Thus the study on the relationship of enterprise life of free cash flow and performance at different stages is a very urgent task. This thesis uses standard research and empirical research to explore the relationship of the different stages of a manufacturing enterprise life cycle with free cash flow and performance. In the empirical research section, the data of the manufacturing industry in China A- share listed companies in 2004-2012 is selected as research sample. First of all, the sample of the selected companies is divided into the life stages, according to Dickinson's cash flow method. Then the author conducts descriptive and statistic regression analysis on growth, maturity and decline period respectively, according to the enterprise's different life stage. Comparing and analysing the result of the regression and analysis conclusion can be drawn: (1) During the growth period, free cash flow and corporation performance are positive related; (2) During the maturity period, free cash flow and corporate performance are negative related; (3) During the downturn period, free cash flow is negatively correlated with the corporate performance. Based on the research conclusion, relevant proposals are put forward.Com a aceleração das reformas introduzidas no Mercado Chinês muitas empresas cresceram e passaram a enfrentar uma concorrência acrescida e a ficar mais expostas a riscos imprevisíveis. Muitas viram o montante dos seus cash flows baixar. Ao longo do ciclo de vida de uma empresa o cash flow livre é sempre a base da sua sustentação e do seu desenvolvimento. Por essa razão, o lema "cash is king" ficou bem gravado na memória das pessoas. A queda presente da economia chinesa tem-se traduzido numa maior pressão sobre as empresas. Muitas enfrentam a pressão do aumento dos gastos salariais e de uma redução na procura externa. A sobrevivência e o desenvolvimento das empresas tornaram-se mais problemáticos. O que torna o estudo das relações entre o ciclo de vida da empresa e o cash flow livre e a performance nos vários estádios uma tarefa ainda mais urgente. Neste estudo utilizou-se procedimentos standard de investigação empírica para analisar a relação entre as várias fases do ciclo de vida das empresas da indústria transformadora com o free cash flow e a performance. Na parte empírica utilizou-se uma amostra com os dados das empresas chinesas admitidas à cotação na categoria A entre 2004 e 2012. Em primeiro lugar aquela amostra foi dividida pelos estádios de vida de acordo com o método do cash flow de Dickinson. De seguida realizou-se uma análise de estatística descritiva e de regressão em relação aos períodos de crescimento, maturidade e de declínio, de acordo com a respetiva fase do ciclo. Comparando os resultados obtidos podem retirar-se as seguintes conclusões: (1) Na fase de crescimento. O cash flow livre e a performance têm uma correlação positiva; (2) Pelo contrário, no período de maturidade, o cash flow livre e a performance empresarial têm uma relação negativa; (3) Durante o período de declínio (ou de recuperação) o cash flow livre também está correlacionado negativamente com a performance. Com base nestas conclusões apresentam-se algumas recomendações para as empresas

" A Critical Assessment of Seven Reports on Financial Reform: A Minskyan Perspective, Part III--G30, OECD, GAO, ICMBS Reports"

This four-part study is a critical analysis of several reports dealing with the reform of the financial system in the United States. The study uses Minsky's framework of analysis and focuses on the implications of Ponzi finance for regulatory and supervisory policies. The main conclusion of the study is that, while all reports make some valuable suggestions, they fail to deal with the socioeconomic dynamics that emerge during long periods of economic stability. As a consequence, it is highly doubtful that the principal suggestions contained in the reports will provide any applicable means to limit the worsening of financial fragility over periods of economic stability. The study also concludes that any meaningful systemic and prudential regulatory changes should focus on the analysis of expected and actual cash flows (sources and stability) rather than capital equity, and on preventing the emergence of Ponzi processes. The latter tend to emerge over long periods of economic stability and are not necessarily engineered by crooks. On the contrary, the pursuit of economic growth may involve the extensive use of Ponzi financial processes in legal economic activities. The study argues that some Ponzi processes--more precisely, pyramid Ponzi processes--should not be allowed to proceed, no matter how severe the immediate impact on economic growth, standards of living, or competitiveness. This is so because pyramid Ponzi processes always collapse, regardless how efficient financial markets are, how well informed and well behaved individuals are, or whether there is a "bubble" or not. The longer the process is allowed to proceed, the more destructive it becomes. Pyramid Ponzi processes cannot be risk-managed or buffered against; if economic growth is to be based on a solid financial foundation, these processes cannot be allowed to continue. Finally, a supervisory and regulatory process focused on detecting Ponzi processes would be much more flexible and adaptive, since it would not be preoccupied with either functional or product limits, or with arbitrary ratios of "prudence." Rather, it would oversee all financial institutions and all products, no matter how new or marginal they might be. See also, Working Paper Nos. 574.1, 574.2, and 574.4.

Safe & Cheap

Summary Our project bundles investment research reports spanning the authors’ time in the Orange Value Fund (OVF), a student run hedge fund in the Whitman School of Management. Each report exemplifies the fund’s unique, bottoms-up investment style. In contrast to traditional valuation methods that focus exclusively on projecting company earnings, the OVF adopts a micro-level approach to analyzing investment opportunities. Analysts study company documents such as annual reports, credit agreements, and proxy statements to identify safe and cheap opportunities. Safe A safe company has access to capital markets, a super-strong financial position, honest and competent management, and an understandable business. We define strong finances as the absence of liabilities and presence of high quality assets on the balance sheet. OVF analysts look for marketable assets such as income producing real estate, cash, and natural resources such as oil and gas reserves. Honest and competent management protects and enhances long-term shareholder value. Managers should focus on long-term wealth creation instead of short-term stock price fluctuations. In addition, we do not invest in businesses that require continual access to capital markets. Businesses that need daily short-term financing to fund operations fare poorly when credit dries up. Finally, we avoid businesses we don’t understand. Cheap A business must be cheap to be considered for investment. Businesses are cheap when their stock price trades at a substantial discount to intrinsic value. We look for wide margins between 30% and 50% between market price and intrinsic value to shield against analyst mistakes. We prefer to be approximately right rather than exactly wrong. OVF analysts use several valuation methods to determine intrinsic value. Generally, we prefer to use valuation methods that minimize assumptions. For example, we value real estate companies using Net Asset Value (NAV), which is the intrinsic value of assets less liabilities. We use market capitalization rates and sales data to determine asset values. In other industries, such as oil exploration and production, we value natural resource reserves based on industry merger and acquisition activity. We may also apply a multiple to normalized adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) after subtracting capital expenditures (CAPEX). Closing Thoughts Due diligence in difficult economic times is important and the OVF’s investment style positions us to profit from incredible opportunities with minimal investment risk

The Institutional Foundation of Foreign-Invested Enterprises (FIEs) in China

Foreign-invested enterprises (FIEs) are now an important component of the Chinese economy. Since 1992, the growth of FIEs has been exponential. However our understanding of the institutional factors driving the FIE growth remains limited. This paper uses data from 39 industries in China for a period of three years (1995-1997) to explore the institutional foundation of the FIE growth. Our findings suggest that the debt obligations on the part of the SOEs and the local control of the SOEs promote the growth of FIEs and that some of the foreign direct investment (FDI) inflows result in acquisition of existing assets and shift asset controls from SOEs to FIEs.foreign direct investment, economic transition, China

Valuation of Mediaset España Comunicación S.A.

Treball Final de Grau en Finances i Comptabilitat. Codi: FC1049. Curs acadèmic: 2019-2020Value Investing is an investment strategy increasingly known and used by investors. Through this strategy, an investor can determine the theoretical value of a company through a thorough analysis of key aspects of the company, thus allowing investment decisions to be made based on the perception obtained. The aim of this study is to determine a range of intrinsic values for Mediaset España Comunicación S.A., the main Spanish company producing and exhibiting audiovisual products. Through the analysis of the Spanish audiovisual industry and the particular situation and evolution of Mediaset, its strengths and weaknesses will be analysed in order to estimate its future evolution and, consequently, to estimate a set of values for this company by means of the Discounted Cash Flow model

Banco Solidario S.A.: The Recovery Strategy, 2000–2004

Five years passed since, in April, 2000, Kurt Koenigsfest took over as the Chief Executive Officer at Banco Solidario S.A. (BancoSol), in La Paz, Bolivia. BancoSol had become the top Latin American bank specializing in providing microbusiness services. Since its beginning in 1992, BancoSol achieved excellent results and became an international reference in the microcredit area. In mid-2000, external and internal factors caused its performance to deteriorate. Kurt and his management team set and implemented a strategy that led the bank to be rated as the best financial institution in the Bolivian financial system in 2004. The time had come to plan for the future; the management team has to establish BancoSol\u27s primary lines of action for the next three years

Local responsiveness strategy of foreign subsidiaries of Chinese multinationals: the impacts of relational-assets, market-seeking FDI, and host country institutional environments

We build upon the theoretical framework of firm-specific advantages (FSAs) and country-specific advantages (CSAs) to examine the determinants of the local responsiveness strategy of foreign subsidiaries of Chinese multinational enterprises (MNEs). Specifically, we focus on relational assets (R-assets is seen as a unique type of Chinese MNEs’ FSA), the market-seeking foreign direct investment (FDI) and host country institutional environments as drivers of the local responsiveness strategy. We empirically test our hypotheses using a survey data of the foreign subsidiaries of Chinese firms together with other secondary data sources. We find that both Chinese MNEs' R-assets and the market-seeking oriented FDI are positively related to subsidiaries' local responsiveness strategy in accommodating local customer needs, government policies, market conditions, and competitive intensity. Moreover, the impact of R-assets in motivating the local responsiveness strategy is stronger in a host country with a weak and underdeveloped institutional environment. While the evidence confirms the existence of the R-assets in influencing subsidiary level strategy, it also casts doubt on such relations-based firm resources in advanced host countries with highly developed institutions