Incentives to (Irreversible) Investments Under Different Regulatory Regimes

This paper addresses the issue of how regulatory constraints affect firm's investment choices when the firm has the option to delay investment. The RPI-x rule is compared to a profit sharing rule, which increases the x factor in case profits go beyond a given level. It is shown that these rules are identical in their impact on investment choices, in that the change in the option value exactly compensates the change in the “direct“ profitability of investment. The result is then analysed in the light of option theory and explained on the basis of the “bad news principle“.

Incentives to (irreversible) investments under different regulatory regimes

This paper addresses the issue of how regulatory constraints affect firm's investment choices when the firm has the option to delay investment. The "RPI-x" rule is compared to a profit sharing rule, which increases the x factor in case profits go beyond a given level. It is shown that these rules are identical in their impact on investment choices, in that the change in the option value exactly compensates the change in the ``direct'' profitability of investment. The result is then analysed in the light of option theory and explained on the basis of the ``bad news principle''.

Compensation and Bargaining with Entrpreneurship as the Outside Option

We analyze the impact of entrepreneurship as an outside option on compensation contracts between a principal and an agent with bargaining power. In the first stage the parties bargain over the base wage and the profit share. In the second stage the principal determines the capital investment and the agent decides on effort. It is shown that while negotiated base wage increases in the degree of the competitiveness in the market for outside equity funding, the profit share is invariant both to the imperfections prevailing in the equity market and to the relative bargaining power of the negotiating parties.Wage bargaining, outside option, entrepreneurship

Aggregating Impact: A Funder's Guide to Mission Investment Intermediaries

This report provides a guide to mission investment intermediaries, organizations that collect capital from multiple sources and reinvest it in people and enterprises, whether nonprofit or for-profit, that deliver both social impact and financial returns. A growing number of foundations and other funders are beginning to use such intermediaries versus making mission investments directly. This is due to a number of advantages that intermediaries can provide, such as ease of investment, reduced risk, lower transaction costs, specialized expertise, performance reporting, and an expanded deal flow. Yet research disclosed that many funders are unaware of the wide range of mission investment intermediaries that are available and of the advantages they can offer. The authors provide an overview of mission investment intermediaries and how foundations use them, the benefits and challenges of investing in intermediaries, and an analysis of available intermediaries that address economic development, housing and the environment

Firm behaviour under alternative bidding systems for US OCS hydrocarbon leases

One of the least settled issues in US offshore oil policy is the "best" scheme to capture resource rents arising from hydrocarbon production. This paper analyses the impact of alternative bidding systems on the intertemporal production path and on the firm's investment decision. It concludes that with the exception of the pure profit share system all other pure or mixed bidding systems are likely to have a distortive effect on production and, thus, eventually lead to a dissipation of economic rent. Further, no leasing system authorised by current public law is found to be neutral regarding investment decisions.

International corporate taxation and US multinationals' behaviour: an integrated approach

Using data from the International Revenue Service, this paper explores the effects of corporate taxation on U.S. capital invested abroad and on tax planning practices (dividend payments, income shifting, and passive investment). The econometric analysis first indicates that investment is strongly influenced by average tax rates, with a magnified impact for particularly low-tax rates implying that the attractiveness of low-tax countries is not weakened by anti-deferral rules and cross-crediting limitations. Further explorations suggest that firms report higher profit and are less likely to repatriate dividends when they are located in low-tax jurisdictions. Firms also report higher Subpart F income in countries in which they shift their profit, suggesting that cross-crediting provides an incentive to shift passive income in low-tax countries and that passive investment can be an alternative strategy to minimize taxes when active investment opportunities are lacking. Finally, the paper estimates the role of effective transfer pricing regulation on income shifting activities using the quality of host countries' law enforcement. It appears that low degrees of law enforcement are associated with higher income-shifting.Uncertainty, Multi-Prior Beliefs, Suspension Schemes, Panic-Driven Bank Runs.

A Survey on Economic-driven Evaluations of Information Technology

The economic-driven evaluation of information technology (IT) has become an important instrument in the management of IT projects. Numerous approaches have been developed to quantify the costs of an IT investment and its assumed profit, to evaluate its impact on business process performance, and to analyze the role of IT regarding the achievement of enterprise objectives. This paper discusses approaches for evaluating IT from an economic-driven perspective. Our comparison is based on a framework distinguishing between classification criteria and evaluation criteria. The former allow for the categorization of evaluation approaches based on their similarities and differences. The latter, by contrast, represent attributes that allow to evaluate the discussed approaches. Finally, we give an example of a typical economic-driven IT evaluation

Why is Las Vegas busy everyday? A behavioural analysis of impact investors’ attitude and decision-making process

Remarking a discrepancy in the statistics of a growing influence of impact investment and yet its restrictive inclusion in the financial market has encouraged this inductive research to take an alternative approach to address the impact investment market. In an emic perspective, this study aims to assess the factors motivating individuals and institutions to pursue impact investment. Further, it also investigates some elements that guide the decision making of the investors in this field. The qualitative nature of the research demands exceptional secondary sources and it is rendered more credible with the inclusion of three relevant primary sources. The analysis of the interviews and its assessment vis-a-vis the theories of behavioral finance, we have learned that media narratives and norms are the external factors that motivate people to invest responsibly. However, their personality, attitudes, values, and moral intensity are also inherent factors that encourage them. Their decision making is reliant upon heuristic biases caused by emotional factors such as trust and human relational more than accountability and data. The investors also tend to be oriented towards risk minimization rather than profit maximization, since many do not view impact investment as a traditional investment and neither do they expect to make a profit, nevertheless, it is debatable and depends on the individual. If the first inquiry is to assess the factors that encourage traditional investors to pursue social impact, then the second inquiry about Church investors is an antithetic approach as we evaluate factors that make Church investors consider financial gain alongside the social service. We conclude that it is the recognition of the need to become financially sustainable We can use these findings to restructure the choice architecture we provide to the clients by collecting relevant data to learn more about their values, attitude, and behavior to ease the decision-making process and encourage impact investment

Pengaruh Kebijakan Dividen terhadap Laba Satu Tahun ke Depan Studi pada Emiten Sub Sektor Manufaktur di Bursa Efek Indonesia 2007 – 2010

Earning growth is one of the company's goals in accounting report. Dividend payment is assumed to have a link in the change of the profit in the following year. Pecking Order Theory revealed that a change in dividend will give a negative impact towards profit change. However, this statement contradicts to Zhou and Rulland's research (2006) which showed that dividend payout has a positive impact towards profit change in the following year. This research is in accordance with signaling theory which describes that dividend is a reflection of a good performance from the company, thus, it will invite investors to increase their investment share. With the increase in the investment, the company is expected to expand and increase its profit. The research is conducted in Indonesia towards all emitents in the manufactory sub sector by taking 95 research samples from companies that paid dividend in 2007, 2008,2009, and 2010. The research type is quantitative research with double regression analysis instrument. The dependent variable is the change of profit while the independent variable is dividend payout. Variable controls in this research are ROA, leverage, and size.The result of the research shows that dividend payout does not significantly influence the change of profit even though the number of co-efficient regression is positive. ROA and leverage variables significantly influence the change of profit while Size variable does not significantly influence it. In the maturity and stable level, the company will find it hard to increase the profit even though dividend payment is high

Understanding Social Investment Policy: evidence from the evaluation of Futurebuilders in England

The concept of social investment has attracted interest from policy makers, financial markets and not for profit organisations. It is an emergent notion which is multi-faceted and includes different market forms, policy responses, and institutional configurations. There is relatively little empirical evidence on the design, implementation and impacts of the various initiatives which have been perceived as falling within the field of social investment. This paper begins to address this gap. It draws on the national evaluation of Futurebuilders in England which was undertaken between 2005 and 2010. At the time Futurebuilders was one of the largest examples of a public policy initiative to support social investment; based on a policy model of government seeking to promote the use of loan funding to third sector organisations as part of a wider agenda of expanding the sector's role in the delivery of public services. The paper explores the effects of the programme on the third sector, on public service delivery and on service users. In conclusion the paper challenges some of the assumptions of this policy model, as well as the potential for 'impact investing' to become a framework for welfare provision