Capital structure, principal/agency--Relation and the value of the corporation: A simulation study

We assume that a corporation yields an uncertain stream of future earnings devoted to meet the contractual payments to creditors and dividends to shareholders. Fluctuating earnings and fixed obligations of payment embody a risk of illiquidity which might lead to bankruptcy. According to the principal/agency-approach, different capital structures might therefore lead to different streams of earnings. Relying on the present-value concept, these conclusions imply that the value of the corporation and especially that of equity is influenced by its capital structure. The implications of the model will be checked against the situation of three major German companies. It is shown that the computational results are compatible with the empirical observed quotations of share price.value of a corporation stochastic simulation bankruptcy moratoriums

Zur Berechnung des Nutzenerwartungswertes

SIGLEBibliothek Weltwirtschaft Kiel C 139617 / FIZ - Fachinformationszzentrum Karlsruhe / TIB - Technische InformationsbibliothekDEGerman

Gambling and nonexpected utility: the perils of the power function

The use of the power utility function is problematic in expected utility theory. We show that, this is also the case in cumulative prospect theory, where the power function violates the assumption of loss-aversion at small stake levels, so that an optimal model of gambling is precluded. In the case of rank-dependent expected utility it has the counterfactual implication that agents will gamble all of their wealth at actuarially unfair odds.

Investments and Trade-offs in the Economics of Information Security

We develop and simulate a dynamic model of investment in information security. The model is based on the recognition that both IT managers and users appreciate the trade-off between two of the fundamental characteristics of information security, namely confidentiality and availability. The model's parameters can be clustered in a manner that allows us to categorize and compare the responses to shocks of various types of organizations. We derive the system's stability conditions and find that they admit a wide choice of parameters. We examine the system's responses to the same shock in confidentiality under different parameter constellations that correspond to various types of organizations. Our analysis illustrates that the response to investments in information security will be uniform in neither size nor time evolution. © 2009 Springer Berlin Heidelberg

The exemplification of governance principles within state asset management laws and policies: the case of Indonesia

Efficient state asset management is crucial for governments as they facilitate the fulfillment of their public functions, which include the provision of essential services and other public administration support. In recent times economies internationally and particularly in South east Asia, have displayed increased recognition of the importance of efficiencies across state asset management law, policies and practice. This has been exemplified by a surge in notable instances of reform in state asset management. A prominent theme in this phenomenon is the consideration of governance principles within the re-conceptualization of state asset management law and related policy, with many countries recognizing variability in the quality of asset governance and opportunities for profit as being critical factors. This issue is very current in Indonesia where a major reform process in this area has been confirmed by the establishment of a new Directorate of State Asset Management. The incumbent Director-General of State Asset Management has confirmed a re-emphasis on adherence to governance principles within applicable state asset management law and policy reform. This paper reviews aspects of the challenge of reviewing and reforming Indonesian practice within state asset management law and policy specifically related to public housing, public buildings, parklands, and vacant land. A critical issue in beginning this review is how Indonesia currently conceptualizes the notion of asset governance and how this meaning is embodied in recent changes in law and policy and importantly in options for future change. This paper discusses the potential complexities uniquely Indonesian characteristics such as decentralisation and regional autonomy regime, political history, and bureaucratic cultur

Fixed Costs, Investment Rigidities, and Risk Aversion in Information Security: A Utility-theoretic Approach.

This paper addresses the question of determining the optimal timing of interventions in information security management. Using utility theory, we derive the limiting condition under which, given a potential or realized risk, a decision to invest, delay, or abandon can be justified. Our primary focus is on the decision to defer costly deterministic investments, such as the removal of a service or implementation of a security patch, when the costs associated with future security vulnerabilities are uncertain. We outline an investment function with irreversible fixed costs that introduces a rigidity into the investment decision-making profile. This rigidity introduces delay in the implementation of security measures, resulting in cyclical investments in information security, as the decision-maker determines the optimal investment horizon. We therefore show that cycles emerge endogenously given the policy-maker’s chosen trade-offs between investment and the deterioration of the system attributes.