The impact of principal-principal conflict on financial flexibility

2016 ◽  
Vol 8 (4) ◽  
pp. 305-330 ◽  
Author(s):  
Stacey Alicia Estwick
Keyword(s):  
Capital Investment ◽  
Qualitative Methodology ◽  
Net Present Value ◽  
Capital Budgeting ◽  
Financial Flexibility ◽  
Content Type ◽  
Professional Management ◽  
Substantial Investment ◽  
And Control ◽  
The Impact

Purpose This study examined the attainment and the benefits of financial flexibility in the presence of concentrated ownership in the Caribbean. Design/methodology/approach This study used qualitative methodology via the use of case studies. Findings Results revealed that liquidity may be considered the most important form of financial flexibility for firms in transitioning economies, due to constrained capital markets. Blockholder firms also focus on liquidity out of a concern for recovering their substantial investment. This study suggested that in addition to an emphasis on liquidity, blockholder owners emphasise professionalism in managing the firm. This professionalism, accompanied by a genuine separation of ownership and control, may be critical in minimising the possibility of misappropriation of surplus liquidity. The study showed that blockholder owned firms may not recognise maximum capital investment benefits because of the use of sub-optimal capital budgeting techniques reflecting their liquidity preference, or pay maximum dividends, opting instead to use dividends as a governance tool. However, the ability to separate ownership from the management of the operations may counteract this, leading to an increased focus on net present value (NPV) maximising projects, and a dividend policy aimed at preserving future financial flexibility. Research limitations/implications This study highlights the value of qualitative studies in finance research, by providing a deeper insight into the management of firm financial flexibility, under blockholder ownership. It emphasises the importance of considering liquidity as a critical form of financial flexibility. Furthermore, the study shows that two significant factors in controlling principal–principal (PP) conflict may be the ability to separate ownership from control and the appointment of a professional management team. Originality/value This research introduces the variable of PP agency in the study of financial flexibility.

Purchasing power return, a new paradigm of capital investment appraisal

2018 ◽  
Vol 44 (2) ◽  
pp. 241-256 ◽  
Author(s):  
David DeBoeuf ◽  
Hongbok Lee ◽  
Don Johnson ◽  
Maksim Masharuev
Keyword(s):  
Capital Investment ◽  
Net Present Value ◽  
Capital Budgeting ◽  
Cash Flows ◽  
Purchasing Power ◽  
New Paradigm ◽  
Content Type ◽  
Investment Projects ◽  
Investment Appraisal ◽  
The Many

Purpose The purpose of this paper is to contribute to financial managers’ capital budgeting decision-making processes by proposing a new paradigm of capital investment appraisal. The expected return, required return structure of the proposed purchasing power return (PPR) methodology eliminates the many flaws associated with the competing internal rate of return (IRR) and modified IRR (MIRR) techniques. Design/methodology/approach The authors provide a new framework for examining long-term investment projects through a percentage return prism. Unlike that of IRR and MIRR, mathematical consistency with net present value (NPV) is a design requirement. Findings PPR eliminates the many flaws found in the IRR and MIRR methodologies, is mathematically consistent with NPV, and identifies positive-NPV investments forecasted to reduce the company’s purchasing power. These projects are acceptable under NPV, but flagged for additional review and potential rejection. Created to examine projects on a percentage return basis, PPR employs market-based inflation rates to convert all cash flows into constant purchasing power units of measure. From these units, an expected real return is estimated and compared to the project’s inflation-adjusted required return, resulting in an accept/reject decision consistent with that of NPV. Originality/value The proposed PPR is a new paradigm of capital investment appraisal that eliminates the many problems found in the IRR and MIRR techniques, is mathematically consistent with the NPV method, and helps financial decision makers examine investment projects on an expected percentage return basis. PPR also flags for further review projects expected to actually reduce the company’s purchasing power.

scholarly journals Capital budgeting practices and political risk: evidence from Lebanon

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ahmed Bakri ◽  
Suzanne G. M. Fifield ◽  
David M. Power
Keyword(s):  
Capital Investment ◽  
Political Risk ◽  
Capital Budgeting ◽  
Capital Projects ◽  
Content Type ◽  
Corporate Managers ◽  
Investment Projects ◽  
Investment Appraisal ◽  
High Level ◽  
The Impact

Purpose This paper aims to examine how capital investment projects are appraised in Lebanon; whether the risk is incorporated into this process by Lebanese firms and the impact of political risk on the capital budgeting process. Design/methodology/approach This paper uses a questionnaire survey to investigate the capital budgeting practices of companies located in Lebanon, which is a country characterised by a high level of political risk. Findings Lebanese companies tend to use more than one method of investment appraisal and, increasingly, they are using sophisticated discounted cashflow techniques alongside the payback period. The most widely used methods to evaluate risk include scenario and sensitivity analysis. Finally, political risk plays an important role in the capital budgeting processes of Lebanese companies. Originality/value The paper reports on whether the methods of capital investment appraisal used throughout advanced Western economies are used in the context of an emerging economy. In addition, Lebanon is an ideal research site to study capital budgeting as the conflicts in the country of the past 50 years have required sizeable new expenditure on capital projects; the country is characterised by high levels of political risk which may lead corporate managers to use different approaches to investment appraisal and it provides an opportunity to study capital budgeting decisions by private, unlisted firms.

Financial battle against climate change – assessing effectiveness using a scorecard

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Candauda Arachchige Saliya ◽  
Suesh Kumar Pandey
Keyword(s):  
Climate Change ◽  
Financial Risk ◽  
Financial System ◽  
Regulatory Agencies ◽  
Theoretical Frameworks ◽  
Content Type ◽  
Banking Regulations ◽  
And Control ◽  
The Impact ◽  
Practical Implications

Purpose This paper aims to investigate how and to what extent the Fijian sustainable banking regulations or guidelines are designed, communicated, implemented and monitored within the financial system in Fiji. A scorecard is introduced for this purpose to assess the effectiveness of Fiji’s financial battle against climate change (FBACC). Design/methodology/approach This study uses a mixed-method methodology. Data were collected mainly from a survey and supplemented by interviews, observations and documents. The scorecard was developed by building on existing two theoretical frameworks, namely, the Sustainable Banking Assessment and Climate Change Governance Index, to make them more appropriate and practically applicable to less developed financial systems in emerging economies such as Fiji. This FBACC scorecard consists of four perspectives, eight critical factors and 24 criteria. Findings The results show that the overall FBACC score averages 40.75%, and all the perspectives scored below 50%, the benchmark. Only the CF “policy” scored 54.25% because of a high positive response of 82.3% for the “political leadership” criterion. The relative contributions of each perspective in constructing the overall score are distributed as 28%, 25%, 24% and 23% among planning, action, accountability and control, respectively. Research limitations/implications These results were complemented by the information shared during the interviews and confirmed that the existing political initiatives need to be effectively communicated and/or implemented in the financial system by the regulatory agencies. Practical implications This FBACC scorecard can be applied to other underdeveloped systems in emerging countries to assess the effectiveness of the sustainable banking regulations and/or guidelines in those countries in relation to the FBACC. It can also be applied to individual firms to assess their contribution to the FBACC. Originality/value To the authors’ best knowledge, this might be the first study in Fiji that considers the impact of climate-related financial risk on the Fijian financial system.

Dice manufacturing company: the acquisition decision

2021 ◽  
Vol 11 (1) ◽  
pp. 1-26
Author(s):  
Aliaa Bassiouny ◽  
Enjy Toma ◽  
Farida Dawood ◽  
Haneen Aljammali ◽  
Salim Seif El Nasr ◽  
...  
Keyword(s):  
Learning Outcomes ◽  
Business Model ◽  
Net Present Value ◽  
Capital Budgeting ◽  
Strategic Decision ◽  
Issues Management ◽  
Content Type ◽  
Project Valuation ◽  
Manufacturing Company ◽  
Evaluation Techniques

Learning outcomes The learning outcomes of this paper is as follows: understand the issues that faced private Egyptian textile producers following the January 2011 revolution and how that impacted their business model. Evaluate whether Dice’s inorganic expansion through acquiring Alex Clothing Company is a sound strategic decision given the economic uncertainty in Egypt. Analyze the acquisition decision through projection evaluation techniques, including net present value (NPV), internal rate of return (IRR) and modified IRR (MIRR), to measure whether the acquisition will add value to Dice. Discuss non-financial issues post-acquisition that are not captured by traditional capital budgeting and project evaluation techniques. Case overview/synopsis Dice Manufacturing Company, an established and successful textile manufacturing family business, is facing an important investment decision with regard to inorganic expansion through the acquisition of Alex Clothing Company and its subsidiary United Dyers. The case is intended to be discussed in an undergraduate corporate finance class. The case setting is inside Dice Manufacturing Company, where one of the founders, Nagy Toma and his CFO Victor ElMalek are analyzing the acquisition decision in January 2015. The protagonist is Victor ElMalek, who has to recommend a course of action for the company owners. The case allows students to apply capital budgeting and project valuation methods to make a decision on whether the acquisition brings value to Dice and to analyze issues management can face post-acquisition. The case follows through the history of Dice, presenting its business model and changes that accompanied the 2011 revolution. It then moves on to outline the acquisition opportunity and provides data for students to analyze through traditional project valuation techniques, including NPV, IRR and MIRR. Complexity academic level Undergraduate. Subject code CSS 1: Accounting and Finance. Supplementary materials Teaching notes are available for educators only.

Turnaround of struggling plant of DJSL Limited: capital investment or operational improvement

2018 ◽  
Vol 8 (3) ◽  
pp. 1-26
Author(s):  
Somnath Chakrabarti ◽  
Nripendra Kumar ◽  
Anupam Upadhyay
Keyword(s):  
Operations Management ◽  
Capital Investment ◽  
Swot Analysis ◽  
Subject Area ◽  
Content Type ◽  
Turnaround Strategies ◽  
People Development ◽  
Operational Issues ◽  
Functional Experience ◽  
The Impact

Subject area Strategy. Study level/applicability The case can primarily be used for a Strategic Management course for teaching the revival strategies for financially weak plants. The case highlights the need to shift from a product manufacturing perspective to a market orientation perspective and, hence, may add value as an add-on case in a Strategic Marketing course. The case also covers the topic of benchmarking which may be of use in an Operations Management course. Case overview DJSL Ltd. is the largest engineering and manufacturing enterprise in India in the energy-related/infrastructure space in the public sector. Its Lucknow unit, manufacturing porcelain insulators and wear resistant ceramic lining (CERA LINING), has started reporting losses. A change of management took place in October 2015, whereby Mr. S P Singh was appointed as the Head of the Lucknow Unit. Mr. Singh had rich functional experience of 30 years, mainly in the domains of strategy, project execution and commercial aspects. He was asked to come up with a revival plan for the Unit by the top management of DJSL. The case highlights the importance of operational issues in turnaround management. Expected learning outcomes Students may be encouraged to debate the benchmarking practices that are best suited for the Lucknow unit. They can also discuss the impact of benchmarking efforts upon turnaround strategy. Students are also encouraged to understand the constraints which may limit the success of initiatives impacting operational improvements. Students need to develop the understanding of marketing strategy to perform a SWOT analysis of each product of the Lucknow unit and to sense the business opportunities in and around the environment. Students need to discuss how productivity may be improved with the adoption of appropriate people development strategies. Students are encouraged to discuss the revival/turnaround strategies and to identify the influence of improvement in operational efficiency/productivity upon revival plan. Supplementary materials Teaching Notes are available for educators only. Please contact your library to gain login details or email [email protected] to request teaching notes. Subject code CSS: 11: Strategy.

Financial impact of high land prices on the viability of winery startup projects

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Michael Santos ◽  
Vincent Richman ◽  
Aidong Hu
Keyword(s):  
Net Present Value ◽  
Weighted Average ◽  
Capital Budgeting ◽  
Investment Horizon ◽  
Internal Rate Of Return ◽  
Content Type ◽  
Land Prices ◽  
Practical Implications

Purpose Does it make economic sense to invest in winery startups with high land prices? This paper aims to apply a capital budgeting analysis for a startup project to investigate the role of land prices in the decision-making of a wine entrepreneur. Design/methodology/approach This paper uses a capital budgeting analysis to evaluate the value of a winery project using the six investment criteria: net present value (NPV), internal rate of return (IRR), modified IRR, profitability index, payback period (PB) and discounted PB. Findings This study finds that high land prices are economically justifiable (NPV is greater or equal to zero) when the weighted average capital cost is sufficiently low for investors who are able to diversify risks and with access to a cheap source of funds. Additionally, this study demonstrates that wine entrepreneurs need a long-term investment horizon because the recovery of the initial investment in winery startup projects takes many years. Research limitations/implications The startup winery projects are heavily influenced by wine pricing, production and cost assumptions. As a result, different assumptions made at other wine regions may result in slightly different outcomes for the acceptability of the wine startup projects. Practical implications High land prices are economically justified for investors and entrepreneurs with the ability to diversify risk and access to cheap financial resources. As such, land prices can be a critical obstacle for individual entrepreneurs who experience a lack of capital. Social implications In the famous wine regions of the world, high land prices may result in more wineries being owned by the capital rich wine conglomerates. Originality/value This paper provides estimations of land prices based on financial methods to discuss the justification of observed prices and the implications regarding the ability of investors and entrepreneurs to access capital.

Impact of AI regulation on intention to use robots

2019 ◽  
Vol 8 (2) ◽  
pp. 97-114
Author(s):  
Sheshadri Chatterjee
Keyword(s):  
Quality Of Life ◽  
Artificial Intelligence ◽  
Design Methodology ◽  
Regulatory Control ◽  
Control Beliefs ◽  
Intention To Use ◽  
Content Type ◽  
And Control ◽  
The Impact

Purpose The purpose of this paper is to identify the factors influencing the citizens to use robots that would improve the quality of life of the citizens. Design/methodology/approach With the help of different adoption theories and models and with the support of background studies, some hypotheses have been formulated and a conceptual model has been developed with the consideration of the impact of artificial intelligence regulation (IAR) that controls the use of robots as a moderator. The model has been validated and the hypotheses have been tested by statistical analysis with the help of survey works involving consideration of feedbacks from 503 usable respondents. Findings The study reveals that the use of robots by the citizens would appreciably increase if government imposes strict artificial intelligence (AI) regulatory control concerning the use of robots, and in that case, it appears that the use of robots would improve the quality of life of the citizens. Research limitations/implications The duly validated model would help the authority to appropriately nurse and nurture the factors such as ethical dilemma, perceived risks and control beliefs for enhancing the intention of the citizens to use robots for many purposes including domestic usage in the context of appropriate restrictions imposed through AI regulation. Such use of robots would eventually improve the quality of life. Originality/value There are a few studies covering analysis of IAR as a moderator on the linkages of the predictors with the intention of the citizens to use robots. In this context, this study is claimed to have offered a novel contribution.

Help Me Grow Utah and the impact on family protective factors development

2018 ◽  
Vol 13 (1) ◽  
pp. 33-43
Author(s):  
Karen D. Hill ◽  
Brian J. Hill
Keyword(s):  
Child Development ◽  
Protective Factors ◽  
Protective Factor ◽  
Response Shift ◽  
Control Group ◽  
Content Type ◽  
Post Test ◽  
Response Shift Bias ◽  
And Control ◽  
The Impact

Purpose The purpose of this paper is to examine the development of family protective factors in participants of Help Me Grow Utah (HMGU), a community-based system that promotes child development, seeks early detection of developmental delays, and links families to services. Design/methodology/approach In this paper, standard quasi-experimental survey design was utilized. HMGU and control group participants completed the FRIENDS Protective Factors Survey, which was slightly modified into a retrospective pre-test and post-test format to address previous survey concerns of response-shift bias, self-serving assessments, and family maturation. Participants were asked to respond to ten questions at present and then again from the perspective of two years previous. Findings Participants in HMGU had statistically significant increases in protective factor scores in all but one subscale, with dramatic increases in two subscale questions on knowledge of parenting and child development. Control group scores statistically increased in four subscales, albeit at lower rates than HMGU participants. Interestingly, control group scores on two subscale questions relating to child maltreatment risk were significantly lower on post-tests as compared to their retrospective pre-test scores. Research limitations/implications Participants in HMGU clearly increased in the development of protective factors. Replication of this study is recommended and the need for a control group in protective factor studies is imperative. Practical implications Findings from this study suggest that child services focused on enhancing knowledge of parenting and child development might also expect to improve protective factors. One-on-one care coordination with families seems particularly effective. The findings might also benefit other social programs as they utilize retrospective pre-test, post-test, and control groups in their evaluations. Originality/value HMGU is the first affiliate to utilize retrospective pre-test/post-test methodology, which can overcome confounding results attributable to response-shift bias. Also, the use of a control group affords inclusion of natural maturation in considering findings.

Transboundary air pollution and respiratory disease mortality: evidence from European countries

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Jonathan Spiteri ◽  
Philip von Brockdorff
Keyword(s):  
Air Pollution ◽  
Air Pollutants ◽  
Respiratory Diseases ◽  
Mortality Rates ◽  
Content Type ◽  
Transboundary Air Pollution ◽  
Per Capita ◽  
Cross Country ◽  
And Control ◽  
The Impact

PurposeThe aim of this paper is to quantify the impact of transboundary air pollutants, particularly those related to urban traffic, on health outcomes. The importance of focusing on the health implications of transboundary pollution is due to the fact that these emissions originate from another jurisdiction, thus constituting international negative externalities. Thus, by isolating and quantifying the impact of these transboundary air pollutants on domestic health outcomes, the authors can understand more clearly the extent of these externalities, identify their ramifications for health and emphasise the importance of cross-country cooperation in the fight against air pollution.Design/methodology/approachThe authors employ panel data regression analysis to look at the relationship between emissions of transboundary air pollution and mortality rates from various respiratory diseases among a sample of 40 European countries, over the period 2003–2014. In turn, the authors use annual data on transboundary emissions of sulphur oxides (SOx), nitrogen oxides (NOx) and fine particulate matter (PM2.5), together with detailed data on the per capita incidence of various respiratory diseases, including lung cancer, asthma and chronic obstructive pulmonary disease (COPD). The authors consider a number of different regression equation specifications and control for potential confounders like the quality of healthcare and economic prosperity within each country.FindingsThe results show that transboundary emissions of PM2.5 are positively and significantly related to mortality rates from asthma in our sample of countries. Quantitatively, a 10% increase in PM2.5 transboundary emissions per capita from neighbouring countries is associated with a 1.4% increase in the asthma mortality rate within the recipient country or roughly 200 deaths by asthma per year across our sample.Originality/valueThese findings have important policy implications for cross-country cooperation and regulation in the field of pollution abatement and control, particularly since all the countries under consideration form a part of the UN's Convention on Long-Range Transboundary Air Pollution (CLRTAP), a transnational cooperative agreement aimed at curtailing such pollutants on an international level.

A survey of capital budgeting practices used by firms in Barbados

2018 ◽  
Vol 16 (4) ◽  
pp. 564-584
Author(s):  
Philmore Alleyne ◽  
Shantelle Armstrong ◽  
Marissa Chandler
Keyword(s):  
Net Present Value ◽  
Cultural Practices ◽  
Contingency Theory ◽  
Capital Budgeting ◽  
The Body ◽  
Capital Projects ◽  
Content Type ◽  
The Individual ◽  
Self Administered Questionnaire

PurposeThis paper aims to examine the capital budgeting practices used by firms in Barbados using contingency theory.Design/methodology/approachThe study involves the use of a self-administered questionnaire sent to the individual responsible for capital budgeting decisions (either the accountant, financial controller or senior manager) in each of the firms selected. In total, 41 completed questionnaires are received; 12 follow-up interviews are conducted with respondents to indicate the reasons for use and non-use of capital budgeting practices.FindingsCapital budgeting practices are not widely used by firms in Barbados. The payback method (PBM) is determined to be the preferred method of choice because of its simplicity, agility and cultural practices. Based on contingency theory, organisations in Barbados believe that the PBM is a better fit for them. Top management drives the capital budgeting process with crude and non-traditional methods for the acceptance of capital projects. While there are no statistically significant differences in the capital budgeting practices used in different sectors, professional accountants are more likely to use net present value and sensitivity analysis than non-professional accountants.Research limitations/implicationsThe sample is small, and consequently, findings may not be generalisable to the population.Originality/valueThis study makes a significant contribution to the body of literature in emerging countries such as Barbados on the usage of capital budgeting practices and factors that may influence their usage. It further contributes to policymakers, practitioners, organisations and stakeholders of organisations.

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