Capital Investment Spending Research Articles

The relationship between financial constraints and investment efficiency

AbstractThis study examines how financial constraints relate to firm‐level investment efficiency. Prior research theorizes that corporate borrowing by issue of risky debt induces suboptimal capital investment spending. We extend this research to examine whether firm‐level financial constraints and internal investment efficiency are significantly related. We measure firms’ degree of overall financial constraint following the procedure developed by Whited and Wu. Our results indicate that among highly financially constrained firms, overall financial constraints are positively associated with investment, and higher financial constraints are more likely to result in greater investment inefficiency. Furthermore, we find that this relationship is more prominent for companies with high free cash flow, high bankruptcy likelihood, and high growth potential. Our findings that financial constraints have significant influence on corporate investment efficiency should be of interest to company managers, investors, and regulators alike.

Can tourism growth drive environmental improvements in the Eurozone economic space: A panel data analysis

Tourism extensively exploits natural resources and uses ecosystem services to expand its potential and increase market share. The present study investigates potential tourism's effects and causalities on the environmental quality levels in the context of the tourism-induced Environmental Kuznets Curve hypothesis (T-EKC). We conceptualize tourism as a function of its contribution to a country's Gross Domestic Product (GDP), whereas we consider capital investment spending directly connected with the travel and tourism sector as an additional determinant of environmental quality. We contextualize environmental degradation as a means of greenhouse gas emissions (GHGs), methane, and nitrous oxide emissions. Furthermore, our models include primary and energy consumption patterns to emphasize energy efficiency in limiting environmental degradation levels. This study's approach also discusses the role of renewables as an explanatory variable. This set of variables remains less visible in the relevant literature, whereas it extensively covers the T-EKC hypothesis concept. We process panel data analyses for the Eurozone member states from 1996 to 2019. Research findings confirm the inverted U-shaped curve for all models regarding tourism's contribution to GDP. Moreover, capital investment spending does not Granger cause air pollution. Additionally, the percentage of renewables should be increased from a long-term perspective since they decrease environmental degradation. Practical implications call for enhancing sustainable growth in the tourism system in light of energy efficiency issues and eco-friendly investments.

Can Business and Leisure Tourism Spending Lead to Lower Environmental Degradation Levels? Research on the Eurozone Economic Space

This study aims to investigate the impacts and identify the causal links between tourism expansion and the environment among countries of the Eurozone from 1996 to 2019 in the context of the environmental Kuznets curve (EKC). To achieve this end, we used a new set of untested tourism proxies when elaborating the EKC. We disaggregated the tourism phenomenon and highlighted its heterogenous nature by including specific and high-impact market segments such as business and leisure tourism spending as well as capital investment spending. The research findings indicate the pivotal role that tourism proxies have on environmental degradation in terms of greenhouse gas emissions (GHGs). Specifically, the identified reciprocal causalities between leisure and investment spending and environmental degradation suggest some complementarities between these variables. In the case of business tourism spending, an increase (decrease) in this variable leads to an increase (decrease) in environmental degradation. The last two feedback hypotheses indicate that the primary and final energy consumption Granger cause GHGs and vice versa. Such a result offers evidence for incorporating the concept of energy efficiency in tourism. Practical implications should motivate supply and demand dimensions within the tourism system to improve efficiency in tourism flow management. The supply side should transfer the environmental message to visitors to spend wisely and consume smarter, whereas the demand side should perform pro-environmental behavior by spending wisely and acting responsibly at destinations.

Is tourism growth a power of environmental‘de -degradation’? An empirical analysis for Eurozone economic space

The present study aims to investigate potential causality relationships between environmental quality, energy efficiency, and economy when testing the validity of the Environmental Kuznets Curve (EKC) hypothesis. To this effort, panel data analysis concerning Eurozone member states is put into the process for the period 1996–2019. We conceptualize environmental degradation in terms of greenhouse gas emissions, energy efficiency in terms of energy consumption, and the economy concerning a nation’s Gross Domestic Product (GDP). We include additional tourism indicators in terms of the direct contribution of tourism to GDP and tourism key market segments when testing the hypothesis of EKC. Scarcely in literature, we find empirical research that investigates the heterogeneous nature of tourism in the context of business tourism spending and leisure tourism spending, and the environment. This is an essential question, which seeks ways to optimize human and technical resources and processes, sectoral and organizational, to establish sustainability within the economy. This suggests that a potential gap in the literature might exist. We process contemporary panel regression tests that consider possible structural breaks and cross-section dependence phenomena across panel data. Empirical findings confirm the EKC hypothesis whereas business tourism spending, capital investment spending, and internal travel and tourism consumption negatively impact GHG emissions. Furthermore, Granger non-causality tests suggest that all variables Granger cause GHG emissions. Practical implications call for establishing sustainable energy consumption and tourism spending patterns in the long run.

Disclosing the Unnoticed Power of Market Segments In the Tourism Growth Nexus Discussion

The present study aims at investigating the tourism growth nexus by launching a new approach when conceptualizing tourism expansion. We add to the relevant discussion in two specific ways. First, we claim that tourism is a heterogeneous economic activity and launch the concept of market segments when searching for cointegrating and causality relationships at the interface of tourism and economy, an issue that goes unnoticed and an approach that is not tested so far. We define them in two different ways: business tourism spending and leisure tourism spending. In the analysis, we also take into consideration capital investment spending as well as internal consumption within the tourism industry. Second, we apply second-generation panel data analysis within the Eurozone economic space, which is insufficiently investigated within the concept of tourism growth nexus discussion. Research findings indicate that a unidirectional causality relationship running from business tourism spending to economic growth is present. Hence, if business tourism spending increases (decreases) then economic growth will increase (decrease) too. Additionally, changes to leisure tourism spending will cause changes to economic growth in the same direction and vice versa. Internal travel and tourism consumption as well as capital investment spending within the travel and tourism sector form a feedback hypothesis with economic growth meaning that they are mutually influenced when changes occur. Practical implications indicate that a friendly and attractive tourism ecosystem in terms of investments and innovations will enhance sustainable economic growth and tourism demand in the long run.

The Financial and Operating Performance of Newly Privatized Firms: an International Empirical Analysis

This study compares the pre- and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.

The Role Of Cash Holdings, Working Capital, Dividend Payout On Capital Investment

An objective of this paper is to investigate the relationship between firms' capital investment spending, cash holdings, and working capital in an expanding Asian financial market. A sample of publicly traded manufacturing firms on the Hong Kong Stock Exchange was examined during the period 2005-2014. The empirical results provide strong and statistically significant evidence on the effect of cash flow on investment. Working capital also exhibits significant relationship with capital investment spending, though the relationship is not as strong and significant as that with cash flow and cash holding. Firms with low dividend payout policy over the sample period depended heavily on cash flow, changes in cash flow and, to a lesser extent, on working capital to finance spending on fixed plant and equipment. These results suggest that the effect of capital investment spending financed by internal cash flow on firm value may depend on a firm's dividend payout.

Federalism, Fiscal Space, and Public Investment Spending: Do Fiscal Rules Impose Hard Budget Constraints?

The core emphasis of rules-based fiscal legislation at the subnational level in India is to achieve debt sustainability through a numerical ceiling on borrowing and the use of borrowed resources for public capital investment by phasing out revenue deficits. Using the Arellano Bond Panel estimation, this paper examines whether the application of fiscal rules has resulted in an increase in the fiscal space for public capital investment spending in major Indian states. This analysis shows that by controlling other factors, there is a negative relationship between fiscal rules and public capital investment spending at the state level during the rules-based fiscal regime.

Commercialization as a recommended approach to hospital restructuring. Case study of Łańcut Medical Center

Our society is on the brink of health care system reorganization and implementation of new medical technology. Hospitals have to be a core component of the medical revolution so they have to be prepared for the upcoming leap in their development. If Poland wants to be a pioneer in providing new medical solutions, the current ineffective system has to be changed. The necessary action should be taken to deal with the financial problems Polish hospitals have faced for over 20 years. The current structure of hospitals - SPZOZ, is old-fashioned and cannot adapt to a turbulent social and economic environment. The hospitals should be commercialized and restructured. Being capitalized companies will give incentives and new tools to deal with financial problems. The article presents an example of the commercialized hospital in £ancut. We make the observations that commercialization increases: a hospital’s profitability, its employment productivity, its capital investment spending and leverage. The case proves that the transformation of hospitals to capital companies proposed by the Ministry of Health may be an appropriate approach and it does work once a reasonable management board is in charge. However, the legal structure alteration should be treated as the first step in the overall restructuring process. The article highlights the problem of managers of Polish hospitals who do not only struggle with financial shortages, but barely know which business model they should follow after commercialization to successfully run the restructuring process. Having examined the LMC the authors are crafting a prelude to the overall research on already commercialized hospitals to find an appropriate business model.

Federalism, Fiscal Space, and Public Investment Spending: Do Fiscal Rules Impose Hard Budget Constraints?

The core emphasis of rules-based fiscal legislation at the subnational level in India is to achieve debt sustainability through a numerical ceiling on borrowing and the use of borrowed resources for public capital investment by phasing out revenue deficits. Using the Arellano Bond Panel estimation, this chapter examines whether the application of fiscal rules has resulted in an increase in the fiscal space for public capital investment spending in major Indian states. This analysis shows that by controlling other factors, there is a negative relationship between fiscal rules and public capital investment spending at the state level during the rules-based fiscal regime.

Commercialization as a Recommended Approach to Hospital Restructuring Case Study of Łańcut Medical Center

Abstract Our society is on the brink of health care system reorganization and implementation of new medical technology. Hospitals have to be a core component of the medical revolution so they have to be prepared for the upcoming leap in their development. If Poland wants to be a pioneer in providing new medical solutions, the current ineffective system has to be changed. The necessary action should be taken to deal with the financial problems Polish hospitals have faced for over 20 years. The current structure of hospitals - SPZOZ, is old-fashioned and cannot adapt to a turbulent social and economic environment. The hospitals should be commercialized and restructured. Being capitalized companies will give incentives and new tools to deal with financial problems. The article presents an example of the commercialized hospital in Łańcut. We make the observations that commercialization increases: a hospital’s profitability, its employment productivity, its capital investment spending and leverage. The case proves that the transformation of hospitals to capital companies proposed by the Ministry of Health may be an appropriate approach and it does work once a reasonable management board is in charge. However, the legal structure alteration should be treated as the first step in the overall restructuring process. The article highlights the problem of managers of Polish hospitals who do not only struggle with financial shortages, but barely know which business model they should follow after commercialization to successfully run the restructuring process. Having examined the LMC the authors are crafting a prelude to the overall research on already commercialized hospitals to find an appropriate business model.

The Demand for Municipal Infrastructure Projects

Many studies have investigated the determinants of current local public expenditures whereas only a few have studied the factors explaining the capital decision-making process at the local government level. This study uses a panel data set of Connecticut town and cities over the 2000 to 2010 period to estimate the local public demand for various types of capital infrastructure projects. The multiple regression analysis reveals a number of insights regarding the capital-investment decision of local communities. First, unlike the demand for current expenditures, the demand for capital-investment projects is elastic with respect to tax price. Second, unlike the demand for current expenditures, the demand for capital projects is not directly related to changes in income. Finally, intergovernmental grants are shown to be an important determinant of capital investment spending although the specific aid doesn’t always seem to stick where it initially hits.

From state to private ownership: performance of small listed Tunisian firms

In this work, we address the financial and operating performance of a sample of seven Tunisian firms which capital was open to the private sector. As many countries, developed or in development, Tunisia initiates privatisation programme from 1987 to 2009. The results indicate that profitability and capital investment spending ratios decline significantly, but efficiency ratios increase. Furthermore, theses enterprises knew an increase in their debt levels. For the dividend payout, the effect is not determiner.

Privatisation in Developing Countries

We survey empirical studies examining privatisation’s effects in developing economies. Most of these studies find that privatisation yields improvements in the operating and financial performance of divested firms, and only a handful document outright performance declines after privatisation. Almost all studies that examine post‐privatisation changes in output, efficiency, profitability, capital investment spending and leverage document significant increases in the first four measures and significant declines in leverage. The studies examined here are far less unanimous regarding the impact of privatisation on employment levels in privatised firms. Studies that explicitly address the sources of post‐privatisation performance improvement using data from multiple non‐transition economies tend to find stronger efficiency gains for firms in regulated industries, in firms that restructure operations after privatisation, and in countries providing greater amounts of shareholder protection.

The Financial and Operational Performances of Privatized Banks: The Philippine Experience

It is widely believed that a great deal of the privatization efforts of governments started in the United Kingdom during the Thatcher Administration. Records show that the first effort to privatize government enterprises started in the Federal Republic of Germany during the time of Prime Minister Adenaur. One of the most remarkable aspects of the privatization efforts of governments is how similar their objectives are to that of Thatcher's. Raising revenue is the primary goal. Apart from this, governments likewise consider the more important objective of improving the financial and operating performance of privatized firm by exposing it to market forces. Thus privatization is also expected to increase the firm's profitability; to increase its operating efficiency; to allow the firm to increase its investment spending; to increase its output; and to maintain employment levels in order to accomplish the just cited objectives, although governments expect employment levels to decline. The financial and operational performance of commercial banks that were privatized in the Philippines was studied. Four banks before privatization and only three banks after privatization, due to the merger of two banks, were considered. The event study flow of analysis was utilized, i.e., the financial and operational performance of the banks three years before privatization was compared with their performance three years after privatization. Major financial measures of profitability, operating efficiency, capital investment spending, output changes, employment changes, leverage charges and dividend payout were considered. Wilcoxon rank sum test and t-test for differences in means were utilized. When the major financial ratios were considered, the Wilcoxon rank sum test results showed that there was significant difference in the median performance before and after privatization in real sales. We applied the t-test for differences in average performance before and after privatization of the bank. Results showed significant differences in mean return on sales, return on assets, real sales and total employment. At this point, Philippine banks that were privatized can already claim substantial improvements in their operational and financial performance.

Impact of privatization on airlines performance: an empirical analysis

This paper examines the impact of privatization on airlines performance in 10 countries. The empirical analysis suggests an overall positive evidence on performance. More specifically, sales grow rapidly and net income, total assets, capital expenditures, and dividends increase moderately after privatization. Furthermore, efficiency and yield improve after privatization. However, profitability slightly declines after privatization due to increases in capital investment spending and airlines financial and administrative restructuring costs. In contrast to many decision makers’ fears, the findings indicate an increase in the size of employment after privatization. Though the findings support privatization of state-owned airlines to reap these benefits, the specific circumstances of an airline under consideration should be well studied prior to proceeding with privatization.

The Financial and Operating Performance of Newly Privatized Firms: Evidence from Developing Countries

ABSTRACTThis paper examines the change in the financial and operating performance of 79 companies from 21 developing countries that experienced full or partial privatization during the period from 1980 to 1992. We use accounting performance measures adjusted for market effects in addition to unadjusted accounting performance measures. Both unadjusted and market‐adjusted results show significant increases in profitability, operating efficiency, capital investment spending, output, employment level, and dividends. We also find a decline in leverage following privatization but this change is significant only for unadjusted leverage ratios. Our results are generally robust when we partition our data into various subsamples.

The Financial and Operating Performance of Newly Privatized Firms: An International Empirical Analysis

ABSTRACTThis study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990. Our results document strong performance improvements, achieved surprisingly without sacrificing employment security. Specifically, after being privatized, firms increase real sales, become more profitable, increase their capital investment spending, improve their operating efficiency, and increase their work forces. Furthermore, these companies significantly lower their debt levels and increase dividend payout. Finally, we document significant changes in the size and composition of corporate boards of directors after privatization.

The Cash Flow/Investment Relationship: Evidence from U.S. Manufacturing Firms

This paper explores reasons for the strong relationship between cash flow and capital investment spending. The equilibrium level of Tobin's q is used to distinguish between liquidity constraints arising from asymmetric information and managerial over-investment of free cash flow. Results suggest that both the Jensen (1986) free cash flow and the Myers and Majluf (1984) pecking order hypotheses are potential explanations for the investment/cash flow relationship. Free cash flow behavior appears to arise most strongly in large, low-dividend firms when they invest in tangible assets. Pecking order behavior appears to arise in smaller, low-dividend firms and in firms making less tangible investments.

Government spending and the budget deficit

The business community of Canada manifests questionable moral and ethical standards in its criticism of government spending, since it itself bears considerable responsibility for the increase in government spending and budget deficits. The contradiction arises from the failure of the business community to recognize the liberalization of society at large and the associated social responsibility for the well-being of its citizens; a well-being manifested in income maintenance programmes, in access to education and training, in health care, and others. The failure to recognize such expectations is manifested in its failure to provide adequately for the retirement of its employees, for the health care of its employees, for laid-off and seperated employees, thereby shifting the burden to government. Further, it has failed to assume responsibility for the training and retraining of the workers it employs, including high-level workers trained specifically to its purposes in business schools. While expecting government to bear full financial responsibility for income maintenance, health, education and training, the business community makes every effort to deny government the revenues it needs to meet its obligations. The avoidance of tax payments stands high amongst business objectives, manifested in the employment of highly paid accountants and tax lawyers specifically for the purpose. Finally, in their criticism of government spending, business spokesmen deliberately fail to distinguish between consumption spending and capital investment spending, notwithstanding the significant contribution to the production infrastructure of the economy of government investment expenditures. If the capital expenditures were to be taken out of the government's budget, the deficit will decrease substantially.