Direct Financing Research Articles

The role of the state in the development of the rocket and space industry

In the USSR, space exploration was considered a national achievement necessary for the state to raise the patriotic spirit of citizens and show the strength of the country. Of course, then the state was the main investor in this area. During this time, little has changed. As then, and now, all over the world, governments are the main investors in the rocket and space industry. Investments are made through the provision of grants, subsidies and direct fi nancing. Over the past ten years, the number of participating countries implementing space programs and participating in global production chains for the creation of rocket and space products has signifi cantly expanded. In addition, private funding for projects has increased, leading to a signifi cant infl ow of private capital into the space sector. The relevance of this article is explained by the fact that the number of players in the market for rocket and space products has increased signifi cantly, as has the intensity of the race in this area between countries. This trend is also facilitated by the active infl uence on this area of the American company SpaceX, whose achievements are monitored by the whole world, and Roscosmos is trying to keep up with its Western competitor. Also, do not discount China, which is one of the most, if not the most signifi cant, competitors to the United States both in the economy as a whole and in the rocket and space industry. The purpose of this article is to analyze the current situation in the rocket and space industry and the role of government regulation in this area.

Trade and Economic Cooperation of BRICS: Problems and Prospects

The subject of this study is the legal and financial features of the BRICS trade and economic cooperation and the practice of their application in modern conditions. The purpose of this article is to identify problems that impede the effective development of economic relations and put forward proposals for their improvement. The study showed that the BRICS countries have significant reserves for multilateral cooperation and support of trade and economic relations. In this regard, harmonization of trade and economic relations of partner countries is necessary, in order to solve strategic problems and improve the living standards of the population. It is shown that simplifying the access of entrepreneurs to credit, tax incentives for exporters of industrial goods, flexible conditions for direct and indirect financing of projects and programs, expanding the participation of BRICS development banks and institutional investors contributes to the progressive development of national economies and improving trade and economic relations of BRICS. For research purposes, IBOV INDEX (Brazil), CRTX INDEX (Russia), SENSEX INDEX (India), SHCOMP INDEX (China), JALSH INDEX (South Africa) and Bloomberg platform (WEI, DES, GP, XLTP XCIT, MEMB) materials were used. Evaluation of data in key sectors of the BRICS economies showed the existence of interconnectedness and interdependence of the BRICS trading floor indices - sources of direct financing for trade and economic cooperation of partner countries. Correlation analysis and cointegration of time series confirmed a solid foundation for stimulating multilateral cooperation of the BRICS, including on the basis of interstate support for business entities and expanding the participation of institutional investors in ensuring sustainable development of the BRICS. It is concluded that the results of the study can be used in developing measures of interstate support for trade and economic cooperation of BRICS in modern conditions.

Is Financial Structure Good for Marine Economic Growth? An Evidence from China

Xu, X. and Cui, Y., 2020. Is financial structure good for marine economic growth? An evidence from China. In: Li, L. and Huang, X. (eds.), Sustainable Development in Coastal Regions: A Perspective of Environment, Economy, and Technology. Journal of Coastal Research, Special Issue No. 112, pp. 311-314. Coconut Creek (Florida), ISSN 0749-0208.This paper mainly studies the relationship between China's marine economic growth and financial structure. Based on the data analysis from 2001 to 2019, there is an inverted U-shaped nonlinear effect between China's loan, bond, stock financing and marine economic growth, so there will be an optimal scale of loan, bond and stock financing in China. In addition, from the perspective of financial asset structure, the results also show that the marketization of financial structure can promote the growth of marine economy. Therefore, China should control the scale of indirect financing mainly by loans and direct financing mainly by bonds and stocks within a reasonable range, so as to promote the rapid and healthy development of marine economy.

The different types of renewable energy finance: A Bibliometric analysis

This article surveys the academic research dedicated to the different types of renewable energy finance. We conduct a bibliometric analysis based on the widely used database Web of Science, covering the period of 1992 to 2018. We generate a bottom-up clustering of academic articles using network analysis tools, leading us to identify 8 main clusters of publications defined by their focus on specific types of finance and their geographical and technological scope. Our main line of research is to observe the discrepancy between the importance of the funding modes in reality and their share in the literature. The critical appraisal of our results highlights that the literature does not reflect the diversity of renewable energy finance. Most studies focus on market-based policy instruments used to support renewable energy development in developed countries. Conversely, few studies of direct financing flows from the public and private sectors were found, while private sources provide an important part of renewable energy investment globally. Furthermore, the literature generally focuses on mature renewable electricity technologies (solar and wind). Our dynamic analysis reveals that private investment is an emerging subject. Overall, our result reveals significant room for development of the field.

Sorting Out State Subsidies

Public sector subsidies (e.g. direct public financing of certain activities or sectors in the economy) are among the key interventions to accomplish public policy goals, including boosting social safety nets for vulnerable groups, empowering different sectors to become much more resilient to climatic shocks and competition, and enhancing the country’s agricultural development and industrialization prospects. The effectiveness of subsidies depend critically, not just on where they are deployed, but also how they are applied. Two sets of support programs — the Pantawid Pamilyang Pilipino Program (4Ps) for poor mothers and children and the various agricultural support programs and subsidies — offer useful insights in this regard. This paper briefly reviews the evidence and lessons from these subsidy programs.

Public health investments and mortality risk in Brazilian peritoneal dialysis patients.

BackgroundEnd-stage kidney disease (ESKD) treatment is very costly and accounts for a significant percentage of public healthcare expenditures. Beyond direct costs, dialysis patients use other healthcare levels, but the impact of public investment on each of these levels is unclear. This study aimed to investigate the association between direct financing at different healthcare levels and overall mortality in peritoneal dialysis (PD) patients.MethodsWe included all adult incident PD patients from a Brazilian prospective, nationwide PD cohort. Overall mortality was the primary outcome of interest. We used a three-level multilevel survival analysis to investigate whether mortality was associated with the investments destined to different levels of healthcare complexity: (i) primary, (ii) medium and high and (iii) professional healthcare training and community awareness.ResultsWe evaluated 5707 incident PD patients from 78 Brazilian cities, which were divided into four quartiles for each healthcare level (Groups I–IV). After taking the highest quartile (Group IV) as a reference, investment in the primary health level was not associated with patient survival. Otherwise, medium and high complexity levels were associated with higher mortality risk. Also, investment in healthcare manager training and community awareness had an impact on patient survival.ConclusionsInvestments in different levels of the healthcare system have distinct impacts on PD patient survival. Investment in healthcare manager training and community awareness seems to be a promising strategy on which to focus, given the relatively low cost and positive impact on outcome.

Doubling Down on the Safe(ty) Bet: Bailouts and Risk-Shifting at the Intensive Margin

Banks have a significant funding-cost advantage since their liabilities are protected by various government safety nets. We construct a corporate finance-style model that shows that banks can exploit this funding-cost advantage by just intermediating funds between investors and ultimate borrowers, thereby earning the spread between their reduced funding rate and the competitive market rate. This mechanism leads to a crowding-out of direct market finance and real effects for bank borrowers through bank risk-shifting at the intensive margin. That is, banks induce their borrowers to leverage excessively, to overinvest, and to conduct inferior high-risk projects.

E-Learning Financing Models in Russia for Sustainable Development

E-learning brings new dimensions to traditional education. This especially affects countries that, due to many factors, have historically been considered the “talent pool” for the world community. In this study, a model for financing e-education has been developed that is applicable to Russian realities. The model was built around the balance between demand (global politics, economics, and principles of sustainable development) and supply (sources of direct financing). As a result, a key challenge of improving the e-learning financing methodology and models, specifically the efficiency of government spending and private investing, demands the use of new approaches and mechanisms. To improve e-learning financing, a clear understanding of the applied purpose of public and private means is required. Responsibilities for the e-learning outcome of institutions that receive financing are linked to their status. An unclear understanding of these issues is more likely associated with the issue of transparency of financing than with inefficiency. The proposed model allows transforming the “standards” of financing both in the field of e-education and Russian education in general and presents a new vision of participants’ interaction in the educational process, taking into account a set of restrictions and market features.

Investment tax deduction for corporate income tax as a promising tool for supporting innovative territorial clusters in Russia

The subject of the study is the investment tax deduction for corporate income tax as a tool for tax incentives for the development of innovative territorial clusters in Russia. The characteristic features of the cluster approach in the economy are noted. Special attention is paid to the federal programs of the Ministry of Economic Development of the Russian Federation to support the development of innovative territorial clusters. The main advantages of tax incentives over other forms of state support for cluster development are highlighted. The benefits related to clusters available in the tax legislation are described. The analysis of the emerging regulatory framework of the subjects of the Federation on the investment tax deduction for corporate income tax is carried out. The conclusion is made about the importance of state support for the development of innovation clusters, which, in the conditions of termination of direct financing in the form of subsidies, can be carried out in the form of tax incentives for investment and innovation activity of cluster participants. The analysis of regional legislation revealed that the current structure of the investment tax deduction in some subjects of the Federation is "overloaded" not always with objective restrictions or overstated requirements, which significantly limit its availability to taxpayers and reduce its effectiveness. It is proposed to direct the benefits to the participants of innovative territorial clusters in their home regions, which, thanks to the synergetic effect generated in them, will lead to an increase in tax revenues of these regions in the future.

Fiscal subsidies and their impact on the efficiency of agricultural enterprises of Trans-Urals Region

Subject. State-sponsored activities to the agro-industrial complex have a significant impact on the performance of rural producers and contribute to their sustainable development. The targeted State support, including the direct budget financing, is not allocated to all economic entities. This leads to large differences in profitability of enterprises, and has a negative effect on the functioning of the entire agricultural industry of the region. It is the improvement of the mechanism of fair distribution of budget funds, both at the federal and regional levels, that may affect the efficiency of agricultural production. Objectives. The study aims to assess the system of State support to rural producers of the Kurgan Oblast, and its impact on sustainable development of the agricultural sector of regional economy, to determine the role of individual factors in calculating an integrated measure of budget efficiency. Methods. The study employs the principle of systems approach, as well as a set of such methods as abstract-logical, grouping, comparison, economic-statistical, and graphic. Results. We analyze the impact of investments on the development of the entire agricultural industry, as well as budget financing of agricultural farms. Agricultural enterprises have been grouped by budget subsidy, including by legal corporate form. Conclusions. We improved the methodology for assessing the effectiveness of government support, based on the calculation of integral indicator, through the inclusion of additional coefficients that reflect the social, insurance and credit efficiency of budget financing.

Direct financial instruments supporting foreign expansion of Polish companies used by Bank Gospodarstwa Krajowego

Expansion to foreign markets usually implies the selection of an adequate financing facility that would fit a given transaction, as well as the specificity of a particular foreign market. This paper explores how Bank Gospodarstwa Krajowego (BGK) in its capacity of a state development bank funding the expansion of Polish business to other countries, i.e., exports and foreign direct investment projects carried out by Polish businesses or their foreign affiliates. The author's considerations focus on instruments offered by BGK, which provide direct financing, such as loans to foreign buyers and investment loans dedicated to projects carried out in other countries. Moreover, the paper discusses, inter alia, the current data for Polish exports, as well as selected transactions that BGK supported financially over the period 2015-2018.

НЕКОТОРЫЕ АСПЕКТЫ ГОСУДАРСТВЕННОГО ФИНАНСОВОГО РЕГУЛИРОВАНИЯ КАК ОСНОВЫ ЭКОНОМИЧЕСКОЙ БЕЗОПАСНОСТИ АРКТИЧЕСКИХ РЕГИОНОВ РОССИИ

The article examines some aspects of state financial regulation of regional development, which is the most important aspect of economic security and is largely associated with the legal features of the regulation of this activity, the implementation of state development programs for the regions of the Arctic zone of Russia (AZRF). The financial regulatory mechanisms are analyzed, which include the system of financial support, tax, budget, investment, insurance and other economic mechanisms. Analysis of the content of the levels and the corresponding mechanisms of state financial regulation made it possible to determine the directions of influence on the subjects of financial regulation. It was established that financial regulation is presented in the form of a set of mechanisms and instruments of influence, which is based on state priorities related to the implementation of an effective financial policy in the Russian Arctic, ensuring the economic security of the regions, and achieving national interests. It was found that direct budget financing is the main mechanism for supporting and stimulating the development of the Russian Arctic. This mechanism is implemented on the basis of state programs of the Russian Federation financed from the federal and regional budgets. It has been established that there is legal uncertainty regarding the issues of financial regulation of the AZRF development. Until now, there is no law "On the Arctic zone of the Russian Federation", which would have fixed the object of state policy in the Arctic, including state financial policy. In the conclusion of the article, it is concluded that there are restrictions on the implementation of programs for the socio-economic development of the regions of the Russian Arctic. Direct budget financing does not allow achieving the set goals, therefore, a set of measures is needed to find investors among large state corporations or private and foreign companies.

Модели механизма финансирования проектов государственно-частного партнерства и особенности их функционирования

This article considers the public-private partnership (PPP) projects financing mechanism through the analysis of its models. The importance and necessity of using variability in structuring of different elements of financing mechanism are proved, which allows to detect the ways of their effective interaction in order to increase the efficiency of using financial resources during PPP projects implementation. The existence of basic models for PPP projects financing mechanism is justified including direct financing, project financing and financing with professional participants in the securities market. The schemes and algorithms of their functioning are presented. The article argues that in the modern conditions it is expedient to supplement the basic models for PPP projects financing mechanism by the new elements: postponed tax payments, bonds with special purpose, elements of Islamic financing mechanism models. Combining new and classic elements contributes to improvement of financing mechanism models and focuses on expanding the circle of potential investors for PPP projects.

Impact of the monetary policy of the People’s Bank of China on the country’s economic development

This article analyzes the current monetary policy of China. The analysis of the monetary policy of the Central Bank of China and the impact of its individual instruments on economic growth will continue. Currently the Central Bank of China conducts an independent monetary policy and uses a number of classic and modern tools to implement it. This has a positive impact on the state of the entire Chinese economy. The author concludes that effective implementation of monetary policy is possible only if there is a stable functioning financial market and public confidence in the state. Direct and indirect methods of China’s monetary policy contribute to economic growth. Direct methods include direct financing of certain projects by the People’s Bank of China, as well as providing loans to commercial banks to Finance certain programs and projects. Indirect methods consist in formulating recommendations, as well as creating conditions for financial institutions involved in financing and investing in priority sectors of the economy. China does not seek to copy global trends in monetary policy, but rather pursues a monetary policy that is focused on the current needs of the economy. The authors conclude that the goals and instruments of the People’s Bank of China are adjusted in accordance with economic conditions. Through the banking system China develops the real sector of the economy, stimulates economic growth pursues a policy of strengthening the national currency and maintains inflation at the level necessary for the sustainable functioning of the economic system. The value of the study is that the conclusions made by the authors expand and define the understanding that monetary policy has a great impact on economic growth. Key words: monetary policy, economic growth, banking system, macroeconomic policy, reform, devaluation.

Simplification of access to systems of financing innovation enterprise

Problem setting. The development of innovative entrepreneurship is a strategic task of the state’s financial and economic policy. The high NBU discount rate and other risks slow the pace of this growth and limit the proper financial support for innovative entrepreneurship. Analysis of resent researches and publications. The problems of financial support of entrepreneurship was devoted to the work of O.O. Drugov, R. Pukala, materials of the Round Table “Economic and legal problems of development and promotion of economic activity in modern conditions”, etc. Target of research. To facilitate access to finance, global practice demonstrates the importance of applying national and regional programs related to either the direct financing of individual business projects or the creation of favorable conditions for attracting funding. Article’s main body. Examples of world practice for introducing programs to facilitate access to innovation entrepreneurship was considered. According to the statistical reporting, the sources of financing of scientific development by sectors of economic activity was identified, the use of entrepreneurs’ funds is analyzed, the priority of Kharkiv region in implementation of programs of support of innovation implementation was established. Conclusions and prospects for the development. The programmatic approach used to develop innovative entrepreneurship at the local level is an important component of these transformations, but needs to be expanded through funding, in particular through venture funds and other startup startups with international donors. The intrinsic features of small business entities require government support for innovation, which should be facilitated through access to funding from a variety of sources. When expanding the use of regional assistance programs, their methodology should be changed to enhance the capacity to develop innovative entrepreneurship.

The Schumpeterian role of banks: Credit reallocation and capital structure

Capital reallocation across firms is a key source of productivity gains. This paper studies the ‘Schumpeterian role’ of banks: They liquidate loans to firms with poor prospects and reallocate the proceeds to more successful, expanding firms. To absorb liquidation losses without violating regulatory requirements, banks need to raise costly equity buffers ex ante. To economize on these buffers, they tend to reallocate too little credit and continue lending to weak firms. Tight capital standards, differentiated risk weights and low costs of bank equity facilitate reallocation. If agency costs of outside equity financing are not too high, their ability to reallocate credit renders banks more efficient than direct finance.

China's new normal and the implications to domestic and global business

AbstractWe use a VEC model to analyse China's “new normal” and how they affect aggregate components of China's balance of payment account, which represents China and the rest of the world. We assessed whether the tightening financial conditions impact China's long‐run growth. We also assessed the reduction in savings and its effect on growth. We further assess the claim of increasing net capital flows through a stable currency. We also compute China's currency gains and losses in CFET countries using the approach in and analysed how reducing national savings will impact on currency gains in the FX market. Analysing the fluctuations in capital flows, and its determinants, are significant for the restructuring since the government has undertaken to reduce his participation in direct financing. The research found that the gradual tightening of monetary policy if core inflation continues to pick up will not affect the long run current account growth, whereas reduced savings will have a short‐run adverse effect on growth. These conclusions support the assertion in. Furthermore, the liberalization of the financial systems reduces growth in the short run, whereas the fluctuations in renminbi have no impact on the capital account. We, therefore, do not find evidence of currency stability, aiding and facilitating net capital flows. Also, the decision to tighten policy rates and the effects on the capital account depends on the margin of the change. Lastly, the liberalization reforms will increase currency gains and also trigger currency appreciations.

A Dirigisme Approach to a Monetary Policy Jobs Guarantee and the Green New Deal

This article applies institutional analysis to H.R. Con. Res. 109, 2019 for the Green New Deal (GND) and a key section of the Federal Reserve Act to imagine new fiscal-monetary policy instrumentalities for community-driven economic transformation. Complementing this technical examination, dirigisme supplies philosophical grounding for the construction of a spatial Development Finance State model (DFS). The foundational program of the model is a monetary jobs guarantee (MJG) that redefines meaningful work as collateral for open labor market operations. GND mobilization advances beyond the buffer stock with communities securitizing their labor collateral to acquire direct financing for grassroots projects. To provide operational clarity, a thought experiment outlines a case study vision of this process juxtaposed with New Monetary Consensus utilization of DFS liquidity provisioning tools during the financial crisis. From this comparison, two design features improve DFS performance for the GND. First enhanced transaction transparency is achieved through digital ledger and spatial analysis technologies, while reflexivity between fiscal policy and local development goals emerges by engineering anchor institutions into the monetary architecture. Together these design features are hypothesized to democratically alter the proto-aesthetic of money and bring forth a political economy of care.

Retailer-Direct Financing Contracts Under Consignment

Problem definition: Many small businesses (suppliers) use web platforms (retailers) to sell their products on a consignment basis. Suppliers are often financially constrained, which affects their profits. Academic/practical relevance: We derive the equilibrium terms of the loan that a retailer will offer to a supplier in a consignment selling environment and their implications for supply chain efficiency. Our model is inspired by the lending program initiated by a major web platform owner. Methodology: We formulate and solve a Stackelberg game. The retailer sets loan terms that may include a debt seniority requirement. The supplier may either accept the retailer’s offer or borrow only from the bank or rely solely on its own capital. A competitively priced bank loan is the supplier’s default option. Results: There exist parameter values for which the on-equilibrium loan terms include retailer debt seniority as well as parameter values that do not. In the latter case, the supplier makes the bank the senior lender. The retailer’s debt seniority choice depends on the supplier’s working capital. When the retailer chooses to be the senior lender, its loan terms may induce the supplier to produce more than the first-best quantity. Managerial implications: Direct financing under equilibrium loan terms weakly improves the expected profits of both the retailer and the supplier. However, it may induce the supplier to produce less than or equal to or greater than the first-best production quantity. Loan limits serve to reduce overproduction.

The Reversal of Leverage Scissors: State-owned Enterprises’ Leveraging or Private-owned Enterprises’ Deleveraging

Recently, the debt level of the Chinese corporate sector has risen rapidly. According to BIS, the ratio of debt to GDP in China’s non-financial sector has soared from 96% in 2008 to 166% in 2016, accounting for 61% of China’s non-financial sector debt growth. Behind the skyrocketing debt of the corporate sector, is there any structural difference in leverage changes of different companies? If yes, what is the reason behind it? Using the annual report data of China’s listed companies from 2001 to 2016, we find that the leverages of China’s private-owned enterprises （POEs） are higher than those of state-owned enterprises （SOEs） before 2008. However, the leverage gap between China’s POEs and SOEs has started to turn negative since 2008, a phenomenon we called the reversal of leverage scissors”. Our further research shows that there is no significant relationship between the leverage gap and the local GDP growth before 2008. After 2008, the negative correlated relationship began to emerge. This finding indicates that the relative increase in the leverage ratio of SOEs after 2008 is likely to come from the increasing intervention of local governments on SOEs’ financing decisions, which is sourced from local governments’ increasing pressure to stabilize economic growth. On the other hand, we also find that the degree of financing constraints that POEs are faced does not increase significantly after 2008, which means that the relative decline in the leverage ratio of POEs is probably only the spontaneous adjustment of enterprises in the context of the decline in the macroeconomic growth rate and the reduction of investment opportunities rather than a result of the deterioration of the supply-side financing environment. Moreover, the impact of changes in equity on leverage, the four trillion” stimulus plan, and the direct financing advantage of listed companies cannot explain the reversal of the leverage ratio scissors. Our conclusions are also robust to the different measures of local government intervention and corporate financing constraints. Overall, this study shows that the reversal of the leverage ratio scissors is mainly due to the active leveraging of SOEs caused by local government intervention in the financing needs of SOEs. The main contribution of this paper is to provide a possible explanation for the structural rise of the leverage ratio of SOEs since 2008. Although the existing literature records the time series changes and structural characteristics of the leverage ratio of Chinese enterprises,there is no consistent view on the reasons behind the structural characteristics. In contrast, from the perspective of stabilizing local economy, we have linked the downward pressure of macroeconomic growth to the structural changes of micro-enterprise leverage, forming a chain of downward trend of the macroeconomic growth rate—the pressure of local governments—local governments’ increasing intervention—the structural changes of SOEs and POEs’ leverage—the deterioration of capital allocation efficiency—macroeconomic growth rate decrease”, thus provide a new insight with the structural increase of SOEs’ leverage. In short, our research provides a new and meaningful profile of structural problems of China’s corporate debt, and also provides a reference for the policy choice of structural deleveraging of state-owned enterprises.