Profitable Investment Opportunities Research Articles

“Money is Not the Problem”: The Slow Financialisation of Kenya’s Water Sector

AbstractThis paper analyses the “arduous and contingent” process of creating the “preconditions” for financialised forms of development in urban Kenya. Building on a growing critical literature on how finance is shaping development in the global South, the paper traces the more‐or‐less concerted effort of an array of actors and intermediaries to create a functioning market for urban water services. Such efforts, which are justified through appeals to a “finance gap” are an attempt to connect capital seeking profitable investment opportunities with a sector long starved of funding. The pursuit of financialised models of water provision, however, is deepening the gulf between service areas that are deemed profitable (or potentially profitable) and those that are not. The paper argues that it is not lack of money, but an emerging system of water service provision which prioritises commercial principles and value extraction, that shapes where investment does (and crucially) does not flow.

Alternative Financial Methods for Improving the Investment in Renewable Energy Companies

Renewable energies have increased in importance in recent years due to the harm caused to the environment by fossil fuels. As a result, renewable energy companies seem to be profitable investment opportunities given their likely substantial future earnings. However, previous empirical evidence has not always agreed about this likely profitability. In addition, the methodologies employed in the existing empirical literature are complicated and not feasible for most investors to use. Therefore, it is proposed an approach which combines the use of performance measures, screening rules, devolatized returns and portfolio strategies, all of which can be implemented by investors. This approach results in high cumulative returns of more than 200% and other positive ratios, even when transaction costs are considered. This should encourage people to invest in these renewable energies and contribute to improving the environment.

The effect of language on investing: Evidence from searches in Chinese versus English

This study examines the language effect on investing behavior in local stock markets for local- and foreign-language investors using Google search records. First, we find that attention to a local language stimulates attention to a foreign language, increases abnormal news coverage, and has better predictability on stock returns. Second, investors who do Google searches in the local language react faster to a news event's shock than those who search in the foreign language. Third, only attention to the local language can reduce the price drift of an earnings surprise. Last, firm-level information asymmetry is a channel for local advantage. Therefore, we suggest that investors who use a stock market's local language have a local advantage when seeking more profitable investment opportunities in that stock market.

Reputation Concerns and Slow-Moving Capital

Abstract We analyze fund managers’ reputation concerns in an equilibrium model, in which we tie together a number of seemingly unrelated phenomena. The model shows that because of reputation concerns, hedge fund managers, especially those with an average reputation, prefer strategies with negatively skewed return distributions. One subtle consequence of this preference is that capital sometimes appears slow moving, leaving profitable investment opportunities unexploited, yet other times appears fast moving, causing large capital relocation and price fluctuations in the absence of fundamental news. More broadly, the analysis demonstrates a limitation of market discipline: fund managers may distort their investments precisely because of market discipline.

Analysis of Gold as a Potential Inflation Hedge in Case of Pakistan

In developing countries such as Pakistan, where the macroeconomic situation remains uncertain and inflationary expectations always linger to a high level, investors stay in search of such cost-effective or profitable investment opportunities that can provide their capital an effective hedge against inflation. The present study empirically tests the status of gold as a potential hedge against inflation in Pakistan by analyzing the relationship of the expected and actual inflation with gold return and its cost of carrying, i.e., the interest rate. The autoregressive moving average (ARMA) with generalized autoregressive conditional heteroscedasticity (GARCH) models is applied to examine the time varying relationship between the variables from January 2001 to December 2015. The results support gold as an effective hedge against inflation in Pakistan; since, the returns on gold investment exceeds its cost of carrying with the view of changing expected inflation.

Practices of Capital Budgeting Techniques in Manufacturing Enterprises in Kathmandu

The research has been carried out on capital budgeting practices in Manufacturing Enterprises, Kathmandu district with the aim to analyze and evaluate the capital budgeting practices applied by manufacturing firms in Kathmandu district. To accomplish the objective, descriptive research is the process of accumulating facts. The research is to be based on the information of the sample companies through structured questionnaires. For the data analysis and interpretation, percentage was used according to the nature of the data.
 The application of CB techniques is useful only for large types of organization. Small types of organizations do not want to evaluate project by using CB techniques. Most manufacturing enterprises get advantages after implementation of the CB evaluation techniques. Organizational objectives can be achieved through effective management and use of CB techniques. Most of the sample companies in Kathmandu district are not foregone profitable investment opportunities in view of some limit imposed on the size of capital budget.

Spotlight on Biotechnology: From a Technological Breakthrough to Valuation Challenges. A Case Study on Crispr Therapeutics and Crispr/Cas 9 Revolution.

High volatility, no predictable cash flows and technological uncertainties make BiotechHealthcare companies’ valuation a challenging task for analysts and investors. Translating clinical promises into economic value represents a rough obstacle to be attractive business, especially in measuring the potential implications that scientific breakthroughs can bring to society and the size of the financial markets’ reaction to such events. The aim of this work is to provide a deeper understanding of dynamics behind biotech companies analysis, moving from traditional valuation models to a risk-adjusted framework, including the technological and regulatory issues approval process. We provide a full immersion in a biological and clinical context that is far and beyond the common practice proper of the financial valuation field. We focus on one of the potential technological disruptors within the clinical and healthcare framework: the CRISPR/Cas 9 system. These revolutionary “molecular scissors” are capable of editing genes by cutting out/repairing disease-causing DNA segment and inserting corrected ones, representing a potential “one-shot” cure for many diseases currently unmet by existing treatments. The potential of CRISPR/Cas9 companies inevitably pours over the financial markets and, in this work, we focus our analysis on CRISPR Therapeutics, the most advanced in clinical trials and the most complete in terms of pipeline products. This represents the perfect example of no-revenues company with an incredible technology breakthrough that could become a profitable investment opportunity. The analysis conducted has been the object of a University of Pavia master’s degree thesis. The following slides are related to the final dissertation held in June 2020 and can be considered as an anticipation of a research paper soon to be published.

Price Adjustments on Ex-Right Dates in Cases of Right Offerings

Using a sample of 618 right offerings made between 2004 and 2016, this study analyzes price adjustments on ex-right dates. The major results are as follows. First, as the ratio of reference price divided by the ex-right opening price is calculated as 0.9613, price adjustments are significantly less than the value of preemptive rights. We also document additional price decreases after ex-right dates. The smaller price drops on ex-right dates and delayed adjustments are evidence of market inefficiency. Second, the listing of preemptive rights certificates makes price adjustments on ex-right dates more efficient. Third, the abnormal return on ex-right dates is 4.24%, which is significantly positive. Fourth, the trading strategies of purchasing at cum-right prices, selling at ex-right prices, and purchasing new shares generate a 2.59% return, and foreign investors are most likely to follow such trading strategies. In addition, for the fourth quartile, which has the largest preemptive rights value, the abnormal return on ex-right dates is 9.31%, and the trading strategy generates a 5.77% return. In summary, although the Korea Exchange discloses a reference price for efficient adjustment, price adjustment on ex-right dates is not efficient, thus generating profitable investment opportunities. Significant abnormal returns owing to inefficient price adjustments on ex-right dates are partly consistent with anchoring biases.

Green Structural Adjustment in the World Bank’s Resilient City

According to an increasingly prevalent set of discourses and practices within environmental and development finance, cities across the Global South are facing a costly infrastructural crisis stemming from rapid urbanization and climate change that threatens to further entrench poverty and precarity for millions of people. The cost of achieving urban resilience across the world dwarfs available public finance, however, from both development banks and governments themselves. Meanwhile, vast amounts of money on capital markets are searching for profitable investment opportunities. The World Bank is attempting to channel return-seeking investment into urban infrastructure in response to these challenges. To harness this private finance, though, cities must be reformatted in investment-friendly ways. In this article, we chart the emergence of this discourse and associated practices within the World Bank. We call this rescaled and climate-inflected program of leveraged investments coupled with technical assistance Green Structural Adjustment. Drawing on policy documents, reports, and interviews with key staff, we examine programs that include Green Structural Adjustment to show how it aims to restructure local governments to capture new financial flows. Green Structural Adjustment reduces adaptation to a question of infrastructure finance and government capacity building, reinscribing both causes and effects of uneven development while creating spatial fixes for overaccumulated Northern capital in the Global South.

Profitability of commercial and industrial photovoltaics and battery projects in South-East-Asia

Solar photovoltaics and batteries are key technologies to enable a rapid decarbonization of electricity systems. Commercial & industrial consumers are an important market for these technologies due to their fast growing electricity demand, particularly in emerging economies. However, it remains unclear if photovoltaics and battery installations are profitable for commercial & industrial applications in an emerging country context. Assessing the profitability of investments in photovoltaics and battery projects, however, is much more complex than for standalone photovoltaics projects, and strongly depends on the regulatory regime. These regimes are often complex and can be inconsistent. Hitherto decision makers lack models which are suitable for detailed assessments and which can serve as basis to adjust the regime. Here, we develop a techno-economic optimization model for commercial & industrial photovoltaics and battery projects, which returns a profit-maximizing storage dispatch and system design. We investigate three South-East Asian countries (Vietnam, Thailand, and Malaysia) and three different industries (Textile, Consumer Goods, and Electronics). The results show that profitable investment opportunities in photovoltaics and battery projects exist already today, even though a battery typically reduces profitability vis-à-vis standalone photovoltaics projects. We discuss how reducing investment risks, building local industries, and shifting existing support schemes towards batteries could support battery deployment in South-East Asia and thereby contribute to the decarbonization of electricity systems in the region.

Banking on courts: financialization and the rise of third-party funding in investment arbitration

In this paper, we explore the drivers of the rise of third-party funding (TPF) in investor-state arbitration. TPF involves financiers shouldering the legal fees of an investment treaty claim against a sovereign state in exchange for a share of any eventual award. Existing research has highlighted how TPF may exacerbate the inequities inherent to a legal regime that is already weighted in favor of private interests by increasing investors’ access to funding of their legal claims, but the factors which gave rise to TPF are little understood. We argue that financialization helps to explain both the spread and the characteristics of TPF. In particular, the evidence presented in this paper suggests that the large supply of investable capital that is searching for profitable investment opportunities helps to account for the rise of TPF. The analysis provides the basis for broader propositions and a research agenda about the ways in which financialization alters the logics of an international legal regime and aligns the interests of different private agents, both of which may change the public-private balance in investor-state arbitration and affect its legitimacy.

Interfirm Ties Between Ventures and Limited Partners of Venture Capital Funds: Performance Effects in Financial Markets

We argue that strong indirect ties are conducive to the transfer of private information, which provides an advantage in identifying profitable investment opportunities. In our context, a strong indirect tie is generated between an investor and a focal firm if the investor was a limited partner of the focal firm’s lead venture capital fund. We suggest that an investor can access private information on the focal firm’s underlying value through its strong indirect tie to the focal firm via the focal firm’s lead venture capitalist. Supporting our theory, we show that after the focal firm’s initial public offering, the investor with a strong indirect tie to the focal firm receives high risk-adjusted return when the investor chooses to invest in the focal firm’s stock in the stock exchange market. We also show that the investor’s private information attained through its strong indirect tie to the focal firm is more valuable (i) when there is higher exogenous market uncertainty and (ii) when the investor faces higher information asymmetry.

Liquidity Insurance with Market Information

Abstract This paper studies how market signals—such as stock prices—can help alleviate the severity of the asymmetric information problem in credit and liquidity management. Asymmetric information hinders the ability of borrowers (firms, investment banks, etc.) to undertake profitable investment opportunities and to insure themselves against liquidity shocks. I show that on the equilibrium path creditors do not learn anything from market signals because they can use a menu of contracts to screen the different types of borrowers. However, by conditioning liquidity insurance on ex post price signals, creditors are able to provide the borrowers with better incentives for truth telling. At the same time, prices depend on the liquidity that creditors offer to the borrowers. This two-way feedback impacts the design of the optimal contract and potentially generates multiple equilibria in financial markets.

Foreign ownership and investment efficiency: new evidence from an emerging market

PurposeThis paper investigates the effect of foreign ownership on corporate investment efficiency in an emerging market.Design/methodology/approachThis paper employs the investment-investment opportunities sensitivity to proxy for investment efficiency. Corporate investment and investment opportunities are measured by capital expenditure and Tobin's Q respectively. Control variables include state ownership, firm profitability, cash flow, financial leverage, firm size, bank debt, asset tangibility and financial distress. The research sample includes 5,502 firm-years from 621 firms listed in Vietnamese stock market from 2007 to 2017.FindingsWe find that foreign ownership negatively affects corporate investment efficiency. Furthermore, we continue to examine the effects of foreign ownership with financially unconstrained and constrained firms that are classified based on the annual medians of Kaplan and Zingales (1997) score, firm size and dividend payout ratio. We find that the negative relationship between foreign ownership and investment efficiency is stronger in financially unconstrained.Originality/valuePrior research shows that foreign ownership is positively related to corporate investment efficiency. However, in Vietnamese stock market, foreign investors may prefer safe business activities as a response to uncertainty in the business environment, ineffective legislations on corporate governance and their informational disadvantage. Therefore, in this paper, we argue that foreign ownership negatively affects Vietnamese firms' investment efficiency. Risk-adverse foreign investors make firms lose some profitable investment opportunities and thus decrease their investment efficiency.

Financial crises, debt overhang, and firm growth in transition economies

ABSTRACT We examine the effects of the global financial crisis of 2008 and the European debt crisis of 2011 on the relationship between capital structure, investments, and performance for Eastern European companies. While the existing literature documents how firms’ investments are sensitive to the availability of internal funds and to debt holdings, we further investigate whether this investment sensitivity also translates in different levels of performance, and document that capital structure indeed has both a direct and an indirect effect, mediated by the capital expenditure channel. We show that firms with higher financial flexibility experience higher investments and returns on capital. Over-levered firms instead suffer from a debt overhang condition, forcing them to curb investments, and consequently experiencing lower performance. Overall, we provide evidence on the importance of capital structure and financial flexibility on investments and performance, showing the real consequences of the debt overhang condition on firm value creation. Firms should therefore aim at maintaining adequate financial flexibility in order to be able to pursue future profitable investment opportunities, and avoid the under-investment problem arising from a debt overhang situation.

Competencies of Human Resource Professionals in the Private Sector of Mongolia: A Pair-Designed Investigation and Comparison with the Global Norm

Mongolia is defined as one of the 3G /Global Growth Generators/ countries and is predicted to generate high growth and profitable investment opportunities over the next 30 years due to its growing young generation and natural resource. Even though Mongolia has increasing development in economy and business, very limited numbers of studies have been published to reveal the economic and management situations in this country. To contribute to closing this gap, the main purpose of this study was to understand the management, especially the field of human resources (HR). This sub management field is immature and has a history less than twenty years in Mongolia. In addition, , the researcher examined HR competencies in Mongolia based on the Human Resource Competency Study (HRCS) model 2012 which is composed of six HR competencies namely: strategic positioning, credible activist, capability builder, change champion, HR innovator, and technology proponents. Furthermore, the local HR competency result was compared with global norms which were identified by the RBL group in 2012. The pair design was carried out, and a total of 200 data has complied from both HR managers as well as employees from 50 private companies in Mongolia. Based on the 5-point Likert scale, local competence levels ranged from 3.5 to 3.8. The results of this study showed that local competency levels were lower than the HR global norms.

Corporate & Project Finance Valuation Techniques for Maximizing Returns & Superior Growth Strategies

In this paper we review corporate and project finance techniques used to maximize investor returns and create superior growth strategies. We review the corporate finance concepts and tools used to evaluate investor returns and compare projects. Time value of money concepts can be used to evaluate the free cash flows generated by a project or corporate capital structure. Such studies empower managers to maximize returns, invest in projects that increase the firm value and prune or remedy activities that reduce firm value. Firstly we introduce the concept that a company or project can be considered as a collection of cash flows and present the tools required to value such cash flows. Secondly we look at corporate & project finance techniques to estimate the cash flows of a broad range of corporate activities and projects. We conclude with a series of case studies where we evaluate a firm’s value, company takeover and acquisition premia and estimate bond financing costs. Finally we consider project finance initiatives, reviewing how to identify profitable investment opportunities and when to accept/reject a project. An Excel example workbook is provided with this paper.

Analysis of Factors Influencing Dividend Policy with Special Reference to Listed Companies in Sri Lanka

The research examines the factors influencing on dividend policy of listed companies in Sri Lanka. The investigation was performed with semi-structured questionnaire prepared by using Google Form and sent through email to the Chief Financial officers of the selected120 listed companies. The findings revealed that the current earnings, past dividend patterns and liquidity constraints more influence on dividend policy in listed companies in Sri Lanka. Further profitable investment opportunities, growth opportunities, shareholders’ preference, target dividend payout ratio, largest shareholder, statutory requirements and method of paying dividend are also influence on dividend policy in listed companies in Sri Lanka.

The Effect of Language on Investing: Evidence from Searches in Chinese Versus English

This study examines the language effect on investing using the Google search records of Chinese- versus English-speaking searchers. First, we find that the attention of Chinese speakers induces that of English speakers, increases abnormal news coverage, and has better predictability on stock returns. Second, Chinese searchers react faster to the shock of news events than those who search in English possibly because of a time lag for translation. Third, Chinese attention can reduce the price drift of earning surprises, whereas English attention cannot do so. Last, evidence shows that the firm-level information asymmetry is the channel of the local advantage. Therefore, our results suggest that investors using their local official language have a home advantage to find more profitable investment opportunities.

The When and How of Delegated Search

Search models have traditionally been used to describe situations such as the development of new technology, job search, and the search for profitable investment opportunities. We address the problem faced by a firm that must conduct a search and therefore contemplates outsourcing that process. This paper models the firm's problem in a dynamic principal-agent framework while embedding the standard model of sequential search. We identify the conditions under which it is preferable to outsource the process (rather than conducting the search in-house) and describe the optimal contracting mechanism through which to compensate the searching agent. The optimal contract is structured as follows: pay the agent a fixed fee in each period as well as a bonus whenever a suitable alternative is found, where the size of the bonus is defined a priori and decreases over time. This contract has several desirable properties. Namely, it is the result of optimization over the entire contract space, it is both history independent and renegotiation proof, and no variables need to be verifiable by a third party if the time horizon is short enough. Whether or not to outsource a search process reduces to evaluating the principal's trade-of between speed and quality. The age-old aphorism “if you want it done right, do it yourself holds, since in-house search is optimal for a principal who prioritizes quality. Yet in this particular setting, we also establish an addendum: “if you want it done fast, hire someone else to do it.