Profitable Investment Opportunities Research Articles

Desarrollo y consecuencias de la globalización financiera

The globalization process managed to open new spaces that favored the financial and economic expansion. This financial expansion resulted in economic growth during the nineties. The accumulated surplus capital, which were threatened by the depreciation, found opportunities for profitable investment in the expansion of the globalization process. However, it also had unintended consequences such as distortion of the economic system through an excessive financialization.

The Relationship between Financial Flexibility and Capital Structure Decisions

Making decisions about capital structure is one of the most challenging and problematic issues companies face and thereby it is the most crucial decisions companies have to make for their survival. The aim of this study was to investigate the relationship between financial flexibility and capital structure decisions in accepted companies in Tehran Stock Exchange with using Falkner and Wang Model. Results of testing hypothesis which are based on a sample- that is consisted of 82 firms for a period of five years from 2006 to 2011- using multivariate linear regression models as well as panel data method, implied that marginal value of cash is negative in terms of market, i.e. the market is not willing to raise funds and will not evaluate this increase to be positive in funds. Furthermore, findings represent that there is no significant relationship between marginal value of financial flexibility and capital structure decisions of firms and firms would not pay attention to financial flexibility level in their decisions regarding increasing or decreasing debts, which in long term would result in loosing financial flexibility as well as profitable investment opportunities.

The Textual Contents of Media Reports of Information Security Breaches and Profitable Short-Term Investment Opportunities

Information security-related incidents continue to make headlines. Interestingly, researchers have found mixed results when attempting to associate reports of information security breaches with changes in the affected firm's stock price. This research delves further into this puzzle by investigating the association between the textual contents of information security breach media reports and the stock price, as well as the trading volume reactions of the affected firm(s) around the breach announcement day. Our findings suggest that when the textual contents of breach reports provide more detailed information regarding the incidents, a more consistent belief is formed by the market about the negative impact of the reported security incident on the firm's business value. However, when there is a lack of specific information regarding the reported breach, the market does not seem to reach consensus on the impact of reported security incidents. We further demonstrate that different perceptions exist among general and sophisticated investors regarding the impact of reported information security incidents on a firm's future performance as demonstrated by changes in trading volume. By exploiting the different perceptions among investors, we form a trading strategy to demonstrate that, on average, one can make about 300% annual profit around the breach announcement day.

Firm Investment, Liquidity, and Bank Health: A Panel Study of Asian Firms in the 2000s

The purpose of this study is to investigate how firms responded to the deterioration of bank health during the financially turbulent periods in the 2000s in making investment decisions and in meeting demand for liquidity. A rise in uncertainty regarding the ability to obtain external funds may have induced firms to rely on internal funds to finance investment activities. Therefore, we shed light on the cash flow sensitivity of investment and cash holdings by estimating firmlevel investment and cash holdings equations using panel data for Asian firms in the 2000s. Our sample firms are from countries at different stages of financial development. The sample enables us to analyze the different roles played by internal funds in the financial and investment policy of firms in a financialenvironment with different stages of development. We find that the cash flow sensitivity of investment and cash holdings rises as bank health deteriorates. Moreover, the impact of non-performing loans on the cash flow sensitivity of investment and cash holdings is more prevalent across firms, irrespective of firm age, in countries with a higher level of financial intermediary development. Our findings suggest that as financial intermediaries develop, firms become more dependent on bank credit so that bank-dependent firms are more vulnerable to external shocks that hit the financial system. Therefore, when bank health is impaired, bank-dependent firms increase their reliance on internal funds and raise their propensity to save cash flow to materialize potentially profitable investment opportunities in the future.

Voluntary Disclosure, Manipulation, and Real Effects

ABSTRACTWe study a model in which managers’ disclosure and investment decisions are both endogenous and managers can manipulate their voluntary reports through (suboptimal) investment, financing, or operating decisions. Managers are privately informed about the value of their firm and have incentives to voluntarily disclose information and manipulate their reports in order to obtain more favorable terms when issuing equity to finance a new profitable investment opportunity. The model shows that treating managers’ disclosure and investment decisions both as endogenous and allowing managers to manipulate their voluntary reports yields qualitatively different predictions from when the disclosure and investment decisions are considered separately and managers cannot engage in manipulation. The model predicts that managers’ disclosure strategy is sometimes characterized by two distinct nondisclosure intervals (contrary to traditional threshold equilibria of voluntary disclosure models) and that managers with intermediate news sometimes forego the new profitable investment opportunity. As such, the paper highlights the importance of considering the interdependencies between firms’ disclosure and investment decisions and provides new empirical predictions.

The Trouble With Capitalism, by Harry Shutt

Harry Shutt The Trouble With Capitalism, Zed Books: London, 2009, 237 pp: 9781848134225 14.99 [pounds sterling] (pbk) In this contribution to the critical financial histories of our times, Harry Shutt explains why he thinks the current crisis may be the end for capitalism as we know it. The book opens with brief chapters sketching the history of capitalism up to the Second World War, followed by a sketch of the workings of the western economies since 1945. Later chapters offer more detailed analyses of current economic difficulties and policy responses. The historical narrative is similar to others in this increasingly crowded field, such as John Bellamy Foster and Fred Magdoff (2009) or Robert Brenner (2003). The principal reason why the current recession may be the final crisis of capitalism is the capital glut thesis. This is similar to the tendency to overaccumulation identified by Marx, then developed by David Harvey, Paul Baran and Paul Sweezy, John Bellamy Foster and other Marxists. Capitalist industry generates too much profit searching for too few investment outlets, with the bourgeoisie chasing around the world in their search for new markets and new investments, only to end up back where they started, facing an even bigger crisis. The next reason why the current crisis may prove terminal is that, according to Shutt, both Keynesian and neoclassical/neoliberal economics have failed. Keynesianism failed in the stagflation of the 1970s; neoclassical economics failed in the succession of bubbles and busts since 1980. There is much to commend in The Trouble With Capitalism. In the historical surveys of capitalism to 1980, the author makes an interesting and useful argument concerning the end of the long postwar boom. The boom itself followed from the confidence felt by both consumers and the private sector in government, keeping the macroeconomic framework stable. This enabled consumers to take on long-term debt such as mortgages and car loans without the fear that such risks would ruin them financially. The welfare state would provide for their children's education and healthcare, and would pay a pension in retirement. Growth began to slow, according to Shutt, when a majority of households in the rich countries had bought their first cars, refrigerators, TVs, etc. From then on, 'the markets for the most durable products ... tended to be more and more governed mainly by replacement demand, rather than by continuous opening up of new groups of buyers' (p. 35). At the same time, there were also signs of a contradiction between government policy and commitment to free markets. More importantly for the viability of the system, profitable investment opportunities were drying up. This final problem, emerging from the long boom, is developed in later chapters of the book. According to Shutt, the long-term cause of the current recession has been 'the impossibility of sustaining high enough economic growth to support the value of capital assets ... while at the same time meeting the income and welfare requirements of the mass of the population' (p. 184). In making this argument, Shutt is on similar ground to David Harvey (1999) and others. Unlike Harvey, Shutt presents the capital glut as an immediate threat to the entire global capitalist economy. The depth and intractability of the crisis is demonstrated, in Shutt's argument, by the myriad policies pursued by governments since the 1970s. All of these policies were sold as means to restore long-term economic growth and ali of them achieved no more than inflating a financial bubble, leading to a crisis more severe than the last, making the problem of capital glut worse. …

Human Interest and Humane Governance in Iraq: Humanitarian War and the Baghdad Zoo

This article argues that the story of the Baghdad zoo in the Iraq war and the ‘human interest’ it attracted are important for the analysis of warfare and humanitarian intervention. The activities at the zoo are notable precisely because they provide a specific site through which to analyse the increasing entanglements between war and humanitarianism, and practices associated with civil–military cooperation. The recovery and reconstruction efforts at the Baghdad zoo brought together a diverse, ad hoc assemblage of civilian, military, local and international actors around a common problem: how to turn a symbol of the tyranny and ‘backwardness’ of the Hussein regime into a space that would foster liberal humane values amongst the Iraqi population. The activities at the zoo thus tell us much about the kind of warfare that not only involves lethal force, but also fosters civilian and military action in reforming a carceral and leisure institution. They also reveal a broader aspiration of reforming the whole Iraqi population around an idea of humane governance, while providing a potentially profitable investment opportunity for foreign speculators.

Securitization Debt and Corporate Performance

We investigate whether corporate securitization enhances a firm’s debt service capacity. Agency problems may arise in the relationship between bondholders and servicers/managers because of the operating nature of the securitized assets. Securitization overcomes such concerns by introducing a set of operating debt covenants. Our study of the public houses with more than 17,000 retail outlets shows that managed firms perform better that tenanted firms as they maximize cash proceeds from an undervalued part of the firm. Operating covenants must therefore allow for profitable investment opportunities as well as manager equity so as to align their interests with that of bondholders.

Corporate investment, government control, and financing channels: Evidence from China's Listed Companies

We investigate the relation between the internally generated cash flows and fixed asset investments of Chinese firms and find that it is U-shaped. Cash flow and investment are negatively related for low levels of cash flow but positively related for high levels of cash flow. We find that government controlled listed firms have greater investment–cash flow sensitivities than do privately controlled listed companies, especially on the left-hand side of the U-shaped curve where cash flow is negative. However, the difference in sensitivities appears only among firms that possess few profitable investment opportunities. We attribute this finding to the government having multiple socio-economic objectives, which leads to increased capital expenditures by the firms it controls when internal funds are abundant and when internal funds are negative. There is no evidence that access to finance and soft budget constraints explain the differences between the investment–cash flow sensitivities of government controlled and privately controlled listed firms.

Co-Creation for Impact Investment in Microfinance

The boom of microfinance and its high profits in emerging countries has raised interest in this sector of investors in developed countries. The question to be addressed is how venture capital will help this MFI scale its business and profits? Can developed country investors, facing a lack of profitable investment opportunities in the wake of the financial crisis, marry their business acumen with social responsibility towards the poor? The paper uses a case study of Riskebiz, a venture capital fund that is investing in the microfinance sector. Microfinance is a tool, among others, in development and poverty alleviation. The value of the tool is enhanced if technology and technical services are provided to the MFI as well as to the poor entrepreneur. The case illustrates that the poor are not only requiring microcredit, but also micropayments and microinsurance, as well as health check-ups. A team of complimentary partners who can standardize and deliver these services could be very useful to provide a rich experience to the customer to co-create value, growth, new revenue opportunities and new delivery opportunities to the MFI. Donors and social investors who do not have specific knowledge of emerging country markets should consider such issues before investing in microfinance funds. The receiving MFI should also try to partner with VCs who can provide the required advice.

The Influence of Productivity Growth on EquityMarket Performance

Ultimately, stock market performance has to be driven by the real side of the economy, and more specifically, economic growth. However, it is well known that there is a difference between growth resulting from improvements in productivity and growth resulting from an increase in inputs, with the former translating into higher living standards. The authors utilize productivity growth data from the NBER-CES and BLS research programs and link productivity growth with stock market performance. They assess whether productivity gains are passed through to shareholders or are bid away through competition, and therefore, whether there is an investment strategy that can be built using these productivity data. Their results show that investing in high productivity growth industries over the long term generates returns in excess of the market, even after adjusting for risk. As such, they show that productivity growth is an important dimension of investment returns and should influence investment strategies. However, if productivity growth is to be used to create profitable investment opportunities, the challenge is to accurately forecast productivity growth on a timely basis. <b>TOPICS:</b>Security analysis and valuation, information providers/credit ratings, performance measurement

Gauging a Firm's Financing Orientation: Integrating Predictions of the Trade-Off Theory, the Pecking Order Model, and the Market Timing Hypothesis

After critiquing arguments and evidence associated with the trade-off theory, the pecking order model, and the market timing hypothesis of corporate financing behavior, we develop a financing orientation hypothesis that integrates arguments from all three theories. The hypothesis posits that a firm's optimal leverage and its propensity to use debt to offset a current financing imbalance (i.e., the basic pecking order coefficient) are both largely driven by (i.e., are strongly inversely related to) the value of the firm's profitable investment opportunities. We test the hypothesis using data on U.S. firms for the years 1971-2009. The evidence is strongly consistent with the hypothesis, and resolves several puzzles lingering from previous empirical studies of the individual theories.

A New Strategic Tool for Managing the Economic Recession: Creating Shareholder Value with Lateral Marketing

Mortgage crisis, which started in 2007 and is still ongoing, has caused a big economic recession in the world economy. That recession made business managements to do important strategically and institutional reactions alongside globalization of markets, changing in industrial structure, information revolution and increasing of customer expectations. Such that, if investors perceived that company stack in an unattractive market and has no competitive advantages, they would give up investing. The main determinant of investing on a company for investors is the company's ability of managing profitable investment opportunities. Managing profitable investment opportunities provide creation of shareholder values by increasing the market value of business. Lateral marketing is the newest and effective way to help businesses while managing profitable investment opportunities and creating shareholder values. Lateral marketing provides businesses to create new product and services for making better existing jobs, to make decision based on lateral thinking phenomenon and to gain competitive advantages on the market.The aim of this study is; assessing the share holder value creating talents of enterprises during economic recession periods for survive and improve their economies by using lateral marketing instrument. In this context, the shareholder value and lateral marketing concepts in literature analyzed and the capacity of companies on creating shareholder value by using lateral marketing assessed. Thus, the study is theoretical and original. The basic assumption of study is, by creating share holder value economic recession might exceeded.

Everything a Young Charterholder Should Know About Energy

Will the challenge of developing new and better sources of sustainable energy provide profitable investment opportunities?

Outward FDI from Canada and Its Policy Context

Canada was a major net importer of foreign direct investment (IFDI) prior to 1996. The stimulus for the surge in Canada's outward FDI (OFDI) came from profitable investment opportunities abroad. Canada has significantly diversified its OFDI away from the United States over the past 20 years. The financial crisis significantly affected Canada's FDI outflows, but OFDI seems to have rebounded in the second half of 2009. While Canadian investment has historically gone mainly to developed countries, recent changes in government policies seem to suggest that Canada is looking to build closer ties with developing countries as well. Canada has a longstanding commitment to multilateral cooperation and actively supports the World Trade Organization (WTO) framework as a way to promote international trade and investment. At the same time, Canada continues actively to negotiate foreign investment promotion and protection agreements (FIPAs).

The current economic crisis and international business. Can we say anything meaningful about future scenarios?

The paper starts with a list of stylized facts on economic trends in the last few decades with particular attention to international elements. A very brief analysis of the current economic crisis is then attempted. The root cause, the causa causans, of the excessive growth of the financial sector and the inevitable current crisis is identified in the lack of profitable investment opportunities in advanced capitalist systems. The short-term remedies include a shift in income distribution to increase the consumption component of effective demand; it also includes serious regulation of the financial sector at both national and international levels. In the medium to longer term governments should consider engaging in large investment projects such as alternative sources of energy, transport as well as in public services. This might help to improve conditions for profitable private sector investment, thus benefiting both the workers and the capitalists operating in the real sector at the expense of the rent-seekers. The paper then draws some inference on key elements likely to impact on futures, particularly with respect to internationalization and the two types of innovation identified in the stylized facts: organizational and technological. Inference is drawn with respect to the economic system as well as to economics as a scientific and academic field. The final discussion draws these various elements together.

Credit Supply and Corporate Policies

This paper develops a model of corporate investment and financing decisions that differs from previous contributions by recognizing that firms face uncertainty regarding their future access to credit markets and may have to search for creditors when raising debt financing. We show that accounting for credit supply uncertainty is critical in understanding corporate policy choices and use the model to explain a key set of stylized facts in corporate finance. Notably, our model provides an explanation for the conservative debt policy puzzle. The model also explains why firms may appear to time the market when issuing common stock. Finally, the model explains why negative shocks to the supply of credit may hamper investment even if firms have enough financial slack to fund all profitable investment opportunities internally.

Leverage and the wealth gains from acquisition program announcements

We examine the market reaction to announcements of an intention to pursue a program of external acquisitions. Although the mean gain is positive, only firms with high Tobin’s q and low leverage experience significant abnormal returns. For firms with low q or high leverage, abnormal returns are zero. Moreover, the stock price reaction is an increasing function of q only for firms with low leverage. These results are consistent with the view that high leverage reduces the ability of a firm to take full advantage of profitable investment opportunities.

A survey of management views on dividend policy in Iranian firms

PurposeThe purpose of this paper is to investigate the views of chief financial officers (CFOs) of Iranian firms listed on the Tehran Stock Exchange about the factors influencing dividend policy in 2006. The paper aims to update and extend previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms.Design/methodology/approachSurvey instruments were used to identify the factors that CFOs consider in formulating dividend policy, based on both theoretical and empirical works on dividends, to identify the factors that are most important in dividend policy of firms.FindingsThe findings show that the most important determinants of a firm's dividend policies are the stability of cash flow, the availability of profitable investment opportunities, and stability of profitability. Also, industry type appeared to influence the importance that respondents placed on one determinant of dividend policy.Research limitations/implicationsIt is likely that the firms that did not respond on time may show a non‐response bias. Despite lacking normal precautionary steps to increase the response rate, non‐response bias may affect the findings. Another limitation of the survey methodology was that it measures beliefs and not necessarily actions. Therefore, caution should be taken in generalizing the findings.Practical implicationsThe findings have implications for CFOs in formulating dividend policy.Originality/valueThe paper updates and extends previous research on dividend policy to capture the determinants of the dividend policy of Iranian firms.

Intended use of proceeds and the long-run performance of seasoned equity issuers

We investigate the relation between seasoned equity issuers' stated intended use of proceeds and their subsequent long-run stock and operating performance. Stated intended uses of proceeds are: investment, recapitalization, and general corporate purposes. We find that issuers stating recapitalization or general corporate purposes experience abnormally poor performance in the subsequent three years, but issuers stating investment display little or no subsequent underperformance. These results suggest that issuers with specific plans to use the proceeds for investment purposes are credibly signaling profitable investment opportunities, whereas issuers without specific investment plans are more likely to be opportunistic market timers. Consistent with a timing motive, the secondary component of the offering is significantly larger when the issuer is not specific about investment plans.