Short-term Cash Flow Research Articles

Assessing urban rooftop PV economics for regional deployment by integrating local socioeconomic, technological, and policy conditions

Assessing the urban rooftop photovoltaic (PV) economics is important for scaling up rooftop PVs for rapid decarbonization. In this study, socioeconomic, technological, and policy factors were integrated into a rooftop PV economic assessment. This comprehensive method was applied to 21 cities in the Guangdong province of China, in combination with local real parameters. The results show that, with higher urbanization levels, electricity tariffs, and PV self-consumption rates, cities in the Pearl River Delta area generally had better economic performance in terms of both economic scale and profitability. They accounted for 75% of the total rooftop PV potential in Guangdong Province and had an internal rate of return (IRR) as high as 14.6–19.2% for Commercial and Industrial buildings (C&I), and 9.9–15.9% for residential buildings (R). Socioeconomic, technological, and policy factors jointly affect the economic performance and create a promising future for Guangdong rooftop PVs. It is projected that the IRR of current worst performing cities will grow by 4.9–5.8, and 4.4–5.9 percentage points, and the payback period will be shortened by 5.8–6.7 and 3.4–4.1 years by 2030 for R and C&I buildings, respectively. Among the three factors, technological advancement had the most significant long-term effect, followed by socioeconomic development. Policy factors play an important role in alleviating short-term cash flow pressure. Integrating the three factors in the assessment provides us with a more comprehensive picture of how urban rooftop PV economics will evolve and a better idea of how to prioritize rooftop PV development. Suggestions for prioritizing the deployment of rooftop PV systems in Guangdong by 2030 were provided.

What Drives Firms’ Hiring Decisions? An Asset Pricing Perspective

Abstract We document that the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market returns and long-term cash flows, and positively predicts short-term cash flows. In addition, through a variance decomposition, we show that the time-series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, with no contribution from variation in long-term expected cash flows. We estimate a neoclassical dynamic model with labor market frictions and show that labor adjustment costs and time-varying risk are essential for the model to replicate the empirical patterns. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

A flexible and scalable model to improve decision quality in shale plays

Shale asset investment decisions are difficult to model because they are portfolios of options under complex and time-evolving uncertainties. Sequential development decisions must balance short-term cash flow with long-term value creation. Typical assets consist of thousands of locations, making exact analysis impossible. Consequently, decision support tools are very simple, usually consisting of decision trees, fixed price decks, and no midstream constraints.We develop a heuristic that maps the current information of an asset, such as inventory, prices, and estimated production, to a well schedule. We combine the heuristic with Monte Carlo simulation and decision trees to form a shale field development model that includes all relevant features while being scalable to realistic problem sizes. To demonstrate our method's performance, we create a sample shale asset with 370 wells, price and production uncertainty, midstream constraints, and 30 decision periods. On the sample problem, our method exhibits first-order stochastic dominance over the decision tree approach and improves expected value by 407%. Using our modeling approach will improve overall decision quality in shale asset management.

ОПТИМІЗАЦІЯ РИЗИК-МЕНЕДЖМЕНТУ ОБОРОТНОГО КАПІТАЛУ ТОРГОВЕЛЬНОГО ПІДПРИЄМСТВА

The article raises a number of problems related to the risk management of working capital of a trading enterprise. It is noted that the war against Russian aggression exacerbated the problem of formation and replenishment of working capital at trade enterprises. It is substantiated that risk management is a process of influence on the subject of economic activity, which provides the widest possible range of coverage of possible risks, their justified acceptance, reduction of the degree of impact of risks on the subject to a minimum, development of a strategy for the behavior of this subject in the event implementation of specific types of risks. It was established that the working capital optimization mechanism covers the following areas: improving the state of payables and receivables; short-term cash flow planning for individual counterparty enterprises and for the company as a whole; rationing and reduction of stocks, launch of management and control mechanisms to ensure the maintenance of stocks at an optimal level. It is proposed to develop and implement risk management tools for working capital and cash, which would involve the following stages: formation of an optimal organizational structure with a clear division of responsibilities; creation of a reporting management system; monitoring the effectiveness of inventory management, receivables and payables; determination of key performance indicators and creation of a system of motivating units for achieving the established indicators. It was determined that in the practice of domestic trade enterprises, it is advisable to apply the following methods of working capital management: rationing; ABC method; optimization. It is justified that in order to increase the efficiency of the use of the company's working capital, it is advisable to implement a number of measures in all spheres of the company's operation, in particular: improvement of the company's marketing activities; acceleration of the process of selling finished products; improvement of the settlement system for shipped products; effective management of receivables; expansion of cooperation with banking institutions regarding raising funds and carrying out settlements; compliance with contractual and payment discipline.

Import competition, heterogeneous preferences of managers, and productivity

When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms.

MALİYYƏ MENECMENTİNDƏ NAĞD PUL VƏSAİTLƏRİNİN EFFEKTİV İDARƏ EDİLMƏSİ

Declining and uncertain demand and disrupting supply chains create cash and turnover problems in enterprises. Businesses have difficulty collecting receivables from customers who do not have enough cash. There are also delays in enterprises' payments to suppliers and contractors due to short-term cash flows, ie short-term cash inflows. Companies need working capital and cash for their daily activities. There are also delays in enterprises' payments to suppliers and contractors due to short-term cash flows, ie short-term cash inflows. Excessive cash holdings also pose a number of problems, such as not being able to take advantage of lucrative investment opportunities. This article will provide information on how to determine the optimal level of cash, what approaches are used, the possibilities and limitations of these approaches, and what measures should be taken to control the inflow and outflow of cash. Keywords: cash, model,finance, alternative value, money management

Implied Equity Duration: A Measure of Pandemic Shutdown Risk

ABSTRACTImplied equity duration was originally developed to analyze the sensitivity of equity prices to discount rate changes. We demonstrate that implied equity duration is also useful for analyzing the sensitivity of equity prices to pandemic shutdowns. Pandemic shutdowns primarily impact short‐term cash flows, thus they have a greater impact on low‐duration equities. We show that implied equity duration has a strong positive relation to U.S. equity returns and analyst forecast revisions during the onset of the 2020 COVID‐19 shutdown. Our analysis also demonstrates that the underperformance of “value” stocks during this period is a rational response to their lower durations.

Economic Vulnerabilities and Livelihoods: Impact of COVID‐19 in Fiji and Vanuatu

Economic Vulnerabilities and Livelihoods: Impact of <scp>COVID</scp>‐19 in Fiji and Vanuatu

Does Big Data Improve Financial Forecasting? The Horizon Effect

We analyze the effect of alternative data on the informativeness of financial forecasts. Our starting hypothesis is that the emergence of alternative data reduces the cost of obtaining information about firms' short-term cash-flows more than their long-term cash-flows. If correct, and forecasting short-term and long-term cash-flows are distinct tasks, analysts will reduce effort to process long-term information when alternative data becomes available. Alternative data thus makes long-term forecasts less informative, while increasing the informativeness of short-term forecasts. We confirm this prediction using variations in analysts' exposure to social media data and a new measure of forecast informativeness at various horizons.

Internal financing, managerial compensation and multiple tasks

We study the optimal capital budgeting policy of a firm taking into account the choice between internal and external financing. The manager can dedicate effort either to increase short-term profitability, thus generating greater immediate cash-flow, or to improve long-term perspectives. When both types of effort are observable, low productivity firms end up using internal funds, while high productivity firms use external capital markets. When effort to boost short-term cash flow is observable, while effort to boost long-term profitability is not, non-monotonic policies may be optimal. In such cases financing switches back and forth between internal and external funds as the quality of the project increases.

What Drives Firms' Hiring Decisions? An Asset Pricing Perspective

In a neoclassical dynamic model of the firm with labor market frictions, optimal hiring is a forward-looking decision that depends on both discount rates and expected cash flows. Empirically, we show that: a) the aggregate hiring rate of publicly traded firms in the U.S. economy negatively predicts stock market excess returns and long-term cash flows both in-sample and out-of-sample, and positively predicts short-term cash flows; and b) through a variance decomposition, the time series variation in the aggregate hiring rate is mainly driven by changes in discount rates and short-term expected cash flows, each contributing roughly to 50% of the variation, with no contribution from variation in long-term expected cash flows. Through a structural estimation of the model, we show that labor adjustment costs and, to a lesser extent, time-variation in the price of aggregate productivity risk, are essential for the model to replicate the empirical patterns.

Maintaining Seismic-Focused Exploration During Downturn Yields Benefits

This article, written by JPT Technology Editor Judy Feder, contains highlights of paper SPE 197213, “New Growth in an Old Basin: Successful Implementation of PDO’s Exploration Strategy in a Downturn,” by Nicholas Feast, Salim Rawahi, and Mohammed Mazrui, Petroleum Development Oman, prepared for the 2019 Abu Dhabi International Petroleum Exhibition and Conference, Abu Dhabi, 11–14 November. This paper has not been peer reviewed. A conventional industry approach is to curtail seismic activity during a downturn, focusing on limiting new exploration and drilling production wells instead. This paper demonstrates how maintaining investment in high-quality 3D seismic during the last downturn, together with selective exploration, quality geoscience, application of new technologies, and efficiently maturing discoveries to early cash flow, was successful in sustaining future production while deploying capital efficiently. Challenge in Oman Block 6 Investment in 3D seismic does not contribute to immediate cash flow and, when funds are scarce, is an early candidate for cost reductions. By mid-2014, the seismic sector was the worst-performing segment in the upstream industry. However, without continued investment in seismic, future exploration success is threatened. This poses a dilemma for energy companies as they balance short-term cash flow with long-term value generation. Petroleum Development Oman took the opposite approach in the mature Oman Block 6. The company reduced short-term exploration drilling and testing and focused on early production from near-term exploration plays for early monetization to partially fund exploration. It used recently acquired seismic data to pursue highly ranked exploration opportunities. Finally, it sustained investment in, and improved efficiency of, advanced seismic acquisition and processing to improve cost efficiency for future plays. Nevertheless, success through both oil and gas exploration was achieved. Enhanced short-term cash flow and improved capital efficiency resulted while significant commercial oil and gas volumes were discovered. During 2016–2018, 1.3 billion BOE were discovered, primarily in subtle and stratigraphic traps, and over 22000 km2 of new 3D wide-azimuth (WAZ) seismic was acquired (Fig. 1). The complete paper presents case studies from the Shammar, Mabrouk North East, and Rakid plays. Focused activity in the Shammar play added volumes while early hookup and production provided cash flow, repaying all Shammar drilling and testing costs within a year. A success rate of 100% in Mabrouk North East exploration and appraisal wells proved the potential of better seismic imaging in pursuing more-complex stratigraphic traps in deep reservoirs. Early monetization focus while implementing new seismic acquisition techniques with fast processing turnaround also opened new play potential. Discoveries in the Rakid field’s Permo- Carboniferous Haushi reservoir between 2016 and 2017 delivered ultimate recovery of more than 80 million bbl through imaging of truncations beneath Nahr Umr sealing shales. These low-unit-technical-cost developments are under accelerated development programs with follow-up potential. In two of the case studies, the authors credited strongly integrated exploration, development planning, well and facility engineering, and operations teams collaborating from early in the project with allowing maximum value to be realized. In addition to the case-study plays, success was also achieved in exploring core and increasingly creamed plays (this term refers to a situation in which exploration has “creamed off ” the best prospects first, leaving more-challenging prospects), in which rejuvenation using new 3D seismic resulted in several discoveries and followup opportunities. Improved seismic quality in a mature basin continues to add value through enabling new discoveries from old ideas. Thus, the strategy of maintaining investment in seismic during a downturn—with a focus on stratigraphic and subtle traps—and achieving cash flow from early production has proved to be a solid basis for future success.

Legal smart contracts for derivative trading in mining

Abstract This research demonstrates financial derivative trade of unprocessed materials, for the mining industry through legal smart contracts. Within the mining supply chain, a stock of mined resources can reside in a mineral stockpile for over twenty years without gaining financial interest and without undergoing the mineral extraction process to derive value from the asset. This research elaborates on a blockchain solution implemented to increase miners’ short-term cash flow for business operations through the issuance of derivative assets on mineral stockpiles which can be traded through legally binding smart contracts. The system is the first to enable mining companies’ access to the underlying asset’s value earlier in the production lifecycle through smart contract technology whilst providing hedge funds with access to new financial products for investment portfolios.

Dynamic Equity Slope

The term structure of equity and its cyclicality are key to understand the risks driving equilibrium asset prices. We propose a general equilibrium model that jointly explains four important features of the term structure of equity: (i) a negative unconditional term premium, (ii) countercyclical term premia, (iii) procyclical equity yields, and (iv) premia to value and growth claims respectively increasing and decreasing with the horizon. The economic mechanism hinges on the interaction between heteroskedastic long-run growth – which helps price long-term cash flows and leads to countercyclical risk premia – and homoskedastic short-term shocks in the presence of limited market participation – which produce sizeable risk premia to short-term cash flows. The slope dynamics hold irrespective of the sign of its unconditional average. We provide empirical support to our model assumptions and predictions.

Balancing Athletic Revenues with Ethical Behavior: Dilemma of NCAA

The desire to win and make money from college athletics threatens the integrity and reputations of once prestigious universities. These pressures to generate revenue can undermine institutional legitimacy and severely injure perceptions of institutions of higher learning. This study assesses ethical violations in four major college programs. These case studies illustrate how concerns for winning, generating revenue, pleasing alumni, and mollifying boosters override adherence to ethical norms. The paper utilizes a seven-fold taxonomy to assess conduct at high-profile institutions. Abuses indicate that a desire for short-term cash flow can weaken core underpinnings of institutions. The paper offers recommendations for corrective action.

Import Competition, Heterogeneous Preferences of Managers, and Productivity

When managers have objectives beyond maximizing monetary profits, inefficiencies may arise. An increase in competition may then force managers to improve the productivity of the firm in order to ensure survival. While this hypothesis has received ample theoretical attention, empirical evidence is scarce, mainly because preferences of managers are typically unobserved. In this paper, we exploit the fact that a large literature has documented specific non-monetary preferences of family managers. Using Spanish firm-level data, we compare how family-managed and professionally-managed firms react to import competition shocks. We find that import competition leads to productivity increases in family-managed firms that are initially unproductive. Productivity improvements are driven by family management as opposed to family ownership or non-managing family members. Furthermore, we show that these managers increase efficiency by reducing material usage, which is consistent with them trying to increase their short-term cash flow in order to survive. Finally, productivity improvements seem to be particularly pronounced in multi-generational family firms that also introduce organizational changes.

Input Price Shocks and Investment: Evidence from OEMs

This paper studies changes in managers' investment decisions in response to short-term cash flow shocks. Using the novel setting of the 1999 Taiwan earthquake and a difference-in-differences design, I find managers reduce investment in research and development (R&D), but not capital expenditure, following the shock. The earthquake increased production costs for a subset of firms in the US high-technology industry that source raw materials from Taiwan. Because the shock occurred in Taiwan and was unexpected, this setting allows me to hold constant market demand and the investment-opportunity set, reducing concerns that changes in demand or investment opportunities could be driving the cutback in R&D. I also provide evidence suggesting the reduction in R&D is related to reduced innovation. Finally, using a decision tree model, I find evidence consistent with an earnings management motive. Specifically, I find firms affected by the shock become more aggressive in revenue recognition.

Cash Flow Sensitivities of Financial Decisions: Evidence from an Emerging Market

This study investigates the sensitivity of financing, investment, and distribution decisions to changes in operating cash flow, and whether these sensitivities depend on whether or not firms are financially constrained. Using a sample of 2,650 firm-years of Turkish firms for the period 1996 to 2013, we find that an increase in the short-term cash flows is associated with an increase in cash balances, irrespective of whether or not firms are financially constrained. However, unconstrained firms hold a larger cash balance than constrained firms. Dividends are positively related to the short-term cash flows of both types of firms. Investments are not sensitive to cash flow for either type of firms. An increase in their short-term cash flow induces the financially constrained firms to reduce debt financing, but makes the unconstrained firms increase their debt financing and reduce equity financing. Although firms in general prefer to use part of the saved cash in the long term, they do not deplete their cash savings. Constrained firms resort to debt financing in response to an increase in their long-term cash flow.

SMEs access to finance and the value of supplier financing

ABSTRACTThis article examines the relationship between supplier financing and small- and medium-sized firms’ value as well as the variation in the marginal value of supplier financing that arises from differences in access to financial markets and internal financing. We employ a sample of Spanish small- and medium-sized enterprises from the period 1998–2014. The results show a positive relationship between supplier financing and firm value. Furthermore, the findings reveal that the marginal value of supplier financing declines with leverage, short-term financial debt and cash flow, whereas it increases with financial costs. Also, the results show a higher marginal value of accounts payable during the financial crisis period when bank credit is reduced, for all firms, regardless of their access to finance. These results are in agreement with the financing motive for trade credit use. Firms with better availability of financial resources (internal and external) and with a lower financial cost place less value on supplier financing.

A STUDY ON THE EFFICACY OF ISLAMIC PAWN BROKING SERVICES IN FULFILLING SOCIO –ECONOMIC NEEDS: A CASE OF TWO CITIES-KUANTAN AND KUALA TERENGGANU IN MALAYSIA

In this paper we aim to examine the effectiveness of Al-Rahnu (Islamic pawn broking) services in fulfilling and enhancing socio-economic needs of its users as an alternative source of managing short term cash flow problem. To achieve our objectives we conducted a survey in two cities of Malaysia: Kuantan and Kuala Terengganu in the states of Pahang and Terengganu respectively. A sample of 128 users of Ar-Rahnu services were used to collect data through distributing a semi-structured questionnaire. The results were analyzed via the cross tabulation using excel spreadsheets. The findings from this study revealed that the community, especially the Malay ethnicity found Al-Rahnu services effective in fulfilling their needs of getting access to small short term loans with fast and hassle freeway and hence making them loyal to Al-Rahnu services. This implies that the Ar-rahnu services are well accepted as a better mean to ease short term financial difficulties and hence able to empower socio-economic needs of the people. The fulfillment of needs are derived from two main components of Al-Rahnu survey questions i.e. the loan tenure and the loan sufficiency. Keywords: Al-Rahn, Islamic pawn broking, socio-economy, loan tenure, loan sufficiency, Malaysia