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Investment Community (investment + community)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	83%

Selected Abstracts

Optimal timing to invest in e-commerce

PSYCHOLOGY & MARKETING, Issue 4 2006
Jow-Ran Chang
The timing of investment in e-commerce remains hotly debated in both the academic and investment communities. This study develops a framework for analyzing the optimal timing for a company to invest in e-commerce for conducting its business-to-business (B2B) or business-to-consumer (B2C) transactions. This study applies a real option theory to assess a new risk,reward dynamic for investing in e-commerce. The numerical results demonstrate that the optimal timing of investment in e-commerce depends on uncertainties regarding future cash flows and the opportunity costs associated with e-commerce. Implications with regard to the behavior of Internet companies from a financial perspective are discussed. © 2006 Wiley Periodicals, Inc. [source]

Quantifying the Impact of Corporate Environmental Performance on Shareholder Value

ENVIRONMENTAL QUALITY MANAGEMENT, Issue 4 2001
Robert Repetto
This article demonstrates an approach for analyzing and communicating the financial implications of a company's environmental exposures. In environmentally sensitive industries, this approach can help companies to benchmark themselves against rivals, to identify major sources of environmental risk and opportunity, to assign financial values to risk-mitigating options, and to communicate their environmental strategies to the investment community and other stake-holders. © 2000 World Resources Institute. Used with permission. [source]

Bookbuidling, Auctions, and the Future of the IPO Process

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2005
William J. Wilhelm Jr.
Auction theorists predict that bookbuilding, long the standard process for selling equity IPOs in the U.S., is about to give way to an Internet-based IPO auction process that is both more efficient and more fair. The promise of auctions is that, by using an electronic platform that gives all investors the opportunity to bid on IPOs, the underpricing of IPOs and commissions to underwriters will be reduced, leading to an increase in net proceeds to issuers. Largely missing from such arguments, however, is an appreciation of why bookbuilding has dominated U.S. practice (and continues to supplant auctions in IPOs in most countries outside the U.S) and the role of undepricing in the IPO process. Rather than canvassing all investors, bookbuilding involves eliciting expressions of interest from institutional investors, and then allocating shares mainly according to the strength of their professed interest. In contrast to auctions, which allocate shares according to a set of explicit rules, bookbuilding involves a set of implicit "rules" that provide considerable room for judgment by the underwriter. This does not mean that the rules are arbitrary or not well understood by participants, particularly after thousands of IPOs conducted over the better part of two centuries. But to manage the exchange of information between issuers and investors, and the potential conflicts of interest in representing both groups, such rules must be administered by an intermediary with a considerable stake in protecting its reputation for fair dealing. Investment banks that deal with both issuers and the investment community on a regular basis are well positioned to perform this function. The underpricing of IPOs is best viewed not as a transfer of wealth from issuers to favored investors but rather as compensation to the large influential investors that play a major role in the price discovery process. By opening the process to all comers, auctions will discourage these large investors from bidding aggressively because less sophisticated investors will be able to "free ride" on their research and due diligence. To the extent this happens, auctions may suc ceed in reducing underpricing (in fact, they may even lead to over pricing), but they will also reduce the net proceeds for issuers. Nevertheless, recent advances in communications technology and auction theory will undoubtedly reshape current securities underwriting practices. In particular, Internet auctions are likely to replace bookbuilding in debt IPOs and less risky equity issues (say, IPOs of LBOs). But the argument that Bookbuilding will be completely cast aside in favor of largely untested alternatives fails to appreciate a successful institutional response to major market imperfections, some of which can never be wholly eliminated. Especially in the case of risky (first-time) equity IPOs, there will continue to be an important role for managing the information exchange between issuers and investors that is critical to the IPO process. [source]

CREATING VALUE IN THE OIL INDUSTRY

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 1 2004
Nick Antill
In contrast with current thinking that conglomerates are inefficient, this article begins by presenting arguments in favor of the size and structure of the large integrated oil companies, also known as "the supermajors." Among the advantages are tax efficiency, information flow, political and technological know-how, broad supplier and customer relationships, scale economies, cross-business economies of scope, brand power, and the ability to coordinate strategic initiatives across businesses. These advantages all translate into a lower cost of capital. One problem, however, is that this lower cost of capital does not seem to be reflected in the target returns on capital currently set by the supermajors. Observing that the financial goal of a corporation is to maximize not its return on capital but rather the net present value of expected future cash flows and earnings, the authors argue that the majors need to make two major changes to current practice. First, their investment hurdle rates should be reduced from their current level of 14,15% to the weighted average cost of capital, which is estimated to run about 8,9%. Second, the actual returns on capital reported in published accounts are largely meaningless; and when evaluating new investments and existing operations alike, the companies must find an annual performance measure that better reflects the economic realities of the business. This paper recommends use of a performance measurement framework based on economic profit that should serve two critical purposes: it will encourage managers to undertake all value-increasing projects (not just those that will maintain or increase reported return on capital), and it will help the companies communicate their strategy and results to the investment community. [source]

EVIDENCE THAT GREATER DISCLOSURE LOWERS THE COST OF EQUITY CAPITAL

JOURNAL OF APPLIED CORPORATE FINANCE, Issue 4 2000
Christine A. Botosan
The effect of corporate disclosure on the cost of equity capital is a matter of considerable interest and importance to both corporations and the investment community. However, the relationship between disclosure level and cost of capital is not well established and has proved difficult for researchers to quantify. As described in this article, the author's 1997 study (published in The Accounting Review) was the first to measure and detect a direct relationship between disclosure and cost of capital. After examining the annual reports of 122 manufacturing companies, the author concluded that companies providing more extensive disclosure had a lower (forward-looking) cost of equity capital (measured using Value Line forecasts with an EBO valuation formula that derives from the dividend discount model). For companies with extensive analyst coverage, differences in disclosure do not appear to affect cost of capital. But for companies with small analyst followings, differences in disclosure do appear to matter. Among this group of companies, the firms judged to have the highest level of disclosure had a cost of equity capital that was nine-percentage points lower than otherwise similar firms with a minimal level of disclosure. Closer analysis of some of the specific disclosure practices also suggests that, for small firms with limited analyst coverage, there are benefits to providing more forward-looking information, such as forecasts of sales, profits, and capital expenditures, and enhanced disclosure of key non-financial statistics, such as order backlogs, market share, and growth in units sold. In closing, the article also discusses an interesting new study (by Lang and Lundholm) that suggests there is an important distinction between effective corporate disclosure and "hyping the stock." The findings of this study show that while higher levels of disclosures are associated with higher stock prices, sudden increases in the frequency of disclosure are viewed with skepticism. [source]

Identifying impediments to SRI in Europe: a review of the practitioner and academic literature

BUSINESS ETHICS: A EUROPEAN REVIEW, Issue 3 2008
Carmen Juravle
For more than 15 years, the investment community and the academic community have written extensively on socially responsible investment (SRI). Despite the abundance of SRI thought, the adoption of SRI practices among institutional investors is a comparative rarity. This paper endeavours to achieve two goals. First, by integrating the practitioner and academic literature on the topic, the paper attempts to identify the many impediments to SRI in Europe from an institutional investor's perspective. Second, the paper proposes a unitary framework to conceptually organize the impediments to SRI by using insights from different relevant research perspectives: behavioural finance, organizational behaviour, institutional theory, economic sociology, management science and finance. The paper concludes by presenting the main shortcomings within both the academic and the practitioner literature on SRI and by providing conceptual and methodological recommendations for further research. [source]