Thesis (M. Sc.)--University of Hong Kong, 1996. / Includes bibliographical references (leaves 46-48).

This paper extends the real options literature by discussing an investment problem, where a firm has to determine optimal investment timing and optimal capacity choice at the same time under conditions of irreversible investment expenditures and uncertainty in future demand. After the project is installed with a certain maximum capacity, this capacity is fixed as an upper boundary to the output and cannot be adjusted later on. It turns out that, in the framework of this once and for all decision, uncertainty in future demand leads to an increase in optimal installed capacity. But on the other hand it causes investment to be delayed to an extent that even small uncertainty makes waiting and accumulation of further information the optimal decision for large ranges of demand. Limiting the capacity which may be installed weakens this extreme effect of uncertainty. (author's abstract) / Series: Report Series SFB "Adaptive Information Systems and Modelling in Economics and Management Science"

The United Kingdom Tax system is not neutral with respect to a Company’s investment and financing decisions, that is incentives and disincentives to invest in particular projects or use particular types of financing arise through the imposition of taxation. Such biases may increase or decrease the value of capital projects, and if a company is to be certain of making accurate investment decisions the incremental tax flows arising due to the project must be included in the evaluation. The tax flows arising through the acceptance of a project may differ depending on the company's or group's tax profile, and therefore the overall tax position of the company or group must be considered. The thesis explains the legislation relating to the taxation of corporate groups and suggests that because the tax system is so complicated, a computerised model is probably necessary. The author's computerised model is developed and tested in the thesis, comparing evaluations conducted using the procedures and assumptions of groups in the surveys, with those of the simulation model. It is shown that both understatements and overstatements occur through incorrectly allowing for taxation. The results of two empirical surveys are presented. The first, a postal survey, discusses the methods used by companies to incorporate tax in their project appraisals, and the second, based on interviews, provides a review of the whole capital budgeting process.

In the face of tightened loans from commercial banks, skyrocketing interest rates, reduced export demand, and weak domestic industries, the countries of the Andean Community (Ancom) turned their eyes, in the early 1990s, to the promise of FOI. Paradoxically, despite the success of the incentives put in place to attract FOI, Ancom failed to attract the sought after technology flows that would assist them in diversifying their exports, strengthening their industry, and retaining a higher portion of the value-added activities in the production chain. FOI was mainly directed to economic sectors entailing enclave-type activities with weak linkages to the rest of the economy as well as often low levels of local processing of resources, unstable international prices, low tax income for non-renewable resources, and environmental contamination. The aim of this thesis is to investigate, first, what are the historical sector-level FOI patterns of inward FOI in Ancom; and second, what are their determinants. In particular, we explore the role that local political and civil institutions play in determining inward FOI, and whether this role varies from one sector to another. We present a newly compiled dataset of inward FDI stocks, disaggregated by eight welldefined economic sectors within each country. The contributions of this dataset are, first, unprecedented time coverage, extending for an entire extra decade, the 1980s, for the countries of Colombia and Peru, for every disaggregated economic sector; second, the presentation of previously unpublished FDI stock data for the Colombian oil and petroleum sector; and third, the reorganisation of the existing individual country datasets into a comprehensive regional dataset. The outcome is the creation of the strongest available statistical foundation, based on published as well as unpublished figures from official sources. From an econometric perspective our analysis uses techniques that allow exploring nonstationary processes such as the analysis of stochastic and time trends, cointegration, and vector-error-correction models. Key findings include the importance of the quality of the institutional quality of a country in determining the industrial structure of inward FOI. Furthermore, we find that institutions are multidimensional and, as such, changes in the quality of different institutions often play conflicting roles in determining sector-level FDI. In the sectors of: Mining, Utilities, and Communications and Transport, FDI is associated with low levels of political rights, and high levels of civil liberties, whilst, the opposite holds for FOI in Agriculture, Manufacturing , Construction, Finance and Oil/Petroleum. Market size and trade openness are found to be important determinant in most sectors, whilst wages are either insignificant or inversely related to FOI. We also examine, from a historical perspective, the political economy surrounding changes in FOI policy as well as the evolving FDI trends, made available by the new dataset. We find, on the one hand, that the degree of political sensitivity to liberalisation, at sector-level, determines the availability and contract-modality of opportunities for foreign investors. On the other hand, geographical characteristics of each sector determine the type of political environment that is most conducive to increases in FDI. For this purpose we propose an extension of the definition of key geographical characteristics. We present an original framework, matching the two dimensions of sector-level characteristics to FDI contractmodality and political-conducive environment to increased FDI.

No description available.

The decision process of venture capitalists has received much attention from researchers and it is a complex and unclear process. There are plenty of factors that affect venture capitalists´ investment decisions. The purpose of this study is to find out the important factors in the due diligence process for the venture capital firms and venture capitalists during their investments. The authors find it interesting to find out factors that influence venture capitalists during their investment decisions according to due diligence process. Qualitative method was seen suitable for this study. Three phone interviews were conducted with three venture capital firms in Turkey named Is Private Equity, Ilab Ventures and Bosphorous Group. The authors find out management, market, location, product, industry and financial factors are important factors for venture capitalists to decide whether to invest or not.

I develop three models that are designed to aid in the analysis of environments in which agents i) benefit from interacting with others, and ii) optimally choose their characteristics mindful of the fact that such choices will influence the quality of interaction that they can expect. Of central interest is the ways in which a concern for interaction affects the efficiency with which agents choose their characteristics. The first two models contrast with previous work in that each agents' relevant characteristics are both unobserved and endogenously determined. The first model provides an explanation for credentialism in the labour market, and demonstrates how a concern for interaction can lead to over-investment in the relevant characteristic. The second model is motivated by human capital development in the presence of peer effects, and demonstrates how a concern for interaction can exacerbate an inherent under-investment problem. The third model retains the feature of unobserved characteristics, and contrasts with previous work by embedding frictions in the process by which agents compete for partners. The model is set in a labour market and demonstrates that outcomes of interest (equilibrium matching patterns, income, inequality and welfare) are generally not monotonic in the level of frictions.

No description available.

The interest for this research developed from the researcher's observation of host countries' policies (particularly developing countries) towards foreign direct investments. Available literature identify five main categories (though not mutually distinguishable) of host country policies: expropriatory, regulatory, receptive, promotional, and open-door policies. In this research, we are concerned with regulatory (control) policies. The response of MNCs to regulatory policies is identified to comprise of two stages: initial behaviour to 'conflict' (the policy), and the exploitation of (ownership) advantages. An MNC's initial behaviour could be competitive, collaborative, accommodative, compromising, or avoidant. Where the MNC adopts a compromising behaviour, bargaining as a means of resolving the 'conflict' is pursued. Whether this takes place or not in resolving the 'conflict', the MNC is likely to look back (assess) on what its ownership advantages are, vis-a-vis the host-country's location advantages, and then act on the basis of this assessment. Nigeria, like any other host country has economic policies, some of which affect MNCs. These include the Business Permit / Immigration Act, 1963; the Companies Decree, 1968; the Nigerian Enterprises Promotion Decrees, 1972 and 1977; the Local Sourcing Policy; etc. This research considers the factors influencing the response of MNCs to three of these policies: indigenization of ownership; nigerianization of management; and the local sourcing of raw materials. Four host-country characteristics and five MNC characteristics were hypothetically chosen as influential in the firms' response to each of the policies. The host country characteristics are: Nigeria's market attractiveness, availability of needed raw materials in Nigeria, availability of required human resources in Nigeria, and competition in the firm's industry in Nigeria. The MNC characteristics are: the firm's technological intensity, export intensity, complexity of managerial and operational tasks, size, and age. The major research findings are: (a) Most of the firms in the sample were collaborative in their behaviour in all the policies. (b) The most important (actually, the only) host country characteristic that significantly influenced the response of firms to the policies was Nigeria's market attractiveness. (c) The most important MNC characteristic that influenced the firms' response to the policies was their technology. (d) Contrary to popular opinion, this research found that important MNC characteristics encouraged or made firms to remain in Nigeria as well as comply with government policy, rather than making them arrogant or delay compliance. (e) All the firms in the study indicated that they had complied with the policies. Survey results were complemented with case studies. And the findings from the cases support all the above.

The dissertation explores the effect of limited contractual commitment on the form of contracts and studies its welfare implications. The main focus is on foundations of incomplete contracts. The thesis studies to what extent incompleteness of contracts can be linked to contract renegotiation. Particular emphasis is put onto explaining the absence of a contract from a relationship. Chapter 1 reviews the literature on contract renegotiation and incomplete contracting. Chapter 2 is based on a version of the hold-up problem. It shows that contracts that are vulnerable to renegotiation cannot provide better investment incentives than no contract. The main driving force is that investment, although beneficial from a total surplus point of view, has an ambivalent effect on the investing party's payoff. It increases the benefit of an efficient action and decreases the benefit of an inefficient action. An example is investment into human capital, such as additional job training. It increases personal satisfaction in a challenging job but may also increase the frustration from a job that consists only of repetitive tasks. If an exact job description is not feasible ex-ante and if the non-investing party has all the bargaining power ex-post, contracts cannot compensate for the cost of investment. Chapter 3 formalizes the intuition that contracting involves a cost because a contract constitutes a less flexible status quo for ex-post bargaining than no contract. For this, asymmetric information is introduced. With asymmetric information contracting is potentially costly because an inefficient outcome is not necessarily undone by an ex-post bargain. For example, during the renegotiation of the contract between General Motors and Fisher Body, the latter adopted a cost intensive production technology in order to convince its partner to renege on the former agreement. In the model of this chapter, parties weigh the benefit of a contract against lost flexibility. If these effects are similar, no contract is written. The possibility that a contract might be strictly dominated by no contract is explored in chapters 4 and 5. Such a strict dominance result is interesting because it is a more forceful advocate for the incomplete contract assumption. Chapter 4 contains a version of the durable good monopoly model with no discounting but costly contracting. These could be writing or legal costs. Early contracting is less costly than late contracting which highlights the idea that bargaining at a deadline is more costly. But also, early contracting suffers from the ratchet effect because it releases information. The main result says that the costs of the ratchet effect outweigh the cost savings, even if initial contracting costs are of order of magnitude smaller than late contracting costs. The seller strictly prefers to offer no contract. In chapter 5, a sequential screening model endogenizes the fixed contracting cost. The buyer is privately informed about one part of the good's value but ignores the second part, which is revealed later. Early contracting is beneficial because it suffers less from asymmetric information than does late contracting. Nevertheless, if uncertainty with respect to the first variable is greater than uncertainty with respect to the second variable, the seller cannot take advantage of this fact and he strictly prefers to wait. Moreover, if this is not the case, contracts are partially incomplete because they are not conditioned on the second variable. Finally, the thesis reports the new effect that all contracts are renegotiated in equilibrium. This is in contrast to the renegotiation proofness principle, which states that in models of contracting with renegotiation one can restrict attention to renegotiation proof contracts.