In the past decade a lot of attention has been devoted to the option valuation approach to i~vestments in financial economics. This theory provides a fl exible way of incorporating uncertainty and irreversibility into the making of the investment decision. The primary purpose of this study is to extend the contingent claim approach by introducing a strategic dimension into the investment decision. In particular we focus on the case where an investor may be preempted by one or more competitors, and where there is an advantage of acting first. Secondly, we apply the strategic options approach to some important areas in financial economics, such as corporate investment under uncertainty, corporate default , market micro-structure . and the timing of arbitrage. Apart from illustrating the wide applicability and relevance of the techniques, this also clarifies some important issues in financial economics. 'Option Games' (jointly written with William Perraudin) describes a way of incorporating strategic behaviour and asymmetric information into optimal stopping decisions under uncertainty. vVe derive optimal stopping rules when each agent's payoff is affected by the actions of other agents and these latter are of unknown type. 'Strategic Sequential Investments: an Application to Preemptive Patenting' derives the optimal investment rules for an incumbent and a challenger who both have an option to patent an innovation with stochastic payoff. We find that the optimal trigger rule is determined by a trade-off between the benefit of waiting to invest and the need to act quickly due to the competitive threat. In particular, we demonstrate that both the strategic Marshallian break-even investment trigger and the trigger obtained by the option valuation approach are in fact limit_ing polar cases of the strategic investment trigger developed in this paper. We then extend the model to a two-stage sequential investment situation where the first and the second stage respectively consist of patenting and launching the product. The model allows us to explain and analyse the phenomenon of sleeping patents. It appears that sleeping patents are more likely to occur when interest rates are low, price volatility is high or when the first stage_ cost is small relative to the second stage cost. 'Creditor Races and Contingent Claims' (jointly written with William Perraudin) presents a simple pricing model in which two debt-holders with incomplete information about each other's type decide when to foreclose on a financially-distressed firm. 'The Timing of Arbitrage: an Options Approach' presents a continuous-time modei for the timing of riskless arbitrage when the mispricing between two equivalent portfolios varies stochastically through time under the exogenous impact of liquidity trades and when there is a persistent prospect that the arbitrage bubble can 'burst'. The model endows the arbitrageur with n options to do arbitrage. When endogenously determined arbitrage bounds a re violated one or more arbitrage trades bring asset prices back within the bounds. The model is extended to the case where there are two competing arbitrageurs who have incomplete information about each other's type.

Chiu, Man Kin. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2008. / Includes bibliographical references (leaves 83-88). / Abstracts in English and Chinese. / Abstract --- p.i / Acknowledgement --- p.iv / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Literature Review --- p.11 / Chapter 3 --- The Model --- p.28 / Chapter 3.1 --- The Preliminaries --- p.28 / Chapter 3.2 --- The problem setting --- p.31 / Chapter 3.3 --- The optimal selling strategy and structural properties --- p.39 / Chapter 3.3.1 --- The optimal selling strategy --- p.39 / Chapter 3.4 --- The optimal investment decision-Making regarding capacity and investment time --- p.44 / Chapter 3.4.1 --- The optimal decision on the construction capacity --- p.45 / Chapter 3.4.2 --- The optimal decision on the starting time of the investment --- p.48 / Chapter 4 --- Numerical analysis --- p.55 / Chapter 4.1 --- The setting of the numerical example --- p.56 / Chapter 4.2 --- The numerical results --- p.63 / Chapter 4.2.1 --- The optimal capacity --- p.63 / Chapter 4.2.2 --- The optimal starting time of the construction --- p.69 / Chapter 4.2.3 --- The effect of the capacity constraint --- p.73 / Chapter 4.2.4 --- The effect of the time constraint --- p.78 / Chapter 5 --- Conclusion --- p.80 / Bibliography --- p.83

A Study of Venture Capitals¡¦ Investment Decision-Making and Performance in Taiwan: A Case of C Venture Capital Abstract Info-tech industry plays an important role in Taiwan¡¦s economic development, and for the last eighteen years a huge amount of capital invested in domestic high-tech industry by Taiwan¡¦s venture capitalists has been spurring capital formation of its high-tech industry. Moreover, the investment by venture capitals in earlier technology companies provides technology start-up teams with outstanding capital backup for management, which thus effectively promotes innovation and development of technology industry. Also, the provision of capital by venture capital industry, the talented technicians trained by ITRI, and the cluster of vertically related industries in Hsinchu Science-based industrial park jointly offer advantaged conditions for the development of such tech industries as semi-conductor, electronics information, and opto-electronic, which makes Taiwan one of the major manufacturing countries in global info-tech industry. However, venture capital is a high-risk, high-stakes investment industry; issues such as whether domestic venture capitalists have preferences in investment decision-making in terms of investing in high-tech companies at stages of seed, early, expansion, and mature, as well as which one¡¦s performance will be better when it comes to investing in domestic or foreign (mainly in America) high-tech companies are worth investigating. Still, little research on venture capitals was conducted to explore key decision factors for whether to invest and what factors cause investment projects to succeed or fail. Using C venture capital as a case, the primary purposes of this study are therefore to examine if there exists any one certain preferred decision factor for investment, to follow up the outcomes of investment projects, and to seek the factors of success and failure for these projects. The results of this study show that venture capitalists do prefer to invest at the stages of expansion and mature, for it is easier to predict the outcomes of investment projects. In addition, as a result of Taiwan¡¦s tech industry relocating to mainland China, venture capitalists¡¦ being still forbidden to invest in China, and the significantly decreasing number of domestic profitable projects, the ratio of increasing investment at the seed and early stages has been rising accordingly. Furthermore, it can be found that the investment performance on foreign high-tech companies is better than that on domestics, the ratio of investment continues rising year by year, and venture capital is moving toward globalization. In this study, the decision factors directing the investment decision-making of the board of directors in the case company are based on four dimensions of evaluation principles: (a) business starter & management team; (b) industry & market; (c) product & technology; and (d) financial planning & reward. The findings of this study show that investment target companies are more likely to be invested if they possess better technology platforms or patents than their competitors, or their products are more unique. But they are unlikely to be invested if their industrial future is uncertain or the product market is small. Also, according to the analysis of factors for the outcomes of investment projects, projects invested based on their advantaged conditions in the dimensions of industry & market and product & technology have better chance to succeed; while those invested due to being advantageous in the dimensions of business starter & management team, and financial planning & reward are more likely to fail. This study indicates that although the two decision factors of finance and management team have advantages, without the matching of industry & market and product & technology, high-tech industry is not necessarily able to gain profit; but if there are problems with the latter two factors, the companies will definitely fail, leading to bankruptcy and liquidation. To sum up, having advantages in both factors of industry & market and product & technology is more likely to profit a company, but only with the positive incorporation of management team and financial planning can it further ensure a company¡¦s success.

This thesis investigates the interplay of context with culture on strategic investment decision (SID) making practises in strategic management accounting, strategic management, cross cultural management and global strategic management research in Singapore using three research questions. These research questions commence from an inter-country perspective on SID making and narrow down to the theme of foreign versus domestic investments. The three research questions are: Research question 1(RQ1): Do strategic management accounting, strategic management and cultural aspects vary across Singaporean companies in SID making? Research Question 2 (RQ 2): Can SID differences be explained by using a four way categorisation of firms? Research Question 3 (RQ3): Do decision making practises for international SIDs differ from domestic SIDs? The first research question aims to determine country versus context specific SID making practises using Singapore as the research context. Having acknowledged unique country specific influences on SID making practises in the analysis conducted using the first research question, the second research question segments the Singaporean SIDs in conjunction with the international SIDs into four contextual categories using unique contextual differences that are highlighted in the analysis. The third research question aims to ascertain unique aspects of SID research that can be applied to global strategic management research. To address RQ3, the findings from RQ1 and RQ2 are consolidated in tandem with global strategic management research in order to distinguish between foreign direct investments versus domestic investments in SID making. Drawing on Singapore as the empirical focus for fieldwork, a multi-tiered case analysis system is used. The methods chapter illustrates the pilot study and thirty case studies that are conducted over two years over three stages with representative companies from the primary, secondary and tertiary sectors. In the detailed case study approach taken by the researcher; web-based research, questionnaire modifications, interviews, field visits, factory observations and financial reports collection are duplicated in Stages one to three to ensure comparability with the previous phases. In the discussion section, the dominating themes from the results chapters are used as comparison with multi-country research in order to investigate the three research questions in detail. In total, nineteen expectations that are derived from the literature review covering the dimensions of strategic management accounting, strategic management, cross cultural management and global strategic management are extracted and compared with actual SID making practises exhibited in the 30 case studies. Cultural similarities within the thirty Singaporean SIDs are contrasted with unique cultural features of U.S, U.K, Japanese and German firms using RQ1. Beyond financial variables, culture specific differences are specifically highlighted for the dimensions of intuition, power distance relationships, long term orientation and minimum financial versus strategic emphasis in the Singaporean sample. In RQ1’s analysis, it is found that Singaporean firms exhibit the highest degree of future orientated behaviour, power distance relationships in conjunction with lower levels of assertiveness and in-group collectivism when contrasted with U.K, U.S, Japanese and German firms. However, some contextual differences are apparent within the Singaporean sample which RQ2 seeks to explain. In RQ2’s analysis, the thirty firms are structured into Market Creators, Value Creators, Refocusers and Restructurers where marked distinctions in financial flexibility, financial expectations and attitude towards financial targets are found. Further observations found that firms in the tertiary sector favour readiness in SID making, as compared to planned SID making approaches in the secondary and primary sectors. Hence, it is concluded that culture and context both play important roles in different aspects in SID making. RQ3’s analysis aims to show subtle distinctions between overseas and domestic SIDs. It is found that firms investing in overseas SIDs are inclined to be longer-term in their SID making approach than firms who have a higher propensity to invest in domestic SIDs. The approaches for host country selection differ for the 4 contextual categories. The Market Creators tend to be influenced by the availability of closeknitted partners when investing overseas. In contrast, the Refocusers and Restructurers are highly customer-driven whereas the Value Creators are attracted by the host country’s market potential. From the literature summary of the four unique dimensions pertinent to SID making, a pre-conceptual framework is derived. In the discussion section, the pre-conceptual framework is restructured into a post-conceptual framework where themes common to the Singaporean and multi-country SIDs that have been used for comparative analysis are emphasised. This framework concludes the thesis by combining both contextual and cultural themes using research from the eastern and western contexts.

Investment in residential real estate involves almost all members of the public at some stage of their lives, whether this be one's first home or the purchasing of one‟s first investment property. Understanding how to maximise the return on one's investment is something that can benefit the investor from before the investment is made until after the property has been sold, if it is sold at all. Literature surveys have concluded that there are a number of variables to consider when maximising the return on investment. As residential real estate is not a perfect science, there are guidelines and routes that are more beneficial to the investor depending on the current market, environment and economic standing. A survey was undertaken by members of the public that are involved in residential real estate investment, relative to the maximisation of the return on investment in residential real estate. The salient findings include: Investors in residential real estate spend more than average to extensive time prior, to investment researching the chosen residential real estate property; Investors in residential real estate perform a feasibility study before committing to the development whereas; Investors in residential real estate make use of financial advisors/valuers/estate agents or other investors' knowledge bases in deciding whether to invest in a residential property development; Investors in residential real estate believe that their degree of knowledge about the residential property market and residential property investments are average to very high. Investors in residential real estate somewhat agree that residential real estate investors do not effectively manage their investments. It was recommended that investors make use of help and guidance when investing in residential real estate, perform a feasibility study and ensure that they know their market before investing in a project. It was also noted that location plays a large role when deciding on an investment opportunity worth investing into. By creating awareness and ensuring that all methods and guidelines have been used to maximise the returns that their proposed residential real estate investment, investors can ensure a stronger, healthier cash flow and reap the highest possible benefits from their residential real estate portfolio.

Cases involving sudden environmental events, such as British Petroleum’s (BP’s) accidental oil spill in the Gulf of Mexico in 2010, clearly demonstrate the causal relation between poor corporate environmental performance and abrupt loss of shareholder value. Under such circumstances, a firm’s results can be readily priced using a conventional valuation model and hence, there is a clear nexus between environmental performance and business outcomes, as represented by the firm’s financial results as well as the event impact on shareholder value through equity prices. However, in less extreme cases there is no clear evidence of there being a relationship between these elements. Further, in relation to the literature on the nature of and motivations for corporate social and environmental reporting, scant attention has been directed towards research on the usefulness of environmental performance information to financial decision makers. Moreover, such studies as there have been have delivered mixed results in the absence of a conceptual framework that is able to distinguish the quality of such reporting from underlying performance and other representations of performance, such as reputation and SRI index membership. In order to address these previous shortcomings in this field, the proposed research focuses on environmental issues to investigate whether corporate environmental performance information can be considered as an aspect of a firm’s value, in terms of equity performance and to this end three empirical studies are carried out probing the relationships, respectively, between: - corporate social responsibility (CSR) reputation and equity performance, - socially responsible investment (SRI) index membership and equity performance, and - CSR ratings and share selection in SRI versus general investment funds, whilst in each case controlling for other environmentally related factors, as well as financial performance. The findings of the first empirical study suggest that environmental reputation and physical performance measured as proxies of the corporate environmental performance have value relevance, being negatively significantly related to the stock valuation, whereas environmental disclosure (DJSI) is not value relevant to financial decision-makers, and hence, not incorporated into share prices. However, the outcomes suggest that the GRI, an alternative measure of environmental disclosure, is value relevant even though it is not incorporated into share prices. The outcomes of the second empirical study indicate that companies being added to the DJSI or the FTSE4Good index in the March announcement results in a temporary decrease in a their share price, whilst companies added in (deleted from) the September announcement of the FTSE4Good index experience a significant but temporary increase (decrease) in stock return. However, membership of SRI indices does not have value relevance. Finally, the findings from the third empirical study suggest that CSR ratings have a weak influence on the ownership holdings decisions taken by SRI fund managers and further, they show that they, on aggregate, prefer to take into account multidimensional CSR measurements when making investment choices.

Current real estate investment decision making frameworks fail to recognise differences posited by the retail sector. The investment decision stage concerned with forecasting expected returns relies on financial and quantitative models such as those derived from the Modern Portfolio Theory. In a shopping mall environment, however, future performance is driven by nonfinancial factors, for example tenant mix and superior customer experience. Therefore, forecasting expected returns in a retail environment requires a nuanced approach relative to other commercial property sectors. Using a Balanced Scorecard framework, this study investigated the usefulness of nonfinancial factors in forecasting expected returns in retail. An electronically administered survey using a sample of institutional investors that contributed to South Africa’s SAPOA/IPD Index for 2012 was conducted. Only officials occupying investment decision making positions were invited to participate in the survey. Nonfinancial factors identified from the literature were presented to the respondents on a Likert-Style scale. In aggregate, participants to the survey possessed 156 years of commercial property experience and 56 years of retail experience. Mean scores obtained from participants’ responses were used to analyse the research findings. The study found nonfinancial factors useful when forecasting expected returns in a retail investment decision environment. Further, the study suggested the use of a Balanced Scorecard framework in order to guide developments in the area of retail investment decisions. In conclusion, the study gave direction for future research in the retail sector. / Dissertation (MBA)--University of Pretoria, 2013. / zkgibs2014 / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted

The soaring number of natural hazards in recent years due largely to climate change has resulted in an even higher level of investment in flood protection structures. However, such investments tend to be made in the aftermath of disasters. Very little is known about the proactive planning of flood protection investments that account for uncertainties associated with flooding events. Understanding the uncertainties such as “when” to invest on these structures to achieve the most optimal cost-saving amount is outmost important. This study fills this large knowledge gap by developing an investment decision-making assessment framework that determines an optimal timing of flood protection investment options. It combines real options with a net present value analysis to examine managerial flexibility in various investment timing options. Historical data that contain information about river water discharges were leveraged as a random variable in the modeling framework because it may help investors better understand the probability of extreme events, and particularly, flooding uncertainties. A lattice model was then used to investigate potential alternatives of investment timing and to evaluate the benefits of delaying investments in each case. The efficacy of the proposed framework was demonstrated by an illustrative example of flood protection investment. The framework will be used to help better inform decision makers.

We study the resource investment decision faced by a firm that offers two demand-classes (i.e., products, services), while incorporating the firm's pricing decision into the investment decision. For this purpose, we consider a monopolistic situation and model the demand curve of each demand-class as a downward sloping linear function of its own price. The firm can invest in dedicated resources, which can only satisfy a specific demand-class, and/or in a more expensive, flexible resource, which can satisfy both demand-classes. We consider a two-stage stochastic decision model: In the first stage, the firm determines the dedicated and flexible resource capacities to invest in under demand uncertainty. In the second stage, demand curves are realized and the firm optimizes its revenue through pricing and resource allocation decisions, constrained by its capacity investment decision in the first stage. Our analysis provides the structure of the firm's optimal resource investment strategy as a function of price elasticities and investment costs, and shows how the value of resource flexibility depends on these parameters and demand correlations. Based on our analysis, we provide principles on the firm's optimal resource investment strategy under uncertainty. We show that it can be optimal for the firm to invest in the flexible resource when demand patterns are perfectly positively correlated, while it is not always optimal to invest in the flexible resource when demand patterns are perfectly negatively correlated. / Master of Science

This thesis responds to the question 'how can sovereign wealth funds manage ambiguity in their decision-making so as to implement substantive long-term investment programmes?' The rapid growth of sovereign wealth funds (SWFs) over the past decade, due largely to booming commodity prices, has inspired optimism among many for their potential to contribute to the sustainability goals of society. SWFs are unconstrained by many of the factors that have kept pension funds from realising their potential as long-term investors and so they are well placed to make significant investments in sustainable projects with positive externalities such as infrastructure and to act as effective monitors of corporate behaviour. But many obstacles stand in the way. At the institutional level, transparency has replaced tight financial market regulation, resulting in entrenched short-termism. At the organisational level, many problems facing long-term investors are too complex to fit into traditional models of decision-making. Decentralisation is necessary to respond to this complexity but it conflicts with the coordination necessary to achieve economies of scale and scope. There may not even be an ideal outcome to coerce or incentivise agents to achieve. Taken together, these problems are understood in this thesis as ambiguity, which results from differences in interpretation and irreconcilable conflict. In contrast, most governance frameworks focus on problems of uncertainty and risk, due to missing information. This thesis has three aims. The first is to reframe the governance challenge for longterm investing in terms of managing ambiguity. Second, this thesis aims to reconcile ambiguity with legitimacy that depends on expert decision-making and provides one right answer to a clearly specified problem. Third, it provides specific examples of how ambiguity, if managed, can improve decision-making. That is, ambiguity forces us to engage with subjective reality but also provides us with a framework to do so. Ambiguity can act as a built-in adaptation mechanism to hold a coalition of diverse interests together in a rapidly changing environment, to identify synergies where others see only trade-offs and to overcome collective action problems. These constructive properties of ambiguity are explored in the four substantive chapters of this thesis, alongside specific recommendations for changes to SWF governance structures to transcend barriers to long-term investing. The first half of the thesis focuses on the earlier stages of the investment process and draws on specific examples of two SWFs. Chapter III investigates ambiguity in the Alberta Heritage Fund's inter-generational equity mandate. If managed in the form of self-reflexivity, ambiguity can contribute to overcoming the time inconsistency problem in the context of sub-national resource wealth funds. Chapter IV focuses on the irreconcilable conflict in the Norwegian Fund's ethical investment policy. It argues that agents use their discretion to interpret the policy and, in doing so, are able to align it more closely to the Fund's long-term investing mandate. The second half of the thesis extends consideration to long-term investors more broadly. Chapter V explores the delegation of shareholder engagement to portfolio managers to leverage synergies in an investment management firm. It finds that introducing ambiguity into incentive design can overcome the multi-task incentive problem. Chapter VI brings concepts explored in earlier chapters to bear on its analysis of a new market for public infrastructure assets. It argues that ambiguity provides the space necessary to bring diverse actors together to transcend collective action problems and create new institutional arrangements to support a more efficient market structure. Taken as a whole, this thesis is optimistic that, as those claiming to have the one right answer are increasingly proven wrong, ambiguity will earn its rightful place in the study and practice of finance.