Through a dynamic panel data analysis of a sample of Nordic firms we investigate how executives’ stock and option incentives influence the choice of capital structure. In addition, we look at how equity ownership by a large external shareholder influences the incentives’ effect on capital structure. Our results show that options have a negative effect on debt level, while stock holdings’ influence is more diffuse. We also see that only options have both a statistical and economical significant impact on leverage, and therefore operate as a stronger incentive than stocks. No significant dependency is found between the size of the largest external shareholder and the incentives’ effect on capital structure. Still, we see a weak trend indicating that the effect of equity based incentives is stronger when firms’ largest shareholders are institutional.

This thesis aims to map out the current state of the Norwegian power industry and reveal opportunities that can serve as a fundament for the formation of new business models in the industry post AMR implementation.Demand side management (DSM) arouse to include end customers and give them incentives for having a power consumption pattern which also benefits the power system. Market structure; lack of ICT infrastructure and understanding of the solutions; costs and competitiveness, as well as the lack of incentives are currently some of the most critical barriers to DSM implementation. However, the forthcoming establishment of a smarter transmission grid is expected to easier facilitate DSM actions. A smart grid facilitates transmission of information in addition to power, and is hence more intelligent than today’s grid as it can integrate the behavior of all connected users. A smart grid is not one single installation, but consists of several components, of which automatic meter reading (AMR) is one. The drivers for implementing a smarter grid in Norway differ from the prevailing European drivers. In Norway, the progress towards a smarter grid is driven by the desire to reduce peak loads and create a secure power system which benefits the end customer. Implementation of AMR has been adopted in Norway, although the specific functionalities and responsibilities are not yet entirely determined. In addition to AMR implementation, a common Nordic end user market is also expected within the coming years. We expect the supplier centric model (SCM) to become the chosen market model. This involves a single contact point for the end customer, so that the supplier will handle most customer specific issues. AMR is expected to facilitate innovation opportunities that potentially can lead to a disruptive change of the industry. Dependent on current position, industry actors must determine whether to act as a first-mover or a fast second when taking positions in the future industry. End customer support is decisive for diffusion of the additional technological functionalities AMR can provide. Four key subjects for examining fundamental conditions for the formation of new business models in this market concern industry changes; a possible redistribution of responsibilities and roles; mapping of market forces and last but not least revealing unrealized value in the value chain. We find that a redistribution of roles in the electrical power market is probable, and that the actor most exposed to changes and new industry actors are the power suppliers. An assessment of market forces in the industry after AMR implementation shows that the end customer has the most power and is of great significance for the development of the industry. We reveal unrealized value in customer relations, customer flexibility and metering data. AMR has disruptive characteristics, and competitive companies spotting disruptive change in advance can choose between defending against the threat and utilizing this change. Due to uncertainty, companies are in danger of underestimating the potential impact of future disruptive changes. Existing power suppliers should enter into alliances to obtain future required qualities for success, such as flexibility, ICT knowledge and innovation skills. In order to achieve desired diffusion of new innovations, companies should be aware of the importance of mapping customers’ behavior and willingness to adopt new solutions. The revealed unrealized value can take different expressions in the future market. Metering data facilitate development of additional solutions on the AMR platform. The customer flexibility is extremely valuable but currently difficult to access. Transactions of flexibility from end customers can follow four different models, dependent on who is buying flexibility. Three different future scenarios for customer relations are predicted; fully separated activities, concentrated activity bundling and fragmented activity bundling, dependent on whether the customer relates to one or more power suppliers and service providers. We expect an industry revolution which will favor companies which are close to the customer and which are flexible and possess competencies within innovation and ICT. Accessing the three sources of unrealized value, which are all customer related, can give competitive advantage and serve as a fundament for the formation of new business models in the Norwegian power industry post AMR implementation.

Using an event study approach on a sample of 72 acquisitions by Norwegian listed firms we study the effect of CEO stock and options based incentives on abnormal return and risk change associated with M&A activity. Our focus is on the bidder firms’ pre-acquisition incentive structures and its effect on the abnormal return and risk change from the transaction. The regression analysis we perform supports the hypothesis that cultural differences lead to different effects of equity based incentives in Norwegian compared to US firms. We find that CEO stock options decrease bidder shareholder returns in M&A, while CEO stock ownership has a non-significant negative influence. Both incentive structures have an insignificant impact on the CEOs’ risk taking behavior. Accordingly, we cannot recommend that shareholders use stocks or options to reduce agency problems.The thesis provides a platform on which shareholders in Norwegian firms can build their decisions regarding the optimal incentive contract for their CEO. However, our limited sample and the lack of supportive research for other markets outside the US, does not allow for generalizing our findings to markets outside Norway.

This paper compares the Value at Risk (VaR) forecasting performance of different quantile regression models to conventional GARCH specifications on the Nord Pool system price. The sample covers hourly data from 2005-2011. In order to identify significant explanatory variables, we use a linear quantile regression to characterize the effects of fundamental factors on the system price formations. From our analysis we are able to show how the sensitivity of the variables change over the range of price quantiles and detect how these sensitivities vary over the hours of the day. Our findings suggest that the demand forecast and the price volatility is the most important determinants of the price in the tails of the distribution. We use these variables in the further analysis and test the out-of-sample VaR performance of linear quantile regression, exponentially weighted quantile regression (EWQR) and conditional autoregressive value at risk (CAViaR) models on the system price. We extend the CAViaR models to account for asymmetrical response to returns and are innovative in including explanatory variables in the CAViaR specification. Our results show that the I-GARCHX CAViaR model with demand forecast as explanatory variable outperform the other models, and that CAViaR models in general perform well. The linear quantile regression with price volatility as explanatory variable also provides good results. The computational complexity of CAViaR models favors a linear quantile regression, so market participants have to make a tradeoff between the level of accuracy in the forecasts and the complexity of the model. Our findings are useful for producers, consumers and traders, as well as clearinghouses, as they provide an accurate measure of the price risk.

The combination of risk management and cost allocation in order to allocate risk in a sensible manner is a field with not much existing theory. The ABC (Activity Based Costing) model seems as an appropriate cost allocation method, with a structure of using activities as a connecting link. ERM (Enterprise Risk Management) is selected as foundation for the risk management theory because it provides a general framework and a holistic approach. Furthermore, we choose to use four main risk categories. Some hypothetical ABRM (Activity Based Risk Management) alternatives based on these can be used to allocate risk. These alternatives include approaches where risk is allocated to products either from the bottom and up (bottom-up) or from the top and down (top-down). The top-down approach is most suitable when the total risk is known, while the bottom-up is most suitable when a risk category should be divided into sub-categories. A combination of the two approaches may also be of purpose. A qualitative research is conducted among Norwegian banks and power companies in order to map current risk practice. This empirical results show that banks are more sophisticated regarding both cost allocation and risk management, but neither of banks and power companies use ABC extensively, in fact the product calculations are independent of the ABC allocations. Banks have a customer focus instead of emphasizing products.If risk can be divided into overhead and direct as for costs, this fact along with the empirical findings gives a good foundation for discussing the hypothetical alternatives. Another alternative is added to better handle complex risk categories, like e.g. concentration risk. It also becomes apparent that the manufacturing industry, which we believe uses ABC for calculating product profitability, can apply all the discussed alternatives in this thesis, whereas banks and power companies can only use some of them. Regarding the question of whether or not the ABRM alternatives would be of purpose or not, this is not easy to answer before having applied it in the real world and judged its results (even after having conducted a research of banks and power companies). However, attention-directing information can be gained, and the present paper is only meant as an introductory discussion to the topic, and will hopefully provide some innovative input to the world of risk management.

This thesis proposes the use of the hybrid real options framework presented by Neely (1998)to facilitate valuation of, and decision making in, R&D projects. The framework combines thefavorable benefits from Decision Analysis (DA) and financial option theory, which are the twomost commonly applied methodologies for real option assessments. The combined frameworkaddresses the DA’s incapability for handling a fluctuating discount rate in a practical way, andthe financial option theory’s requirement of historical data, that is generally unavailable forunique R&D projects. The value of flexibility is estimated by distinguishing two types of risks;project and market risks, where DA and option theory are applied, respectively.The hybrid real options is a practical and at the same time accurate approach. It allows the useof the risk-free rate as a consistent constant discount rate. In addition, the valuation becomesorganized in the sense that the process is divided in a technical and financial part. Hence, technicaland financial experts can apply their knowledge independently. However, the framework’suse of a decision tree restricts the complexity of the model as it could turn too comprehensiveto be applicable in an assessments context.When exemplifying the framework, an option to continue or abandon further development of CCSis modelled. The framework values the CCS project - at best - when continuing the development.This returns an expected profit of NOK 28 billion. However, risk analysis yields a probabilityclose to 50% that the project returns a loss of similar magnitude. The estimated expected valueis NOK 860 million higher compared to the traditional Net Present Value methodology. Hence,the value of including the inherent flexibility of an R&D project is significant. In this context,this difference represents the option value in the decision of whether to implement or not.The sensitivity analysis concludes that the annual growth in production stand out as the mostimportant variable for the expected value of Carbon Capture and Storage (CCS). This is ratherintuitive as new production yields possibly large emissions of CO2, which is the main benefitdriver for the CCS technology. In addition, the share of unconventional oil in new production,that we assume would require CCS, is essential.We extend the framework of Neely (1998) by incorporating simple game theory, which provedto introduce a significant value change because of the possible strategic advantages of a CCSinvolvement. The game considered only a valuation of the First Mover Advantage (FMA) and showed that the strategic value is superior to the flexibility value by more than NOK 50 billion. The dominant strategy is to continue further development of CCS, which then values the project at NOK 48.1 billion. Now, risk analysis concludes that there is a probability of more than 70% to achieve a positive return from the CCS R&D project.For further work, a more detailed consideration of game theory is suggested. An interestingtopic would be Statoil’s impact on its own technology supply environment - does it really makea difference that Statoil is engaged in the CCS field, or should it let others do the hard work? Inaddition, inclusion of other uses of the CCS technology would yield a more complete valuation.

Structural estimation is an important technique in analyzing economic data. Unfortunately, it is often computationally expensive to implement the most powerful and efficient statistical methods. One such method is the Nested Fixed Point (NFXP) algorithm. In this thesis, we develop methodology and techniques that allow us to apply NFXP to real options models of hy- dropower production. In particular, we develop a way to regard hydropower planning and scheduling as a stationary problem. Further, we create a nu- merical method for solving specific types of equation systems with sparse matrices of a specific structure, an approach that significantly increases the speed with which we can compute Fréchet and partial derivatives of con- traction mappings for large state spaces.

I formulate a phase theory of microcredit market dynamics. The theory is developed and validated using an in-depth multiple case study examining three mature microfinance markets: Bolivia, Bosnia and Herzegovina, and Morocco. I present a specific case study framework that is used to analyze each of the three markets separately. This framework combines qualitative and quantitative empirical analysis through the evaluation of 12 specific indicators. These indicators are chosen to represent four different market dynamics that are believed to affect microfinance institutions and their performance.A cross-case analysis is conducted to detect similar patterns across the three mature markets, and the findings are summarized into the phase theory. I present a theory of six different phases that a microfinance market goes through from its emergence until the crisis is resolved. Some of the important findings across the three cases are rapid growth, increased bargaining power of consumers and excessive funding to the microfinance institutions, all in the time period leading up to the repayment crisis.In essence, the phase theory predicts that a market that grows beyond what is sustainable and controllable will eventually crash when macroeconomic instability occurs. To make sure a market maintains a sustainable growth, it’s important for the microfinance institutions to focus on long-term profitability over short-term growth. Mechanisms for information sharing are also essential to eliminate the new information asymmetries that arise from introducing competition in microcredit markets.I also examine a microfinance market that is under development: Cambodia. This market has not yet experienced a repayment crisis, and I apply the phase theory on this case market to assess how likely it is that it will.

The purpose of this work has been to develop a generic framework with a set of indicators, suited for ensuring that technology will be successfully transferred. It was stressed that the framework should be generic, as it should be suitable for projects with differing technologies, locations and environments. Methodology:The development of the indicators followed a systematic and rigorous process, starting with formulation of visions, sub-visions and goals for successful technology transfer. The formulation was completed in the specialisation project during the autumn 2010. The indicators were then prepared in response to the formulated goals, and categorized within either the social, institutional, environmental, business or technological dimension. The indicators are for practical purposes gathered in a Protocol, which provides a complete tool for considering technology transfer on the project level. To further operationalize the Protocol, a technology-specific set of indicators was called for. As a response, one indicator set for hydropower, and one indicator set for wind power is prepared. The indicator development was an iterative process, where the indicators were reviewed by experts and tested on ongoing projects. Firstly, a Delphi Survey was conducted, with academics and practitioners within the fields of international energy production and technology transfer. The survey had 12 respondents from 11 different organisations. Secondly, the validity of the indicator set was attempted indicated by comparing the result of using the Protocol, with the observed technology transfer track record for two operating projects. Results:The Delphi Survey showed that the experts agreed that the indicators for assessing technology transfer potential in general were of high quality, and their suggestions for further improvements were later implemented. The case studies showed that the results of using the Protocol indeed correlated with the observed technology transfer in both projects. However, this is only regarded as an indication of the validity of the Protocol, not as a rigorous proof. Conclusion and further work: The work with this thesis has culminated in a Protocol for assessing the potential for technology transfer in energy projects. The indicators are thoroughly reviewed and applied. To further validate the Protocol as a tool predicting technology transfer, an extensive study should be conducted with a large number of projects, where the results from applying the Protocol in the early stages are compared with the observed technology transfer. Additionally, more technology-specific indicator sets could be prepared for other forms of energy production technologies.

This empirical study examines investment behavior in small hydropower investments under uncertain electricity prices and revenues from selling so-called green certificates. We assess 73 small hydropower projects granted a license to build from the Norwegian authorities. The license is considered an American call option with infinite lifetime. To examine the investment behavior, we conduct a survey to recreate the available information on the date of investment decision. We apply a net present value approach and a real options value approach to the small hydropower projects by using two scenarios; with and without green certificates. Our data does not support that a real options approach explains investor behavior better than a net present value approach.