Cash Flow Estimation and Cost of Capital for Overseas Projects

Several issues concerning foreign project evaluation are critically examined. The paper suggests that the point of view for analysis, cost of capital and cash flow estimation be internally consistent. Three points of views of analysis, local, global, and parent specific, are identified and various inconsistencies in the estimation of the initial outlay and project cash flows are identified. The elimination of the inconsistencies is discussed. It is argued that the treatment of blocked funds is relevant only from the parent specific point of view. A number of alternatives for the estimate of the terminal value is also suggested. The differences between the parent specific point of view and the global and local views are sharply drawn. An integrated scheme is also presented to underscore the need for consistency in evaluating foreign investments.     

Resurrecting the size effect: Evidence from a panel nonlinear cointegration model for the G7 stock markets

Firm size is known to be an important factor affecting stock returns. This study proposes a panel threshold cointegration model to investigate the impact of the size effect on stock returns for the panel of G7 countries: Canada, France, Germany, Italy, Japan, the U.K., and the U.S. over the period 1991:1–2012:12. The empirical analysis is based upon the nonlinear cointegration framework using the asymmetric ARDL cointegration methodology (Shin et al., 2011). This methodological approach permits a much richer degree of flexibility in the dynamic adjustment process toward equilibrium, than in the classical linear model. Our findings indicate the presence of asymmetric adjustment around a unique long-run equilibrium. In particular, the empirical analysis provides evidence of asymmetric effects between stock returns and the size effect, while controlling for the book-to-market ratio and the price-to-earnings ratio.     

Rafting the River: A Risk Management Expert System for Dynamic Problem Solving

Commercial project management systems focus on preproject planning and after-the-fact documentation, but not on the dynamic problem solving required in day-to-day project management. Yet the need for risk-oriented management is clear. To understand and control project risks, managers must be able to identify problems as they occur, immediately assess their downstream impacts, and plan a course of action. The Advanced Risk Management System (ARMS) is a prototype system built to address the issues of identifying, analyzing, prioritizing, monitoring, and controlling project risk. ARMS uses expert systems, data base management, and hypermedia technologies to capture and classify project schedule problems, to determine their semantic impacts to future activities, and to alert appropriate project personnel in advance of problem occurrence.     

Sticking points: common‐agency problems and contracting in the US healthcare system

We propose a “common‐agency” model for explaining inefficient contracting in the US healthcare system. Common‐agency problems arise when multiple payers seek to motivate a provider to invest in improved care coordination. We highlight the possibility of “sticking points,” that is, Pareto‐dominated equilibria in which payers coordinate around contracts which give weak incentives to the provider. Sticking points rationalize three hard‐to‐explain features of the US healthcare system: widespread fee‐for‐service arrangements; problematic care coordination; and the historical reliance on single‐specialty practices to deliver care. The model also analyzes the effects of policies promoting more efficient contracting between payers and providers.     

Multinational capital structure and financial flexibility

We address multinational capital structure decisions when firms have varying degrees of financial flexibility for shifting income and/or tax shields between subsidiaries. We find: (1) firms can use leverage to dramatically reduce negative valuation effects from operating in a high-tax country; (2) financial flexibility is a key determinant of optimal capital structure, acting as both a substitute and a complement for leverage; (3) multinational firms derive a synergistic effect from financial flexibility, which can enhance their value beyond that for a single-country firm from a low-tax jurisdiction; and (4) optimal capital structure typically differs substantially across subsidiaries, with each having positions in multiple currencies.     

Day-of-the-Week Autocorrelations, Cross-Autocorrelations, and the Weekend Phenomenon

This study examines whether autocorrelations or cross-autocorrelations are more closely associated with the weekend phenomenon. Our results show a significant day-of-the-week pattern in autocorrelations associated with the weekend phenomenon. However, we find no marginal influence of a day-of-the-week pattern in cross-autocorrelations on the weekend phenomenon.