Investment under uncertainty Dixit, Robert K; Pindyck, Robert S
1994., 20120714, 2012, 1994, 2012-07-14, 19930101
eBook
How should firms decide whether and when to invest in new capital equipment, additions to their workforce, or the development of new products? Why have traditional economic models of investment ...failed to explain the behavior of investment spending in the United States and other countries? In this book, Avinash Dixit and Robert Pindyck provide the first detailed exposition of a new theoretical approach to the capital investment decisions of firms, stressing the irreversibility of most investment decisions, and the ongoing uncertainty of the economic environment in which these decisions are made. In so doing, they answer important questions about investment decisions and the behavior of investment spending.
This new approach to investment recognizes the option value of waiting for better (but never complete) information. It exploits an analogy with the theory of options in financial markets, which permits a much richer dynamic framework than was possible with the traditional theory of investment. The authors present the new theory in a clear and systematic way, and consolidate, synthesize, and extend the various strands of research that have come out of the theory. Their book shows the importance of the theory for understanding investment behavior of firms; develops the implications of this theory for industry dynamics and for government policy concerning investment; and shows how the theory can be applied to specific industries and to a wide variety of business problems.
Les choix des investisseurs en equity crowdfunding, ce mode récent d'entrée au capital de jeunes sociétés en phase d'amorçage, est un sujet qui interroge. Sa compréhension est importante pour la ...protection des investisseurs, car ceux-ci n'ont généralement pas conscience des facteurs pouvant influencer leurs décisions.Or, l'investissement en equity crowdfunding place l'investisseur dans un cadre décisionnel singulier dans lequel l'image, les vidéos et le storytelling sont autant de moyens mobilisés par les entrepreneurs et les plates-formes comme outils de persuasion. Ce contexte semble ainsi favoriser une prise de décision plus holistique et affective que rationnelle et analytique.Dans ce premier volume, le travail de recherche est centré sur les déterminants affectifs et axiologiques du choix. Une analyse théorique transdisciplinaire est réalisée, mêlant différents champs des sciences sociales, principalement la finance, le marketing et la psychologie. Cet état de l'art permet l'émergence d'un cadre théorique original pour la compréhension des choix d'investissement en equity crowdfunding.
This article focuses on how crowdfunding might democratize the commercialization of innovation as well as financing. First, it examines how crowdfunders decide what effort to support and asks how do ...crowd and expert decisions differ? Second, it investigates whether crowdfunding democratizes access to capital by asking whether groups that have historically been underrepresented in capital markets gain additional access to capital markets through crowdfunding. Finally, it investigates whether crowdfunding leads to the growth of new firms in the same way that traditional funding does. Taken together, these questions point at a potentially vast alternative infrastructure for developing, funding, and commercializing innovation.
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5.
Africa's Power Infrastructure Anton Eberhard, Orvika Rosnes, Maria Shkaratan, Haakon Vennemo
2011, 04-11-2011, 20110101
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This study is a product of the Africa Infrastructure Country Diagnostic (AICD), a project designed to expand the world's knowledge of physical infrastructure in Africa. The AICD provides a baseline ...against which future improvements in infrastructure services can be measured, making it possible to monitor the results achieved from donor support. It also offers a more solid empirical foundation for prioritizing investments and designing policy reforms in the infrastructure sectors in Africa. The book draws upon a number of background papers that were prepared by World Bank staff and consultants, under the auspices of the AICD. The main findings were synthesized in a flagship report titled Africa's infrastructure: A time for transformation, published in November 2009. Meant for policy makers, that report necessarily focused on the high-level conclusions. It attracted widespread media coverage feeding directly into discussions at the 2009 African union commission heads of state summit on infrastructure.
Fields of Gold critically examines the history, ideas, and political struggles surrounding the financialization of farmland. In particular, Madeleine Fairbairn focuses on developments in two of the ...most popular investment locations, the US and Brazil, looking at the implications of financiers' acquisition of land and control over resources for rural livelihoods and economic justice. At the heart of Fields of Gold is a tension between efforts to transform farmland into a new financial asset class, and land's physical and social properties, which frequently obstruct that transformation. But what makes the book unique among the growing body of work on the global land grab is Fairbairn's interest in those acquiring land, rather than those affected by land acquisitions. Fairbairn's work sheds ethnographic light on the actors and relationships—from Iowa to Manhattan to São Paulo—that have helped to turn land into an attractive financial asset class.
This study examines how equity market fragmentation affects firms’ capital investment decisions. Recent empirical research finds that market fragmentation lowers trading costs and thus improves ...market quality. We examine whether this increase in market quality translates into greater revelatory price efficiency, where stock prices reveal with greater precision information to managers and/or creditors about firms’ investment opportunities. Consistent with this notion, our findings reveal that the association between capital investment and investment opportunities is increasing in market fragmentation. Additional evidence suggests that (a) market fragmentation increases revelatory price efficiency at least in part by encouraging information acquisition and informed trade by equity investors and (b) the more efficient stock prices inform both managers and creditors about firms’ investment opportunities. Inferences based on difference-in-differences and instrumental variable tests are consistent with those based on our primary findings.
This paper was accepted by Suraj Srinivasan, accounting.
Funding:
The authors are grateful to the Kenan-Flagler Business School, Cox School of Business, Smeal School of Business, and David Eccles School of Business for funding our research.
Supplemental Material:
The data files and online appendix are available at
https://doi.org/10.1287/mnsc.2023.4905
.
Abstract
Since the 1980s, the shareholder value revolution has undermined the position of workers and organized labor within US firms. At the same time, workers have paradoxically become one of the ...largest classes of shareholders through labor pension funds (LPF), including state public employee funds and private sector union-affiliated funds. Does workers’ concentrated ownership of capital in LPF represent a mechanism to advance worker interests against the prevailing wage, benefit, and jobs squeeze in publicly traded firms? This article links data on US state pension funds’ investments and shareholder activism to firm-level data on work and employment outcomes from 2001–2016. LPF shareholder proposals targeting large firms have declined over time. However, panel regression models show that intra-firm mobilization by LPF in the form of shareholder proposals is associated with modestly improved worker outcomes. There is no evidence that greater ownership share by public pension funds (PPF) is associated with more labor-friendly outcomes. This null association obtains even when focusing only on ownership by the most socially activist funds, or those from Democrat-controlled states. Nor does PPF ownership buffer workers from the negative impact of extractive hedge funds. Together, the results help reconcile contending accounts of pension fund capitalism’s effects on worker well-being. The analysis contributes to the sociological study of financialization, corporate governance, work and employment, and labor movements.
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We use forward-looking and exogenous measures of output price uncertainty to examine the effect of price uncertainty on firm-level capital investment, risk management, and debt issuance. The effects ...of uncertainty vary significantly by firm size. When faced with high price uncertainty, large firms increase their hedging intensity but do not lower capital investment or debt issuance. In contrast, small firms do not adjust their hedging intensity but significantly lower capital expenditure and debt issuance even after controlling for investment demand. Moreover, the negative effect of uncertainty on capital investment is significantly weaker for firms that hedge their output price risk. Our analysis highlights that, in the presence of financial frictions, high price uncertainty has significant dampening effects on capital investment of small firms by exacerbating their financial constraints, and that this negative effect is amplified by firm-level constraints on ability to hedge risk exposures.
The Internet appendix is available at
https://doi.org/10.1287/mnsc.2017.2815
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This paper was accepted by Amit Seru, finance.
This paper examines whether tax uncertainty can alter investment decisions, focusing primarily on the timing of large capital investments. Empirically, we exploit the staggered implementation of ...Schedule UTP, a discrete policy change expected to increase tax uncertainty, finding that, on average, firms responded by delaying large capital investments. This effect is stronger among firms at which the policy treatment is particularly germane, that is, for firms with more material UTBs or with low-to-moderate quality public accounting information. We also test the underlying mechanism, finding that managers buffer against higher tax uncertainty with cheaper sources of financing (cash) and that the investment effect is concentrated among financially constrained firms. The results show that Schedule UTP also reduces the sensitivity of investment to growth opportunities (investment-Q sensitivity) in line with a higher hurdle rate for firms facing higher tax uncertainty.
This paper was accepted by Brian Bushee, accounting.
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