Agency problems and capital expenditure announcements

This article examines the market valuation of announcements of new capital expenditure. Prior research suggests that the firm's growth opportunities and cash flow position condition the market response. This study jointly examines the role of growth and cash flow, and the interaction between them. Using a new data set of Australian firms that avoids problems associated with expectations models, the results are remarkably strong and support a positive association between growth opportunities and the market valuation, in addition to supporting the role of free cash flow. The findings have implications for the relationship between general investment information and stock prices.

Price discovery and volatility spillovers in index futures markets: Some evidence from Mexico

This paper investigates the hypotheses that the recently established Mexican stock index futures market effectively serves the price discovery function, and that the introduction of futures trading has provoked volatility in the underlying spot market. We test both hypotheses simultaneously with daily data from Mexico in the context of a modified EGARCH model that also incorporates possible cointegration between the futures and spot markets. The evidence supports both hypotheses, suggesting that the futures market in Mexico is a useful price discovery vehicle, although futures trading has also been a source of instability for the spot market. Several managerial implications are derived and discussed. (C) 2004 Elsevier B.V. All rights reserved.

Diversification economies and specialisation efficiencies in a mixed food and coffee smallholder farming system in Papua New Guinea

Smallholder farming systems in Papua New Guinea are characterised by an integrated set of cash cropping and subsistence food cropping activities. In the Highlands provinces, the subsistence food crop sub-system is dominated by sweet potato production. Coffee dominates the cash cropping sub-system, but a limited number of food crops are also grown for cash sale. The dynamics between sub-systems can influence the scope for complementarity between, and technical efficiency of, their operations, especially in light of the seasonality of demand for household labour and management inputs within the farming system. A crucial element of these dynamic processes is diversification into commercial agricultural production, which can influence factor productivity and the efficiency of crop production where smallholders maintain a strong production base in subsistence foods. In this study we use survey data from households engaged in coffee and food crop production in the Benabena district of Eastern Highlands Province to derive technical efficiency indices for each household over two years. A stochastic input distance function approach is used to establish whether diversification economies exist and whether specialisation in coffee, subsistence food or cash food production significantly influences technical efficiency on the sampled smallholdings. Diversification economics are weakly evident between subsistence food production and both coffee and cash food production, but diseconomies of diversification are discerned between coffee and cash food production. A number of factors are tested for their effects on technical efficiency. Significant technical efficiency gains are made from diversification among broad cropping enterprises.

The 'parallel bridge' and its relevance to biotechnology new ventures

A firm's competitive strategy and innovation processes are strongly influenced by, and must be responsive to, its competitive environment. This is nowhere more strongly evident than in the high technology industries. In the present work, case studies of biotechnology new ventures are presented. These studies illustrate how an initial market entry strategy of parallel competition (through creative imitation) has enabled several biotechnology start-ups to reduce their mortality risk. We coin the term ''parallel bridge'' to describe this strategy. The parallel bridge provides early cash flows which support research and development and provide time for new ventures to develop core competencies, including a capacity to produce second and third horizon products that will sustain longer term competitiveness.

Management motivation for using financial derivatives in Australia

This study takes a direct approach to determine management motivation for the use of financial derivatives. We survey a sample of Australian firms on attitudes to derivative use and financial risk management. Management views are sought on the importance of a series of theoretical reasons for using derivatives. Generally, we find that managers are focused on the broad reduction of risk and volatility of cash flows and earnings in using derivatives. Specific issues such as reducing bankruptcy costs, debt levels and taxation are not considered as important. A further interesting result from this research is that even though firms may use derivatives they may not necessarily hedge all of their annual exposures across different financial risks. This helps explain the inconsistency of results in many empirical studies on the determinants of derivative use.

The NASCAR phenomenon: Auto racing sponsorships and shareholder wealth

This study presents the first analysis of the impact of NASCAR sponsorship announcements on the stock prices of sponsoring firms. The primary finding of the study-that NASCAR sponsorship announcements were accompanied by the largest increases in shareholder wealth ever recorded in the marketing literature in response to a voluntary marketing program-represents a striking and unambiguous stock market endorsement of the sponsorships. Indeed, the 24 sponsors analyzed in this study experienced mean increases in shareholder wealth of over $300 million dollars, net of all of the costs associated with the sponsorships. A multiple regression analysis of firm-specific stock price changes and select corporate and sponsorship attributes indicates that NASCAR sponsorships with more successful racing teams, corporate (as opposed to product or divisional) sponsorships, and sponsorships with direct ties to the consumer automotive industry are all positively correlated with perceived sponsorship success, while corporate cash flow per share (a well-known proxy for agency conflicts within the firm) is negatively related with shareholder approval.

Numerical methods for strong solutions of stochastic differential equations: an overview

This paper gives a review of recent progress in the design of numerical methods for computing the trajectories (sample paths) of solutions to stochastic differential equations. We give a brief survey of the area focusing on a number of application areas where approximations to strong solutions are important, with a particular focus on computational biology applications, and give the necessary analytical tools for understanding some of the important concepts associated with stochastic processes. We present the stochastic Taylor series expansion as the fundamental mechanism for constructing effective numerical methods, give general results that relate local and global order of convergence and mention the Magnus expansion as a mechanism for designing methods that preserve the underlying structure of the problem. We also present various classes of explicit and implicit methods for strong solutions, based on the underlying structure of the problem. Finally, we discuss implementation issues relating to maintaining the Brownian path, efficient simulation of stochastic integrals and variable-step-size implementations based on various types of control.

Effects of tourism development on the local poor people - Case study in Taibai Region China

In China, protected areas are one of the main destinations attracting tourists and homeland for many poor people living in and around them. Based on a case study, the paper focuses on correlation between tourism and poverty alleviation by tracing the cash flows to the local poor. It also reviews the social and environmental effects of tourism on local area. The case study is conducted in a group of protected areas in Qinling Mountain Region in Shaanxi, a western province in China. Qinling Mountain is one of the most important distribution zones for Giant Panda and some other endangered wildlife such as Golden Takin and Golden Monkey. The tourism development in the region is happening. Research indicates that there is 29.33%, of tourist expenditure is going to local households, directly or indirectly. Tourist spends US$7.11 (13.67%) in food and beverage, and US$6.39 (12.23%) in accommodation service, which are the greatest contributors to local households in terms of tourism benefits. Local households can get US$8.15 from food/beverage and accommodation sectors, taking 56.64% of total income from tourism. Generally, tourism development benefits all stakeholders. However, poor people get less benefit. The paper analyses the barriers for the poor to be involved in tourism development, and discusses the government roles, major issues in implementation of Sustainable Tourism-Eliminating Poverty (ST-EP) model. [ABSTRACT FROM AUTHOR]

Conditional performance evaluation and the relevance of money flows for Australian international equity funds

This paper assesses the importance of fund flows in the performance evaluation of Australian international equity funds. Two concepts of fund flows are considered in the context of a conditional asset pricing model. The first measure is net fund flow relative to fund size and the second is net fund flow relative to sector flows. We find that incorporating a fund flow measure relative to the sector flow results in a reduction of measured perverse market timing. The results indicate that, at the individual fund level, cash flows are relevant in assessing management outcomes.

Short-Term Perturbations and Tourism Effects: The case of SARS in China

In China, protected areas are one of the main destinations attracting tourists and homeland for many poor people living in and around them. Based on a case study, the paper focuses on correlation between tourism and poverty alleviation by tracing the cash flows to the local poor. It also reviews the social and environmental effects of tourism on local area. The case study is conducted in a group of protected areas in Qinling Mountain Region in Shaanxi, a western province in China. Qinling Mountain is one of the most important distribution zones for Giant Panda and some other endangered wildlife such as Golden Takin and Golden Monkey. The tourism development in the region is happening. Research indicates that there is 29.33%, of tourist expenditure is going to local households, directly or indirectly. Tourist spends US$7.11 (13.67%) in food and beverage, and US$6.39 (12.23%) in accommodation service, which are the greatest contributors to local households in terms of tourism benefits. Local households can get US$8.15 from food/beverage and accommodation sectors, taking 56.64% of total income from tourism. Generally, tourism development benefits all stakeholders. However, poor people get less benefit. The paper analyses the barriers for the poor to be involved in tourism development, and discusses the government roles, major issues in implementation of Sustainable Tourism-Eliminating Poverty (ST-EP) model.

Design for sampling - preliminary exploration

A modern mineral processing plant represents a substantial investment. During the design process, there is often a period when costs (or revenues) must be compensated for by cuts in capital expenditure. In many cases, sampling and measurement equipment provides a soft target for such 'savings'. This process is almost analgous to reducing the capital investment in a corner store by not including a cash register. The consequences will be quite similar - a serious lack of sound performance data and plenty of opportunities for theft - deliberate or inadvertent. This paper makes the case that investment in sampling and measurement equipment is more cost-effective during the design phase. Further, a strong measurement culture will have many benefits including the ability to take advantage of small gains. In almost any business, there are many more opportunities to make small gains than to make large, step changes. In short, if a project cannot justify the cost of accurate and reliable measurement of its performance, it probably should not be a project at all.

Power generation investment opportunities evaluation: A comparison between net present value and real options approach

To evaluate an investment project in the competitive electricity market, there are several key factors that affects the project's value: the present value that the project could bring to investor, the possible future course of actions that investor has and the project's management flexibility. The traditional net present value (NPV) criteria has the ability to capture the present value of the project's future cash flow, but it fails to assess the value brought by market uncertainty and management flexibility. By contrast with NPV, the real options approach (ROA) method has the advantage to combining the uncertainty and flexibility in evaluation process. In this paper, a framework for using ROA to evaluate the generation investment opportunity has been proposed. By given a detailed case study, the proposed framework is compared with NPV and showing a different results

The spatial pattern of child growth in Papua New Guinea

Child growth in PNG shows strong regional differences, with highlands children being generally shorter but stockier than those from lowland areas. Differences in diet, socioeconomic status and local subsistence agriculture were found to be important predictors of child growth. All variables indicating higher socioeconomic status were correlated with better growth, as was a high consumption of imported and local high quality foods such as cereals, legumes, tinned fish or meat and fresh fish. Differences in subsistence explained between 25% and 50% of the geographical variation in growth. Child growth was better in systems based on cassava and sweet potato, and worse in those where banana, sago and taro are staples. The cultivation of all major cash crops and sales of fish and food crops improved child growth. Birth weights show similar patterns to those observed in child growth. The implications of these findings for possible interventions are discussed.