Theory of foreign portfolio investment

This dissertation examines one category of international capital flows, private portfolio investments (private refers to the source of capital). There is an overall lack of a coherent and consistent definition of foreign portfolio investment. We clarify these definitional issues.^ Two main questions that pertain to private foreign portfolio investments (FPI) are explored. The first problem is the phenomenon of home preference, often referred to as home bias. Related to this are the observed cross-investment flows between countries that seem to contradict the textbook rendition of private FPI. A description of the theories purporting to resolve the home preference puzzle (and the cross-investment one) are summarized and evaluated. Most of this literature considers investors from major developed countries. I consider--as well--whether investors in less developed countries have home preference.^ The dissertation shows that home preference is indeed pervasive and profound across countries, in both developed and emerging markets. For the U.S., I examine home bias in both equity and bond holdings as well. I find that home bias is greater when we look at equity and bond holdings than equity holdings solely.^ In this dissertation a model is developed to explain home bias. This model is original and fills a gap in the literature as there have been no satisfactory models that handle at the same time both home preference and cross-border holdings in the context of information asymmetries. This model reflects what we see in the data and permits us to reach certain results by the use of comparative statics methods. The model suggests, counter-intuitively, that as the rate of return in a country relative to the world rate of return increases, home preference decreases. In the context of our relatively simple model we ascribe this result to the higher variance of the now higher return for home assets. We also find, this time as intended, that as risk aversion increases, investors diversify further so that home preference decreases.^ The second question that the dissertation deals with is the volatility of private foreign portfolio investment. Countries that are recipients of these flows have been wary of such flows because of their perceived volatility. Often the contrast is made with the perceived absence of volatility in foreign direct investment flows. I analyze the validity of these concerns using first net flow data and then gross flow data. The results show that FPI is not, in relative terms, more volatile than other flows in our sample of eight countries (half were developed countries and the rest were emerging markets).^ The implication therefore is that restricting FPI flows may be harmful in the sense that private capital may not be allocated efficiently worldwide to the detriment of capital poor economies. More to the point, any such restrictions would in fact be misguided. ^

The emergence of integrated private reporting

Purpose - This paper aims to provide evidence to suggest that private social and environmental reporting (i.e. one-on-one meetings between institutional investors and investees on social and environmental issues) is beginning to merge with private financial reporting and that, as a result, integrated private reporting is emerging. Design/methodology/approach - In this paper, 19 FTSE100 companies and 20 UK institutional investors were interviewed to discover trends in private integrated reporting and to gauge whether private reporting is genuinely becoming integrated. The emergence of integrated private reporting through the lens of institutional logics was interpreted. The emergence of integrated private reporting as a merging of two hitherto separate and possibly rival institutional logics was framed. Findings - It was found that specialist socially responsible investment managers are starting to attend private financial reporting meetings, while mainstream fund managers are starting to attend private meetings on environmental, social and governance (ESG) issues. Further, senior company directors are becoming increasingly conversant with ESG issues. Research limitations/implications - The findings were interpreted as two possible scenarios: there is a genuine hybridisation occurring in the UK institutional investment such that integrated private reporting is emerging or the financial logic is absorbing and effectively neutralising the responsible investment logic. Practical implications - These findings provide evidence of emergent integrated private reporting which are useful to both the corporate and institutional investment communities as they plan their engagement meetings. Originality/value - No study has hitherto examined private social and environmental reporting through interview research from the perspective of emergent integrated private reporting. This is the first paper to discuss integrated reporting in the private reporting context.

Policy Transfer and the Sustainability of Public Private Partnership in Ireland::A conceptual analysis

There has been private sector involvement in the delivery of public services in the Irish State since its foundation. This involvement was formalised in 1998 when Public Private Partnership (PPP) was officially introduced. Ireland is a latecomer to PPP and, prior to the credit crisis, was seen as a ‘rapid follower’ relying primarily on the UK PPP model in the procurement of infrastructure in transport, education, housing/urban regeneration and water/wastewater.  PPP activity in Ireland stalled during the credit crisis, and some projects were cancelled, but it has taken off again recently with part of the Infrastructure and Capital Investment Plan 2016 – 2021 to be delivered through PPP showing continuing political commitment to PPP.  Ireland’s interest in PPP cannot be explained by economic rationale alone, as PPP was initiated during a period of prosperity. We consider three alternative explanations: voluntary adoption – where the UK model was closely followed; coercive adoption – where PPP policy was forced upon Ireland; and institutional isomorphism – where institutional creation and change was promoted to aid public sector organisations in gaining institutional legitimacy. We find evidence of all three patterns, with coercive adoption becoming more relevant in recent years. Ireland’s rapid uptake of PPP differs from other European countries, mostly because when PPP was introduced in 1998, the Irish State was in an economic position where it could have directly procured necessary infrastructure. This paper therefore asks why PPP was adopted and how this adoption pattern has affected the sustainability of PPP in Ireland.  This paper defines PPP; examines the background to the PPP approach adopted in Ireland; outlines the theoretical framework of the paper: transfer theory and institutional theory; discusses the methodology; reports on findings and gives conclusions.   

Capital 2.0 capital formation and legal risk in a new global economic order from fiat to exit: including case studies of the proposed transatlantic trade and investment partnership between the United States and the European Union and the financing relation between the United States and the People’s Republic of China

Following the intrinsically linked balance sheets in his Capital Formation Life Cycle, Lukas M. Stahl explains with his Triple A Model of Accounting, Allocation and Accountability the stages of the Capital Formation process from FIAT to EXIT. Based on the theoretical foundations of legal risk laid by the International Bar Association with the help of Roger McCormick and legal scholars such as Joanna Benjamin, Matthew Whalley and Tobias Mahler, and founded on the basis of Wesley Hohfeld’s category theory of jural relations, Stahl develops his mutually exclusive Four Determinants of Legal Risk of Law, Lack of Right, Liability and Limitation. Those Four Determinants of Legal Risk allow us to apply, assess, and precisely describe the respective legal risk at all stages of the Capital Formation Life Cycle as demonstrated in case studies of nine industry verticals of the proposed and currently negotiated Transatlantic Trade and Investment Partnership between the United States of America and the European Union, TTIP, as well as in the case of the often cited financing relation between the United States and the People’s Republic of China. Having established the Four Determinants of Legal Risk and its application to the Capital Formation Life Cycle, Stahl then explores the theoretical foundations of capital formation, their historical basis in classical and neo-classical economics and its forefathers such as The Austrians around Eugen von Boehm-Bawerk, Ludwig von Mises and Friedrich von Hayek and most notably and controversial, Karl Marx, and their impact on today’s exponential expansion of capital formation. Starting off with the first pillar of his Triple A Model, Accounting, Stahl then moves on to explain the Three Factors of Capital Formation, Man, Machines and Money and shows how “value-added” is created with respect to the non-monetary capital factors of human resources and industrial production. Followed by a detailed analysis discussing the roles of the Three Actors of Monetary Capital Formation, Central Banks, Commercial Banks and Citizens Stahl readily dismisses a number of myths regarding the creation of money providing in-depth insight into the workings of monetary policy makers, their institutions and ultimate beneficiaries, the corporate and consumer citizens. In his second pillar, Allocation, Stahl continues his analysis of the balance sheets of the Capital Formation Life Cycle by discussing the role of The Five Key Accounts of Monetary Capital Formation, the Sovereign, Financial, Corporate, Private and International account of Monetary Capital Formation and the associated legal risks in the allocation of capital pursuant to his Four Determinants of Legal Risk. In his third pillar, Accountability, Stahl discusses the ever recurring Crisis-Reaction-Acceleration-Sequence-History, in short: CRASH, since the beginning of the millennium starting with the dot-com crash at the turn of the millennium, followed seven years later by the financial crisis of 2008 and the dislocations in the global economy we are facing another seven years later today in 2015 with several sordid debt restructurings under way and hundred thousands of refugees on the way caused by war and increasing inequality. Together with the regulatory reactions they have caused in the form of so-called landmark legislation such as the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act of 2010, the JOBS Act of 2012 or the introduction of the Basel Accords, Basel II in 2004 and III in 2010, the European Financial Stability Facility of 2010, the European Stability Mechanism of 2012 and the European Banking Union of 2013, Stahl analyses the acceleration in size and scope of crises that appears to find often seemingly helpless bureaucratic responses, the inherent legal risks and the complete lack of accountability on part of those responsible. Stahl argues that the order of the day requires to address the root cause of the problems in the form of two fundamental design defects of our Global Economic Order, namely our monetary and judicial order. Inspired by a 1933 plan of nine University of Chicago economists abolishing the fractional reserve system, he proposes the introduction of Sovereign Money as a prerequisite to void misallocations by way of judicial order in the course of domestic and transnational insolvency proceedings including the restructuring of sovereign debt throughout the entire monetary system back to its origin without causing domino effects of banking collapses and failed financial institutions. In recognizing Austrian-American economist Schumpeter’s Concept of Creative Destruction, as a process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one, Stahl responds to Schumpeter’s economic chemotherapy with his Concept of Equitable Default mimicking an immunotherapy that strengthens the corpus economicus own immune system by providing for the judicial authority to terminate precisely those misallocations that have proven malignant causing default perusing the century old common law concept of equity that allows for the equitable reformation, rescission or restitution of contract by way of judicial order. Following a review of the proposed mechanisms of transnational dispute resolution and current court systems with transnational jurisdiction, Stahl advocates as a first step in order to complete the Capital Formation Life Cycle from FIAT, the creation of money by way of credit, to EXIT, the termination of money by way of judicial order, the institution of a Transatlantic Trade and Investment Court constituted by a panel of judges from the U.S. Court of International Trade and the European Court of Justice by following the model of the EFTA Court of the European Free Trade Association. Since the first time his proposal has been made public in June of 2014 after being discussed in academic circles since 2011, his or similar proposals have found numerous public supporters. Most notably, the former Vice President of the European Parliament, David Martin, has tabled an amendment in June 2015 in the course of the negotiations on TTIP calling for an independent judicial body and the Member of the European Commission, Cecilia Malmström, has presented her proposal of an International Investment Court on September 16, 2015. Stahl concludes, that for the first time in the history of our generation it appears that there is a real opportunity for reform of our Global Economic Order by curing the two fundamental design defects of our monetary order and judicial order with the abolition of the fractional reserve system and the introduction of Sovereign Money and the institution of a democratically elected Transatlantic Trade and Investment Court that commensurate with its jurisdiction extending to cases concerning the Transatlantic Trade and Investment Partnership may complete the Capital Formation Life Cycle resolving cases of default with the transnational judicial authority for terminal resolution of misallocations in a New Global Economic Order without the ensuing dangers of systemic collapse from FIAT to EXIT.

Three essays on investment in human capital in Canada

Cette thèse examine l’investissement en capital humain au Canada en s’intéressant à la contribution de l’aide financière aux études, aux effets de la fiscalité, à la rentabilité de l’investissement en éducation postsécondaire et à la redistribution des revenus. Elle est subdivisée en cinq chapitres. Le premier chapitre présente une révue chronologique des études microéconomiques sur l’investissement en capital humain. Il présente également une synthèse des études canadiennes sur l’investissement en capital humain en insistant sur les limites portant essentiellement sur la non prise en compte de l’hétérogénéité des systèmes de prêts et bourses et des systèmes fiscaux à travers les provinces canadiennes et la faible analyse de la répartition des coûts et bénéfices de l’investissement en éducation au Canada. Le second chapitre présente la méthodologie de mesure des rendements de l’éducation et des gains issus des investissements en éducation. Il décrit les données utilisées et les résultats des régressions économetriques. Finalement, le chapitre présente SIMAID, un calculateur d’aide financière aux études élaboré pour les objectifs dans cette thèse et qui permet d’estimer le montant de l’aide financière devant être attribuée à chaque étudiant en fonction de ses caractéristiques personnelles et de celles de sa famille. Dans sa première section, le troisième chapitre présente les rendements sociaux, privés et publics de l’éducation et montre que les rendements de l’éducation varient selon les provinces, les filières de formation, le genre et les cohortes d’année de naissance et décroient avec le niveau d’éducation. Dans sa seconde section, le chapitre montre que l’aide financière aux études accroît le rendement des études du baccalauréat de 24.3% et 9.5% respectivement au Québec et en Ontario. Finalement, le chapitre indique qu’un changement du système d’aide financière aux études de Québec par celui de l’Ontario entraîne une baisse de 11.9% du rendement des études au baccalauréat alors qu’un changement du système fiscal québécois par celui ontarien entraine une hausse du rendement du baccalauréat de 4.5%. L’effet combiné du changement des systèmes d’aide financière et fiscal est une baisse du rendement du baccalauréat de 7.4%. Le quatrième chapitre fournit une décomposition comptable détaillée des gains sociaux, privés et publics des investissements en éducation. Le gain social de l’investissement au baccalauréat est de $738 384 au Québec et de $685 437 en Ontario. Ce gain varie selon les filières de formation avec un niveau minimal pour les études humanitaires et un niveau maximal pour les études en ingénierie. Le chapitre montre également que la répartition des bénéfices et des coûts de l’investissement en éducation entre les individus et le gouvernement est plus équitable en Ontario qu’à Québec. En effet, un individu qui investit à Québec supporte 51.6% du coût total et engrange 64.8% des gains alors que le même individu supporterait 62.9% des coûts sociaux et engrangerait 62.2% des gains en Ontario. Finalement, le cinquième chapitre présente et analyse les effets rédistributifs des transferts et des taxes suite à un investissement en éducation. Il examine aussi si l’aide financière aux études est effectivement allouée aux personnes les plus pauvres. L’argument selon lequel l’aide financière est destinée aux plus pauvres est rejeté en analysant la distribution du revenu permanent. En effet, il ressort que 79% des personnes bénéficiant de l’aide financière aux études se trouvent dans le cinquième quintile de la distribution des revenus permanents. Le chapitre montre également que l’investissement en éducation impacte positivement les effets rédistributifs en 2006, 2001 et 1996 et négativement en 1991 et 2011. L’impact est également perceptible sur les composantes de l’effet rédistributif. Toutefois, la sensibilité de l’impact au taux d’actualisation dépend de l’indice utilisé dans l’analyse.

Foreign direct investment motives and location decision factors under economic recession: Three cases of Finnish FDI in Portugal

The purpose of this thesis was to study how uncertainty in economic conditions of the FDI host country affects location decision of an investment, and what kinds of motives are behind the investment decision to a country in economic recession, in this case Portugal. The country has attracted foreign direct investment steadily, but it is evident that most multinational firms and investors tend to be more interested in emerging economies in general. The aim was to find out also which host country specific advantages are important in this kind of cross-border investment and which factors are important for an FDI to succeed under economic uncertainty at the host country. The study was done by analyzing three Finnish case companies: a private equity and real estate investment firm Pontos Group, A wave energy technology research and development company AW Energy and NSN, Nokia Solutions and Networks, a global telecommunications company. The research was done empirically, by interviewing experts on the subject, mainly persons representing these companies. In addition relevant articles, journals and content from case companies’ web-pages is used for the desk research regarding the topic. The results of this thesis showed that the FDIs with strategic asset-seeking investments seem most profitable FDI types under uncertain economic conditions. This kind of investments aim to strengthen the company’s long-term strategy, including the time after recession. Firm-specific ownership advantages that bring competitive advantage proved out to be important under these circumstances, as well as first-mover advantages and externally created assets such as government promotional policies regarding FDI incentives. Also the location was considered suitable for resource- or efficiency seeking motives, based on the lowered price level at the host country. Problems were related mainly to financing, but as foreign companies receive financing usually from their home countries, the economic recession of the host country does not have significant effect for FDI decision, according to this study

O setor privado sem fins lucrativos e as políticas públicas de esporte e lazer (2008-2011) = : The non-profitable private sector and the public policies for sport and leisure (2008-2011)

Universidade Estadual de Campinas . Faculdade de Educação Física

Financial distress, financial constraint and investment decision: Evidence from Brazil

This paper analyses the presence of financial constraint in the investment decisions of 367 Brazilian firms from 1997 to 2004, using a Bayesian econometric model with group-varying parameters. The motivation for this paper is the use of clustering techniques to group firms in a totally endogenous form. In order to classify the firms we used a hybrid clustering method, that is, hierarchical and non-hierarchical clustering techniques jointly. To estimate the parameters a Bayesian approach was considered. Prior distributions were assumed for the parameters, classifying the model in random or fixed effects. Ordinate predictive density criterion was used to select the model providing a better prediction. We tested thirty models and the better prediction considers the presence of 2 groups in the sample, assuming the fixed effect model with a Student t distribution with 20 degrees of freedom for the error. The results indicate robustness in the identification of financial constraint when the firms are classified by the clustering techniques. (C) 2010 Elsevier B.V. All rights reserved.

FOREIGN INVESTMENT AND THE BRAZILIAN REAL ESTATE MARKET

This article discusses the main aspects of the Brazilian real estate market in order to illustrate if it would be attractive for a typical American real estate investor to buy office-building portfolios in Brazil. The article emphasizes: [i] - the regulatory frontiers, comparing investment securitization, using a typical American REIT structure, with the Brazilian solution, using the Fundo de Investimento Imobiliario - FII; [ii] - the investment quality attributes in the Brazilian market, using an office building prototype, and [iii] - the comparison of [risk vs. yield] generated by an investment in the Brazilian market, using a FII, benchmarked against an existing REIT (OFFICE SUB-SECTOR) in the USA market. We conclude that investing dollars exchanged for Reais [the Brazilian currency] in a FII with a triple A office-building portfolio in the Sao Paulo marketplace will yield an annual income and a premium return above an American REIT investment. The highly aggressive scenario, along with the strong persistent exchange rate detachment to the IGP-M variations, plus instabilities affecting the generation of income, and even if we adopt a 300-point margin for the Brazil-Risk level, demonstrates that an investment opportunity in the Brazilian market, in the segment we have analyzed, outperforms an equivalent investment in the American market.

Tax Cost of Investment Projects: the case of ICMS credits

This article discusses the impact on the profitability of firms under Complementary Law 102/2000 (which abrogated the Law 89/96 - Kandir Law) allowing the appropriation of ICMS credits, due to investment in fixed assets goods, at a ratio of 1/48 per month. The paper seeks to demonstrate how this new system - which resulted in the transformation of the ICMS as a value added tax (VAT) consumption-type to an income-type - leads to a loss of approximately 30% of the value of credits to be recovered and the effect it generates on the cost of investment and the profits for small, medium and large firms. From the methodological point of view, it is a descriptive and quantitative research, which proceeded in three stages. Initially, we have obtained estimated value of net sales and volume of investments, based on report Painel de Competitividade prepared by the Federacao das Indtustrias do Estado de Sao Paulo (Fiesp/Serasa). Based on this information, it was possible to obtain estimates of the factors of generation of debits and credits for ICMS, using the model Credit Control of Fixed Assets (CIAP). Finally, we have calculated three indicators: (i) present value of debt recovery/value of credits, (ii) present value of debt recovery / investment value, (iii) present value of debt recovery / sales profitability. We have conclude that the system introduced by Complementary Law 102/2000 implicates great opportunity cost for firms and that legislation should be reviewed from this perspective, aiming to ensure lower costs associated with investment projects.

Private valuation of carbon sequestration in forest plantations

Approval of the Clean Development Mechanism, provided for in the Kyoto Protocol, enables countries with afforested land to trade in carbon emissions reduction certificates related to carbon dioxide equivalent quantities (CO(2-e)) stored within a certain forest area. Potential CO(2-e) above base line sequestration was determined for two forest sites on commercial eucalyptus plantations in northern Brazil (Bahia). Compensation values for silvicultural regimes involving rotation lengths greater than economically optimal were computed using the Faustmann formula. Mean values obtained were US$8.16 (MgCO(2-e))(-1) and US $7.19 (MgCO(2-e))(-1) for average and high site indexes, respectively. Results show that carbon supply is more cost-efficient in highly productive sites. Annuities of US$18.8 Mg C(-1) and US$35.1 Mg C(-1) and yearly payments of US$4.4 m(-3) and US$8.2 m(-3) due for each marginal cubic meter produced were computed for high and average sites, respectively. The estimated value of the tonne of carbon defines minimum values to be paid to forest owners, in order to induce a change in silvicultural management regimes. A reduction of carbon supply could be expected as a result of an increase in wood prices, although it would not respond in a regular manner. For both sites, price elasticity of supply was found to be inelastic and increased as rotation length moved further away from economically optimal: 0.24 and 0.27 for age 11 years in average- and high-productivity sites, respectively. This would be due to biomass production potential as a limiting factor; beyond a certain threshold value. an increase in price does not sustain a proportional change in carbon storage supply. The environmental service valuation model proposed might be adequate for assessing potential supply in plantation forestry, from a private landowner perspective, with an economic opportunity cost. The model is not applicable to low commercial value forest plantations. (C) 2009 Elsevier B.V. All rights reserved.

View along western boundary; paperbark trees between private and public housing, Cotton Tree Housing Estate, Maroochydore

This pilot project at Cotton Tree, Maroochydore, on two adjacent, linear parcels of land has one of the properties privately owned while the other is owned by the public housing authority. Both owners commissioned Lindsay and Kerry Clare to design housing for their separate needs which enabled the two projects to be governed by a single planning and design strategy. This entailed the realignment of the dividing boundary to form two approximately square blocks which made possible the retention of an important stand of mature paperbark trees and gave each block a more useful street frontage. The scheme provides seven two-bedroom units and one single-bedroom unit as the private component, with six single-bedroom units, three two-bedroom units and two three-bedroom units forming the public housing. The dwellings are deployed as an interlaced mat of freestanding blocks, car courts, courtyard gardens, patios and decks. The key distinction between the public and private parts of the scheme is the pooling of the car parking spaces in the public housing to create a shared courtyard. The housing climbs to three storeys on its southern edge and falls to a single storey on the north-western corner. This enables all units and the principal private outdoor spaces to have a northern orientation. The interiors of both the public and private units are skilfully arranged to take full advantage of views, light and breeze.

East elevation, overlooking driveway, private housing, Cotton Tree Housing Estate, Maroochydore

This pilot project at Cotton Tree, Maroochydore, on two adjacent, linear parcels of land has one of the properties privately owned while the other is owned by the public housing authority. Both owners commissioned Lindsay and Kerry Clare to design housing for their separate needs which enabled the two projects to be governed by a single planning and design strategy. This entailed the realignment of the dividing boundary to form two approximately square blocks which made possible the retention of an important stand of mature paperbark trees and gave each block a more useful street frontage. The scheme provides seven two-bedroom units and one single-bedroom unit as the private component, with six single-bedroom units, three two-bedroom units and two three-bedroom units forming the public housing. The dwellings are deployed as an interlaced mat of freestanding blocks, car courts, courtyard gardens, patios and decks. The key distinction between the public and private parts of the scheme is the pooling of the car parking spaces in the public housing to create a shared courtyard. The housing climbs to three storeys on its southern edge and falls to a single storey on the north-western corner. This enables all units and the principal private outdoor spaces to have a northern orientation. The interiors of both the public and private units are skilfully arranged to take full advantage of views, light and breeze.