An analysis of household farm investment decisions under varying land tenure arrangements in Ghana

Land tenure insecurity is widely perceived as a disincentive for long-term land improvement investment hence the objective of this paper is to evaluate how tenure (in)security associated with different land use arrangements in Ghana influenced households’ plot level investment decisions and choices. The paper uses data from the Farmer-Based Organisations (FBO) survey. The FBO survey collected information from 2,928 households across three ecological zones of Ghana using multistaged cluster sampling. Probit and Tobit models tested the effects of land tenancy and ownership arrangements on households’ investment behaviour while controlling other factors. It was found that marginal farm size was inversely related to tenure insecurity while tenure insecurity correlate positively with value of farm land and not farm size. Individual ownership and documentation of land significantly reduced the probability of households losing uncultivated lands. Individual land ownership increased both the probability of investing and level of investments made in land improvement and irrigation probably due to increasing importance households place on land ownership. Two possible explanations for this finding are: First, that land markets and land relations have changed significantly over the last two decades with increasing money transaction and fixed agreements propelled by population growth and increasing value of land. Secondly, inclusion of irrigation investment as a long term investment in land raises the value of household investment and the time period required to reap the returns on the investments. Households take land ownership and duration of tenancy into consideration if the resource implications of land investments are relatively huge and the time dimension for harvesting returns to investments is relatively long.

Multicollinearity and financial constraint in investment decisions: a Bayesian generalized ridge regression

This paper addresses the investment decisions considering the presence of financial constraints of 373 large Brazilian firms from 1997 to 2004, using panel data. A Bayesian econometric model was used considering ridge regression for multicollinearity problems among the variables in the model. Prior distributions are assumed for the parameters, classifying the model into random or fixed effects. We used a Bayesian approach to estimate the parameters, considering normal and Student t distributions for the error and assumed that the initial values for the lagged dependent variable are not fixed, but generated by a random process. The recursive predictive density criterion was used for model comparisons. Twenty models were tested and the results indicated that multicollinearity does influence the value of the estimated parameters. Controlling for capital intensity, financial constraints are found to be more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.

Mergers, investment decisions and internal organisation

We analyse the effects of investment decisions and firms' internal organisation on the efficiency and stability of horizontal mergers. In our framework economies of scale are endogenous and there might be internal conflict within merged firms. We show that often stable mergers do not lead to more efficiency and may even lead to efficiency losses. These mergers lead to lower total welfare, suggesting that a regulator should be careful in assuming that possible efficiency gains of a merger will be effiectively realised. Moreover, the paper offers a possible explanation for merger failures.

Booms, Recessions and Financial Turmoil: A Fresh Look at Investment Decisions under Cyclical Uncertainty

The paper studies the interaction between cyclical uncertainty and investment in a stochastic real option framework where demand shifts stochastically between three different states, each with different rates of drift and volatility. In our setting the shifts are governed by a three-state Markov switching model with constant transition probabilities. The magnitude of the link between cyclical uncertainty and investment is quantified using simulations of the model. The chief implication of the model is that recessions and financial turmoil are important catalysts for waiting. In other words, our model shows that macroeconomic risk acts as an important deterrent to investments.

Studying the micro-angels approach to micro-investment decisions

Purpose: The paper analyzes the micro-angels investment behaviour, looking both to the criteria used in the selection of their investment projects and to the characteristics of their guidance role during the investment period. Design/Methodology/Approach: The paper focuses on a double bottom line movement of French micro-angels clubs that has been operating since 1983. Our primary source of data is an online survey carried out during March 2012, asking members of clubs all over France for different aspects of their procedures. Findings: Our findings suggest that micro-angels are interested in small, socially or environmentally friendly projects having the potential to contribute to the development of their neighbourhood. We find that women are even more interested than men in such projects. Educated micro-angels value entrepreneurial motivation and understanding of the project more than less-educated micro-angels. We also point out the factors that micro-angels consider important in accompanying enterprises. Here we find that gender makes little difference. However, retired micro-angels value financial diagnosis made conjointly with entrepreneurs, while both active micro-angels and educated micro-angels value more the use of their network to help micro-entrepreneurs. Practical/Social Implications: Given the potential benefits of micro-angels investing and guiding the development of micro-enterprises, a social micro-angel investment on a major scale in developing countries could help in tackling some of the problems faced by the development of microfinance, such as the over-indebtedness of micro-entrepreneurs. Practitioners and new initiatives would gain from understanding what adaptations need to be made. Originality/value: We expect to add to the venture capital theory to take into account non-economic motives.

When mothers work and fathers care. Joint household fertility decisions in Denmark and Spain

We analyze second birth decisions within the theoretical framework of joint household decision making, comparing two countires that represent the international extremes in terms of women's career behaviour, Denmark and Spain. Using all 8 ECHP panels we apply discrete time estimations of the likelihood of a second birth and show that in Spain, fertility behaviour continues to conform to the classic "Becker model" while in Denmark we identify a radically new behavioral pattern according to which career-women's fertility is conditional of their partners' contribution to care for the children.

Pitfalls in the modeling of forward-looking price setting and investment decisions

The present paper makes progress in explaining the role of capital for inflation and output dynamics. We followWoodford (2003, Ch. 5) in assuming Calvo pricing combined with a convex capital adjustment cost at the firm level. Our main result is that capital accumulation affects inflation dynamics primarily through its impact on the marginal cost. This mechanism is much simpler than the one implied by the analysis in Woodford's text. The reason is that his analysis suffers from a conceptual mistake, as we show. The latter obscures the economic mechanism through which capital affects inflation and output dynamics in the Calvo model, as discussed in Woodford (2004).

INCLUDING RISK IN ECONOMIC FEASIBILITY ANALYSIS:A STOCHASTIC SIMULATION MODEL FOR BLUEBERRY INVESTMENT DECISIONS IN CHILE

ABSTRACT The traditional method of net present value (NPV) to analyze the economic profitability of an investment (based on a deterministic approach) does not adequately represent the implicit risk associated with different but correlated input variables. Using a stochastic simulation approach for evaluating the profitability of blueberry (Vaccinium corymbosum L.) production in Chile, the objective of this study is to illustrate the complexity of including risk in economic feasibility analysis when the project is subject to several but correlated risks. The results of the simulation analysis suggest that the non-inclusion of the intratemporal correlation between input variables underestimate the risk associated with investment decisions. The methodological contribution of this study illustrates the complexity of the interrelationships between uncertain variables and their impact on the convenience of carrying out this type of business in Chile. The steps for the analysis of economic viability were: First, adjusted probability distributions for stochastic input variables (SIV) were simulated and validated. Second, the random values of SIV were used to calculate random values of variables such as production, revenues, costs, depreciation, taxes and net cash flows. Third, the complete stochastic model was simulated with 10,000 iterations using random values for SIV. This result gave information to estimate the probability distributions of the stochastic output variables (SOV) such as the net present value, internal rate of return, value at risk, average cost of production, contribution margin and return on capital. Fourth, the complete stochastic model simulation results were used to analyze alternative scenarios and provide the results to decision makers in the form of probabilities, probability distributions, and for the SOV probabilistic forecasts. The main conclusion shown that this project is a profitable alternative investment in fruit trees in Chile.

‘Driving Forces of Investment Decisions in Mutual Funds’

Unfortunately, in India it is a fact that most of the investors are not interested in mutual funds. Those who are investing, they are investing only very small amounts. But what is important to be noted here is that when compared to other financial instruments, investments in mutual funds are safer and also yields more returns on the investment portfolio. Moreover as an investment avenue mutual fund is available for those investors who are not willing to take any exposure directly in the security market. It also helps such investors to build their wealth over a period of time. At the retail level, investors are unique and are highly heterogeneous, and the mutual fund schemes' selection will also differ depends on their expectations. Hence, investors’ expectation is a very important factor in this regard that needs to be analysed by all the investment houses. Hence, the factors that drive the investment decisions of individual investors to meet their expectations by investing money in mutual funds need an in-depth analysis. These driving forces include the preference of investors on mutual fund compared to various available avenues of financial investments, risk attitude of investors, influence of characteristics of instruments of mutual funds on investors, the investment specific attitudes of investors, and influence of qualities of fund management on investors. The success of any mutual fund, a popular means of investment, depends on how effectively an Asset Management Company has been able to understand the level of influence of these factors on the decision of investors to invest in mutual funds. For a substantial growth in the mutual fund market, there must be a high level precision in the design and marketing of the products of mutual funds taking into account these driving forces by the Asset Management Companies. Therefore, there is a need to conduct a detailed study on investments in mutual funds in this direction. A review of available literature also revealed that no detailed study on mutual funds has so far been attempted in this direction; hence the present study on Driving Forces of Investment Decisions in Mutual Funds is undertaken.

The impact of past hyperinflation on current household investment behavior

Neste estudo é proposto que a instabilidade macroeconômica extrema causada pela hiperinflação nas décadas de 80 e 90 no Brasil causou um efeito de longo prazo no comportamento de poupança dos indivíduos. Usando dados da Pesquisa Nacional por Amostra de Domicílio (PNAD) de 2009 e 2011 e um questionário complementar, encontramos três evidências significantes: (1) indivíduos que possuem memória do período de hiperinflação no Brasil tem uma menor probabilidade de participar do mercado de ações; (2) há uma forte evidência que pessoas que estavam em idade formativa durante a hiperinflação são menos dispostos de possuir algum tipo de instrumento financeiro do que pessoas que tiveram a experiência desse choque macroeconômico em outros períodos de suas vidas; (3) mulheres solteiras são muito mais prováveis de ter uma poupança financeira que homens solteiros.

Asymmetric preferences in investment decisions in the Brazilian financial market

The main objective of this article is to test the hypothesis that utility preferences that incorporate asymmetric reactions between gains and losses generate better results than the classic Von Neumann-Morgenstern utility functions in the Brazilian market. The asymmetric behavior can be computed through the introduction of a disappointment (or loss) aversion coefficient in the classical expected utility function, which increases the impact of losses against gains. The results generated by both traditional and loss aversion utility functions are compared with real data from the Brazilian market regarding stock market participation in the investment portfolio of pension funds and individual investors.

Multicollinearity and financial constraint in investment decisions: a bayesian generalized ridge regression

This paper addresses the investment decisions considering the presence of financial constraints of 373 large Brazilian firms from 1997 to 2004, using panel data. A Bayesian econometric model was used considering ridge regression for multicollinearity problems among the variables in the model. Prior distributions are assumed for the parameters, classifying the model into random or fixed effects. We used a Bayesian approach to estimate the parameters, considering normal and Student t distributions for the error and assumed that the initial values for the lagged dependent variable are not fixed, but generated by a random process. The recursive predictive density criterion was used for model comparisons. Twenty models were tested and the results indicated that multicollinearity does influence the value of the estimated parameters. Controlling for capital intensity, financial constraints are found to be more important for capital-intensive firms, probably due to their lower profitability indexes, higher fixed costs and higher degree of property diversification.

Corporate aging and investment decisions

Paper I: Corporate aging and internal resource allocation Abstract Various observers argue that established firms are at a disadvantage in pursuing new growth opportunities. In this paper, we provide systematic evidence that established firms allocate fewer resources to high-growth lines of business. However, we find no evidence of inefficient resource allocation in established firms. Redirecting resources from high-growth to low-growth lines of business does not result in lower profitability. Also, resource allocation towards new growth opportunities does not increase when managers of established firms are exposed to takeover and product market threats. Rather, it seems that conservative resource allocation strategies are driven by pressures to meet investors’ expectations. Our empirical evidence, thus, favors the hypothesis that established firms wisely choose to allocate fewer resources to new growth opportunities as external pressures force them to focus on efficiency rather than novelty (Holmström 1989). Paper II: Corporate aging and asset sales Abstract This paper asks whether divestitures are motivated by strategic considerations about the scope of the firm’s activities. Limited managerial capacity implies that exploiting core competences becomes comparatively more attractive than exploring new growth opportunities as firms mature. Divestitures help stablished firms free management time and increase the focus on core competences. The testable implication of this attention hypothesis is that established firms are the main sellers of assets, that their divestiture activity increases when managerial capacity is scarcer, that they sell non-core activities, and that they return the divestiture proceeds to the providers of capital instead of reinvesting them in the firm. We find strong empirical support for these predictions. Paper III: Corporate aging and lobbying expenditures Abstract Creative destruction forces constantly challenge established firms, especially in competitive markets. This paper asks whether corporate lobbying is a competitive weapon of established firms to counteract the decline in rents over time. We find a statistically and economically significant positive relation between firm age and lobbying expenditures. Moreover, the documented age-effect is weaker when firms have unique products or operate in concentrated product markets. To address endogeneity, we use industry distress as an exogenous nonlegislative shock to future rents and show that established firms are relatively more likely to lobby when in distress. Finally, we provide empirical evidence that corporate lobbying efforts by established firms forestall the creative destruction process. In sum, our findings suggest that corporate lobbying is a competitive weapon of established firms to retain profitability in competitive environments.