Davis, P., Akintoye, A. and Holt, G. (2014), "Editorial", Journal of Financial Management of Property and Construction, Vol. 19 No. 3. https://doi.org/10.1108/JFMPC-08-2014-0017
Emerald Group Publishing Limited
Article-type: Editorial From: Journal of Financial Management of Property and Construction, Volume 19, Issue 3
Welcome to The Journal of Financial Management of Property and Construction (JFMPC) final issue of Volume 19 and, of 2014. This year has witnessed JFMPC move forward in terms of its international recognition as evidenced for example, by our acceptance into Scopus. The content of the year’s issues has presented a balanced blend of papers from both our property and construction themes; and the rigour of our reviewing process has been bolstered through a double blind process that now employs at least three independent reviews per manuscript. We have also refreshed and extended our Editorial Advisory Board (EAB) this year and will be appointing additional internationally renowned academics in 2015, to both our EAB and reviewer panel. JFMPC is fortunate to have so many high-profile and upcoming subject experts and thought leaders, who continue to bolster our reach and reputation. The editorial team would like to extend a thank you to all who have contributed to this year’s progress: our editorial board, our expert reviewers and, most importantly, our authors.
The global challenge to finance, economic development, restructuring and transformation increasingly focusses on infrastructure, housing market performance, real estate and other construction issues. The remit of JFMPC has never been more apposite. We move forward with a real sense of purpose – these global issues will continue to be addressed in our future issues through empirical studies, case study evidence, international and cross-disciplinary perspectives and a focus on the key financial interface that unites the property and construction fields and which ultimately, supports international economic development.
Volume 19.3 has a key linking theme – partnership in the face of the risks of a dynamic external environment. These partnerships can exist between public and private sectors, parties to a contract and between domestic economic activity and the international financial market. Important messages among the papers of this issue are that well-informed, designed and managed arrangements can help to mitigate and manage risk; and that professionalism, transparency and trust can help overcome the challenges faced by policymakers and practitioners in today’s global economy.
The first paper by Ismail and Haris revisits a subject high in on the agenda of policymakers across the world – the appetite and opportunity for Public Private Partnership (PPP) in addressing the infrastructure investment gap. The study examines the desire for such “in vogue”, yet complex contractual arrangements in a rapidly developing Asian context. A questionnaire-based survey is deployed to compare public and private sector attitudes, from which findings identify a number of sectorial discrepancies and identify important drivers, the most important being a desire to increase the role of the private sector. It is perhaps surprising to note that decreasing the role of the state was not a high priority. It would appear that while industry sees a huge opportunity, they do not see government as a competitor or fundamental roadblock – more as an essential partner who needs market direction and support.
The second paper by Annamalai, Bansal and Gemson targets a subject that has received comparatively little academic attention to date – the role of private equity in the Indian property market. The authors focus on residential development, but the study has wider relevance – illuminating emergent trends, given the relative scarcity of extant literature and the reality that residential is the largest of the real estate sectors. The paper compared development schemes with and without private equity, with and without foreign investment and between specialised and diversified investors. It is found that the “footloose” private equity funding followed larger schemes and tended to partner developers with an established track record – with foreign investors investing more per deal, while taking smaller percentage stakes on average – minimising risks where possible to gain exposure to such a lucrative, yet risky market activity. The increased scrutiny and professionalism required by foreign investment can only improve transparency in this notoriously opaque sector, with the potential to drive increased investment opportunities and further support economic development in the region.
Ho provides the third paper, which also studies property development. Ho considers how the external environment affects developer operations – in this case in Hong Kong. Factor analysis identified six major environmental factors, with an input-transformation-output system perspective providing insights into how these affect the development process. While the development environment will vary from time to time and from place to place, the study suggests that developers need to be dynamic in their approach to management. The property industry can be notoriously traditional in its approach, adopting a relatively narrow focus and responding to a limited number of economic “cues”. This research suggests such perspective needs to be widened and that market monitoring should play a more important role if developers are to successfully navigate the economic “squalls” characteristic of a contemporary global economy.
The fourth paper by Lai, Abdul Aziz and Chan investigates the effects of not just a “squall” but a full scale economic “hurricane” – by considering the effects of the global financial crisis (GFC) on Malaysian publicly listed construction companies. An interesting mixed methods approach was adopted – with financial analysis, stress measures and content analysis of strategy carried out on a small number of key organisations, to determine both the approaches taken by and performance of key firms in the face of economic threat. Findings demonstrate that larger firms weathered the GFC, suffering at worst profit reduction, while continuing to grow – largely due to direct government intervention via capital investment programmes. This swift government response was matched by the firms themselves, who undertook a range of “austerity measures”, which left them leaner and better able to weather the crises and rebound as conditions improved. This presents a classic case of combined public and private sector action, to successfully mitigate risk.
The final paper by Mahdi Hosseinian and Carmichael looks at another form of risk distribution – that between owner and contractor in construction projects – with the aim of identifying how these two parties’ interests can be aligned. Their research elucidates how pricing should be affected by the risk appetite of the parties and contributes to the literature on risk sharing. The study should offer interesting practical implications for contractual arrangements in what historically has proven to be a notoriously risky and litigious arena. JFMPC would welcome a future update on how the authors’ work is received in practice.
Akintola Akintoye, Peadar T. Davis and Gary D. Holt