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Article
Publication date: 1 February 1991

C. Carl Pegels

Evaluating capital investments for additions or modifications towarehouses, for replacement of equipment or for entirely new facilitiesis a complex activity which involves…

Abstract

Evaluating capital investments for additions or modifications to warehouses, for replacement of equipment or for entirely new facilities is a complex activity which involves numerous financial, competitive and other considerations. The financial aspect of capital investments is addressed and it is shown how ten different investment criteria can be brought to bear on the capital investment issue. The ten investment criteria consist of five primary criteria and five secondary criteria. The primary criteria are payback period in years, non‐discounted rate of return on investment, internal rate of return, Baldwin rate of return, and benefit cost ratio. All ten criteria are described and suggestions are made when each criterion is appropriate.

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International Journal of Physical Distribution & Logistics Management, vol. 21 no. 2
Type: Research Article
ISSN: 0960-0035

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Knowledge Assets and Knowledge Audits
Type: Book
ISBN: 978-1-78973-771-4

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Article
Publication date: 16 July 2021

Sheunesu Zhou

The aim of this paper is to analyse the relationship between public debt, corporate debt service costs and private capital formation in South Africa.

Abstract

Purpose

The aim of this paper is to analyse the relationship between public debt, corporate debt service costs and private capital formation in South Africa.

Design/methodology/approach

To capture the long-run characteristic of investment, the study adopts the Fully Modified Ordinary Least Squares approach and tests for cointegration using Hansen (1992)'s Parameter Instability test.

Findings

We find that private capital formation increases in domestic debt and decreases in external debt during the pre-crisis period. However, during the period post the Global Financial Crisis, we find evidence of domestic public debt crowding out private capital formation, whereas external debt crowds-in capital formation. Debt service costs are found to reduce investment due to the effect of the debt overhang throughout the period under analysis.

Research limitations/implications

The paper has important implications for macroeconomic policy. In particular, there is need for deleveraging and allocation of a higher proportion of debt to public infrastructure expenditure which has complementary effects on private investment.

Practical implications

Debt overhang signal that South African firms could be over-leveraged, which hinders future growth prospects. Firms that face high levels of debt should consider debt restructuring.

Originality/value

Empirical studies undertaken to explore this relationship have yielded contradicting results suggesting that the relationship between public debt and private investment is heterogeneous depending on a given economy or prevailing macroeconomic environment. In particular, existing research does not provide evidence on whether recent increases in public debt in South Africa have led to crowding-in or crowding-out of private investment. This paper therefore contributes to empirical literature on the impact of public debt on private investment within a small open economy.

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African Journal of Economic and Management Studies, vol. 12 no. 3
Type: Research Article
ISSN: 2040-0705

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Silicon Valley North
Type: Book
ISBN: 978-0-08044-457-4

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Book part
Publication date: 23 September 2014

Donald K. Clancy and Denton Collins

The purpose of this study is to review the capital budgeting literature over the past decade.

Abstract

Purpose

The purpose of this study is to review the capital budgeting literature over the past decade.

Design/methodology

Specifically, over the years 2004–2013, we review works appearing in the major academic journals in accounting, finance, and management. Further, we review the specialized academic journals in management accounting. We examine the frequency of articles by journal and year published, the type of research method applied, and the topic area studied. We then review the research findings by topic area.

Findings

We find 110 articles appearing in the selected journals. While the articles increase in frequency, the research methods applied are predominantly analytical and archival in nature with relatively few experiments, case studies, or surveys. Some progress is observed for capital budgeting techniques and new methods for structuring uncertainty. The studies find that the size of capital budgets is about right for companies with high financial reporting quality, for liquid companies, during periods of normal cash flow, when the budget is financed by equity, for companies when they first go public or first go private. Tax rates and financial reporting methods for depreciation and tax expenses distort capital budgets. Organization structure and performance measurement can distort capital budgeting. Individual differences, especially optimism and honesty, can influence capital budgeting decisions.

Limitations and Implications

This review is limited to the major journals in accounting, finance, and management; and the specialized journals in management accounting. There is much research to be done on capital budgeting, especially case studies of actual practice and experiments related to individual and group decision processes.

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Book part
Publication date: 14 March 2003

Douglas J. Cumming and Jeffrey G. MacIntosh

This paper considers efficient venture capital investment duration for different types of entrepreneurial firms so that on exit information asymmetries between the venture…

Abstract

This paper considers efficient venture capital investment duration for different types of entrepreneurial firms so that on exit information asymmetries between the venture capitalist (as seller) and the new owners of the investment are minimized, and capital gains maximized. We hypothesize that a number of factors are likely to affect investment duration, and our empirical tests confirm the statistical significance of some of these variables (stage of firm at first investment, capital available to the venture capital industry, whether the exit was preplanned, and whether the exit was made in response to an unsolicited offer). However, the fit between our theoretical model and the data is stronger in the United States than in Canada, offering evidence in support of the view that institutional factors have distorted investment duration in Canada.

Details

Issues in Entrepeneurship
Type: Book
ISBN: 978-1-84950-200-9

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Book part
Publication date: 4 December 2003

Julia Sass Rubin

Access to equity capital is critical for business success, especially for young companies which lack the cash flows necessary for debt repayment. The creation and growth…

Abstract

Access to equity capital is critical for business success, especially for young companies which lack the cash flows necessary for debt repayment. The creation and growth of such companies is a means to economic opportunity and wealth for ethnic-minority entrepreneurs. Unfortunately, the traditional venture capital industry is extremely limited in its investments.1 It also is significantly less likely to invest in businesses owned by ethnic-minority entrepreneurs than those owned by white entrepreneurs (Bates & Bradford, 1992).2

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Ethnic Entrepreneurship: Structure and Process
Type: Book
ISBN: 978-1-84950-220-7

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Article
Publication date: 1 February 1987

John Pointon

Numerous simulations are made of whether the tax system (1984 UK corporate tax) should have a neutral effect on the investment decision or whether there are incentives or…

Abstract

Numerous simulations are made of whether the tax system (1984 UK corporate tax) should have a neutral effect on the investment decision or whether there are incentives or disincentives to invest.

Details

Management Research News, vol. 10 no. 2
Type: Research Article
ISSN: 0140-9174

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Article
Publication date: 23 January 2007

Roland Burgman and Göran Roos

This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC…

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8690

Abstract

Purpose

This paper has two purposes: to identify and explain the major forces that are causing the increasing need for operational reporting and intellectual capital (IC) reporting for European companies; and to identify the necessary and sufficient conditions for operational and intellectual capital reporting if such reporting is to be meaningful for information users.

Design/methodology/approach

The approach for this paper has been to examine relevant papers, reports, guidelines, compendiums, annual reports, opinions, submissions and legislation.

Findings

Eight determining forces are identified that make the basis of the case for the provision of operating and IC information: the long‐standing global dominance and growth of the US economy; the emergence of business models other than the value chain (especially the emergence of network businesses); the changing nature of stock exchanges; the influence of different investment fund types (mutual, pension and hedge funds); the roles of buy‐side and sell‐side analysts; global and European investment index development; rating agency activity; and financial reporting and corporate governance regime development.

Practical implications

The eight forces are interdependent and immutable. Comprehensive operational and IC reporting are unavoidable. Accordingly, the authors propose that the necessary and sufficient conditions for adequate enterprise information reporting are: a legal requirement for mandatory operational and IC reporting and attendant regulatory framework(s) where the legal framework is based on the concept of neglect; key operating and IC resource status and activity performance definitions and metrics that reflect the enterprise's underlying business model(s); and (3) a mapping of the capitalized operational and IC investments that are by definition normally expensed to the financial report accounts.

Originality/value

The authors believe that no one has previously formally proposed a mandatory operational and IC reporting requirement; a legal reference frame of reference based on the legal concept of neglect; standard definitions for operational and IC performance metrics; a reference framework for information quality that is, inter alia, based on the consistency, comparability and comprehensiveness of reported metrics; and the requirement to map all capitalized IC resources back to the financial reports of the company.

Details

Journal of Intellectual Capital, vol. 8 no. 1
Type: Research Article
ISSN: 1469-1930

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Article
Publication date: 1 August 1996

Richard Harrison and Colin Mason

Concern about the equity gap in the UK has existed for more than 60 years. Despite various government measures and institutional responses (e.g. the development of a…

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2074

Abstract

Concern about the equity gap in the UK has existed for more than 60 years. Despite various government measures and institutional responses (e.g. the development of a venture capital industry) an equity gap still persists. Current debate has recognized the role of the informal venture capital market as a source of risk capital for SMEs. Argues that this market is both inefficient and underdeveloped, due largely to information deficiencies which hinder contact between potential investors and entrepreneurs seeking finance. Against this background, identifies the role of business angel networks (BANs) as a key means of stimulating the flow of informational venture capital in the UK. In particular, a government scheme to provide pump‐priming assistance to establish five local BAN demonstration projects is shown to have achieved impressive results. However, with the recent emergence of a number of private sector BANs, the continued role of government is now being questioned. Further demonstrates that public sector BANs, operating on a local scale, are filling a different market niche from that of private sector BANs, which operate predominantly on a national scale. Concludes that the top priority for policy is to ensure that all parts of the UK are served by local BANs. An appropriate way forward might be to build on experimental networking arrangements between local, public sector BANs and national, privately operated BANs.

Details

International Journal of Entrepreneurial Behavior & Research, vol. 2 no. 2
Type: Research Article
ISSN: 1355-2554

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