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Article
Publication date: 9 October 2017

Abdul Rashid and Muhammad Saeed

The purpose of this paper is twofold. First, based on the value optimization problem of the firm, the authors proposed a theoretical model for firms’ investment decisions…

Abstract

Purpose

The purpose of this paper is twofold. First, based on the value optimization problem of the firm, the authors proposed a theoretical model for firms’ investment decisions, which incorporates the effects of both idiosyncratic (firm specific) and macroeconomic uncertainty/risk. Second, the authors empirically estimate the proposed model for Pakistan.

Design/methodology/approach

The authors utilize an unbalanced firm-level panel data covering the period 1988-2013. To generate time-variant firm-specific uncertainty, the authors estimate the autoregressive model on firm sales for each firm included in the sample over the examined period. Firm-specific risk is also measured based on the square of the residuals of firms’ sales. Two measures of macroeconomic uncertainty are computed using the conditional variance obtained by estimating the ARCH model for consumer price index and industrial production index. Several alternative measures of both types of uncertainties are used to ensure the robustness of uncertainty effects. To mitigate the problem of endogeneity, the robust two-step system-generalized method of moments estimator is used to estimate the empirical model.

Findings

The results indicate that firms are likely to cut down their level of investment spending when either type of uncertainty increases. The results also reveal that the sensitivity of firms’ investment decisions to macroeconomic (aggregate) uncertainty is higher as compared to the firm-specific uncertainty. The authors show that these findings are robust to different uncertainty measures used in the analysis. The results related to firm characteristics suggest that the firm-specific variables namely the debt to assets ratio, the costs of debt to assets ratio, and the sales to assets ratio are also equally important in the determination of investment decisions of corporate manufacturing firms.

Practical implications

The empirical findings of the paper are useful for firm managers, investors, and government authority. Specifically, the results help firm managers and investors to understand how firm-specific and macroeconomic uncertainty affects firms’ investment decisions. The finding that firms cut their investment spending in times of macroeconomic instability implies that declines in firms’ investment spending during the periods of macroeconomic turmoil may delay the process of recovery. Therefore, the policy makers should design such policies that encourage firms to invest more in economic crisis periods, which, in turn, would enhance the growth of the economy and help to overcome the problem of downturn/recession.

Originality/value

The authors first propose a theoretical model for firms’ investment decisions based on the value optimization problem of the firm by incorporating the role of both firm-specific and macroeconomic uncertainty. Next, unlike most of previous studies, they estimate the proposed model for non-financial firms operating in Pakistan. The authors predict that a higher exposure to both idiosyncratic and macroeconomic uncertainties leads to lower investment in Pakistani manufacturing firms. Further, the authors hypothesize that both types of uncertainties have differential effects on firms’ investment decisions.

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Article
Publication date: 1 August 2016

Weisheng Chiu and Doyeon Won

The purpose of this paper is to examine the key determinants of brand commitment in sports products based on the investment model and seeks to predict consumers…

Abstract

Purpose

The purpose of this paper is to examine the key determinants of brand commitment in sports products based on the investment model and seeks to predict consumers’ repurchase intention.

Design/methodology/approach

Data from a survey questionnaire (n = 247) were analysed primarily using structural equation modelling techniques.

Findings

The results support the investment model’s hypothesis that brand commitment is weakened by the quality of alternative options but strengthened by consumers’ satisfaction with and investment in the brand. Moreover, brand commitment had a positive influence on consumers’ repurchase intention.

Originality/value

Using the investment model of commitment processes, the study provides useful information on consumer-brand relationships and repurchase intention.

Details

International Journal of Sports Marketing and Sponsorship, vol. 17 no. 3
Type: Research Article
ISSN: 1464-6668

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Book part
Publication date: 10 June 2009

Fernando R. Chaddad and Jeffrey J. Reuer

This paper focuses on the potential advantages of strategic investment models in examining firm investment behavior. Strategic investment models are derived from rigorous…

Abstract

This paper focuses on the potential advantages of strategic investment models in examining firm investment behavior. Strategic investment models are derived from rigorous modeling techniques grounded on formal analytical models, and they have been widely applied in corporate finance and economics to examine the problem of firm underinvestment. In this paper, we present an overview of strategic investment models, including empirical applications that highlight their methodological strengths. We conclude that the empirical application of such investment models in the context of strategic management research presents research opportunities in many new directions.

Details

Research Methodology in Strategy and Management
Type: Book
ISBN: 978-1-84855-159-6

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Article
Publication date: 2 August 2013

Andreas Pfnür and Stefan Armonat

The purpose of this paper is to apply a numerical simulation of stochastic processes to the problem of real estate investment appraisal.

Abstract

Purpose

The purpose of this paper is to apply a numerical simulation of stochastic processes to the problem of real estate investment appraisal.

Design/methodology/approach

These uncertain operating costs are integrated into an enhanced dynamic simulation. To model the dynamics in the uncertainty of the cost schedule, a range of different types of stochastic processes is used. The operating costs are classified by cost drivers and an appropriate stochastic process is determined for each of the derived cost clusters. To optimise the capital structure in this application, heuristic optimisation with genetic algorithms is used.

Findings

The application of the model to real world investment situations shows that linear and deterministic modelling underestimates the risk‐generating effect of uncertain operating expenses, which often can lead to inefficient investment decisions.

Practical implications

In a further application of the model, the authors demonstrate the effect of uncertain operating costs on the optimal capital structure of real estate investments.

Originality/value

In contrast to models in the literature that are usually focussed on the income side, here the focus is on the uncertain dynamics of real estate operating costs as a key factor affecting return.

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Article
Publication date: 27 November 2018

Said Sami Al Hallaq, Mohamad M. Ajlouni and Ahmed Shakir Al-Douri

With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology and its Applications: Economics, Finance, Science, and Society” in 2014, in a…

Abstract

Purpose

With reference to the methodology of Prof Choudhry in his book “Tawhidi Epistemology and its Applications: Economics, Finance, Science, and Society” in 2014, in a different context, this study aims to present the conceptual fundamental of Islamic finance investment, where investment decisions are governed by Divine law and Islamic jurisprudence, followed by the empirical nature of real-world issues where investment decisions are governed by only financial indicators, using the Amman Stock Exchange as a case study.

Design/methodology/approach

As pointed out by Raderbauer (2011), research and industry initiatives mainly focus on environmental measures while ignoring the economic and socio-cultural dimension of sustainability. Recognizing the importance of a holistic understanding to define sustainable business practices for the accommodation industry. Financial markets are no exception; moral and values either coming from secular or religious understanding help to examine relationships between attitudes and actions, as well as differences in attitudes and actions related to the business’ characteristics. In business, ethical considerations apply to a broad list of virtues that companies, their managers and employees customarily seek to adopt. These include, but are not limited to, the encouragement of honesty, integrity and efficiency, as well as diversity and communication skills. One of the most common sources of ethical considerations is religion. In these cases, religious doctrine imparts a sense of applied ethics, where one considers what right conduct is, how to live a life pleasing to the Divine and how one should treat him/herself and others in accordance with those teachings. Again, as ethical considerations is a broad philosophical concept, it can apply to any situation where the person ponders the nature of right and wrong, how to recognize the difference and the meaning those conclusions carry for everyday life.

Findings

It can be concluded that the overall the quantitative and qualitative statistics showed that accommodation business manager’s decision has had a very little positive attitude toward sustainability and the implementation of sustainable business practices in ASE financial transaction, no matter what classification, type of business, ownership or size of business. Only rules and regulations govern the attitude and behavior when making financial transactions with profit is the main target. Moral indicators could not be seen throughout the analysis and test used to achieve objectives of the study at hand. One can imagine that the combined two factors together “Moral-Material” in implementing financial transactions will produce a more beneficial outcome. Achieving a material and holistic objective will produce an optimum situation, which can contribute positively to sustainable development.

Originality/value

Islamic alternatives to traditional investment tools have been driven by the fact that such tools do not conform to the Islamic general principles of the Shari’ah (Usmani, 2002). There has been a growing desire to have funds in which profits are not based on riba or interest, which is prohibited in Islam. Muslims deem that profit should come because of efforts; this is not the case in interest-dominated investments. In addition, there is a desire to have investment portfolios, which are morally purified. Thus, investments in companies that are not in compliance with the Shari’ah are not permitted and are eliminated from the portfolio. To ensure compliance with the forgoing condition, Shari’ah advisory boards whose role is mainly to give assurance that money is managed within the framework of Islamic laws govern Islamic mutual funds (Hassan, 2001; Hassan, 2002). On the other hand, dealing with the applied part, the paper will deal with a case study from Jordan (Amman Stock Exchange), where, code of ethics is issued by virtue of the provisions of Article 26 (e) of the Securities Law No. 23 of 1997. The Amman Stock Exchange operates as an exchange for the trading of securities. The company lists securities such as equities and bonds. Its activities include providing enterprises with a means of raising capital by listing on the exchange; encouraging an active market in listed securities based on the determination of prices and trading; providing facilities and equipment for trading the recoding of trades and publication of prices; monitoring and regulating market trading; and coordinating with the Jordan Securities Commission as necessary. The company’s activities also include ensuring compliance with the law, fair market and investor protection; setting out and enforcing a professional code of ethics.

Details

International Journal of Ethics and Systems, vol. 35 no. 1
Type: Research Article
ISSN: 0828-8666

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Article
Publication date: 10 April 2009

Shuping Wan

The purpose of this paper is to research the optimal portfolio proportion for the optimal investment model and the optimal consumption investment strategies for the…

Abstract

Purpose

The purpose of this paper is to research the optimal portfolio proportion for the optimal investment model and the optimal consumption investment strategies for the optimal consumption investment model under compound‐jump processes.

Design/methodology/approach

Traditionally, the price of risky security or asset is often modeled as geometric Brownian motion. However, the analysis of stock price evolution reveals sudden and rare breaks logically accounted for by exogenous events on information. It is natural to model such behavior by means of a point process, or, more simply, by a Poisson process, which has jumps of constant size occurring at rare and unpredictable intervals. Assume that the price of risky security stock is modeled by a compound‐jump process, the renew process theory is chosen to solve the optimal investment model, the HJB equation is chosen for the optimal consumption investment model.

Findings

Derive the analytical optimal portfolio proportion for the reduction model of optimal investment. The optimal consumption investment strategies are given by some equations for the optimal consumption investment model.

Research limitations/implications

Accessibility and availability of data are the main limitations which model will be applied.

Practical implications

The results obtained in this paper could be used as a guide to actual portfolio management.

Originality/value

The new approach for the optimal portfolio model under compound‐jump processes. The paper is aimed at actual portfolio managers.

Details

Kybernetes, vol. 38 no. 3/4
Type: Research Article
ISSN: 0368-492X

Keywords

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Book part
Publication date: 20 May 2017

Jared C. Carbone and Snorre Kverndokk

Empirical studies show that years of schooling are positively correlated with good health. The implication may go from education to health, from health to education, or…

Abstract

Empirical studies show that years of schooling are positively correlated with good health. The implication may go from education to health, from health to education, or from factors that influence both variables. We formalize a model that determines an individual’s demand for knowledge and health based on the causal effects, and study the impacts on the individual’s decisions of policy instruments such as subsidies on medical care, subsidizing schooling, income tax reduction, lump-sum transfers, and improving health at young age. Our results indicate that income redistribution policies may be the best instrument to improve welfare, while a medical care subsidy is the best instrument for longevity. Subsidies to medical care or education would require large imperfections in these markets to be more welfare improving than distributional policies.

Details

Human Capital and Health Behavior
Type: Book
ISBN: 978-1-78635-466-2

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Article
Publication date: 28 January 2014

Vicente Lima Crisóstomo, Félix Javier López Iturriaga and Eleuterio Vallelado González

– The purpose of this paper is to verify the existence of financial constraints for investment in Brazil, an emerging market with growing international visibility.

Abstract

Purpose

The purpose of this paper is to verify the existence of financial constraints for investment in Brazil, an emerging market with growing international visibility.

Design/methodology/approach

Using panel data methodology and generalized method of moments (GMM), the paper estimates dynamic investment models based on the Euler equation and Tobin's q for a panel data set of 199 Brazilian non-financial firms for the time period 1995-2006.

Findings

Results show that Brazilian firms face financial constraints since their investments depend on internally generated funds. Results are robust to different investment models based on the Euler equation, also controlling for growth opportunities. Significant investment-cash flow sensitivity has been found for the whole sample of firms. Subsamples of firms considered as under financial constraints, according to dividend payout and equity issuance policies, have higher investment-cash flow sensitivity. Investment-cash flow sensitivity of financially constrained firms in Brazil is higher than that in the UK and in Romania, a transition economy.

Originality/value

The results extend empirical evidence of financial constraints in Brazil. The paper contributes to the literature by assessing the firms’ financial constraint status on an annual basis, and by using panel data methodology and GMM to estimate dynamic models of investment that take into account the proposals of the hierarchy of finance theory. In addition, the paper controls for growth opportunities. Capital market imperfections affect firm investment in Brazil and such effects are even stronger for financially constrained firms.

Details

International Journal of Managerial Finance, vol. 10 no. 1
Type: Research Article
ISSN: 1743-9132

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Article
Publication date: 1 July 1995

Giuliano Noci

In recent years it has been often claimed that quality is one ofmost critical success factors for organizations. Managers introducedquality‐based programmes – such as…

Abstract

In recent years it has been often claimed that quality is one of most critical success factors for organizations. Managers introduced quality‐based programmes – such as total quality management – assuming that performances would improve. However, many quality‐based initiatives failed. There are several reasons that could explain the failure of quality‐based strategies in a number of firms; suggests two causes: the lack of effective decisional tools for evaluating the most effective investment(s) among a set of potential programmes; and the lack of specific goals to be assigned to each investment in order to monitor the actual results of the programmes on time. In small firms these problems are greater because of the limited availability of financial and managerial resources which make more difficult the identification of the most effective decisional solutions. Identifies a conceptual framework aimed at supporting the choice of most effective models for evaluating quality‐related investments in small firms, particularly an approach which balances different decisional needs such as completeness, urgency of evaluation, measurability of output and structural characteristics.

Details

International Journal of Operations & Production Management, vol. 15 no. 7
Type: Research Article
ISSN: 0144-3577

Keywords

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Article
Publication date: 5 February 2018

Ann-Louise Andersen, Thomas Ditlev Brunoe, Kjeld Nielsen and Mads Bejlegaard

The purpose of this paper is to present a decisions support tool that can be applied in initial stages of design, for evaluating the investment feasibility of changeable…

Abstract

Purpose

The purpose of this paper is to present a decisions support tool that can be applied in initial stages of design, for evaluating the investment feasibility of changeable and reconfigurable manufacturing design concepts, based on future demand predictions and their uncertainties. A quantitative model is proposed, which evaluates the discounted value of capital and operating costs of changeable manufacturing design concepts, based on essential characteristics regarding their type and extent of changeability.

Design/methodology/approach

Quantitative empirical modeling is applied, where model conceptualization, validation, and implementation are central elements, using two Danish manufacturing companies as cases.

Findings

The applicability of the model is demonstrated in the two case companies, highlighting differences in type, extent, and level of feasible changeability, as a result of differences in product and production characteristics.

Research limitations/implications

Further studies of changeability implementation should be conducted across industrial fields in order to generalize findings.

Practical implications

There is currently limited support for the conceptual design phase of changeable and reconfigurable manufacturing, where critical decisions regarding type, extent, and level of changeability must be made, regardless of high degrees of uncertainty about future demand scenarios.

Originality/value

This paper expands previous research on design for changeability and reconfigurability, by explicitly considering changeability as a capability that can be enabled in various ways for various purposes in different industrial contexts. The proposed model and the case implementations provide important knowledge on the transition toward changeability in industry.

Details

Journal of Manufacturing Technology Management, vol. 29 no. 3
Type: Research Article
ISSN: 1741-038X

Keywords

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