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Article
Publication date: 27 September 2021

Stephen Gray, Jason Hall, Grant Pollard and Damien Cannavan

In the context of public-private partnerships (PPPs), it has been argued that the standard valuation framework produces a paradox whereby government appears to be made…

Abstract

Purpose

In the context of public-private partnerships (PPPs), it has been argued that the standard valuation framework produces a paradox whereby government appears to be made better off by taking on more systematic risk. This has led to a range of approaches being applied in practice, none of which are consistent with the standard valuation approach. The purpose of this paper is to demonstrate that these approaches are flawed and unnecessary.

Design/methodology/approach

The authors step through the proposed alternative valuation approaches and demonstrate their inconsistencies and illogical outcomes, using theory, logic and mathematical proof.

Findings

In this paper, the authors demonstrate that the proposed (alternative) approaches suffer from internal inconsistencies and produce illogical outcomes in some cases. The authors also show that there is no problem with the current accepted theory and that the apparent paradox is not the result of a deficiency in the current theory but is rather caused by its misapplication in practice. In particular, the authors show that the systematic risk of cash flows is frequently mis-estimated, and the correction of this error solves the apparent paradox.

Practical implications

Over the past 20 years, PPP activity around the globe amounts to many billions of dollars. Decisions on major infrastructure funding are of enormous social and economic importance.

Originality/value

To the best of the authors’ knowledge, this study is the first to demonstrate the flaws and internal inconsistencies with proposed valuation framework alternatives for the purposes of evaluating PPPs.

Details

Accounting Research Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1030-9616

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Book part
Publication date: 22 May 2013

Ralf W. Schlosser, Parimala Raghavendra and Jeff Sigafoos

Systematic reviews – that is, research reviews that are rigorous and follow scientific methods – are increasingly important for assisting stakeholders in implementing…

Abstract

Systematic reviews – that is, research reviews that are rigorous and follow scientific methods – are increasingly important for assisting stakeholders in implementing evidence-based decision making for children and adults with disabilities. Yet, systematic reviews vary greatly in quality and are therefore not a panacea. Distinguishing “good” reviews from “bad” reviews requires time and skills related to the appraisal of systematic reviews. The purpose of this chapter is to inform stakeholders (i.e., practitioners, administrators, policy makers) of evidence-based information sources that provide synopses (i.e., appraisals) of systematic reviews, to provide guidance in reading and interpreting the synopses of various sources, and to propose how to make sense of multiple synopses from different sources for the same systematic review. A secondary purpose of this chapter is to illustrate how stakeholders can conduct their own appraisals if synopses are not available.

Details

Evidence-Based Practices
Type: Book
ISBN: 978-1-78190-429-9

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Book part
Publication date: 30 September 2003

John T Reisch, Karen S McKenzie and Alan H Friedberg

This paper investigates state auditors’ decisions regarding the isolation or projection of sample misstatements to underlying sample populations. Seventy-eight state…

Abstract

This paper investigates state auditors’ decisions regarding the isolation or projection of sample misstatements to underlying sample populations. Seventy-eight state auditors completed four treatment cases that incorporate the complete 2×2 manipulation of intentional/unintentional and systematic/non-systematic misstatements in different case scenarios, enabling a test of the independent variables both across and within case scenarios.

The results indicate that both across and within case scenarios, auditors tend to project systematic misstatements more often than they project non-systematic misstatements. However, the auditors’ isolation/projection decisions are generally not influenced by whether the sample misstatements are intentional or unintentional.

Details

Advances in Accounting Behavioral Research
Type: Book
ISBN: 978-1-84950-231-3

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Book part
Publication date: 24 October 2019

Lalit Arora, Shailendra Kumar and Piyush Verma

Today, firm performance must be measured not only on traditional metrics but also on those that reflect the changing imperatives and new metric knowledge. Thus, the focus…

Abstract

Today, firm performance must be measured not only on traditional metrics but also on those that reflect the changing imperatives and new metric knowledge. Thus, the focus of managers, investors, and researchers is shifting from rubrics like sales and profitability to growth as a more appropriate measure of firm performance. We aim to highlight the effects that growth of a firm can have on the level of its systematic risk. Using a sample of 203 firms across nine industries taken from the Indian manufacturing sector for a period of 17 years (1998–2014), we develop and test a panel vector autoregressive (VAR) model to analyze the causal relationship between growth aspects and systematic risk of firms. Results depict that a growth option available to firms increase their level of systematic risk and the risk decreases when firms start chasing this growth by increasing their assets in place. Sustainable growth rate, which depicts the growth potential of firms, plays an important role in reducing the level of systematic risk. The findings of this chapter are relevant to managers who think that growth is always beneficial.

Details

Essays in Financial Economics
Type: Book
ISBN: 978-1-78973-390-7

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Article
Publication date: 11 July 2008

Chyi Lin Lee, Jon Robinson and Richard Reed

This paper aims to identify and examine the determinants of downside systematic risk in Australian listed property trusts (LPTs).

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Abstract

Purpose

This paper aims to identify and examine the determinants of downside systematic risk in Australian listed property trusts (LPTs).

Design/methodology/approach

Capital asset pricing model (CAPM) and lower partial moment‐CAPM (LPM‐CAPM) are employed to compute both systematic risk and downside systematic risk. The methodology of Patel and Olsen and Chaudhry et al. is adopted to examine the determinants of systematic risk and downside systematic risk.

Findings

The results confirm that systematic risk and downside systematic risk can be individually identified. There is little evidence to support the existence of linkages between systematic risk in Australian LPTs and financial/management structure determinants. On the other hand, downside systematic risk is directly related to the leverage/management structure of a LPT. The results are also robust after controlling for the LPTs' investment characteristics and varying target rates of return.

Practical implications

Investors and real estate analysts should conscious with the higher returns from high leverage and internally managed LPTs. Although there is no evidence that these higher returns are related to higher systematic risk, there could be the compensation for higher downside systematic risk.

Originality/value

This study provides invaluable insights into the management of real estate risk in Australian LPTs with implications for REITs in other countries. Unlike previous studies of systematic risk in REITs or LPTs, this is the first study to assess downside systematic risk and explore the determinants of downside systematic risk in LPTs.

Details

Journal of Property Investment & Finance, vol. 26 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 2 August 2011

Glenn Pederson and Nicholas Sakaimbo

The purpose of this paper is to investigate the relationship between loan default and loss given default (LGD) in an agricultural loan portfolio. The analysis employs a…

Abstract

Purpose

The purpose of this paper is to investigate the relationship between loan default and loss given default (LGD) in an agricultural loan portfolio. The analysis employs a simulation model approach to evaluate the role that systematic and non‐systematic risks play in determining the economic capital requirements under different agricultural economic conditions.

Design/methodology/approach

The authors employ the theoretical approach suggested by Miu and Ozdemir to assess the role of LGD in the banking industry. A Monte Carlo simulation model is developed using Excel and calibrated to an agricultural credit association using historical data. The simulation model is used to evaluate the mark‐up to economic capital that is implied by increasing credit risks due to cyclical changes in farm real estate values.

Findings

The paper demonstrates that historical systematic risks due to the correlation between probability of default (PD) and LGD through the business cycle can result in a significant mark‐up in the economic capital required by an agricultural lender. Using historical land price changes as the driver of systematic risk, the authors show that the correlations between changing PD and land values and between the PD and LGD provide evidence of how sensitive credit risk exposure is to these parameters.

Originality/value

This paper is the first application of the Miu and Ozdemir model of systematic risk to an agricultural lending institution. The model approach can be adapted by farm lenders to evaluate their changing economic capital requirements through an economic cycle in agriculture.

Details

Agricultural Finance Review, vol. 71 no. 2
Type: Research Article
ISSN: 0002-1466

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Article
Publication date: 14 August 2018

SoYeon Jung, Michael Dalbor and Seoki Lee

The purpose of this study is twofold: to investigate the relationship between restaurant firms’ internationalization and systematic risk, and to further examine the…

Abstract

Purpose

The purpose of this study is twofold: to investigate the relationship between restaurant firms’ internationalization and systematic risk, and to further examine the relationship between internationalization and systematic risk based on the type of restaurant firm (i.e. limited-service vs full-service restaurants).

Design/methodology/approach

This study analyzes data from US-based publicly traded restaurant firms by estimating systematic risk based on the Carhart four-factor model and by performing a two-way random-effects model.

Findings

Findings support not only the risk-reduction effect of internationalization on systematic risk but also the moderating effect of the role of restaurant type on the relationship between internationalization and systematic risk. More specifically, the risk-reduction effect of internationalization on systematic risk is greater for limited-service than full-service restaurants.

Practical implications

The findings of this study can provide restaurant executives with more confidence in pursuing internationalization as part of their risk management strategy, acknowledging that more international operations could mitigate restaurant firms’ systematic risk. More specifically, limited-service restaurants can more significantly enjoy the risk-reduction benefits by increasing their international operations than full-service restaurants based on the findings of this study. Furthermore, risk-averse investors could consider purchasing shares of limited-service multinational restaurants’ stocks to enjoy more risk-reduction benefits.

Originality/value

By focusing on the restaurant industry with consideration for the restaurant type, this study provides more tailored recommendations for implementing internationalization strategies with regard to risk management.

Details

International Journal of Contemporary Hospitality Management, vol. 30 no. 8
Type: Research Article
ISSN: 0959-6119

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Article
Publication date: 5 October 2012

Loukia Evripidou

The purpose of the current study was first to identify the motives for mergers, and second to examine the effect of mergers on the systematic risk of bidder firms in the…

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2691

Abstract

Purpose

The purpose of the current study was first to identify the motives for mergers, and second to examine the effect of mergers on the systematic risk of bidder firms in the airline industry.

Design/methodology/approach

To evaluate the effect of mergers in the systematic risk, two different market models are estimated for each company in the sample, one with pre‐merger data and one with post‐merger data. Then the results obtained from the two data sets are compared so as to identify possible differences.

Findings

The study has identified three diving motives behind the merges, namely cost efficiency, economies of scale, and market power. All of these motives are expected to affect the new firm's earnings stream and in turn affect its systematic risk. With the use of the market model the individual merger results are mixed and in line with the relevant literature. Nonetheless, the average results showed a decrease in the post‐merger systematic risk.

Research limitations/implications

A reduced post‐merger systematic risk indicates a success in achieving management objectives. Mergers can generate synergetic gains from increasing cost efficiencies and/or scale economies and can also increase shareholders value through the reduction in the new firm's cost of capital. However, to have a more valid perspective a larger number of mergers should be included in the sample together with alternative calculation of systematic risk to test the robustness of the results.

Originality/value

Taking into account the current economic hardship this paper addresses the issue of shareholders wealth maximization through mergers.

Details

International Journal of Organizational Analysis, vol. 20 no. 4
Type: Research Article
ISSN: 1934-8835

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Article
Publication date: 21 September 2017

Yaojie Zhang and Benshan Shi

The purpose of this paper is to alleviate the moral hazard problem created by deposit insurance and therefore develop a deposit insurance pricing model explicitly…

Abstract

Purpose

The purpose of this paper is to alleviate the moral hazard problem created by deposit insurance and therefore develop a deposit insurance pricing model explicitly considering systematic risk.

Design/methodology/approach

Using the market model, the authors introduce the systematic risk component consisting of market risk and beta risk. A closed-form solution for the authors’ pricing model is derived based on the option pricing framework.

Findings

Compared with the authors’, the pricing model that ignores systematic risk underestimates deposit insurance premium, and cannot cover the excessive loss created by systematic risk. To examine the effect of the systematic risk component on the deposit insurance premiums estimated by the authors’ model, this paper also provides empirical evidence from China by regression analysis. The results demonstrate that, in addition to the individual failure risk, the systematic risk component is properly priced and explicitly reflected in the authors’ model.

Research limitations/implications

More risk factors such as liquidity risk should be introduced in the pricing of deposit insurance.

Practical implications

Deposit insurance premiums estimated by the authors’ model can alleviate the moral hazard problem that banks have an incentive to take on excessive systematic risk, because substantial higher insurance premiums would be charged in doing so.

Originality/value

Applying the option pricing theory and market model, this paper develops a deposit insurance pricing model with explicit consideration of systematic risk. The systematic risk component contains not only the market volatility but also the sensitivity of market risk.

Details

China Finance Review International, vol. 7 no. 4
Type: Research Article
ISSN: 2044-1398

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Article
Publication date: 17 October 2016

Arian Abdulla and Mangala Krishnamurthy

Effective literature searches are critical to researchers and health care professionals. To conduct literature searches, clinicians, researchers and nurses rely primarily…

Abstract

Purpose

Effective literature searches are critical to researchers and health care professionals. To conduct literature searches, clinicians, researchers and nurses rely primarily on a few major databases (PubMed, Cochrane, CINAHL, etc.) to retrieve information. However, there is a lack of literature on the comparative efficiencies of major databases for systematic review results on a clinically related topic. This paper aims to fill that gap in the literature.

Design/methodology/approach

Cochrane Handbook (2011) defines systematic review as a review of a clearly formulated question that uses systematic and explicit methods to identify, select and critically appraise relevant research and to collect and analyze data from the studies that are included in the review. In this paper, search results of systematic reviews on a clinical topic between two major databases – PubMed and Cochrane Library – are compared.

Findings

Searching within PubMed for key terms in the titles and abstracts of articles is important to include in any systematic review, in addition to searching Medical Subject Heading terms. After applying filters, PubMed retrieved 130 systematic reviews that matched the criteria. In Cochrane Library, the searches were performed on the chosen topic using Boolean and phrase searching: text field searches resulted in 251 reviews. The search was further narrowed by subject, which yielded 20 reviews. It is strongly recommended to use multiple health-care specialty databases, check for duplicate reviews in the results and not limit results to English-only publications.

Practical implications

This paper can be used to introduce new researchers and/or students to methods for conducting systematic reviews using two or more databases on a chosen topic.

Originality/value

This paper fills a gap in the literature regarding comparative efficiencies of major databases for systematic review results on clinically related topics.

Details

Reference Reviews, vol. 30 no. 8
Type: Research Article
ISSN: 0950-4125

Keywords

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