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The purpose of this paper is to analyse the current rhetoric of predictability in investment theory. After making the case for unpredictability, a new rhetoric for investment theory is proposed.

McCloskey's project of the rhetoric of economics provides the background and approach for the author's investigation. In particular the author will use the notions of metaphor, prediction, discourse analysis, and virtue ethics.

The current rhetoric equals the original rhetoric in the seminal work of Markowitz. The current rhetoric is based on predictability and rational behaviour. The proposed new rhetoric for investment theory denies predictability. The new rhetoric aims to cope with statistics by stressing that statistics is supportive but not decisive: handling investment theory is about judgements, combining virtues with historical and theoretical insights.

The investigation of the rhetoric of investment theory has practical relevance because the theory constitutes investment practice, and can put financial wealth at risk. The new rhetoric for investment theory invites practitioners and researchers to reflect on the epistemology of investment theory, and its consequences for the field.

The rhetoric of investment theory is to the author's knowledge not yet analysed in the literature. The rhetorical analysis of the current rhetoric and the proposal of a new rhetoric aim to contribute to the literature on the rhetoric of investment theory.

The end of World War II brought about many economic changes, among them the tremendous increase of US manufacturing activities in Western Europe. This astronomical increase of foreign direct investment (FDI) required a new theory ‐ an economic theory of foreign direct investment. International economic theory, which traditionally had ignored the FDI decision, was not able to explain the FDI decision, nor could it explain the phenomena of multinational corporation (MNC). In a world of perfect competition, foreign direct investment would be absent. And when all markets operate efficiently, when there are no external economies of production and marketing, when information is costless and there are no barriers to trade or competition, international trade is the only possible form of international involvement. Logically, it follows that it is the departures from the models of perfect competition that must provide the rationale for foreign direct investment. Since, according to the Heckscher‐ Ohlin‐Samuelson (neoclassical) model, trade of goods will equalize factor prices in a world of factor immobility. In fact, the FDI decision is even ignored by new international economics which, since the late 1970's, has utilized new developments in the field of industrial organization. Proponents of these new theories have developed models that emphasize increasing returns and imperfect competition and see the possibility that government involvements in trade (trade restrictions, export subsidies, etc.) may under some circumstances be useful. All of this is done while foreign direct investment is ignored.

The paper seeks to develop an analytical theory of project investment.

The authors derive a partial differential equation that the variable cost of a project should satisfy, determine a proper initial condition through a thought experiment, and solve the equation.

A formula of variable cost as an analytical function of fixed cost, uncertainty of the environment and the duration of a project is obtained.

The analytical formula enables systematic comparison of returns of different investment under different market conditions to be made. This refines the insights from real option theory in many ways. Since all production systems need fixed investment to lower variable costs, by providing an analytical theory about the relation among fixed costs, variable costs and uncertainty, this theory contributes a new foundation to investment theory and other different fields.

An analytical theory of project investment about the relation among fixed costs, variable costs, uncertainty of the environment and the duration of a project, which is the core concern in most business decisions, does not exist in the current literature.

The purpose of this study is to examine the extent to which the quality of corporate governance mechanisms and growth opportunities affect agency problems in hotel firms.

The effects of cash flows on investments and cash holdings were analyzed using three-stage least square analysis to determine the extent to which agency problems are due to the quality of corporate governance in hotel firms.

The findings showed that the effects of cash flows on investments and cash holdings were greater in well-governed hotel firms than in poorly governed hotel firms. These effects were also greater in low-growth hotel firms than in high-growth hotel firms. However, the results from a concurrent examination of the quality of corporate governance and growth opportunities showed that poorly governed hotel firms with low-growth opportunities are exposed to agency problems.

These results suggest that neither corporate governance mechanisms nor growth opportunities alone indicate agency problems. Theoretical implications are discussed within the realms of free cash flow theory and growth hypothesis.

High-growth hotel firms should retain all of their cash and cash flows to undertake value-increasing projects when they become available. Shareholders’ wealth is more likely to be maximized in high-growth firms regardless of the quality of corporate governance.

Although various aspects of corporate governance have been investigated in hospitality literature, previous studies did not examine the concurrent effects of corporate governance and growth opportunities on agency problems.

Boards of directors are assumed to exercise three key accountability roles – control, monitoring and oversight roles. By researching one board type – investment fund boards – and the power relations around those boards, the purpose of this paper is to show that such boards are not capable of operating the three key roles assumed of them.

The authors conducted 25 in-depth interviews and a focus group session with investment fund directors applying a grounded theory methodology.

Because of their unique position of power, the authors find that fund promoter organisations (that establish and attract investors to the funds) exercise control and monitoring roles. As a result, contrary to prior assumptions, oversight is the primary role of investment fund boards, rather than the control role or monitoring role associated with corporate boards. The findings can be extended to other board-of-director contexts in which boards (e.g. subsidiary boards, boards of state-owned entities) have legal responsibility but limited power because of power exercised by other parties such as large shareholders.

Shareholders and regulators generally assume boards exercise control and monitoring roles. This can lead to an expectations gap on the part of shareholders and regulators who may not consider the practical realities in which boards operate. This expectations gap compromises the very objective of governance – investor protection.

Based on interviews with investment fund directors, the authors challenge the control-role theory of investment fund boards of directors. Building on our findings, and following subsequent conceptual engagement with the literature, the authors differentiate control, monitoring and oversight roles, terms which are often used interchangeably in prior research. The authors distinguish between the three terms on the basis of the level of influence implied by each.

The paper aims to describe the behind-the-scenes strategy and processes that fund managers use to make investment decisions.

The research involved semi-structured, face-to-face interviews with 34 fund managers in Istanbul, London, Melbourne and New York during 2012. Results describe their approach, and tie it back to theoretical explanations.

Large investors make limited use of neoclassical finance theory. They believe that securities markets trend over the short term, mean revert over the long term, and have upward sloping demand curves. They rely on qualitative techniques, think of security prices rather than returns, acknowledge constraints by their employer and clients, are heavily socialised and see no limitation from using similar approaches to competitors.

This is the first interview-based evaluation of global manager techniques since the market crash after 2008, and provides an innovative depiction of actual processes followed by institutional investors.

Unlike the traditional growth model of emerging markets after economic liberalization, India’s inward foreign direct investment (FDI) surged paralleling its strong economic growth in the 2000s, despite the failure to establish a strong secondary sector. This creates an opportunity to deepen the conceptual and contextual understanding of the pivotal mechanisms that impel foreign multinational enterprises to invest into India and provides a natural setting to better understand the nature of its institutional, political and economic environment.

The authors develop a theory contextualized to Indian inward FDI patterns for the 2000–2017 period. The theoretical framework expands upon received investment motives, with explicit consideration given to the idiosyncrasies of developments in India’s recent macro and socioeconomic environment. The authors test the hypotheses using panel data from 134 countries that invested in India, using a Hausman–Taylor estimation.

The authors find that India’s transition toward a knowledge economy attracts asset augmenting rather than asset exploiting FDI. Investors appear to target long-term investments by gaining access to India’s digital capabilities, R&D, and growing talent base with a high degree of specialization within analytics, biotechnology, engineering, or pharmaceuticals. Foreign investors do not seem to be notably deterred by infrastructural challenges nor by legal and regulatory restrictions.

By providing a new perspective on India’s atheoretical economic development and FDI environment, this study offers a distinct point of comparison with regard to established hypotheses within the extant literature on FDI into emerging markets. Rethinking contemporary investment motive theory by introducing an adapted conceptual framework provides further opportunity to inform the understanding of firm strategies in similar environments.

This paper aims to focus on the trade effects of outward direct investment in developing countries.

To illustrate the effects, the author analyses it from the efficiency of resource utilization, technological advancement and transaction costs, respectively.

The author concludes that OFDI has a positive effect on trade development in developing countries.

Studying the interactions between FDI and trade, the traditional perspective that the investment can only lead to changes in capital endowment in a country is not perfect. These theories were mainly created and founded in developed countries and aimed only to explain their direct investment behavior. If the perspective is shifted to developing countries, it is found that the effect of FDI not only changes the supply-demand relationship of monetary capital, but also significantly influences division of labor and trade through the change in knowledge-oriented factors. Therefore, incorporating international direct investment as a new variable into contemporary international trade theories will enrich the existing theories, and also be beneficial for the development of integration theory of investment and trade.

The aim of this paper is to demonstrate how a grounded theory method applied to a case study within a particular industrial context can be used to derive a substantive model of the practice of capital budgeting and contribute to an understanding of contextual elements that affect investment decisions. This study aims to examine how the investment decision to acquire aircraft, strategic core assets, is made by small players within an industry that is small by world standards, Australian regional aviation.

This research adopts a grounded theory approach to the case study. Primary data were collected using questionnaires, semi‐structured and open‐ended interviews. Secondary data comprised pro‐forma aircraft lease contracts and information from a law firm. Consistent with grounded theory, qualitative research mining software (Leximancer) was used to facilitate initial analyses of data and understanding of decision factors and their relationships. The model was derived, refined and confirmed using data from follow‐up unstructured interviews.

This research within a specific industrial context finds that a substantive model derived through a grounded theory approach provides an understanding of the richness of the investment scenario and the decision factors considered in the capital budgeting decision. Reflection on such narrow industrial findings in terms of existing theories provides insight into the reasons for the gap between practice and theory.

This research is original in that it employs a grounded theory approach, which has received little attention within prior literature, to derive a substantive model based on industrial practice of managers who are instrumental in and responsible for a capital budgeting decision. Such an alternative approach to modelling is of value in bridging the gap between practice and theory. Substantive models produced for different industries or contexts can be compared and similarities refined into a theory that is grounded in practice. Dissimilarities may provide valuable insights into variables and processes that are unique to particular contexts.

Research in labour economics during the past several years has led to the development of the theory of human capital. This theory deals with a variety of issues concerning the productivity of people as the result of their human capital.