bluuebunny/crossref_metadata_2025 huggingface dataset:
DCF Methods of Investment Appraisal
Authors: Fung W.K.H. , Stapleton R.C.
Published: January 2008

Given the range of tools and techniques available for appraising capital projects, financial managers are confronted with the problem of selecting appropriate techniques that adequately reflect their goals. This article explores the rationale underlying alternative measures of project profitability in order to discuss the relationship between various appraisal methods and the goals of management. Appraisal methods are introduced by way of numerical illustrations and diagrams which are summarised together with their underlying rationale into a single chart in order to facilitate easy reference.
Calculating a Project's Hurdle Rate
Authors: Pike Richard
Published: January 2008

Of vital importance to the long‐term profitability and level of investment in a company or indeed an economy is the determination of reliable hurdle rates, or minimum required rates of returns, for investment projects. Hurdle rates set too high lead to missed opportunities for profit and growth. Understating hurdle rate levels give rise to uneconomic investment decisions and fall in market values. As every financial manager faced with the problem of determining these rates of return is aware there are many different approaches, each of which, if followed mechanically, could produce very different solutions. The main reasons for such variances rest in the assumptions underlying the various approaches. This article concentrates on the application of one of the more recent approaches based on the capital asset pricing model (CAPM). Its positive orientation and intuitively appealing conclusions have made it the central equilibrium model of financial economics.
Valuing a Going Concern — an Exposure Draft for Accountants.
Authors: Lawson G.H.
Published: January 2008

This and the following article are published at the suggestion of the Institute of Chartered Accountants in Scotland in the hope that they will stimulate greater interest on the part of practitioners in the going concern valuation problem. Both articles reflect the deliberations and experience of the members of the Valuation Group of the Union Européenne des Experts Comptables Economiques et Financiers (UEC).
Pension Fund Initiatives in Development and Innovation
Authors: Fanning David
Published: January 2008

This article discusses the activities of some leading pension funds in providing money for business and commerce, especially the smaller company sector, and outlines ways in which those activities might be enhanced by further initiatives.
The Role of Forecasting
Authors: Simister L.T.
Published: January 2008

Forecasting is a natural part of human behaviour and experience whether we explicitly realise it or not. For all of us are continually implementing plans as we go about our daily living and these plans must necessarily be founded upon views about the future i.e. upon forecasts. These forecasts may, of course, be very imprecise and it may be argued that to dignify such an imprecise and unstructured process as ‘forecasting’ is to misuse the term. Then again we may rely for our main forecasts on views of experts such as weathermen, modifying them to suit our own particular needs. What is true for the individual is also true for the firm in its approach to forecasting. It may be very imprecise and unstructured and a good deal of reliance may be placed on the views of experts such as economic forecasters. However, the purpose of this article is to argue that forecasting may be conducted in a systematic manner, despite all the pitfalls to be enumerated, and to explain the growth of the forecasting activity in industry and its role.
The Cyclical Indicator Approach to Forecasting
Authors: Sparkes John R.
Published: January 2008

Cyclical fluctuations in the level and rate of growth of economic activity have long been a feature of the British economy. The ability to forecast “turning points” (peaks and troughs) in business activity is of crucial importance for changes in companies' stockholding policy, hiring policy, capital budgeting, and many other aspects of corporate appraisal.
Learning and Experience Curves — A Review
Authors: Howell Sydney
Published: January 2008

The origin and applications of learning curves. Learning curves were first noticed by aircraft producers before World War II. The time taken to assemble a new type of aircraft diminished with each successive airframe built. Typically, the time taken for assembly had dropped by 20% each time the cumulative output had doubled. Later, similar “start up effects” were noticed in many other industries, and were used for contract negotiations and for cost control. Prices of new products, especially chemicals, often fell with time and output according to some kind of “learning curve”. However exceptions to the “learning curve” were sometimes found. Assembly times sometimes ceased to drop, or dropped at different rates at different sites.
Formal Forecasting in British Industry
Authors: McHugh A.K. , Sparkes John R.
Published: January 2008

This article is based on a questionnaire survey of seventy‐six British manufacturing companies, chosen by circularising members of the Institute of Cost and Management Accountants who hold senior management positions within their organisations. 54 per cent of the respondents completing the questionnaire were Financial Directors, the remaining responses coming from Managing Directors and other senior executives. The questionnaire concerned numerous aspects of the use of formal forecasting techniques in British industry, but our concern here will be mainly with those aspects which involve the finance function.
Accounting Information and Industrial Relations: Towards a managerial evaluation of the Disclosure Policy decision
Authors: Maunders Keith
Published: January 2008

The primary objective of this article is to assist organisational management to evaluate policies on disclosure of information to trade unions. Such policies form part of the industrial relations system of an organisation, which embraces all aspects of personnel and labour management. I shall be drawing particular attention below to the need to consider the dynamic and interactive effects of information on the components of this system. Before looking directly at issues relating specifically to trade union negotiators, therefore, I want briefly to consider some aspects of communication of information to employees in general since there is clearly a potential interaction with the information supply to union negotiators.
An Empirical Investigation of Disclosure, Usage and Usefulness of Corporate Accounting Information
Authors: Sherer Michael , Southworth Alan , Turley Stuart
Published: January 2008

This paper reports the findings of an empirical investigation into the disclosure of corporate accounting information to trade union decision makers. These findings are evaluated against earlier normative and descriptive literature on corporate disclosure to trade unions and an attempt is made to derive some implications for the design of accounting reports for use in the context of collective bargaining. The research methodology used was a case study of decision making in one trade union, the Amalgamated Textile Workers' Union (ATWU) which represents most of the manual workers in the Lancashire cotton industry.
Power in Organisations: some implications for the use of Accounting in Industrial Relations
Authors: Bougen Philip , Ogden Stuart
Published: January 2008

The use of accounting information in industrial relations has reached a critical stage in its development. Further studies which merely serve to ornate the existing framework of analysis (for example by continuing the debate as to the type and amount of appropriate information disclosure; the dangers of non‐disclosure; the costs and benefits of disclosure, etc.) we believe to be of little value. The subject area needs to be exposed to a much wider critical analysis encompassing specific alternative perspectives as to the nature and roles of organisations, accounting, and industrial relations. In this paper we review first some of the orthodox perspectives derived from models of organisation which have been employed to analyse the role of accounting. Secondly we discuss the conceptualisations of industrial relations which have informed much of the discussion as to the use which may be made of accounting information to promote good industrial relations. Our discussion of both these areas suggests that the role of power, although largely ignored, is of central importance to analysis of these areas.
Modelling the Portfolio Behaviour of British Building Societies ‐ A Survey
Authors: Dodds J.C.
Published: January 2008

Building societies, as we illustrated in the Preface, occupy an important position in the British financial system. There are at present over four hundred societies although this industry is highly concentrated, with the ten largest societies (with well developed branch networks) in 1978 accounting for 66 per cent of the total assets.
How Much Should A Firm Borrow?
Authors: Dobbins Richard , Pike Richard
Published: January 2008

Firms should borrow a lot to finance their investment schedules, because interest payable on borrowings is tax deductible. However, firms should not borrow beyond the point where bankruptcy becomes a distinct possibility. When a firm's investment schedule collapses by failing to generate adequate cash to make compulsory interest payments, shareholders may be forced to suffer the costs and delays of liquidation. To ensure the survival of the firm, corporate managers should have a strategy for financial emergencies.
How Much Should A Firm Pay in Dividends?
Authors: Dobbins Richard , Witt Stephen F
Published: January 2008

The objective of the firm is to maximise the wealth of its owners. If corporate managers can maximise the market value of the firm by manipulating dividend payments, then they should do so. The optimal dividend policy, if there is one, is the policy which maximises shareholder wealth. As the value of the firm depends upon anticipated operational cash flows, new investment, and risk, then it seems improbable that managers can create wealth by distributing cash flows generated by successful trading between dividend payments and retentions within the company.
The Theory of Capital Asset Pricing
Authors: Parkinson John M.
Published: January 2008

A respectable theory which accounts for investor behaviour needs to start from a statement of investor objectives. The objective may be generally stated as the maximisation of utility (von Neumann & Morgenstern 1953), though of itself utility is difficult to measure. In order to operationalise the theory utility may be broken down into more readily measurable elements, risk and return. From an investor's point of view, it also becomes necessary to specify a scale whereon various combinations of risk and return may be compared. This latter exercise is a very personal one; indeed it may be unique to each investor. It is beyond the scope of this paper to follow this line of argument. Instead we shall concentrate on describing the measurement of risk and return, in particular by using the Capital Asset Pricing Model (CAPM). We recognise, however, that in using this model, we are simplifying the investment behaviour process, in particular we posit the choice of portfolios to be based on single period return/risk with investors having identical estimates (subjective) of these returns.
An Introduction to Options
Authors: Hemmings Dan B.
Published: January 2008

An option is a contract between two parties by which party A grants party B the right to buy from or sell to A, at B's discretion, a given asset at a fixed price until a fixed date after which any rights or obligations expire. The party having the discretionary right to buy or sell is the buyer of the option (in this case, B), and the party granting the right is the seller, or writer, of the option. An option to buy is known as a call option, and an option to sell as a put option. The fixed price specified in the option contract is termed the exercise or striking price, and the fixed date the expiration date. A European option is one which can only be exercised on the date when the option expires; an American option can be exercised at any time up to and including the expiration date. Though there are many different types of underlying asset on which an option could be based, it is options written on ordinary shares quoted on the Stock Market which have been of most interest. This has been greatly enhanced in recent years by the creation of organised markets for options in the main financial centres of the world. The first part of this paper considers the practical aspects of options and the main features of an organised options exchange. The second part of the paper concentrates on introducing option pricing theory in a simplified form. Finally, some of the many and varied possible applications of options and option pricing theory are briefly reviewed.
The Planning Phase in Management Information Systems
Authors: Rushinek Sara F.
Published: January 2008

There are several planning processes that must be performed prior to the actual design and the implementation of a Management Information System (MIS). The main functions of a MIS are to meet the needs of the managers and of the organization by gathering data and implementing systems which can be used to make positive, effective decisions. These decisions, in turn, should benefit the company by reducing costs, and improve efficiency (Newell, 1981).
Manufacturing Information Systems Using Computer Assisted Design (CAD), Computer Assisted Manufacturing (CAM) and Material Requirement Planning (MRP)
Authors: Rushinek Sara
Published: January 2008

Computers were first used in manufacturing firms around 1958. Since then, their impact on manufacturing has been of mixed results. In some instances, they have greatly improved the work done in the factories, especially in the area of computer controlled robots; while in other aspects of manufacturing, the results have been far below the desired standards. Inventory control and production scheduling are two examples of where computers have not lived up to management's expectations (Wright, 1974).
Cost Accumulation for Different Costing Systems and their Computer Applications
Authors: Rushinek Avi
Published: January 2008

One of the most important aspects of managerial accounting is the accumulation of costs in the manufacturing process. This data is of value to the manager owing to the information it provides him for planning, control, and decision making. The purpose of this paper is to describe the different costing systems, compare them, and show how they affect the accumulation of costs for product costing, as well as decision making.
The Development of Financial Accounting and Reporting Standards in the United Kingdom
Authors: Colin Storrar A. , Peebles Hugh B.
Published: January 2008

The Acounting Standards Committee (ASC) has recently been reconstituted, its membership revised and its agenda drastically reduced. Such sweeping changes in the body responsible for the formulation of accounting standards in Britain necessarily invite speculation concerning the future of accounting standards in this country. However, we believe that the current problems of the ASC have to be seen in the context of the historical development of financial accounting and reporting standards in the United Kingdom. The ASC was only formed in 1969 and its work on the regulation of financial accounting, that is of financial measurement, has to be set against the background of a tradition of statutory regulation of financial reporting, that is the presentation and disclosure of financial information, which dates back to the early nineteenth century. The purpose of this paper is therefore to put the issues surrounding the recent upheavals in the ASC in the context of the historical experience.
Personal Investment & Financing Decisions
Authors: Colin Dodds J.
Published: January 2008

Personal Finance has, in our view, been an area of relative neglect in academic circles in the UK compared, say, to the USA. This statement is based on a perusal of course listings and contents from both sides of the Atlantic. That, of course, is not to say that the subject matter is completely ignored as other courses in economics, financial management and accounting often cover topics which would be found in a fully fledged course on personal finance. Additionally, academics and others do write and publish in the UK (witness this current volume) on some of the subject matter, and the newspapers and periodicals offer a wide variety of advice to would‐be savers and borrowers. What is lacking, perhaps, is a systematic framework into which the various activities can be placed.
Personal Fortunes, Inheritance and Investment Behaviour
Authors: Harbury C.D. , Hitchens D.M.W.N.
Published: January 2008

It may seem unusual for economists to approach the question of investment behaviour from the standpoint of wealth. Personal fortunes are a stock while investment is a flow and the traditional approach associates with income and other flow concepts.
Housing Finance
Authors: Lomax David F.
Published: January 2008

Purchasing a house is the single most important financial transaction made by most people during their lives and the housing market is the most important type of financial asset held by individuals. Ownership of a house provides multiple services. It is an investment asset. It provides direct convenience and service. And it can be a means of registering and acquiring social status. It is the classic inflation hedge. The price of a house tends to be determined by what people can afford to pay, and the cost of building them tends to reflect the general movements of labour and other costs. Both on the supply side and on the demand side prices and costs move naturally in line with inflation.
Consumer Credit Analysis
Authors: Galitz Lawrence C.
Published: January 2008

The last twenty years has seen a revolution in consumer credit, with more and more people borrowing on an increasing scale. The explosion in demand for consumer credit could probably not have been met successfully without the development of better and more efficient techniques for handling a key decision. This decision — whether or not to lend money to a prospective borrower — underpins all credit operations. The well‐being of a credit institution, and ultimately its survival, depends on the ability to make this fundamental lending decision correctly.
Can we use State Preference Theory?
Authors: Kerruish Alison M.
Published: January 2008

One of the most important recent developments in company finance has been that of state preference theory, although the basics of the theory are not new. In how many finance textbooks do we read the following?
Operational Approaches to Risk Management in Financial Institutions: A Technique for Commercial Banks
Authors: Gardener Edward P.M. , Ayling David E.
Published: January 2008

This article provides an overview of operational approaches to risk in financial institutions along with a more specific look at risk in banking. The coverage includes traditional approaches to the subject and more recent developments such as the use of computer simulation models.
ASIR — Advanced Simulation of Insurance and Reinsurance
Authors: Galitz Lawrence
Published: January 2008

The use of corporate simulation models has grown dramatically over the past decade. A survey of 300 major US companies taken in 1974 indicated that nearly two‐thirds of the respondents were already using corporate models, and that over two‐thirds of the remainder were either developing or planning to develop a model. A more recent study in the UK estimates that some 40% to 50% of the “Times 1000” companies now have models of one form or another.
Cash Management Policies for Alternative Objectives: Profit Versus ROI Maximization
Authors: Stowe John D. , Vadakkepat Manchunath , Willoughby Todd
Published: January 2008

While shareholder wealth maximization is accepted by finance theoreticians as the financial goal of the firm, the implementation of this goal is not simple. There can be significant economic impacts of using an alternative goal such as return on investment (ROI) maximization instead of net present value maximization. Many areas of management discretion can be affected by the choice of ROI maximization versus profit maximization. Differential managerial decisions for these two alternative goals have been noted in such areas as investments in new plant and equipment, investments in research and development, and maintenance of plant and equipment. In addition, managers may have preferences among alternative accounting policies (depreciation schema and inventory valuation methods) that depend on their objective.
The Management of Technological Innovation and New Product Development
Authors: Rosson Philip J. , Martin Michael J.C.
Published: January 2008

Many firms are once again enjoying favourable business conditions after a number of very difficult years. The economies of the world have begun to grow, interest rates and inflation are down, and even though unemployment levels are still high, consumer spending patterns display a measure of optimism about the future. However, complacency is not advised; having made it through a deep recession, numerous companies now have to face a series of fresh challenges.
Marketing Expenditures: Investments or Expenses
Authors: Gillingham David W.
Published: January 2008

The treatment of marketing expenditures will influence how the firm makes decisions. This paper discusses the relationship between the firm's marketing effort and the firm's marketing investment. Current practice in most companies dictates that marketing costs are treated as expenses and this leads to marketing executives lacking the required information for effective decision making. Often the wrong pressures are placed on the marketing function resulting in poor marketing decisions and consequently affecting the financial performance of the firm.
The Marketing Audit: An Extension of the Marketing Control Process
Authors: Kling Nathan D.
Published: January 2008

The element most common to marketing strategies and tactics among companies in the 1980's is the rate at which they become out of date. The rapid changes in interest rates, employment, fuel costs, international exchange rates, technology, competitive offerings, consumer tastes, as well as the many other elements in the macro environment quickly make today's marketing activities obsolete. Unfortunately, all too often many companies do not readily recognize how these changes have diminished the effectiveness of their otherwise carefully nurtured marketing programmes. For example, they see falling sales and undertake changing salesmen's compensation schemes or reorganizing sales territories. Alternatively, the distribution channel or pricing policies may receive the focus of attention as sales languish. The element or elements of the marketing mix to get evaluated closely is often the result of a managerial hunch or predisposition to believe that a certain functional area is primarily responsible for the faultering performance. Rarely do the managers step back and question the basic assumptions underlying the grand strategic design or see how the system is operating as an integrated whole. A special evaluation procedure, however, has been developed to do this. It is called a marketing audit.
Managing Foreign Exchange Risks: Strategy Considerations
Authors: Mathur Ike
Published: January 2008

Just a few years ago, active management of foreign exchange risks was confined to a relatively small number of multinational firms. With saturation of domestic markets, though, many firms have turned their attention to product markets abroad. Some have gone abroad in search of lower production costs. Second, since 1973, foreign exchange rates have fluctuated widely, oftentimes wildly. Finally, recent financial accounting reporting requirements have made corporate gains and losses due to foreign exchange transactions much more visible. All of these factors have served to magnify the importance of managing foreign exchange risks.
Factors Influencing the Designing of International Transfer Pricing Systems
Authors: Knowles Lynette L. , Mathur Ike
Published: January 2008

The designing of international transfer pricing systems needs to take into consideration a variety of factors that could ultimately affect the smooth operation of the systems. Many of these factors are organisational in nature, including organisational and personal perspectives toward transfer pricing. Decentralisation, while allowing lower‐level management mobility in operational decision making, has the potential for suboptimisation. Similarly, it is not immediately apparent whether profit or cost centres are more appropriate for transfer pricing purposes. These and other related factors that influence transfer pricing systems are considered in this article.
Designing International Transfer Pricing Systems
Authors: Knowles Lynette L. , Mathur Ike
Published: January 2008

Two companion articles have considered transfer pricing objectives and factors influencing the designing of these systems. This article, the last in the series, treats the topic of designing transfer pricing systems. Since many multinational firms have subsidiaries in the U.S., it is worthwhile to consider the U.S. Internal Revenue Service regulations regarding transfer pricing. Transfer pricing systems can be designed under a variety of alternative market scenarios. These topics are discussed in the first two sections of the article. The designing of profit‐oriented and cost‐oriented transfer pricing systems are considered in the next two sections. A mention of methods for selecting transfer pricing systems concludes the article.
Institutional Investors and the Stock Market
Authors: Witt Stephen F. , Pass Christopher L.
Published: January 2008

Implications of Modern Portfolio Theory for Investment Management. The general principles of portfolio management are explained by Dobbins and Witt, Sprecher, Francis, Van Home and Fama and Miller. Portfolio theory is concerned with the choice of efficient combinations of assets and its foundation lies in the work of Markowitz. It is assumed that investors base their decisions simply on the expected return and variance of return of assets, where the variance is taken to measure risk. For any given level of risk, the optimal portfolio is that which offers the maximum expected return; and for any given expected return, the investor prefers minimum risk. The set of efficient portfolios therefore comprises those combinations of assets which promise the highest expected return corresponding to each level of risk.
Economic and Industrial Democracy
Authors: Cuthbert Norman H. , Dobbins Richard
Published: January 2008

The Changing Pattern of Share Ownership. As indicated elsewhere in these pages, one of the most important economic developments of recent years has been the changing pattern of share ownership in UK quoted companies. Ownership of equities gives the holder the legal right to vote at company annual general meetings on such matters as the appointment and removal of directors. When a group of investors owns enough shares to control the board of directors then that group can clearly exert a powerful influence over managerial decision‐making. This is now the case in the United Kingdom with respect to a major group of investors. The combined equity holdings of institutional investors — pension funds, insurance companies, investment trust companies and unit trusts — amounted to 51 per cent of all UK quoted equities at the end of 1980. These financial institutions thus controlled more than half the voting power in British industrial and commercial enterprises, and they continue to acquire a further two per cent of all UK quoted equities each year. This gives considerable power to institutional portfolio managers. It could be suggested that this power, particularly in the case of pension funds which form the largest and fastest growing sector, should be vested in those who contribute the savings which finance the growth of institutional equity holdings, that is employees or their elected representatives.
The Retain and Transfer System: An Alternative Perspective
Authors: Stewart G.
Published: January 2008

Presented as the “linchpin of the footballer's labour market”, the retain and transfer system in English professional football is recognised as the major mechanism by which players are distributed between the ninety‐two clubs of the Football League (F.L). Despite the scope for investigating the numerous aspects of the system, however, much academic discussion focuses narrowly upon its function in preventing a concentration of playing talent into an “elite” core of clubs, a prospect viewed with alarm by most commentators on the industry. Such an overriding concern with this aspect stems primarily from the adoption of a “unitary” perspective of organisation which, inter alia, views all the organisation's members as striving towards the attainment of some commonly held objective. In football, “playing success is the objective of all relevant participants in the Club”.
Application of ZBB: North American Public Sector (Academic Institutions)
Authors: Ralston Bill
Published: January 2008

The purpose of this article is to review the surveys and comments made with respect to ZBB applications in academic institutions. In addition, the results of the writer's masters dissertation on “The use and usefulness of ZBB in Academic Institutions” are summarised here. However, the detailed results of the Mail Questionnaire are included in the next article of the series.
Results of ZBB Field Research: Use and Usefulness of ZBB in Academic Institutions
Authors: Ralston Bill
Published: January 2008

The purpose of this article is to review the results of the detailed questionnaire which was the core of the field research referred to in the previous article on Applications of ZBB in Academic Institutions.
Profit Sharing and Income Risk: A Survey
Authors: Mukhopadhyay Arun K.
Published: January 2008

The predominant method by which workers in a business organization get compensated for their labour is that they earn a wage which has been guaranteed to them through an employment contract. By contrast, the earnings of the company (the firm, the owner) remains risky, since they earn the residual after making all the contractual payments to the different factors of production. The residual is a random variable because of production and market uncertainty, and the firm absorbs this risk while insuring the income risk of the workers. A modification of this payment scheme occurs when the earnings of the workers are made contingent upon either their productivity, or the profit of the company. A prominent example is the piece‐rate payment system in which the earnings of a labourer are directly related to the amount of output he or she produces. Profit sharing is another example of variable wage; in this system the workers are paid a share of the firm's profit.
Determinants of Electric Utility Betas
Authors: CHANDY P.R. , DAVIDSON WALLACE N.
Published: January 2008

Determinants of Electric Utility Betas. One important aspect of utility regulation is the estimation of cost of equity capital of the firm. Several techniques have been used to estimate the cost of equity, including the discounted cash flow model and the capital asset pricing model (CAPM). CAPM has its foundations in modern portfolio theory and its application has generated a lot of controversy — both from academia and the professional world. Much of the problem in using CAPM in utility rate cases has centered on the issue of estimating the beta coefficient. Myers (1972) points out that problems exist in the following areas: measurement of beta; stability of beta; and incomplete description of risk and return by CAPM. There is evidence to believe that CAPM is still widely used be expert witnesses to explain risk‐return relationships in utility rate cases (Cooley, 1980).
INDIVIDUAL FORECASTING ABILITY
Authors: O'Brien Patricia C.
Published: January 2008

Are some analysts ‘superstars’? Financial press coverage of analysts' performance suggests that there are superior financial analysts. One example of this coverage is the Institutional Investor ‘All American Research Team’, based on surveys of money managers, who nominate and rank analysts. In this paper, I explore the question of individual superiority by examining one aspect of analysts' services: earnings forecasting. Forecasts of future earnings are of interest to investors, as inputs to investment decisions, and also to researchers, as data on earnings expectations.
Corporate Financing Policy and Taxation
Authors: Evans E.A.
Published: January 2008

Considerable debate centres around the use of debt finance as opposed to new equity and internally generated funds for the financing of new investment projects. The favourable corporate tax treatment of debt interest payments compared to equity returns appears to be a government incentive to debt finance. In addition, the differential tax treatment of financial institutions' income and individual investors' income under the tax code, all leads to the idea, that debt financing may increase the market value of a firm beyond the expected value of its operational cash flows.
CORPORATE COMMUNICATIONS AND FIRM VALUE
Authors: Groth John C.
Published: January 2008

Corporate communications are crucially important to a firm because effective communications will increase firm value.
RISK AND VALUATION IN THE PETROLEUM INDUSTRY:
Authors: Uselton G.C. , Fraser D.R.
Published: January 2008

When the original contracts between the Organization of Petroleum Exporting Countries (OPEC) and the Arabian‐American Oil Companies (ARAMCO) were signed, the price per barrel of crude was less than $3.00. The prices were stated in U.S. dollars because the dollar was “the” international currency and because it was “as good as gold”. Governments accumulating dollar reserves could convert them into gold at the rate of $35.00 per ounce of gold (guaranteed by the U.S. Government). This tie between the dollar and gold was eliminated by President Nixon's “New Economic Policy” (NEP) enunciated on 15 August 1971.
THE CAPITAL INVESTMENT PROJECT AS A SET OF EXCHANGE OPTIONS
Authors: Kensinger John W.
Published: January 2008

Models for valuing an option to exchange one commodity for another, or any combination of n commodities for some combination of m others, are applied to the capital budgeting problem. By analyzing a project in the exchange option pricing framework, it is possible to draw wellfounded conclusions about the effects on project value of such attributes as flexibility and innovativeness. A project which uses systems that have many alternative uses is recognized by such analysis to be more valuable than an otherwise identical project which uses very specialized systems, because the former provides a greater array of choices. Likewise, a company which thinks of a new use for some kind of system will be able to generate a project which has a higher value than any other company could generate from the same system. By including divestiture as one of the alternatives in the portfolio of options representing a project, it is possible to incorporate project abandonment into the analysis, which is an improvement over earlier methodologies which simply add the value of the “abandonment option” to the discounted cash flow net present value. Finally, shortcomings of the options approach to capital budgeting are discussed.
AGENCY THEORY:
Authors: Jassim Amir , Dexter Carolyn R. , Sidhu Aman
Published: January 2008

This paper reviews and analyzes the literature on agency theory in terms of the nature of the problem and its implications for management. Finance theory posits that the goal of economic organizations is to maximize stockholders' wealth. Attaining this goal was not an issue when owners were also managers. But since World War II corporate ownership world‐wide has become increasingly diffused. By 1969 only 15% of the largest U.S. non‐financial institutions were owned by their managers. This change raises the issue of the relationships between owners and managers. To what extent do managers act on their own behalf rather than the owners as prescribed by finance theory? Several studies indicate that managers substitute their own interests in place of the shareholders. This is possible because managers possess more information about the firm, control the election procedure to the Board of Directors, and the shareholders are widely dispersed. This phenomenon is called an agency problem. According to Jensen and Meckling an “agency problem” exists when managers own less than 100% of the firm. With less than 100 per cent ownership, managers can shift part of the cost associated with decisions made in their own interest. Clearly these conditions are common in major corporations of the world where global markets require raising large amounts of capital for the research, development, and production facilities required to remain competitive.
VARIABLE RATE LEASES.
Authors: Hodges Stewart D.
Published: January 2008

Major financial lease contracts are commonly written on a variable interest rate basis. The conditions of this sort of lease include an interest rate variation clause which provides for adjustments to be made to the rentals when interest rates change. Such adjustments are usually made periodically by applying the change in the interest rate (from the rate at the beginning of the lease) to the amount of the lessor's investment in the lease.
ASSET‐SALES‐INDUCED ABNORMAL RETURNS OFACQUIRING FIRMS
Authors: De Soumendra , Mathur Ike , Rangan Nanda
Published: January 2008

The empirical evidence on mergers and takeovers indicates that positive gains due to mergers and takeovers ac‐crue almost entirely to the target firms. While average abnormal returns to target firms are invariably positive, returns to bidding firms are negative in case of mergers and not significantly different from zero in case of takeovers (see Jensen and Ruback [1983] and De and Mathur in this issue for a review of the empirical evidence). That acquiring firms should offer the shareholders of the target firms such handsome rewards and accept marginal returns for themselves is one of the unresolved problems in the context of mergers and takeovers.
CORPORATE COMBINATIONS OR FAILED ACQUISITION ATTEMPTS: PARTIAL ACQUISITIONS BY POSNER AND NON‐POSNER FIRMS.
Authors: Rosenstein Stuart
Published: January 2008

Corporate control is assumed to rest in management's hands in firms with widely dispersed share ownership, but ownership of a relatively small block of shares may be sufficient to give the blockholder at least some measure of control or influence. Although the influence of individuals or institutions holding large minority positions is generally believed to benefit all shareholders through improved monitoring of management, one corporation may be motivated to acquire a sizeable minority position in another to achieve the benefits of merger without incurring the costs of a complete takeover. Given this motivation, the interests of the corporate minority shareholder may differ considerably from the interests of other shareholders.
PROTRADER: An Expert System for Program Trading
Authors: Chen K.C. , Liang Ting‐peng
Published: January 2008

Recently, program trading has allowed arbitrageurs to take advantage of the discrepancies in the futures market and the stock market. The key that enables program trading is computer technology. This article presents the design of PROTRADER ‐ an expert system prototype for program trading implemented in M.1. In particular, a learning mech‐anism that allows the system to adapt to the changes in the market is presented.
LP: AN EXPERT SYSTEM FOR LEASE VERSUS PURCHASE DECISION
Authors: Solis Rafael , Shahrokhi Manuchehr
Published: January 2008

Only recently have the applications of expert systems in finance received tremendous attention from not only the practitioners but the academicians as well. Widespread applications of this technology in diverse financial problems include credit management loan evaluation portfolio analysis capital budgeting cash flow analysis, and so forth. Another problem area that can benefit from this technology is the lease versus purchase decision, the joint process of corporate capital budgeting decision and financing decision. Because of the complex nature in the evaluation of the lease versus purchase decision, expert systems are thus appropriate for this type of application.
LIQUIDITY CHARACTERISTICS OF SMALL AND LARGE MANUFACTURING FIRMS
Authors: Moss Jimmy , Stine Bert
Published: January 2008

Many studies have compared various characteristics of large and small business firms. For example, recent studies have documented the “small firm effect”. These articles have indicated a tendency for small companies to exhibit greater risk‐adjusted stock returns than large companies. Other research has focused on comparing the financial aspects of small and large firms. These previous studies found a positive relationship between size and liquidity as measured by the current and quick ratios. Little, however, has been written in recent years that compares the liquidity characteristics of small and large firms.
CORPORATE APPLICATIONS OF CONTINGENT CLAIMS ANALYSIS: A SELECTIVE PERSPECTIVE
Authors: Kieschnick Robert L.
Published: January 2008

The purpose of this paper is to present a review of selected applications of contingent claims analysis in corporate finance. Contingent claims analysis is an approach to valuing payoffs which are contingent on other uncertain payoffs. The essential logic of the different applications reviewed is that we can value these derivative payoffs by replicating them with assets, whose prices are known. This simple logic is capable of providing one with insights into the pricing of new types of financial assets (e.g. optional bonds) as well as providing new insights into the valuation of strategic corporate investments.
CAPITAL BUDGETING FOR INTERNATIONAL BUSINESS: A FRAMEWORK FOR ANALYSIS
Authors: Holland John
Published: January 2008

This article focuses on three related themes. Firstly, normative decision rules for the international capital budgeting decision are outlined. Secondly, the strengths and limitations of finance theory in guiding the capital budgeting plan within the MNC are discussed. Thirdly, strategic views are introduced to complement financial analysis in the area of international capital budgeting.
THE FINANCING OF MERGERS AND ACQUISITIONS — A REVIEW OF RECENT DEVELOPMENTS
Authors: Grahame Boocock J.
Published: January 2008

Over recent years an increasing amount of funds has been committed to mergers and acquisitions in the UK. Expenditure rose nearly tenfold from £2.3bn in 1983 to £22.1bn in 1988. This surge in spending has continued despite fears over economic trends, both domestic and international, and shocks in financial markets, notably the global col lapse in share values of October 1987. This monograph is essentially concerned with the events up to, and including, the first three quarters of 1989, ie, a period of two years after the crash of October 1987. Whilst the financing of mer gers and acquisitons activity is a fast moving arena, it does seem to be an opportune time to review developments to date and, tentatively, to suggest future trends in this sphere.
The Small Firms Effect on New Issues of Common Stocks When Listing Requirements Differ Between Exchanges
Authors: Ayling David
Published: January 2008

This paper extends the search for small firms and exchange efficiency effects on seasoned stocks to the new issues market on a sample of placings drawn from the UKs Official List, Unlisted Securities Market and Third Market. Tests of means and regressions are undertaken to examine the relationships between sizes of new issues discounts, sizes of firms, and the exchange on which their equities are traded. Despite the observation that new issues discounts tend to be larger for equities of firms traded on exchanges with lower listing requirements, there is little evidence that the differences in discounts are affected by firm size.
Planning a Successful Acquisitions Strategy: Some Guidelines
Authors: Aggarwal Raj , Edward J. , Mellen Louise E. , Navratil Frank J.
Published: January 2008

So far, the overall performance track record for corporate mergers and acquisitions has not been very encouraging. Both the academic and trade literature report that on average the gains to stockholders of acquiring companies tend to be small or non‐ existent.
Defending Against Hostile Takeovers: Impact on Shareholder Wealth
Authors: Borstadt Lisa , Zwirlein Thomas , Brickley James
Published: January 2008

Innovations in takeover financing, less restrictive regulatory requirements, and a general desire to enhance market position have led to a substantial increase in corporate takeover and restructuring activity. In response target firm managers have become increasingly active in devising defensive strategies and tactics designed to ward off hostile bidders. It is well‐ documented, however, that large wealth gains accrue to target firm shareholders in mergers and acquisitions. Thus the emergence of such terms as “shark repellents”, “poison pills”, and “greenmail”, raises the question of whose best interests are really being served by antitakeover measures.
Antitakeover Regulations: Lessons from the American Experience
Authors: Yoder Lois
Published: January 2008

Last year was particularly unsettling for European managers. Daily, they heard reports of an oncoming decade of hostile takeovers presaged by the likes of Hoylake's bid for BAT, KKR's interests in Britain, or GEC‐Siemens's recently consummated bid for Plessey.
Capital Budgeting and the Utilization of Full Information: Performance Evaluation and the Exercise of Real Options
Authors: Agmon Tamir
Published: January 2008

Recently there has been a new interest in capital budgeting. The interest can be traced to two sources: (1) lack of satisfaction with the way that standard NPV procedures perform, and (2) the development of new financial techniques and their application to corporate finance, notably the application of option pricing models. The first source creates the demand for a critical re‐evaluation of the accepted procedures of capital budgeting, the second provides the means for such an evaluation.
Justifying Investments in Flexible Manufacturing Technology: Adding Strategic Analysis to Capital Budgeting Under Uncertainty
Authors: Aggarwal Raj , Edward J. , Mellen Louise E.
Published: January 2008

Justifying new manufacturing technology is usually very difficult since the most important benefits are often strategic and difficult to quantify. Traditional capital budgeting procedures that rely on return measures based on direct cost savings and incremental future cash flows do not normally capture the strategic benefits of higher quality, faster responses to wider ranges of customer needs, and the options for future growth made available by flexible manufacturing technology. Adding to these limitations is the difficulty of using traditional cost accounting systems to generate the information necessary for justifying new manufacturing investments. This paper reviews these problems and recommends procedures useful for assessing investments in flexible manufacturing technology.
Foreign Exchange Management: New Opportunities and a New Perspective
Authors: Hekman Christine R.
Published: January 2008

Foreign exchange exposure management has traditionally been viewed by corporate line management as a specialized and arcane corporate function. From its organizational position in Treasury or International Treasury, the function and the experts responsible for its execution, are frequently removed from the process of strategic planning and formulation of objectives. Foreign exchange experts are even less frequently consulted on matters of marketing and production investments and operation.
ECU Spot Rates, Interest Rates and Yields: Are There Arbitrage Opportunities?
Authors: Sercu Piet
Published: January 2008

Facts vs Fantasies about the ECU. Advantages frequently ascribed to the ECU include the following: