The Link between Short-termism and Risk: Barriers to Investment in Long-term Infrastructure Projects

2020 ◽  
Author(s):  
Boyan Yanovski ◽  
Kai Lessmann ◽  
Ibrahim Tahri
Keyword(s):  
Infrastructure Projects ◽  
Short Termism

Innovative Enterprise Solves the Agency Problem

2019 ◽  
pp. 156-191
Author(s):  
William Lazonick ◽  
Jang-Sup Shin
Keyword(s):  
Agency Theory ◽  
Hedge Fund ◽  
Innovation Theory ◽  
Long Term Effects ◽  
Business Corporation ◽  
Innovative Enterprise ◽  
And Performance ◽  
Short Termism ◽  
The U.S

This chapter uses innovation theory to provide both a general theoretical critique and a selective empirical critique of the use of agency theory to rationalize the looting of the U.S. business corporation as enhancing economic efficiency. It focuses on three empirical works, Bebchuk and Fried, Pay Without Performance (2004); Bebchuk, Brav, and Jiang, “The Long-Term Effects of Hedge-Fund Activism” (2015); and Fried and Wang, “Short-Termism and Capital Flows” (2017). The chapter contends that MSV ideology as promulgated by agency theorists has contributed to inferior corporate and economic performance. It then argues that, for analyzing the operation and performance of the economy, innovation theory should replace agency theory.

A Collaborative Model for Long-Term Investing

2017 ◽  
Author(s):  
Ashby Monk ◽  
Rajiv Sharma ◽  
Duncan L. Sinclair
Keyword(s):  
Social Network ◽  
Network Theory ◽  
Institutional Investors ◽  
Social Network Theory ◽  
Clear Distinction ◽  
Financial Intermediaries ◽  
Collaborative Model ◽  
Short Termism

This chapter introduces the key themes that will be looked at in this book. In particular, it looks at the problem of long-term investing, illustrating why institutional investors are not acting in a long-term manner and the repercussions that this has for wider society. It provides a clear distinction between asset owner investors who have monopolies over their capital source and financial intermediaries, who are essentially acting on the former’s behalf but have come under much scrutiny for their shorter-term, opportunistic, and at times unethical behavior. The collaborative model of long-term investing and re-intermediation thesis is introduced as an innovative way for institutional investors to overcome some of the challenges of short-termism. The chapter outlines how social network theory and economic sociology are used to validate the collaborative model. This paves the way for detailed explanations and case study examples starting in Chapter 2.

scholarly journals THE ROLE OF EARNINGS PERSISTENCE IN VALUATION ACCURACY AND THE TIME HORIZON

2016 ◽  
Vol 56 (1) ◽  
pp. 71-86 ◽  
Author(s):  
RENÊ COPPE PIMENTEL ◽  
ANDSON BRAGA DE AGUIAR
Keyword(s):  
Financial Analysis ◽  
Strong Support ◽  
Earnings Persistence ◽  
Total Risk ◽  
Compensation Contracts ◽  
Listed Firms ◽  
Accounting Numbers ◽  
Short Termism

ABSTRACT Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms' idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market.

Mexico projects will not drive post-pandemic recovery

2020 ◽  
Keyword(s):  
Economic Growth ◽  
Strategic Alliances ◽  
State Governments ◽  
Infrastructure Projects ◽  
Content Type ◽  
Investor Confidence ◽  
Energy Needs ◽  
Exploration And Production ◽  
Term Energy

Significance The package of 39 projects, worth MXN297bn (USD14.5bn), aims to boost post-pandemic economic growth through privately funded investments or strategic alliances between private entities and state governments in infrastructure, energy and communications. Several government flagship infrastructure projects also receive increased resources in the proposed 2021 budget. Impacts The ARE will not solve Mexico’s long-term energy needs as it excludes major areas such as hydrocarbons exploration and production. The 190,000 jobs that the ARE may create will do little to offset the 2 million formal jobs lost due to the pandemic in March-August. Most of the employment that will be created by the ARE and government priority projects will be temporary, low-paid jobs. Concerns regarding contractual security under the current administration will continue to dampen investor confidence.

The sustainable executive: antecedents of managerial long-term orientation

2017 ◽  
Vol 8 (2) ◽  
pp. 179-195 ◽  
Author(s):  
Dietmar Sternad ◽  
James J. Kennelly
Keyword(s):  
Organizational Level ◽  
Temporal Orientation ◽  
Managerial Behavior ◽  
Content Type ◽  
Long Run ◽  
Managerial Myopia ◽  
Decision Making Processes ◽  
Sustainable Organizations ◽  
Short Termism

Purpose The purpose of this paper is to explain how managers incorporate long-term thinking in their decision-making processes as an antipode to a widely criticized managerial short-termism. For this purpose, the authors present a model of the influence of institutional, cultural and individual temporal factors on managerial long-term orientation (LTO). Design/methodology/approach This conceptual paper is based on a multidisciplinary review of the literature on the causes of managerial LTO. Findings It is proposed that managerial LTO is influenced by cultural and institutional factors on both a societal and an organizational level, as well as by managers’ individual temporal predispositions and the strengths of relational commitments with different stakeholder groups. It is further expected that managerial LTO has an influence on sustainability-related managerial behavior. Practical implications As the presented model reveals the main factors that orient managers toward the long run in their decisions, it can also be used as a framework to evaluate policies to curb managerial myopia on both an organizational and a societal level. Social implications As sustainability is intrinsically linked with the ability to think and act in the long term, understanding the factors that influence managerial LTO can also contribute to building more sustainable organizations. Originality/value One of the main contributions of this paper is that it highlights the link between reciprocal relationships and LTO, an aspect that has not yet been the focus of the literature on the temporal orientation of managers.

scholarly journals PUBLIC-PRIVATE PARTNERSHIP AS INSTRUMENT OF IMPLEMENTATION OF INFRASTRUCTURE PROJECTS (ON THE EXAMPLE OF THE ASTRAKHAN REGION)

2018 ◽  
pp. 62-69
Author(s):  
Vladimir Yuryevich Ivanov
Keyword(s):  
Economic Development ◽  
Capital Intensity ◽  
Public Private Partnership ◽  
Infrastructure Projects ◽  
Private Partnership ◽  
Social Sphere ◽  
Russian Economy ◽  
Social And Economic Development ◽  
The Russian Federation

The ability of regions to the competition in the international market to use of modern approaches to social and economic development, defines a vector of intensive advance of the Russian economy. Existence of worthy infrastructure and its full functioning become a guarantee of successful development of economy and social sphere of the country and particular regions. Therefore, for its updating and full functioning implementation of infrastructure projects is necessary. The specificity of implementation of infrastructure projects has been designated: excessive capital intensity, long payback periods, increased complexity and large scales (including territorial scales). Conditions of limited budgetary financing of infrastructure predetermine the need of attracting private investments. So, the mechanism of public-private partnership in the concept of long-term social and economic development of the Russian Federation up to 2020 is designated as one of priority tools, which emphasizes the importance of a problem. The potential of expansion of opportunities for implementation of infrastructure projects at the expense of mechanisms of public-private partnership has been studied. Special attention is paid to the practice of implementing infrastructure projects in the territory of the Astrakhan region. There have been presented practices of such projects, mainly in the form of concessions, strategic priorities of development of public-private partnership on the territory of the Astrakhan region for implementation of infrastructure projects. The Astrakhan shipbuilding production association is taken as an example of successful realization of public-private partnership mechanism. The leading shipbuilding and ship repairing plants of the region make its basis. There has been given the rating of the Russian regions in terms of the development of public-private partnership during 2017. Since 2015 there has been stated positive dynamics of development parameters of public-private partnership in the region. As of 2017, in the region there are realized eighteen projects, among which one project is of a regional level, and seventeen projects are the municipal events.

scholarly journals Multilateral Banks’ Participation in Infrastructure Projects of the Eurasian Economic Union and in the Belt and Road Initiative in Central Asia

2020 ◽  
pp. 107-111
Author(s):  
Alexander S. Burnasov ◽  
◽  
Ksenia G. Muratshina ◽  
Keyword(s):  
Central Asia ◽  
Infrastructure Investment ◽  
Infrastructure Projects ◽  
Development Bank ◽  
Investment Bank ◽  
Asian Infrastructure Investment Bank ◽  
Strategic Value ◽  
Central Asian ◽  
International Banks

This article analyses the infrastructure projects in Central Asia, which are being financed by two major international organisations, two multilateral banks: the Eurasian Development Bank (EDB) and the Asian Infrastructure Investment Bank (AIIB). The article aims to evaluate the activity of these two institutions in the region and to compare their priorities and the probable efficiency of their projects for the development of Central Asian countries. The choice of the region for the study is conditioned by the fact that Central Asian states are Russia’s close neighbours, and the whole region is characterised by its critical strategic value for Russia’s foreign policy. The methodology of the study is based on the use of discourse analysis of the organisations’ documents, accessible for public: agreements, plans, reports, project-related documentation. In addition, the authors have monitored and analysed the relevant news archives of Russian and foreign mass media. The article consequently analyses the typology of both organisations through the lens of the international integration studies, the institutional structure of the EDB and the AIIB, the specific features of their functioning as international relations actors, and the actual infrastructure projects financed by these institutions in Central Asia. The study demonstrates that the policies and the priorities of the two international banks differ considerably. While the Asian Infrastructure Investment Bank prefers to finance the construction of roads and energy infrastructure, the Eurasian Development Bank remarkably credits production more and finances projects aimed at the industrial cooperation of Eurasian countries. Obviously, in the view of the long-term development, all areas of infrastructure expansion are worth financing; however, one can note that projects, approved by the EDB, can be characterised as more significant both at the present stage and in the long-term perspective. In addition, they contribute to the development of regional economic cooperation and Eurasian integration. If we look at the environmental and social safety of the infrastructure projects, the activities of the AIIB, regardless of its declarations on sustainable development, bear certain risks due to the existing cases of violation of environmental rules by the bank’s founder and major operator – the People’s Republic of China – in its infrastructure projects abroad. This circumstance highlights the critical importance of elaboration of national and multilateral mechanisms of control and inspection of major international infrastructure projects, as well as the necessity to fulfill the obligation of demanding their approval by the citizens of the recipient countries.

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