nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2007‒11‒03
three papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. CAPM and capital budgeting: present versus future, equilibrium versus disequilibrium, decision versus valuation By Magni, Carlo Alberto
  2. SMES, FDI and financial constraints By De Maeseneire, W.; Claeys, T.
  3. A comparison of healthcare managers and entrepreneurs: investigating the change profile of two different sectors By Cools, E.; Van den Broeck, H.; Sioncke, G.

  1. By: Magni, Carlo Alberto
    Abstract: This paper deals with the use of the CAPM for capital budgeting purposes. Four different measures are deductively drawn from this model: the disequilibrium Net Present Value, the equilibrium Net Present Value, the disequilibrium Net Future Value, the equilibrium Net Future Value. While all of them may be used for accept-reject decisions, only the equilibrium Net Present Value and the disequilibrium Net Future Value may be used for valuation, given that they are additive. However, despite their additivity, the latter are not always reliable metrics, because they do not signal arbitrage opportunities whenever there is some state of nature for which they are decreasing functions with respect to the end-of period cash flow. In this case, the equilibrium value of a project is not the price it would have if it were traded in the security market. This result is the capital-budgeting counterpart of Dybvig and Ingersoll’s (1982) result.
    Keywords: Capital budgeting; investment appraisal; project; risk-adjusted rate of return; CAPM; equilibrium; disequilibrium; present value; future value; decision; valuation; cost; risk.
    JEL: G12 D81 G3 G11 G31
    Date: 2007
  2. By: De Maeseneire, W.; Claeys, T. (Vlerick Leuven Gent Management School)
    Abstract: This paper explores the problems experienced by small and medium-sized enterprises (SMEs) with international ambitions in gaining access to debt and equity finance for foreign direct investment (FDI) projects. We develop several arguments why such small businesses are expected to face severe financing constraints for foreign investments and provide an explorative empirical analysis of these issues for a sample of thirty-two Belgian SMEs. We find that the market of FDI finance for SMEs is subject to considerable capital market imperfections. The information problems, lack of collateral, the home bias of financiers and the capital gearing method used by banks to evaluate small firms' foreign projects give rise to financial constraints. The FDI finance gap hinders SMEs in their internationalization strategy and negatively affects their economic performance.
    Keywords: small business financing; SMEs; FDI; internationalization; financing constraints
    JEL: F21 F23 F34 G32 M13
    Date: 2007–10–01
  3. By: Cools, E.; Van den Broeck, H.; Sioncke, G. (Vlerick Leuven Gent Management School)
    Abstract: The aim of this study was to investigate the extent to which people from two different sectors are ‘armed’ to deal effectively with change. Change is apparently the only constant factor in current work surroundings. A crucial issue to manage change professionally is coping with the involved uncertainty. The individual manager plays an important role in this regard, as successfully coping with change is strongly influenced by the psychological predispositions of the individual experiencing the change. We compared Flemish entrepreneurs and healthcare managers on four traits (locus of control, self-efficacy, tolerance for ambiguity, proactive personality) and on cognitive styles (i.e., individual preferences for organising and processing information). Entrepreneurs (n = 177) scored significantly higher on all traits than healthcare managers (n = 60). Healthcare managers scored significantly higher on the knowing and planning style than entrepreneurs, but no significant differences were found for the creating style. With this study, we hope to enhance the knowledge about the influence of particular characteristics in organisational change processes and to give relevant insights to design effective change management programmes.
    Keywords: change management, leadership, cognitive styles, micro-perspective
    Date: 2007–10–01

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