nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2010‒04‒04
five papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. The valuation of N-phased investment projects under jump-diffusion processes By R. Andergassen; L. Sereno
  2. The Costs of Favoritism: Is Politically-Driven Aid Less Effective? By Dreher, Axel; Klasen, Stephan; Vreeland, James Raymond; Werker, Eric
  3. Building Sustainable Historic Centres A Comparative Approach for Innovative Urban Projects By Rabinovich, Adriana; Catenazzi, Andrea
  4. Skills and financial Incentives: matching funds providers and syndicates in venture capital investments By Eric Nasica; Dominique Torre
  5. Exit routes in LBO projects By Ouidad Yousfi

  1. By: R. Andergassen; L. Sereno
    Abstract: In this paper we consider N-phased investment opportunities where the time evolution of the project value follows a jump-diffusion process. An explicit valuation formula is derived under two different scenarios: in the first case we consider fixed and certain investment costs and in the second case we consider cost uncertainty and assume that investment costs follow a jump-diffusion process
    JEL: G12 G13 G30 C60
    Date: 2010–03
  2. By: Dreher, Axel (University of Göttingen); Klasen, Stephan (University of Göttingen); Vreeland, James Raymond (Georgetown University); Werker, Eric (Harvard Business School)
    Abstract: As is now well documented, aid is given for both political as well as economic reasons. The conventional wisdom is that politically-motivated aid is less effective in promoting developmental objectives. We examine the ex-post performance ratings of World Bank projects and generally find that projects that are potentially politically motivated – such as those granted to governments holding a non-permanent seat on the United Nations Security Council or an Executive Directorship at the World Bank – are no more likely, on average, to get a negative quality rating than other projects. When aid is given to Security Council members with higher short-term debt, however, a negative quality rating is more likely. So we find evidence that World Bank project quality suffers as a consequence of political influence only when the recipient country is economically vulnerable in the first place.
    Keywords: World Bank, aid effectiveness, political influence, United Nations Security Council
    JEL: O19 O11 F35
    Date: 2010–03
  3. By: Rabinovich, Adriana; Catenazzi, Andrea
    Abstract: Since the 1980s, the promotion of heritage values has gradually become a relevant issue for urban planning. Together with the emergence of new peripheries, inner-city areas and particularly old historic centres, affected by deterioration due to the recession of the last decades, have been the object of study and actions. Consequently, the need to turn the historic centres into areas of development for the market, through legislative measures and investments in infrastructure and services, and the re-evaluation of the heritage value of existing buildings, oscillated between policies which, linked to the mechanisms of economic and cultural globalization, promoted tourism as a source of revenue while striving to find alternatives to gentrification. The renewed priority given to the development of inner-city areas, centred round the rehabilitation of their historic values and central nature, has generated innovative operating modes in the urban environment that seek to reconcile the challenges of modernity, particularly in regard to social inequalities with those of the past, and to rethink the central role of historic centres, their relations with the city and their development in terms of sustainability. The goal of our contribution is to gain a better understanding of the major challenges of the rehabilitation of historic centres within the framework of ‘innovative’ approaches to urban planning, aiming at promoting sustainable living conditions. The analysis is based on an ongoing comparative and transdisciplinary research project, in which the decision-making processes of concrete interventions for the rehabilitation of inner-areas with heritage value are being analyzed in different cities of the world: Buenos Aires, La Havana and Bangkok. The main questions that arose in our analysis concern the contexts allowing for innovation, focusing on those institutional arrangements, which, as modes of governance, were introduced in the interventions, studied.
    Keywords: urban planning, innovative planning, urban governance, decision-making, sustainable development, historic centres, heritage values, access to the city
    Date: 2010
  4. By: Eric Nasica (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis); Dominique Torre (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR6227 - Université de Nice Sophia-Antipolis)
    Abstract: Venture Capital investments combine skills and financial risks. The capacity of financial intermediaries to assume financial risk has to meet managerial skills able to screen the projects, then to increase the number and the return of the successful projects among the selected ones. The screening tasks are devoted in seed stage to the Venture Capitalist in charge of the project (the leader). Improving the number and the quality of the successful projects is a task which is partly shared by the members of syndicates associated with the leader during the development stage. Venture capitalists are heterogeneous; there also exist many ways to fund a project; finally, there are many forms of syndicates. Looking at this diversity, the question is to find a relevant way to match - for each kind of Venture Capitalist and for each kind of project - the good financial solutions (which can be interpreted as a financial incentive) and the appropriate form of syndication. Is there a way to reach the best combination: this point is analyzed in depth in our paper. We first present a review of the literature on the nature and goals of funds providers on the one hand and the motives of syndication in the other hand. Then we propose an original model analyzing from the partners (venture capitalists and funds providers) and from the social points of view, the properties of the relevant available technologies associating more or less skillful leader, different forms of syndicates and of financial partners. A first set of results is devoted to the matching competencies of the leader and the syndicates within a given financial environment. A second set of results considers as endogenous the type of incentives introduced by the financial partners and the consequence of their optimization on the form of syndication promoted by the leaders, according to their own skills and the quality of the syndicates. The influence of the level of risk and of the shape of the project on the optimal matching solutions is then analyzed.
    Keywords: venture capital, funds providers, syndication, skills
    Date: 2010
  5. By: Ouidad Yousfi
    Abstract: The current paper studies the financial structure in buyout firms under moral hazard due to unobservable efforts and an excessive risk-taking. The choice of the exit route may lead to agency conflicts between the entrepreneur and the LBO firm: the former may take very risky decisions to increase the probability of IPO exit. If the target is taking public, he gets a non transferable and private benefit. The opportunistic behavior of the entrepreneur decreases the probability of sale exit; the preferred exit route of the LBO firm. Without moral hazard, there are many ways to finance the project and the two agents exert strictly positive efforts. With moral hazard, the entrepreneur, the LBO firm and the bank must finance jointly the buyout. Financing the project through standard debt-equity contracts does not implement the first-best solution. Only a set of projects can be financed through both the LBO fund and the bank at the macroeconomic level. If the entrepreneur is not wealthy enough, her project is not undertaken
    Keywords: LBO, moral hazard, excessive taking risk, financial structure, Exits
    JEL: G15 G23 G32
    Date: 2010

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