nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2010‒05‒29
six papers chosen by
Arvi Kuura
Parnu College - Tartu University

  1. Axiomatic Foundations of Cost Effectiveness Analysis By David Canning
  2. The Limits of Nonprofit Impact: A Contingency Framework For Measuring Social Performance By Alnoor Ebrahim; V. Kasturi Rangan
  3. Debt- Versus Equity-Financing in Auction Designs By Zheng, Charles Zhoucheng
  4. Holding on for too long? An experimental study on inertia in entrepreneursâ and non-entrepreneursâ disinvestment choices By Sandri, Serena; Schade, Christian; Musshoff, Oliver; Odening, Martin
  5. Credit constraints, cyclical fiscal policy and industry growth. By Aghion, P.; Hemous, D.; Kharroubi, E.
  6. Investor Protection and Income Inequality: Risk Sharing vs Risk Taking By Alessandra Bonfiglioli

  1. By: David Canning (Harvard School of Public Health)
    Abstract: Cost-effectiveness analysis, which ranks projects by quality adjusted life years gained per dollar spent, is widely used in the evaluation of health interventions. We show that cost effectiveness analysis can be derived from two axioms: society prefers Pareto improvements and society values discounted life years, lived in perfect health, equally for each person. These axioms generate a unique social preference ordering, allowing us to find the cost effectiveness threshold to which health projects should be funded, and to extend cost effectiveness analysis to give a consistent method of project evaluation across all sectors of the economy.
    Keywords: Cost-benefit, cost-utility, social choice, welfare economics
    Date: 2009–12
  2. By: Alnoor Ebrahim (Harvard Business School, General Management Unit); V. Kasturi Rangan (Harvard Business School, Marketing Unit)
    Abstract: Leaders of organizations in the social sector are under growing pressure to demonstrate their impacts on pressing societal problems such as global poverty. We review the debates around performance and impact, drawing on three literatures: strategic philanthropy, nonprofit management, and international development. We then develop a contingency framework for measuring results, suggesting that some organizations should measure long-term impacts, while others should focus on shorter-term outputs and outcomes. In closing, we discuss the implications of our analysis for future research on performance management.
    Keywords: performance measurement, impact, nonprofit management, social enterprise, philanthropy, accountability, management control systems.
    Date: 2010–05
  3. By: Zheng, Charles Zhoucheng
    Abstract:  A social planner wishes to launch a project but the contenders capable of running the project are cash-constrained and may default.  To signal their capabilities, the contenders may finance their bids through debt or equity, depending on the mechanism chosen by the social planner.  When moral hazard is absent, it is established as theorems that the ex post efficient social choice function cannot be achieved by any mechanism using only debt financing and can be achieved by a mechanism using equity financing.  When moral hazard is present, however, it is illustrated heuristically that equity share discourages effort and exacerbates default more than risky debt does.
    Keywords: auction; finance; debt; equity; default; financial constraint; budget constraint
    JEL: D44 D92
    Date: 2010–05–18
  4. By: Sandri, Serena; Schade, Christian; Musshoff, Oliver; Odening, Martin
    Abstract: Disinvestment, in the sense of project termination and liquidation of assets including the cession of a venture, is an important realm of entrepreneurial decision-making. This study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non-entrepreneurs. Our experimental results reject the standard net present value approach as an account of observed behavior. Instead, most individuals seem to understand the value of waiting. Their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning. We also observe a pronounced âpsychological inertiaâ, i.e., most individuals hold on to a losing project for even longer than real options reasoning would predict. The study provides evidence for entrepreneurs and non-entrepreneurs being quite similar in their behavior.
    Keywords: Real-Options, Disinvestment, Exit Behavior, Experimental Economics, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Institutional and Behavioral Economics,
    Date: 2010–01
  5. By: Aghion, P.; Hemous, D.; Kharroubi, E.
    Abstract: This paper evaluates whether the cyclical pattern of fiscal policy can affect growth. We first build a simple endogenous growth model where entrepreneurs can invest either in short-run projects or in long-term growth enhancing projects. Long-term projects involve a liquidity risk which credit constrained firms try to overcome by borrowing on the basis of their short-run profits. By increasing firms' market size in recessions, a countercyclical fiscal policy will boost investment in productivity-enhancing long-term projects, and the more so in sectors that rely more on external financing or which display lower asset tangibility. Second, the paper tests this prediction using Rajan and Zingales (1998)'s diff-and-diff methodology on a panel data sample of manufacturing industries across 17 OECD countries over the period 1980-2005. The evidence confirms that the positive effects of a more countercyclical fiscal policy on value added growth, productivity growth, and R&D expenditure, are indeed larger in industries with heavier reliance on external finance or lower asset tangibility.
    Date: 2009–06
  6. By: Alessandra Bonfiglioli
    Abstract: This paper studies the relationship between investor protection, entrepreneurial risk taking and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk when lending to firms, thereby improving the degree of risk sharing between financiers and entrepreneurs. On the other hand, by increasing risk sharing, investor protection also induces more firms to undertake risky projects. By increasing entrepreneurial risk taking, it raises income dispersion. By reducing the risk faced by entrepreneurs, it reduces income volatility. As a result, investor protection raises income inequality to the extent that it fosters risk taking, while it reduces it for a given level of risk taking. Empirical evidence from a panel of forty-five countries spanning the period 1976-2000 supports the predictions of the model.
    Keywords: Keywords: Investor protection, income inequality, optimal financial contracts, risk taking, risk sharing.
    JEL: D31 E44 O16
    Date: 2010–04–17

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