nep-ppm New Economics Papers
on Project, Program and Portfolio Management
Issue of 2014‒11‒17
four papers chosen by
Arvi Kuura
Tartu Ülikool

  1. Using Case Studies to Explore the External Validity of 'Complex' Development Interventions By Woolcock, Michael
  2. Public Financial Institutions and the Low-carbon Transition: Five Case Studies on Low-Carbon Infrastructure and Project Investment By Ian Cochran; Romain Hubert; Virginie Marchal; Robert Youngman
  3. Bank Capital Requirements and Mandatory Deferral of Compensation By Feess, Eberhard; Wohlschlegel, Ansgar
  4. Optimal Dynamic Contracts in Financial Intermediation: With an Application to Venture Capital Financing By Igor Salitskiy

  1. By: Woolcock, Michael (World Bank)
    Abstract: Rising standards for accurately inferring the impact of development projects has not been matched by equivalently rigorous procedures for guiding decisions about whether and how similar results might be expected elsewhere. These 'external validity' concerns are especially pressing for 'complex' development interventions, in which the explicit purpose is often to adapt projects to local contextual realities and where high quality implementation is paramount to success. A basic analytical framework is provided for assessing the external validity of complex development interventions. It argues for deploying case studies to better identify the conditions under which diverse outcomes are observed, focusing in particular on the salience of contextual idiosyncrasies, implementation capabilities and trajectories of change. Upholding the canonical methodological principle that questions should guide methods, not vice versa, is required if a truly rigorous basis for generalizing claims about likely impact across time, groups, contexts and scales of operation is to be discerned for different kinds of development interventions.
    JEL: B40 O10
    Date: 2013–11
  2. By: Ian Cochran; Romain Hubert; Virginie Marchal; Robert Youngman
    Abstract: Public financial institutions (PFIs) are well-positioned to act as a key leverage point for governments’ efforts to mobilise private investment in low-carbon projects and infrastructure. The study identifies the tools, instruments and approaches used by five PFIs to directly support and scale-up domestic private sector investment in sustainable transport, energy-efficiency and renewable energy in OECD countries. Between 2010-2012, these five institutions – Group Caisse des Dépôts in France, KfW Bankengruppe in Germany, the UK Green Investment Bank, the European Investment Bank, and the European Bank for Reconstruction and Development – have provided over 100 billion euros of equity investment and financing for energy efficiency, renewable energy and sustainable transport projects. They use both traditional and innovative approaches to link low-carbon projects with finance through enhancing access to capital; facilitating risk reduction and sharing; improving the capacity of market actors; and shaping broader market practices and conditions. Les institutions financières publiques (IFP) sont particulièrement bien placées pour compléter les efforts des pouvoirs publics visant à mobiliser les investissements privés dans des projets et des infrastructures sobres en carbone. Cette étude identifie les outils, instruments et méthodes dont se servent cinq IFP pour financer et / ou accroître les investissements du secteur privé au niveau national dans les transports durables, l’efficacité énergétique et l’énergie renouvelable dans des pays membres de l’OCDE. De 2010 à 2012, ces cinq institutions – le Groupe Caisse des Dépôts en France, la KfW Bankengruppe en Allemagne, l’UK Green Investment Bank, la Banque européenne d’investissement, et la Banque européenne pour la reconstruction et le développement – ont apporté un total de plus de 100 milliards EUR d’investissements en fonds propres et de financement en faveur de projets d’efficacité énergétique, d’énergies renouvelables et de transports durables. Elles font appel à des méthodes à la fois traditionnelles et nouvelles pour lier des projets aux moyens de financement, en améliorant l’accès aux capitaux ; en facilitant la réduction et le partage des risques ; en renforçant les capacités des acteurs de marché et, dans un cadre plus large, en mettant en place des pratiques et des conditions de marché.
    Keywords: climate change, renewable energy, energy efficiency, climate finance, low-carbon, investment, infrastructure, public financial institutions, institutions financières publiques, finance climat, bas carbone, efficacité énergétique, changement climatique, investissement, infrastructure, énergie renouvelable
    JEL: G11 G18 G23 G28 O44 Q01 Q54
    Date: 2014–11–06
  3. By: Feess, Eberhard; Wohlschlegel, Ansgar
    Abstract: Tighter capital requirements and mandatory deferral of compensation are among the most prominently advocated regulatory measures to reduce excessive risk-taking in the banking industry. We analyze the interplay of the two instruments in an economy with two heterogenous banks that can fund uncorrelated projects with fully diversifiable risk or correlated projects with systemic risk. If both project types are in abundant supply, we find that full mandatory deferral of compensation is beneficial as it allows for weaker capital requirements, and hence for a larger banking sector, without increasing the incentives for risk-shifting. With competition for uncorrelated projects, however, deferred compensation may misallocate correlated projects to the bank which is inferior in managing risks. Our findings challenge the current tendency to impose stricter regulations on more sophisticated institutes.
    Keywords: Bank capital requirements; deferred bonuses; risk-shifting; financial crisis; executive compensation
    JEL: D62 G21 G28 J33
    Date: 2014–07–23
  4. By: Igor Salitskiy (Stanford University)
    Abstract: This paper extends the costly state verification model from Townsend (1979) to a dynamic and hierarchical setting with an investor, a financial intermediary, and an entrepreneur. Such a hierarchy is natural in a setting where the intermediary has special monitoring skills. This setting yields a theory of seniority and dynamic control: it explains why investors are usually given the highest priority on projects' assets, financial intermediaries have middle priority and entrepreneurs have the lowest priority; it also explains why more cash flow and control rights are allocated to financial intermediaries if a project's performance is bad and to entrepreneurs if it is good. I show that the optimal contracts can be replicated with debt and equity. If the project requires a series of investments until it can be sold to outsiders, the entrepreneur sells preferred stock (a combination of debt and equity) each time additional financing is needed. If the project generates a series of positive payoffs, the entrepreneur sells a combination of short-term and long-term debt.
    Date: 2014

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