Agreeing to disagree: structuring future capital investment provisions in joint ventures

2020 ◽  
Vol 13 (1) ◽  
pp. 12-22
Author(s):  
Edgar Elliott ◽  
Lois D’Costa ◽  
James Bamford
Keyword(s):  
Joint Ventures ◽  
Capital Investment ◽  
Joint Venture ◽  
Investment Decisions ◽  
Capital Investments ◽  
Agreeing To Disagree ◽  
Structural Work ◽  
Opt Out ◽  
Contractual Structures

Abstract Prior to entering into any joint venture agreement (JVA), dealmakers should be aware of the options available to resolve future investment disagreements. There are three broad capital investment structures commonly found in joint ventures: (i) standard passmark rules; (ii) non-consent/opt-out; and (iii) sole risk. Within each category, deal practitioners have numerous options to tailor capital investment structures. As much as possible, deal practitioners should contemplate the most likely areas of disagreement, and then tailor the capital investment structures appropriately to ensure that the joint ventures (JV) can manage capital investment decisions in an efficient, value-preserving way. While it is impossible to establish a formula to determine which specific contractual structures will best accommodate future capital investments in a given JV, companies should weigh various factors to inform their position. We reviewed 40 JVAs to understand various capital investment mechanics and how they differ based on the nature of the venture and owner context. Our research found an extremely diverse array of creative structural work-arounds to address different owner appetites to make future capital investments. The purpose of this article is to describe, illustrate and provide benchmarks on different mechanics and contractual terms found in joint venture agreements, and to offer guidance as to which future capital investment mechanics should be included in venture agreements.

Promotion Signaling and Human Capital Investments

2020 ◽  
Vol 12 (1) ◽  
pp. 125-155 ◽  
Author(s):  
Michael Waldman ◽  
Ori Zax
Keyword(s):  
Human Capital ◽  
Labor Market ◽  
Capital Investment ◽  
Investment Decisions ◽  
Human Capital Investment ◽  
Capital Investments ◽  
Human Capital Investments ◽  
Asymmetric Learning ◽  
Specific Human Capital ◽  
Investment Choices

In a world characterized by asymmetric learning, promotions can serve as signals of worker ability, and this, in turn, can result in inefficient promotion decisions. If the labor market is competitive, the result will be practices that reduce this distortion. We explore how this logic affects human capital investment decisions. We show that, if commitment is possible, investments will be biased toward the accumulation of firm-specific human capital. We also consider what happens when commitment is not possible and show a number of results including that, if investment choices are not publicly observable, choices are frequently efficient. (JEL D82, J24, J31, M12, M51)

scholarly journals Distortionary Impacts of the 1982 and 1986 U.S. Tax Codes on Capital Investments: A Case Study of Investment in Orange Groves

1989 ◽  
Vol 21 (2) ◽  
pp. 107-115
Author(s):  
Charles B. Moss ◽  
Ronald P. Muraro ◽  
William G. Boggess
Keyword(s):  
Income Tax ◽  
Capital Investment ◽  
Tax Reform ◽  
Investment Decisions ◽  
The United States ◽  
Capital Investments ◽  
Fiscal Responsibility ◽  
Tax Rate ◽  
Tax Simplification

AbstractThe 1980s have been a period of dramatic change for the income tax code in the United States. Although numerous modifications were considered in policy deliberations, two key goals, the reduction of the importance of tax considerations in investment decisions and tax simplification, emerged from the discussion and guided drafting of the 1986 Tax Reform Act. This study examines the importance of tax considerations in investment decisions under the provisions of the Tax Reform Act of 1986 and its predecessor, the Tax Equity and Fiscal Responsibility Act of 1982. The study then compares the tax liability under these tax codes with a nondistortionary tax scheme. Results indicate that the Tax Reform Act of 1986 reduced the distortionary effects of the tax code on capital investment decisions. However, a large portion of the reduction can be attributed to the change in the average tax rate.

Fishery Joint Ventures in Developing Countries

1973 ◽  
Vol 30 (12) ◽  
pp. 2328-2332 ◽  
Author(s):  
K. Honda
Keyword(s):  
Joint Ventures ◽  
Capital Investment ◽  
Technical Assistance ◽  
Joint Venture ◽  
Recipient Country ◽  
Fish Processing ◽  
Excessive Competition ◽  
Trawl Fishing ◽  
The Government ◽  
And Storage

To an increasing degree joint ventures are being used to assist developing nations to make better use of the fishery resources in their own waters or adjacent thereof. Japan has been active in this field, providing technical assistance, equipment, training, and fellowships. The Japanese fishing industry has also provided capital and skills.The first Japanese fisheries joint venture was established in 1953 and the system has grown rapidly since; by March 1972 there were 38 countries involved, with 77 enterprises and a capital investment of $25 million. Most joint ventures have been established in Asia and Oceania; Africa has shown the greatest increase in recent years. Most enterprises are for fishing activities, especially trawl fishing for shrimp; the others are for cold storage, fish processing, and aquaculture.About 46% of joint venture enterprises are owned mostly by Japan, but increasingly the local country has an equal or larger share. Most land-based employees are of the local country, but over half the fishermen are Japanese; this reflects the difficulty of obtaining enough skilled local fishermen. One task of the ventures should be to train such men.Successful joint ventures require the following: The national interest of the recipient country should be kept fully in mind; Recipient countries should take the steps necessary for resource conservation, for prevention of conflicts on the fishing grounds, and for avoiding excessive competition; Fisheries require complex infrastructures, including harbors and supply and storage facilities, which cannot be supplied by commercial enterprises. Arrangements should be made by the recipient country to provide these, by the government or through bilateral or multilateral assistance; and Recipient governments should fully appreciate the characteristics and risks of fishery ventures, and take a long view of development. They should recognize the need for exploratory and experimental fishing, and give favorable treatment regarding taxation, employment, import of fishing materials, and remittance of foreign exchange.

scholarly journals A grounded theory exploration of appraisal Process of Capital Investment Decisions — Capex Appraisal Model (CAM)

2020 ◽  
Vol 11 (7) ◽  
pp. 2778-2804
Author(s):  
Umair Baig ◽  
Manzoor Ahmed Khalidi
Keyword(s):  
Grounded Theory ◽  
Capital Investment ◽  
Relevant Literature ◽  
Investment Decisions ◽  
Idea Generation ◽  
Theory Approach ◽  
Capital Investments ◽  
Monitoring And Control ◽  
Theoretical Contribution ◽  
Appraisal Process

The purpose of this study was to explore the appraisal process of capital investment decisions. The study adopted the grounded theory approach for the exploration of the objective. In the first stage, 48 in-depth interviews were conducted from finance executives of PSX listed companies. After transcription of all of the interviews, NVIVO software was used for analysis. Theoretical sampling was used in this study. Initially, 35 concepts and 19 categories were obtained from the initial coding of 48 cases. In the next stage, using focused coding, 19 initial categories into 09 categories were classified. These 09 categories represent each stage of the appraisal process of capital investment. These stages are Idea generation, Strategic planning, Analysis, Risk Evaluation, Selection, Mode of finance, Implementation, Monitoring and control, and Post-audit. The development of appraisal process stages is the novelty of this study and key theoretical contribution. Findings provide an in-depth understanding of the systematic way that industry appraises capital investments. This study opens grounds for new knowledge for academia, adds to relevant literature and reduces the gap between the corporate world and academia.

Solar Renewable Energy Credit Price Volatility and Investment Returns: Have Policies Stranded Capital Investment?

Commonwealth ◽  
2017 ◽  
Vol 19 (1) ◽  
Author(s):  
Somayeh Youssefi ◽  
Patrick L. Gurian
Keyword(s):  
Solar Energy ◽  
Capital Investment ◽  
Supply And Demand ◽  
Price Volatility ◽  
The United States ◽  
Investment Model ◽  
Capital Investments ◽  
Demand Model ◽  
Market Prices ◽  
Investment Returns

Pennsylvania is one of a number of U.S. states that provide incentives for the generation of electricity by solar energy through Solar Renewal Energy Credits (SRECs). This article develops a return on investment model for solar energy generation in the PJM (mid-­Atlantic) region of the United States. Model results indicate that SREC values of roughly $150 are needed for residential scale systems to break even over a 25-­year project period at 3% interest. Market prices for SRECs in Pennsylvania have been well below this range from late 2011 through the first half of 2016, indicating that previous capital investments in solar generation have been stranded as a result of steep declines in the value of SRECs. A simple conceptual supply and demand model is developed to explain the sharp decline in market prices for SRECs. Also discussed is a possible policy remedy that would add unsold SRECs in a given year to the SREC quota for the subsequent year.

scholarly journals The Fiduciary Duties of Joint Venture Parties – When do They Arise and What Do They Comprise?

2011 ◽  
Vol 42 (1) ◽  
pp. 117 ◽  
Author(s):  
Jane Knowler ◽  
Charles Rickett
Keyword(s):  
Joint Ventures ◽  
Joint Venture ◽  
Case Law ◽  
The Other ◽  
Common Goal ◽  
Fiduciary Duties ◽  
Fiduciary Obligations ◽  
Australian Case

Joint Ventures are often used by parties in commercial enterprises where parties seek to achieve a common goal. One issue which is increasingly contentious is the extent to which, if any, joint venture parties owe each other fiduciary obligations. This paper refutes, as a dangerous heresy, the idea that joint venture relationships are discrete legal relationships that are inherently fiduciary in nature. The majority of self-styled "joint ventures" are, invariably, nothing more in legal terms than contracts. If parties are going to be bound by fiduciary duties, over and above the contractual duties they owe each other, this will only be so by virtue of the particular arrangement they have entered into which, on a thorough examination of the facts, is found to require each party to give unstinting loyalty to the other. Recent Australian case law bears this out.

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