scholarly journals CAPITAL IMPLICIT EXPENSES IN THE SHADOW ECONOMIC REVENUE

10.23856/2509 ◽  
2017 ◽  
Vol 25 (6) ◽  
pp. 85 ◽  
Author(s):  
Oleg Tereshchenko ◽  
Natalia Voloshanyuk
Keyword(s):  
Emerging Markets ◽  
Risk Premium ◽  
Shadow Economy ◽  
Substantial Reduction ◽  
Developed Countries ◽  
Global Market ◽  
Global Risk ◽  
Expected Return ◽  
Stable Relationship ◽  
Risk Free Rate

 In many countries related to emerging markets (EM), there is a high proportion of the shadow economy. The main source of shadow incomes replenishment are incomes that are actually generated in the official sector of the economy, however, they are withdrawn to the shadow segment. The article is dedicated to solving the actual task of income amount estimating that flows from the official sector of the economy to the shadow one. The paper shows that the amount of annual profits that "poured" into the shadow sector corresponds to the size of the hidden (implicit) payment for capital. The problem of shadow payment for capital is closely connected with the shadowing of profits, salaries and payments for the resources usage. The causal relationship between risk premium, shadow economy and key macroeconomic parameters of individual countries are shown in the article. The average income to GDP per capita ratio in Ukraine and other EM countries is significantly lower than in developed countries. In addition, there is a low share of staff costs in the structure of costs of enterprises. Thus, in the EM countries, the orientation of the business to the interests of the shareholders is clearly manifested and the interests of the stakeholders are ignored. In emerging markets, an increase in risks primarily leads to an increase in the risk premium and the shadowing level, to rising prices and to a substantial reduction in real salaries. For the estimation of real capital expenditures, it is advisable to use indirect methods, especially modification of capital assets pricing model (CAPM), adapted to the conditions of the EM. The proposed modification (hybrid crisis model) involves minimum usage of the data from the local financial market. It includes the following parameters: global risk-free rate of return, global market premium for risk, country risk premium, beta-factor, calculated on the basis of the analogue approach, and premium for specific risks of investing in a particular asset. According to our assumption, the shadow interest rate on capital is the difference between the expected return by CAPM and the averaged ROE that follows from the official reporting. Thus, the size of annual profits, "transferred" into the shadow sector, corresponds to the size of the implicit capital charge. The calculations made have showed a stable relationship between the level of country risks and the size of shadow revenues in the country.

STRATEGIES OF EMERGING COUNTRIES TO EXPAND THE OPERATIONS TO THE GLOBAL MARKET OF BIOPHARMACEUTICALS

INDIAN DRUGS ◽  
2021 ◽  
Vol 58 (06) ◽  
pp. 07-18
Author(s):  
Ria Christine Siagian ◽  
◽  
Novilia Bachtiar ◽  
Prastuti Soewondo ◽  
◽  
...  
Keyword(s):  
Literature Review ◽  
Global Health ◽  
Emerging Markets ◽  
Developed Countries ◽  
Emerging Countries ◽  
Global Market ◽  
Market Growth ◽  
The Past ◽  
Government Involvement ◽  
Political Economic

The past decade has seen an increasing number in production of newly-developed biopharmaceuticals, biosimilars and biobetters that can help contribute to improved global health. Global market growth in this industry was reported to increase and approach more than US$200 billion. As the industry matures, the growth is significantly higher in emerging markets than in developed countries. This shows a shift of biopharmaceuticals production outside of developed countries, thereby sending signals to emerg-ing countries the opportunity to become global leaders in new industries. This literature review seeks to identify the commercial levers in biopharmaceutical development in emerging countries. The study found that biopharmaceuticals industry was promising for emerging countries to compete in global mar-ket if it were supported by strong government involvement. This involvement revealed key strategies to improve poor pipeline productivity shaped by political, economic, technological and market fact.

RATE OF COSTS ON INVESTMENT CAPITAL IN EMERGING MARKETS

2019 ◽  
Vol 6 ◽  
pp. 665 ◽  
Author(s):  
Oleg Tereshenko ◽  
Nataliya Voloshanyk ◽  
Dmytro Savchuk
Keyword(s):  
Emerging Markets ◽  
Discount Rate ◽  
Capital Market ◽  
Risk Premium ◽  
Emerging Market ◽  
Weighted Average ◽  
Capital Costs ◽  
Investment Capital ◽  
Capm Model ◽  
Risk Free Rate

To date, there is no adequate methodology for calculating the discount rate that would satisfy most financial analysts. The most common approach to determining the discount rate is to use the weighted average cost of capital (WACC) algorithm. The calculation of capital costs (discount rates) in emerging market countries (EM) is characterized by a number of problems related to the information inefficiency of the capital market, instability of demand for products, inflation, macroeconomic and legal uncertainty and a lack of proper payment discipline. Even more complex are the corresponding calculations during the financial crisis, accompanied by hyperinflation, a fall or significant fluctuations in the rate of the national monetary unit, trade wars, and the collapse of the banking system.Especially problematic for emerging markets is the calculation of the cost of equity (investment) capital. In developed markets, the classical CAPM model is used for these purposes. Taking into account the lack of an effective capital market in EM-related countries, it is quite difficult to determine the standard parameters of the model (risk-free rate of return, market risk premium, beta factor). Significant problems also lie in the sources and shadow schemes for paying high premiums for the risks of investing capital in EM. The aim of the paper is to substantiate recommendations on the procedure for calculating the rate of costs for own (investment) capital, taking into account the specifics of corporate activities in countries related to EM. 

scholarly journals How leverage can improve performance

2020 ◽  
Vol 83 ◽  
pp. 01031
Author(s):  
Miroslav Kmeťko ◽  
Eduard Hyránek
Keyword(s):  
Risk Premium ◽  
Expected Returns ◽  
Tax Rates ◽  
Expected Return ◽  
Tax Rate ◽  
Equity Ratio ◽  
Risk Free Rate ◽  
The Cost ◽  
Managed Portfolios ◽  
The Impact

One of the best-known Capital Asset Pricing Model (CAP/M) provides us with a methodology for measuring the relationship between the risk premium and the impact of leverage on expected returns. However, this model is not used only to value the cost of capital but also to evaluate the performance of managed portfolios. We will test how the expected return changes in percent by changing the debt-equity ratio and the tax rate based on following assumptions: market return 7%, risk-free rate of return 1% and beta 1.2. These assumptions will be constant and we will change the debt-equity ratio and tax rate. Based on these results, it is clear that the change in profitability varies, in relation to the change of the DE ratio by one tenth. As for changes I n tax rates, changes in expected profitability are not entirely in direct proportion to these changes.

The Price of Predictability: Estimating Inconsistency Premiums in Social Interactions

2021 ◽  
pp. 014616722199853
Author(s):  
Judith Gerten ◽  
Michael K. Zürn ◽  
Sascha Topolinski
Keyword(s):  
Risk Premium ◽  
Psychological Research ◽  
Expected Value ◽  
Decision Makers ◽  
Expected Returns ◽  
Expected Return ◽  
Total N ◽  
Financial Decision ◽  
Variance Risk ◽  
Risky Option

For financial decision-making, people trade off the expected value (return) and the variance (risk) of an option, preferring higher returns to lower ones and lower risks to higher ones. To make decision-makers indifferent between a risky and risk-free option, the expected value of the risky option must exceed the value of the risk-free option by a certain amount—the risk premium. Previous psychological research suggests that similar to risk aversion, people dislike inconsistency in an interaction partner’s behavior. In eight experiments (total N = 2,412) we pitted this inconsistency aversion against the expected returns from interacting with an inconsistent partner. We identified the additional expected return of interacting with an inconsistent partner that must be granted to make decision-makers prefer a more profitable, but inconsistent partner to a consistent, but less profitable one. We locate this inconsistency premium at around 31% of the expected value of the risk-free option.

scholarly journals Globalization Impact on Multinational Enterprises

World ◽  
2021 ◽  
Vol 2 (2) ◽  
pp. 216-230
Author(s):  
Justine Kyove ◽  
Katerina Streltsova ◽  
Ufuoma Odibo ◽  
Giuseppe T. Cirella
Keyword(s):  
Developing Country ◽  
Multinational Enterprises ◽  
Developed Countries ◽  
Global Market ◽  
Data Availability ◽  
Negative Effects ◽  
Developed Country ◽  
Excellent Starting Point ◽  
Starting Point ◽  
The Impact

The impact of globalization on multinational enterprises was examined from the years 1980 to 2020. A scoping literature review was conducted for a total of 141 articles. Qualitative, quantitative, and mixed typologies were categorized and conclusions were drawn regarding the influence and performance (i.e., positive or negative effects) of globalization. Developed countries show more saturated markets than developing countries that favor developing country multinational enterprises to rely heavily on foreign sales for revenue growth. Developed country multinationals are likely to use more advanced factors of production to create revenue, whereas developing country multinationals are more likely to use less advanced forms. A number of common trends and issues showed corporate social responsibility, emerging markets, political issues, and economic matters as key to global market production. Recommendations signal a strong need for more research that addresses contributive effects in the different economies, starting with the emerging to the developed. Limitations of data availability and inconsistency posed a challenge for this review, yet the use of operationalization, techniques, and analyses from the business literature enabled this study to be an excellent starting point for additional work in the field.

scholarly journals Impact of Ownership Structure on Bank Profitability in Nigeria

2008 ◽  
Vol 4 (3) ◽  
pp. 170-183
Author(s):  
Uhomoibhi Aburime Toni
Keyword(s):  
Emerging Markets ◽  
Ownership Structure ◽  
Developed Countries ◽  
Bank Profitability ◽  
Limited Applicability ◽  
The Usa ◽  
The Individual ◽  
The Uk ◽  
Finance Theory ◽  
Political Economic

Ownership structure is considered an important factor that affects a firm’s health. If ownership structure affects a firm’s health, it is possible then to use the ownership structure to predict firm profitability. Against this backdrop, this paper analyzes the relationship between ownership structure and bank profitability in Nigeria. There are two motivations for this paper. Firstly, midway into the banks consolidation exercise in Nigeria, the CBN identified the need for a determination of the most appropriate composition of bank capitalization that would enhance the individual and systemic profitability and efficiency of banks in Nigeria post-consolidation. Hence, it decided to minimize state governments’ investment in banks during the exercise and also issued a December 2007 ultimatum to all tiers of governments that have stakes in banks to dilute their investments to a maximum of 10 per cent. Unfortunately, the CBN did not state any econometrically-based rationale giving credence to its directives. Secondly, the effect of ownership structure and concentration on a firm’s performance is an important issue in the literature of finance theory. However, no researcher has studied this important aspect of finance theory in the Nigerian context. It is worth noting that most research on ownership structure and firm performance has been dominated by studies conducted in developed countries. However, there is an increasing awareness that theories originating from developed countries such as the USA and the UK may have limited applicability to emerging markets. Emerging markets have different characteristics such as different political, economic and institutional conditions, which limit the application of developed markets’ empirical models.

scholarly journals A Balanced Portfolio Can Have a Higher Geometric Return than the Risky Asset

2021 ◽  
Vol 14 (9) ◽  
pp. 409
Author(s):  
Miriam Arden ◽  
Tiemen Woutersen
Keyword(s):  
Risk Premium ◽  
Large Fraction ◽  
Developed Countries ◽  
Policy Implications ◽  
Government Bonds ◽  
Stock Portfolios ◽  
Bond Portfolio ◽  
Target Date ◽  
Stock Portfolio ◽  
The U.S

In the U.S., the geometric return on stocks has been higher than the geometric return on bonds over long periods. We study whether balanced portfolios have a larger geometric return (and expected log return) than stock portfolios when the risk premium is low. We use a theoretical model and historical data and find that this is the case. This low-risk premium is often observed in other developed countries. Further, in the past two decades, a balanced portfolio with 70% or 90% invested in the U.S. stock market (with the remainder invested in U.S. government bonds) performed better than a 100% stock or bond portfolio. The reason for this is that a pure stock portfolio loses a large fraction of its value in a downturn. We show that this result is not driven by outliers, and that it occurs even when the returns are log normally distributed. This result has broad policy implications for the construction of pension systems and target-date mutual funds.

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