scholarly journals VALUE OF INVESTORS’ ESCALATION OF COMMITMENT IN PPP PROJECTS USING REAL OPTION THINKING

2020 ◽  
Vol 24 (5) ◽  
pp. 348-364
Author(s):  
Ruolan Gao ◽  
Jicai Liu
Keyword(s):  
Return On Investment ◽  
Real Option ◽  
Threshold Model ◽  
Escalation Of Commitment ◽  
Government Guarantee ◽  
Asset Value ◽  
Behavioral Preferences ◽  
Total Investment ◽  
Belief Adjustment ◽  
The Government

Escalation of commitment (EOC) is a common behavior among investors who receive negative feedback (NF) in public-private partnership (PPP) projects, and this behavior typically leads to sizable losses. Recognizing this, investors set a mental threshold and track investments for escalation. Once losses reach the threshold, investors will terminate the escalation behavior, namely, they will transfer projects to governments to obtain compensation or residual asset value. This paper analyzes the maximum amount of NF that investors can sustain based on a belief-adjustment model, followed by the analysis of the greatest loss degree. Then, a threshold model for EOC is constructed using real option thinking. Different from the usual judgment criteria of the traditional option method, the threshold is less than zero in the EOC scenario. The results show that the threshold correlates with the initial generative cognition, the sunk cost level, the degree of the government guarantee and investors’ behavioral preferences as well as with total investment and return on investment. These findings serve as a reference for governments to de-escalate investors’ commitment in PPP projects.

scholarly journals GOVERNMENT MOTIVATION-EMBEDDED RETURN GUARANTEE FOR URBAN INFRASTRUCTURE PROJECTS BASED ON REAL OPTIONS

2016 ◽  
Vol 22 (7) ◽  
pp. 954-966 ◽  
Author(s):  
Qingpeng MAN ◽  
Chengshuang SUN ◽  
Yuesheng FEI ◽  
Martin SKITMORE ◽  
Yong BAI ◽  
...  
Keyword(s):  
Real Options ◽  
Return On Investment ◽  
Urban Infrastructure ◽  
Chinese Government ◽  
Infrastructure Development ◽  
Systematic Method ◽  
Main Method ◽  
Valuation Model ◽  
Government Guarantee ◽  
The Government

Governments usually guarantee the amount of investment income to private sector partners to encourage their participation in Public-Private Partnership urban infrastructure development projects, with the ‘float return on investment guarantee’ being the main method in use by the Chinese government today. The current problems with the float return on investment guarantee are analysed and a guarantee approach with embedded motivatio nal behaviour is presented as an alternative. A pricing method option is then introduced as the motivation-embedded return guarantee has similar charac­teristics to real options. From this, a valuation model is developed that provides the basis of a new systematic method for calculating the government guarantee value.

scholarly journals Ease of Doing Business Index: An Analysis of Investors Practical View

2021 ◽  
Vol 17 (1) ◽  
pp. 101-123
Author(s):  
Shakirat Adepeju Babatunde ◽  
Mohammed Kayode Ajape ◽  
Kabir Dandago Isa ◽  
Owolabi Kuye ◽  
Eddy Olajide Omolehinwa ◽  
...  
Keyword(s):  
Private Sector ◽  
World Bank ◽  
Return On Investment ◽  
Government Procurement ◽  
Cross Sectional ◽  
Procurement Process ◽  
Chamber Of Commerce ◽  
Doing Business ◽  
Ease Of Doing Business ◽  
The Government

Abstract: This study investigates the effect of Ease of Doing Business Index (EDBI) on Return on Investment (ROI). The study employs a cross-sectional survey design covering five years from 2015 to 2019. The sample is 47 registered companies with the Lagos Chamber of Commerce and Industry, which is the most representative of the organised private sector group in Nigeria. The study adopts descriptive and linear regression statistical analysis. Findings show a statistically significant negative effect of Government policy continuity. The government procurement process, Raw materials availability and Quality of workforce show adverse effects. Traffic and transportation management, power supply and Security infrastructure show insignificant effect on ROI. Hence, findings indicate that Government procurement process is inimical to ease of doing business in Nigeria despite the government improvement efforts. Since government efforts are insufficient, the World Bank should incorporate private sector ideals into EDBI to create a synergy a robust EDBI. Keywords: Ease of Doing Business, ease of doing business index, return on investment, investors, World Bank.      Ease of Doing Business Index: Sebuah Analisis terhadap Pandangan Praktis InvestorAbstrak: Penelitian ini menginvestigasi pengaruh Ease of Doing Business Index (EDBI) terhadap Return on Investment (ROI). Penelitian ini menggunakan desain survei cross-sectional dari tahun 2015 sampai dengan tahun 2019. Sampel penelitian ini adalah 47 perusahaan yang terdaftar di Lagos Chamber of Commerce and Industry. Penelitian ini menggunakan analisis deskriptif dan statistik regresi linear. Dari berbagai elemen EDBI, temuan dari penelitian ini menunjukkan adanya pengaruh negatif yang signifikan antara keterlanjutan kebijakan pemerintah terhadap ROI. Proses pengadaan pemerintah, ketersediaan bahan mentah, dan kualitas tenaga kerja menunjukkan pengaruh berkebalikan dengan ROI. Lalu lintas dan manajemen transportasi, supply listrik, dan infrastruktur keamanan menunjukkan pengaruh tidak signifikan terhadap ROI. Usaha pemerintah dalam meningkatkan proses pengaadaan pemerintah masih belum memadai karena masih kecilnya pengaruh terhadap EDBI Nigeria. World Bank sebaiknya memasukkan pengaruh sektor privat dalam indikator EDBI sebagai upaya menciptakan sinergi antara pemerintah dan sektor privat untuk peningkatan EDBI dan dampaknya pada ekonomi. Kata kunci: Ease of Doing Business, indeks kemudahan berbisnis, pengembalian investasi, investor, Bank Dunia

scholarly journals Research on Green Total Factor Productivity of Logistics Industry and its threshold effect of Environmental Regulation

2021 ◽  
Vol 235 ◽  
pp. 02022
Author(s):  
Wanchun Li
Keyword(s):  
Environmental Regulation ◽  
Total Factor Productivity ◽  
Threshold Model ◽  
Intermediate Stage ◽  
Threshold Effect ◽  
Inhibitory Effect ◽  
Regulation System ◽  
Factor Productivity ◽  
Logistics Industry ◽  
The Government

This paper is based on the input-output panel data of logistics industry in 30 provinces and regions in China from 2005 to 2017, using nonparametric DEA model to evaluate the green total factor productivity of logistics industry, and build a panel threshold model to empirically test the nonlinear impact of environmental egulation. It is found that environmental regulation has a double threshold effect on green total factor productivity of logistics industry, the estimated threshold values are 89.85 and 211.27 respectively; when environmental regulation is at a low level below 89.85, environmental regulation has a positive effect of 2.09% on green total factor productivity of logistics industry, when environmental regulation is in the intermediate stage of 89.85 to 211.27, environmental regulation has a positive improvement effect of 6.41% on green total factor productivity of logistics industry; when environmental regulation is at a higher level than 211.27, environmental regulation has a negative inhibitory effect of 1.57% on green total factor productivity of logistics industry. Based on the empirical conclusion, this paper puts forward: First, using the performance assessment as the baton to urge the local government to establish an effective environmental regulation system; second, the government should plan to guide the green transformation and upgrading of the logistics industry to avoid “one size fits all” environmental regulation.

scholarly journals Assessment of Average Market Investment Returns in Development of the Residential Real Estate in the Moscow Region

2019 ◽  
Vol 12 (3) ◽  
pp. 140-152
Author(s):  
S. G. Sternik ◽  
Ya. S. Mironchuk ◽  
E. M. Filatova
Keyword(s):  
Real Estate ◽  
Initial Data ◽  
Housing Market ◽  
Return On Investment ◽  
High Reliability ◽  
Real Estate Market ◽  
Moscow Region ◽  
Residential Real Estate ◽  
Market Return ◽  
Total Investment

In the previous work, G.M. Sternik and S.G. Sternik justified the options for the method of assessing the average current annual return on investment in residential real estate development, depending on the nature and content of the initial data on the costs contained in the sources of information (construction costs or total investment costs). Based on the analysis of the composition of the elements of development costs used in various data sources, we corrected the coefficients that allowed us to move from the assessment of the current annual return on investment in development in relation to the cost (full estimated cost) of construction to the assessment of the current annual return on investment in relation to the total investment costs. This calculation method was tested on the example of the housing market inMoscow. As a result, we concluded it is possible its use for investment management in the housing market. In this article, based on G.M. Sternik and S.G. Sternik’s methodology for assessing the return on investment into the development, and taking also into account the increase of information openness of the real estate market, we improved the calculation formulas, using new sources of the initial data, and recalculated the average market return on investment into the development of residential real estate in the Moscow region according to the data available for 2014–2017. We concluded that, since 2015, the average market return on investment takes negative values, i.e. the volume of investment in construction exceeds the revenue from sales in the primary market. However, in the second half of 2017, the indicator has increased to positive values, which was due to a greater extent of the decrease in the volume of residential construction in the region. The data obtained by us, together with the improved method of calculations, allow predicting with high reliability the potential of the development of the regional markets of primary housing for the purpose of investment and state planning of housing construction programs.

Research on the Real Options in Investment Decision of Waterway Infrastructure Construction

2013 ◽  
Vol 734-737 ◽  
pp. 1617-1620
Author(s):  
Wei Jin
Keyword(s):  
Real Options ◽  
Carbon Dioxide Emissions ◽  
Capital Investment ◽  
Real Option ◽  
Investment Decision ◽  
Energy Utilization ◽  
Real Options Theory ◽  
The Real ◽  
The Government ◽  
Real Option Method

Developing the waterway infrastructure construction can improve the efficiency of energy utilization, reduce the energy consumption intensity and carbon dioxide emissions. Till the year 2020, China plan to complete 19,000 kilometers high grade channel. Construction of water infrastructure construction requires a large capital investment. However, the main financial source of funding the construction of transportation infrastructure at present in China is special financial allocation of the government. The unitary financing structure as well as the funding pressure has leaded to some serious financing problems. This paper applied the real options theory to the waterway infrastructure construction financing, analyzed the limitations of the NPV method and the advantages of real option method in investment decision of waterway infrastructure construction, and took an example to show its feasibility.

Return on investment of Canadian tobacco control policies implemented between 2001 and 2016

2021 ◽  
pp. tobaccocontrol-2021-056473
Author(s):  
Jean-Eric Tarride ◽  
Gord Blackhouse ◽  
G. Emmanuel Guindon ◽  
Michael O Chaiton ◽  
Lynn Planinac ◽  
...  
Keyword(s):  
Tobacco Control ◽  
Return On Investment ◽  
Economic Benefits ◽  
Sensitivity Analyses ◽  
Control Policies ◽  
Productivity Costs ◽  
Tobacco Policies ◽  
Tobacco Control Policies ◽  
Life Years ◽  
The Government

ObjectivesTo determine the return on investment (ROI) associated with tobacco control policies implemented between 2001 and 2016 in Canada.MethodsCanadian expenditures on tobacco policies were collected from government sources. The economic benefits considered in our analyses (decrease in healthcare costs, productivity costs and monetised life years lost, as well as tax revenues) were based on the changes in smoking prevalence and attributable deaths derived from the SimSmoke simulation model for the period 2001–2016. The net economic benefit (monetised benefits minus expenditures) and ROI associated with these policies were determined from the government and societal perspectives. Sensitivity analyses were conducted to check the robustness of the result. Costs were expressed in 2019 Canadian dollars.ResultsThe total of provincial and federal expenditures associated with the implementation of tobacco control policies in Canada from 2001 through 2016 was estimated at $2.4 billion. Total economic benefits from these policies during that time were calculated at $49.2 billion from the government perspective and at $54.2 billion from the societal perspective. The corresponding ROIs were $19.8 and $21.9 for every dollar invested. Sensitivity analyses yielded ROI values ranging from $16.3 to $28.3 for every dollar invested depending on the analyses and perspective.ConclusionsThis analysis has found that the costs to implement the Canadian tobacco policies between 2001 and 2016 were far outweighed by the monetised value associated with the benefits of these policies, making a powerful case for the investment in tobacco control policies.

Asset Value Enhancement of Singapore’s Public Housing Main Upgrading Programme (MUP) Policy: A Real Option Analysis Approach

Urban Studies ◽  
2009 ◽  
Vol 46 (11) ◽  
pp. 2329-2361 ◽  
Author(s):  
David Kim Hin Ho ◽  
Eddie Chi-man Hui ◽  
Muhammad Faishal Bin Ibrahim
Keyword(s):  
Public Housing ◽  
Real Option ◽  
Analysis Approach ◽  
Real Option Analysis ◽  
Asset Value

scholarly journals Fiscal Sustainability in the European Countries: A Panel ARDL Approach and a Dynamic Panel Threshold Model

2020 ◽  
Vol 12 (20) ◽  
pp. 8505 ◽  
Author(s):  
María del Carmen Ramos-Herrera ◽  
María A. Prats
Keyword(s):  
Threshold Model ◽  
Fiscal Sustainability ◽  
Causality Test ◽  
Panel Ardl ◽  
Long Run ◽  
Ardl Approach ◽  
Panel Granger Causality ◽  
Potential Gdp ◽  
The Government ◽  
First Time

We analyze the fiscal sustainability hypothesis for a panel of 20 European Union countries from 2000 to 2019. In particular, we employ new econometric methodologies that, to the best of our knowledge, are applied for the first time to the study of sovereign fiscal policy sustainability in these economies. Specifically, we estimate the panel ARDL technique, distinguishing between short- and long-run coefficients because the order of integration of our variables is not the same. Moreover, a panel threshold model with endogeneity is considered to investigate whether, departing from a particular threshold, there is different behavior between the government primary balance and public debt, both taken as a ratio of potential GDP. Finally, the panel Granger causality test is implemented to determine the direction of causality or the existence of bidirectional causality.

scholarly journals ANALISIS EFEKTIFITAS PROGRAM BANTUAN KEUANGAN KHUSUS (BKK) GERBANGSADU MANDARA DI KABUPATEN KARANGASEM TAHUN 2017 (STUDI KASUS PADA 18 DESA KAWASAN RAWAN BENCANA ERUPSI GUNUNG AGUNG)

2019 ◽  
Vol 9 (1) ◽  
Author(s):  
Komang Agus Rudi Indra Laksmana ◽  
I Ketut Merta
Keyword(s):  
At Risk ◽  
Financial Performance ◽  
Return On Investment ◽  
Financial Institution ◽  
Poverty Rate ◽  
Measurement Instruments ◽  
Coverage Ratio ◽  
Significant Difference ◽  
Before And After ◽  
The Government

Karangasem Regency is one of the regencies in Bali which has the highest poverty rate in Bali, The Gerbangsadu Mandara program in 2016 has been distributed in 54 villages with an average budget of 1 billion rupiah per village. However, in mid 2017 the eruption of Mount Agung erupted causing economic paralysis in 22 affected villages in Karangasem Regency. Among them 18 villages are disaster prone areas (KRB) are recipients of the Gerbangsadu Mandara program.  Indicators in measuring effectiveness used are performance measurement instruments for 2016-2018 in the form of CCR, ROI, LAR financial ratios aimed at measuring health and its relation to the readiness of citizens to receive further intervention from the government for the following year. The problems to be solved in this study are: How is the effectiveness of Gerbangsadu Mandara Special Financial Assistance (BKK) in 18 villages of Mount Agung Eruption in Karangasem Regency as seen from Cost Coverage Ratio (CCr), Return on Investment (ROI), and Loan at Risk (LAR). The results showed that during the period 2016-2018, the average performance of 18 Bumdes in Karangasem Regency for a Cost Coverage Ratio (CCr) ratio of 183% (very satisfying), Return on Investment (ROI) of 7% (quite satisfactory), and Loan at Risk (LAR) of 19% (minimum). Paired T-test shows that Sign.2-tailed value is greater than 0.05, it means that financial performance before and after the eruption of Mount Agung did not occur a significant significant difference. The conclusion is that the Bumdes financial performance in Karangasem Regency is not affected by the risk of the eruption of Mount Agung. The limitation of the research lies in the object of research at one financial institution that is Bumdes, further research this concept can be tested at other financial institutions such as Village Credit Institutions, Banks and Cooperatives.

scholarly journals Public–Private Partnership Monitor: Pakistan

2021 ◽  
Keyword(s):  
Private Sector ◽  
Energy Sector ◽  
Public Private Partnership ◽  
Public Infrastructure ◽  
Related Services ◽  
Private Partnership ◽  
The Public ◽  
Private Sector Investment ◽  
Total Investment ◽  
The Government

The Government of Pakistan strongly supports public–private partnership (PPP) initiatives. From 1990 to 2019, Pakistan witnessed 108 financially closed PPP projects, with a total investment of approximately $28.4 billion. About 88% of these projects are in the energy sector, attracting more than $24.7billion, followed by investments in the port sector. In early 2021, Parliament approved the amendments to the 2017 PPP Law, enacting the Public Private Partnership Authority (Amendment) Act 2021. This further strengthens the enabling legal and regulatory framework for developing and implementing PPPs, thereby promoting private sector investment in public infrastructure and related services.

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