Azure Lodging, Inc.: A Case Study on Capital Budgeting with Capital Rationing in a Service Industry Context

This case illustrates capital budgeting in a service industry context. Three features should make this case attractive to instructors. First, the firm's rationing of capital means that students must select one investment among competing investment alternatives. Second, the project involves renovation of an existing hotel. Most cases consider a business expansion where analysis involves estimation of a single series of cash flows to generate net present value (i.e., future cash flows or not). In this case, students model cash flows if the project is accepted, comparing those cash flows to a model of cash flows if the hotel continues without renovation. Third, we introduce Monte Carlo analysis, an advanced technique for assessing uncertainty. The extensive data students use in this case is from an actual hotel chain's project database. The case has been used in undergraduate and graduate managerial accounting classes.

Company valuation and the nonlinear state marginal price vector model under agency conflicts

In the present contribution, the innovative nonlinear state marginal price vector model introduced in Toll and Kintzel (CEJOR 27(4):1079–1105, 2019) (plus Errata herein) is enriched to include budgeting problems under agency conflicts. Under asymmetric information, a company owner as principal can only rely on information transmitted to her from her managers as agents. In the related modeling, it is assumed that slack and capital rationing are optimal. The governing budgeting relations are integrated into a nonlinear framework furnished by a multi-period newsvendor approach and are solved numerically by means of a two-step valuation procedure based on two successive nonlinear convex optimizations. The capital market is assumed to be imperfect. As case study, the M&A-valuation case of a merger of two IT-service companies is considered subjected to optimal combined dimensioning of capacities and budgets under stochastic demand. On balance, by addressing agency conflicts within the well-established nonlinear framework, the practical application field of the valuation procedure is widened.

Impact of Loan Accessibility on Working Capital Management and Profitability: Comparative Study of Family Versus Non-Family Firms

This study is conducted to identify the direction of the relationship between working capital management (WCM) and firm performance of the non-financial sector of Pakistan from 2009 till 2018. This has also looked at the effect of restricted access to loan on the WCM- Profitability relationship. The findings confirmed that restricted loan accessibility impacts the WCM-Profitability relationship. The comparative analysis demonstrated that financially constrained firms are mostly non-family firms that are new, growing, smaller in size, face high risk, maintain high liquidity and tangibility ratios than non-constrained firms. Further, the working capital levels of financially constraint firms is lower because of high operating expenses and greater capital rationing. Managers and scholars may use these findings for the administration of their working capital policies in order to avoid the financial cost and create more opportunities for financial accessibility which is further beneficial for making informed investment decisions, yielding higher profits that contribute towards sustainable growth.

Can Public-Private Partnerships Foster Investment Sustainability in Smart Hospitals?

This article addresses the relationship between Public-Private Partnerships (PPP) and the sustainability of public spending in smart hospitals. Smart (technological) hospitals represent long-termed investments where public and private players interact with banking institutions and eventually patients, to satisfy a core welfare need. Characteristics of smart hospitals are critically examined, together with private actors’ involvement and flexible forms of remuneration. Technology-driven smart hospitals are so complicated that they may require sophisticated PPP. Public players lack innovative skills, whereas private actors seek additional compensation for their non-routine efforts and higher risk. PPP represents a feasible framework, especially if linked to Project Financing (PF) investment patterns. Whereas the social impact of healthcare investments seems evident, their financial coverage raises growing concern in a capital rationing context where shrinking public resources must cope with the growing needs of chronic elder patients. Results-Based Financing (RBF) is a pay-by-result methodology that softens traditional PPP criticalities as availability payment sustainability or risk transfer compensation. Waste of public money can consequently be reduced, and private bankability improved. In this study, we examine why and how advanced Information Technology (IT) solutions implemented in “Smart Hospitals” should produce a positive social impact by increasing at the same time health sustainability and quality of care. Patient-centered smart hospitals realized through PPP schemes, reshape traditional healthcare supply chains with savings and efficiency gains that improve timeliness and execution of care.