The Secret Formula for Managing Multiple Projects

An emphasis on company-wide collaboration and flexible oversight is key.

Title: Managing a Group of Multiple Projects: Examining the Influence of Team Culture and Leader Competencies (free)

Authors: Peerasit Patanakul (Pennsylvania State University) and Zvi H. Aronson (Stevens Institute of Technology)

Publisher: Howe School of Technology Management Research Paper No. 2013-6

Date Published: January 2013

The importance of team culture to a project’s success has long been extolled by researchers and managers alike. But this paper breaks with conventional wisdom by adding a significant wrinkle. In the increasingly common situation in which managers are handling several projects simultaneously, team culture has little bearing on the success of an initiative, the authors found. Instead, the most crucial factors are an organization-wide focus on collaboration and the availability of agile managers who can juggle responsibilities.

Words of Wisdom on Managing a Global Investment Firm

by: David I. Fisher

Chairman of the Board

The Capital Group Companies, Inc.

Structuring an increasingly global organization and managing investment professionals in such an organization demand focus and energy. The most important principles, however, may be simple—remembering that investment management is a people business, being skeptical about so-called management “truths,” and attending to a few basic tenets of organizational success.

This presentation comes from the Managing the Investment Professional conference held in Chicago, Illinois, on April 2, 1996.

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Efficient Markets Hypothesis

Andrew W. Lo 

Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER)

THE NEW PALGRAVE: A DICTIONARY OF ECONOMICS, L. Blume, S. Durlauf, eds., 2nd Edition, Palgrave Macmillan Ltd., 2007 
Abstract:      
The efficient markets hypothesis (EMH) maintains that market prices fully reflect all available information. Developed independently by Paul A. Samuelson and Eugene F. Fama in the 1960s, this idea has been applied extensively to theoretical models and empirical studies of financial securities prices, generating considerable controversy as well as fundamental insights into the price-discovery process. The most enduring critique comes from psychologists and behavioural economists who argue that the EMH is based on counterfactual assumptions regarding human behaviour, that is, rationality. Recent advances in evolutionary psychology and the cognitive neurosciences may be able to reconcile the EMH with behavioural anomalies.

Number of Pages in PDF File: 28

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The Best Leadership Model for Organizational Change Management: Transformational Verses Servant Leadership

B. Tim Lowder 

Saint Leo University
June 14, 2009

Abstract:      
The differences between the transformational and servant leadership models have significant implications concerning organizational change management. First, transformational leaders have a stronger focus on intellectual stimulation than servant leaders. Servant leader emphasize developing their followers’ personal potential and facilitating their personal growth whereas, transformational leaders emphasize enhancing employees’ innovation and creativity. This concept is important because it illustrates the servant leader’s focus on individual development and the transformational leader’s focus on organizational development. Second, servant leaders place greater emphasis on behaviors associated with valuing individuals at an emotional level and learning from others. Third, transformational leader are more willing to take risks to attain organizational success and eliminate ineffective processes and systems. The servant leader is willing to take initiative but only in the sense of initial strategic planning, new programs for added efficiency, and ultimate responsibility for the company’s success. The transformational leader’s focus on risk taking as an essential component of leadership is significantly greater than that of the servant leader. Fourth, the servant leader is more will to forsake self-advancement and rewards toward the betterment of followers. These differing attributes are analyzed in this paper to determine which model promises to be more effective in implementing organizational change management.

Number of Pages in PDF File: 26

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Financial Analysis and Control - Financial Ratio Analysis (In Spanish)

Ignacio Velez-Pareja 

Universidad Tecnologica de Bolivar Department of Finance and International Business - Instituto de Estudios para el Desarrollo (IDE)

Miguel Ricardo Davila 

affiliation not provided to SSRN
July 14, 2009

Abstract:      
This is a teaching material for a module of Financial analysis at Universidad Tecnologica de Bolivar. The educational material was developed with Professor Ricardo Davila from Universidad Javeriana, Bogota, Colombia. The written material has been modified several times, but the basic content is the same we developed many years ago. This material is an unpublished one.

This chapter is a detailed presentation of different financial ratios commonly used in financial management. However, we make some changes to the traditional way of measuring ratios and many of them are related to items from current and previous period. The usual formulation is to compare all items with other items of the same period. This is not correct for some ratios (i.e. for measuring return of equity and/or total assets. We give detailed examples for each case.

Note: Downloadable document is in Spanish.

Number of Pages in PDF File: 57

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Applied Mergers and Acquisitions

Robert F. Bruner 

University of Virginia - Darden School of Business

Robert F. Bruner, APPLIED MERGERS AND ACQUISITIONS, New York: John Wiley & Sons, 2004 
Abstract:      
Applied Mergers and Acquisitions aims to present a one-volume coverage of practice and research in a way that is both pragmatic and rigorous. This document gives an overview of the book and contains the table of contents, a description of associated software, an excerpt from the preface, and an excerpt from Chapter 1 - these give a sense of the perspective taken here. In brief, the book seeks to:

- Integrate topics and practices. Surveyed here are ethics, strategy, search, due diligence, valuation, accounting, tax, deal design, negotiation, post-merger integration, and leadership of a business development unit. By combining these aspects in one volume it is possible to show linkages among them and what these linkages mean for practitioners.

- Highlight best practices and state of the art. In particular, the book identifies seven new disruptive ideas that are likely to change practice.

- Marry research and practice. The book summarizes academic research findings that bear important insights and implications for practitioners. Case examples give practical illustrations of new ideas. The comprehensive list of writings about M&A that is contained in the book can help the practitioner and the scholar understand better the domain and limits of our knowledge.

- Promote self-paced discovery and continuing learning. M&A is a complex subject and the nexus of numerous disciplines. This book strives to make accessible the ideas in various areas and to lay the foundation for continued exploration. A workbook entitled, Applied Mergers and Acquisitions: Workbook, (Wiley, 2004) contains chapter summaries and problems with worked-through solutions. A CD-ROM contains templates for quantitative analysis of M&A transactions using approaches outlined in the book, additional written lectures dealing with legal aspects of M&A, and more problems with worked-through solutions.

Number of Pages in PDF File: 20

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Insider Trading: An Overview

Stephen M. Bainbridge 

University of California, Los Angeles (UCLA) - School of Law

Abstract:      
Insider trading is one of the most controversial aspects of securities regulation, even among the law and economics community. One set of scholars favors deregulation of insider trading, allowing corporations to set their own insider trading policies by contract. Another set of law and economics scholars, in contrast, contends that the property right to inside information should be assigned to the corporation and not subject to contractual reassignment. Deregulatory arguments are typically premised on the claims that insider trading promotes market efficiency or that assigning the property right to inside information to managers is an efficient compensation scheme. Public choice analysis is also a staple of the deregulatory literature, arguing that the insider trading prohibition benefits market professionals and managers rather than investors. The argument in favor of regulating insider trading traditionally was based on fairness issues, which predictably have had little traction in the law and economics community. Instead, the economic argument in favor of mandatory insider trading prohibitions has typically rested on some variant of the economics of property rights in information. A comprehensive bibliography is included.

Number of Pages in PDF File: 41

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The History of Corporate Governance

Brian R. Cheffins 

University of Cambridge - Faculty of Law; European Corporate Governance Institute (ECGI)
December 1, 2011

OXFORD HANDBOOK OF CORPORATE GOVERNANCE, Mike Wright, Donald Siegel, Kevin Keasey and Igor Filatotchev, eds., Oxford University Press, Forthcoming
University of Cambridge Faculty of Law Research Paper No. 54/2011
ECGI - Law Working Paper No. 184/2012 
Abstract:      
“Corporate governance” first came into vogue in the 1970s in the United States. Within 25 years corporate governance had become the subject of debate worldwide by academics, regulators, executives and investors. This paper traces developments occurring between the mid-1970s and the end of the 1990s, by which point “corporate governance” was well-entrenched as academic and regulatory shorthand. The paper concludes by surveying briefly recent developments and by maintaining that analysis of the inter-relationship between directors, executives and shareholders of publicly traded companies is likely to be conducted through the conceptual prism of corporate governance for the foreseeable future.

Number of Pages in PDF File: 38

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Understanding Risk and Return, the CAPM, and the Fama-French Three-Factor Model

Kent L. Womack 

University of Toronto - Rotman School of Management

Ying Zhang 

affiliation not provided to SSRN

Abstract:      
The first-year MBA finance course regularly includes a discussion of the CAPM. This teaching note extends the typical textbook discussion of CAPM in two ways. First, it provides a step-by-step approach explaining empirically how one can calculate beta and alpha using simple regression. Second, it extends the risk-return asset pricing relationship to the richer three-factor Fama-French model. By examining and controlling for the multiple betas of this model, students can come to understand mutual fund investment styles and multi-factor alphas.

Number of Pages in PDF File: 14

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Understanding the Subprime Mortgage Crisis

Yuliya S. Demyanyk 

Federal Reserve Bank of Cleveland

Otto Van Hemert 

New York University (NYU) - Department of Finance 
December 5, 2008

Abstract:      
Using loan-level data, we analyze the quality of subprime mortgage loans by adjusting their performance for differences in borrower characteristics, loan characteristics, and macroeconomic conditions. We find that the quality of loans deteriorated for six consecutive years before the crisis and that securitizers were, to some extent, aware of it. We provide evidence that the rise and fall of the subprime mortgage market follows a classic lending boom-bust scenario, in which unsustainable growth leads to the collapse of the market. Problems could have been detected long before the crisis, but they were masked by high house price appreciation between 2003 and 2005.

Number of Pages in PDF File: 40

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Exercises in Advanced Risk and Portfolio Management - With Step-by-Step Solutions and Fully Documented Code

Attilio Meucci 

SYMMYS ; Kepos Capital 
August 15, 2010

Abstract:      
Exercises and case studies for a rigorous approach to risk- and portfolio-management. This booklet stems from the review sessions of the six-day ARPM bootcamp.

Contents include:
Advanced multivariate statistics; copula-marginal decomposition
Annualization/projection (FFT, cumulants, simulations)
Pricing: exact; first order (delta/duration); second order (gamma/convexity)
Quest for invariance (stationarity, volatlity clustering, cointegration)
Mutlivariate estimation
- Non-parametric; MLE; shrinkage; robust; Bayesian; missing data
- Generalized hypothesis testing
Dimension reduction
- Statistical (random matrices; principal components; factor analysis)
- Cross-sectional / time-series factor models
- Factors on Demand
Risk management
- VaR/CVaR (marginal Euler decomposition; extreme value theory; Cornish-Fisher; elliptical)
- Generalized objectives (p&l, return, relative return, etc)
- Stochastic dominance/utility theory
Classical portfolio management: mean-variance
Dynamic strategies (option replication, CPPI, utlity maximization)
Advanced portfolio management
- Robust optimization
- Black-Litterman and beyond: fully flexible views
Solution code available at MATLAB Central File Exchange.

Number of Pages in PDF File: 111

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Comparing the Decision Styles of American, Chinese and Japanese Business Leaders

Maris G. Martinsons 

City University of Hong Kong (CityUHK) - Department of Management 

Best Paper Proceedings of Academy of Management Meetings, Washington, DC, August 2001 
Abstract:      
The globalization of industry and commerce creates an imperative to understand how business leaders from different parts of the world make decisions. A recent study used the Decision Styles Inventory to compare the decision making of American business leaders with those of counterparts from Asia's two largest economies - Japan and the People's Republic of China. American, Chinese and Japanese business leaders were each found to have a distinctive decision making style that reflects differing needs for achievement, affiliation, and power. The implications for further research and international business practice are considered.

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Cost of Capital Estimation and Capital Budgeting Practice in Australia

Giang Truong 

affiliation not provided to SSRN

Maurice Peat 

University of Sydney

Graham Partington 

University of Sydney - School of Business - Finance Discipline 

Abstract:      
We use a sample survey to analyse the capital budgeting practices of Australian listed companies. We find that NPV, IRR and Payback are the most popular evaluation techniques. Real options techniques have gained a toehold in capital budgeting but are not yet part of the mainstream. Discounting is typically by the weighted average cost of capital, assumed constant for the life of the project, and with the same discount rate across divisions. The WACC is usually based on target weights for debt and equity. The CAPM is widely used while other asset pricing models are not. The discount rate is reviewed regularly and is updated as conditions change. In most companies, project analysis takes no account of the value of imputation tax credits. Australian corporate practice is generally consistent with the practice of Australian price regulators, except that regulators take into account the value of imputation tax credits when computing the cost of capital.

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The Use of Capital Budgeting Techniques in Businesses: A Perspective from the Western Cape

Pradeep Brijlal 

University of the Western Cape 
August 21, 2008

21st Australasian Finance and Banking Conference 2008 Paper 
Abstract:      
Capital budgeting is one of the most important areas of financial management. There are several techniques commonly used to evaluate capital budgeting projects namely the payback period, accounting rate of return, present value and internal rate of return and profitability index. Recent studies highlight that financial managers worldwide favor methods such as the internal rate of return (IRR) or non-discounted payback period (PP) models over the net present value (NPV), which is the model academics consider superior. In particular this research focused on small, medium and large businesses and investigated a number of variables and associations relating to capital budgeting practices in businesses in the Western Cape province of South Africa.

The results revealed that payback period, followed by net present value, appears to be the most used method across the different sizes and sectors of business. It was also found that 64% of businesses surveyed used only one technique, while 32% of the respondents used between two to three different types of techniques to evaluate capital budgeting decisions. The findings show that the more complicated methods such as IRR and NPV are most favored by the large businesses as compared to the small businesses. The majority of the respondents believed that project definition was the most important stage in thecapital budgeting process. Implementation stage appeared to be the most difficult stage for the manufacturing sector whereas Project definition, Analysis and selection and Implementation were generally rated as being the difficult stages by the retail sector. Project definition and Analysis and selection were found to be the most difficult stages by the service sector. Most businesses used the cost of bank loan as a basis in capital budgeting and more than two thirds of respondents used non-quantitative techniques to consider risk when making a decision on investing in fixed assets.

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The Corporate Cost of Capital and the Return on Corporate Investment

Eugene F. Fama 

University of Chicago - Booth School of Business (Finance Authors)

Kenneth R. French 

Dartmouth College - Tuck School of Business ; National Bureau of Economic Research (NBER) 
April 1998

CRSP Working Paper 

Abstract:      
We estimate two internal rates of return for the non-financial corporate sector: (i) the return on the initial market values of the securities issued by firms, and (ii) the return on the cost of their investments. The return on cost is the return delivered by firms on investment outlays. The return on value is an estimate of the overall corporate cost of capital, that is, the return on investment required by the capital market. The estimate of the corporate cost of capital for 1950-96 is 10.72 percent. The return on cost is larger, 12.11 percent, so on average corporate investment seems to be profitable. A byproduct of calculating these returns is information about the history of corporate earnings, investment, and financing decisions that is perhaps more interesting than the returns themselves.

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Optimal Asset Allocation in Asset Liability Management

Jules H. Van Binsbergen 

Stanford University - Graduate School of Business; Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Michael W. Brandt 

Duke University - Fuqua School of Business; National Bureau of Economic Research (NBER)
September 2006

EFA 2007 Ljubljana Meetings Paper 
Abstract:      
We study the impact of regulations on the investment decisions of a defined benefits pension plan. We assess the influence of ex ante (preventive) and ex post (punitive) risk constraints on the gains to dynamic, as opposed to myopic, decision making. We find that preventive measures, such as Value-at-Risk constraints, tend to decrease the gains to dynamic investment. In contrast, punitive constraints, such as mandatory additional contributions from the sponsor when the plan becomes underfunded, lead to very large utility gains from solving the dynamic program. We also show that financial reporting rules have real effects on investment behavior. For example, the current requirement to discount liabilities at a rolling average of yields, as opposed to at current yields, induces grossly suboptimal investment decisions.

Crisis Instability and US-China Relations: The Present (If Not Clear) Danger

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Crisis Instability and US-China Relations: The Present (If Not Clear) Danger

Avery Goldstein 

affiliation not provided to SSRN
2011

APSA 2011 Annual Meeting Paper 
Abstract:      
Two concerns have driven much of the debate about international security in the post Cold War era. The principal concern has been the potentially deadly mix of nuclear proliferation, rogue states, and international terrorists, a concern that became clearly dominant after the 9/11 attacks. The second concern, one whose prominence has waxed and waned since the mid-1990s, is the potentially disruptive impact of China if it emerges as a peer competitor of the United States, challenging an international order established during the era of American preponderance. Reflecting this second concern, some have expressed reservations about the dominant post 9/11 security agenda, arguing that China could challenge American global interests in ways that terrorists and rogue states cannot. In this essay, I raise a different concern prompted by China’s changing role in the early 21st century. I suggest that a more pressing issue, one to which not enough attention has been paid, is the danger of instability during a Sino-American crisis. For at least the next decade, while China remains relatively weak, the gravest danger in Sino-American relations is the possibility they will find themselves in a crisis that could escalate to open military conflict. In contrast to the long term prospect for a new great power rivalry between the US and China that ultimately rests on uncertain forecasts about big shifts in national capabilities and debatable claims about the motivations of the two countries, the danger of instability in a crisis involving these two nuclear-armed states is clear and present. It is a danger that rests neither on hypothetical future capabilities nor questionable assumptions about each side’s intentions. In what follows, I identify not just preemptive pressures that could pose the most serious risk during such a crisis, but also related, if slightly less dramatic, incentives to use force that could produce instability.

Why did the Crisis of 2008 Happen?

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Why did the Crisis of 2008 Happen?

Nassim Nicholas Taleb 

NYU-Poly 
August 26, 2010

Abstract:     
This paper - while a standalone invited essay written for a special crisis issue of New Political Economy - synthesizes the various technical documents by the author as related to the financial crisis. It can also be used as a technical companion to The Black Swan (2007-2010).
Number of Pages in PDF File: 5

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Cross Hedging with Single Stock Futures

Chris Brooks 

University of Reading - ICMA Centre

Ryan J. Davies 

Babson College - Finance Division

Sang Soo Kim 

The Korea Development Bank
July 1, 2006

Abstract:      
This study evaluates the efficiency of cross hedging with single stock futures (SSF) contracts. We propose a new technique for hedging exposure to an individual stock that does not have options or exchange-traded SSF contracts written on it. Our method selects as a hedging instrument a portfolio of SSF contracts which are selected based on how closely matched their underlying firm characteristics are with the characteristics of the individual stock we are attempting to hedge. We investigate whether using cross-sectional characteristics to construct our hedge can provide hedging efficiency gains over that of constructing the hedge based on return correlations alone. Overall, we find that the best hedging performance is achieved through a portfolio that is hedged with market index futures and a SSF matched by both historical return correlation and cross-sectional matching characteristics. We also find it preferable to retain the chosen SSF contracts for the whole out-of-sample period while re-estimating the optimal hedge ratio at each rolling window.

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Cash Flow, Investment, and Hedging

George Allayannis 

University of Virginia - Darden School of Business

Abon Mozumdar 

Virginia Polytechnic Institute & State University - Department of Finance
June 2000

AFA 2001 New Orleans Meetings 
Abstract:      
Using a sample of S&P 500 non-financial firms between 1993 and 1995, we examine whether the use of foreign currency derivatives by firms with significant exposure to exchange-rate risk enables them to reduce their dependence on internal cash flow for making investments, as predicted by Froot, Scharfstein, and Stein's (1993) model of optimal hedging. Consistent with our hypothesis, we find that while hedgers and non-hedgers have similar sensitivities of investment to net cash flow, sensitivity to unhedged cash flow is significantly lower for hedgers than non-hedgers. This result is robust to the use of alternative specifications of cash flow, investment, and Q; to further controls for leverage, size, and diversification; and to controls for the endogeneity of the hedging decision. Finally, we find additional evidence supporting the effectiveness of hedging as indicated in the above model: hedgers reduce the volatility of net cash flow significantly more than non-hedgers.