{"title":"Rehabilitation of the Internal Rate of Return","authors":"N. Kulakov, Anastasia Blaset","doi":"10.2139/ssrn.3593173","DOIUrl":"https://doi.org/10.2139/ssrn.3593173","url":null,"abstract":"The Internal Rate of Return (IRR) is a widely used investment performance measure. However, due to well-known pitfalls and wrong assumptions rather attributed than inherent in the IRR technique some experts on capital budgeting recommend either using the IRR rule very carefully or avoiding it entirely. The paper discusses the most significant pitfalls concerning the IRR in some cases appear to be common misconceptions, while the actual pitfalls are related to the NPV rather than the IRR. The paper affirms that: (i) if a project is conventional, the IRR being the NPV function root, is a rate of return or an interest rate and much better than any other modified IRR; (ii) irrelevant IRRs are due to an imperfection of the NPV method that should not be used for evaluating nonconventional projects; (iii) if a project is nonconventional the GNPV method should be used that is an extension of the NPV method from one to two different discount rates for investment and loan; (iv) the GIRR and GERR are rate of return and rate of cost for nonconventional project.","PeriodicalId":250596,"journal":{"name":"Fisher: Accounting & MIS (Topic)","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134356644","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Carlos Piñeiro-Sánchez, Pablo de Llano-Monelos, Manuel Rodríguez - López
{"title":"IT Investments, Intangibles, and Financial Performance, Revisited: A RBV-Based Empirical Analysis","authors":"Carlos Piñeiro-Sánchez, Pablo de Llano-Monelos, Manuel Rodríguez - López","doi":"10.2139/ssrn.2765475","DOIUrl":"https://doi.org/10.2139/ssrn.2765475","url":null,"abstract":"Drawing on the resource - based view of the firm (RBV), this study aims at evaluating the relation between current IT resources and capabilities and corporate performance, as measured by the probability of default. We use a novel experimental design to move towards a prospective approach, and make predictions about whether current IT resources and capabilities will affect future financial performance. We provide evidence that the ability of the company to survive as an independent economic unit is modified by IT decentralization, flexibility, and the development of synergistic bundles of IT resources and capabilities, once controlled for dimension, industry, and financial resources. Our findings are compatible with time lags and long-term effects on financial performance previously reported by IT literature. We also provide evidence that the ability to survive is a suitable measure of performance, within the RBV frame.","PeriodicalId":250596,"journal":{"name":"Fisher: Accounting & MIS (Topic)","volume":"35 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-04-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134367745","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Sumit Agarwal, Gene Amromin, Itzhak Ben-David, S. Chomsisengphet, Douglas D. Evanoff
{"title":"Market-Based Loss Mitigation Practices for Troubled Mortgages Following the Financial Crisis","authors":"Sumit Agarwal, Gene Amromin, Itzhak Ben-David, S. Chomsisengphet, Douglas D. Evanoff","doi":"10.2139/ssrn.1690627","DOIUrl":"https://doi.org/10.2139/ssrn.1690627","url":null,"abstract":"The meltdown in residential real-estate prices that commenced in 2006 resulted in unprecedented mortgage delinquency rates. Until mid-2009, lenders and servicers pursued their own individual loss mitigation practices without being significantly influenced by government intervention. Using a unique dataset that precisely identifies loss mitigation actions, we study these methods—liquidation, repayment plans, loan modification, and refinancing— and analyze their effectiveness. We show that the majority of delinquent mortgages do not enter any loss mitigation program or become a part of foreclosure proceedings within 6 months of becoming distressed. We also find that it takes longer to complete foreclosures over time, potentially due to congestion. We further document large heterogeneity in practices across servicers, which is not accounted for by differences in borrower population. Consistent with the idea that securitization induces agency conflicts, we confirm that the likelihood of modification of securitized loans is up to 70% lower relative to portfolio loans. Finally, we find evidence that affordability (as opposed to strategic default due to negative equity) is the prime reason for redefault following modifications. While modification terms are more favorable for weaker borrowers, greater reductions in mortgage payments and/or interest rates are associated with lower redefault rates. Our regression estimates suggest that a 1 percentage point decline in mortgage interest rate is associated with a nearly 4 percentage point decline in default probability. This finding is consistent with the Home Affordable Modification Program (HAMP) focus on improving mortgage affordability.","PeriodicalId":250596,"journal":{"name":"Fisher: Accounting & MIS (Topic)","volume":"11 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2010-10-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127245918","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Differential Earnings Management to Avoid Earnings Declines And Losses Across Publicly and Privately-Held Banks","authors":"Anne Beatty, B. Ke, K. Petroni","doi":"10.2139/ssrn.204592","DOIUrl":"https://doi.org/10.2139/ssrn.204592","url":null,"abstract":"There is a documented empirical regularity that publicly-held firms report fewer small losses and fewer small declines in earnings than expected. This paper betters our understanding of this observed phenomenon by testing for this regularity on a sample of public and private banks during 1987-1998. We argue that the incentives to manage the earnings stream to achieve simple benchmarks such as positive earnings and increases in earnings should be higher for publicly-held banks. Consistent with our predictions we find that private banks with earnings near zero are significantly more likely to report losses than public banks with earnings near zero even after controlling for bank size, cash flows, and differences in the types of loans written. Similarly, private banks with changes in earnings that are near zero are significantly more likely than public banks to report a decline in earnings than an increase. In addition, we also find that the length of the string of consecutive earnings increases, even after controlling for the length of the string of consecutive increases in cash flows, is greater for public banks. These three tests all suggest that public banks face a greater incentive than private banks to achieve simple earnings benchmarks.","PeriodicalId":250596,"journal":{"name":"Fisher: Accounting & MIS (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125755289","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}