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We use randomized grants to generate shocks to capital stock for a set of Sri Lankan microenterprises. We find the average real return to capital in these enterprises is 4.6%-5.3% per year), substantially higher than market interest rates. We then examine the heterogeneity of treatment effects. Returns are found to vary with entrepreneurial ability and with household wealth, but not to vary with measures of risk aversion or uncertainty. Treatment impacts are also significantly larger for enterprises owned by males; indeed, we find no positive return in enterprises owned by females.

We present new data on effective corporate income tax rates in 85 countries in 2004. The data come from a survey, conducted jointly with PricewaterhouseCoopers, of all taxes imposed on \"the same\" standardized mid-size domestic firm. In a cross-section of countries, our estimates of the effective corporate tax rate have a large adverse impact on aggregate investment, FDI, and entrepreneurial activity. Corporate tax rates are correlated with investment in manufacturing but not services, as well as with the size of the informal economy. The results are robust to the inclusion of many controls.

Using data on more than 56,000 enterprises in 90 countries, this study finds that objective conditions in the business environment vary substantially across firms of different sizes and that there are important nonlinearities in their impact on employment growth. The study focuses on four areas: access to finance, business regulations, corruption, and infrastructure. The results, particularly on the impacts of finance and corruption on growth, depend on whether and how the analysis accounts for the possible endogeneity of the business environment. Controlling for endogeneity revises the finding that small firms benefit most from access to finance, particularly for sources of finance associated with investment and growth. The findings are also sensitive to how “small” is defined. Differentiating micro (fewer than 10 employees) from other small firms shows that, while small firms can be disadvantaged in such an environment, micro firms tend to be proportionally less affected by a weak business climate—and, on occasion, it can help them to grow. Overall, allowing different size classifications provides insights into the impact of the business environment that are lost in more aggregate analyses.

Microfinance banks use group-based lending contracts to strengthen borrowers' incentives for diligence, but the contracts are vulnerable to free-riding and collusion. We systematically unpack microfinance mechanisms through ten experimental games played in an experimental economics laboratory in urban Peru. Risk-taking broadly conforms to theoretical predictions, with dynamic incentives strongly reducing risk-taking even without group-based mechanisms. Group lending increases risk-taking, especially for risk-averse borrowers, but this is moderated when borrowers form their own groups. Group contracts benefit borrowers by creating implicit insurance against investment losses, but the costs are borne by other borrowers, especially the most risk averse.

The world’s cruise corporations regularly purchase large, luxurious cruise ships. In accordance with the Cruise Line International Association, 33 new ocean cruise ships will be available on the market by 2020. These types of capital expenditures are associated with large financial outlays of up to $ 1 billion. The leading cruise corporations are not able to finance purchases of new units with their own resources and therefore look for different solutions. Available publications focus mainly on issues related to purchasing cargo ships, not cruise ships. The objective of the article is to identify sources of funding of new cruise ships. Our analysis identifies the average capital expenditure associated with purchasing new cruise ships and factors that influence it. The most popular methods for raising such capital are also provided. Our research methodology relies on data exploration method, a desk research method and comparative analysis.

We study market reaction to the announcements of the selected country hosting the Summer and Winter Olympic Games, the World Football Cup, the European Football Cup and World and Specialized Exhibitions. We generalize previous results analyzing a large number and different types of mega-events, evaluate the effects for winning and losing countries, investigate the determinants of the observed market reaction and control for the ex ante probability of a country being a successful bidder. Average abnormal returns measured at the announcement date and around the event are not significantly different from zero. Further, we find no evidence supporting that industries, that a priori were more likely to extract direct benefits from the event, observe positive significant effects. Yet, when we control for anticipation, the stock price reactions around the announcements are significant.

Methane digesters may offer dairy producers a way to lower production costs by becoming self-sufficient in electricity production. In addition, the technology may offer additional income through surplus electricity sales and fertilizer and bedding savings as well. However, the typical methane digester is a large and irreversible capital investment characterized by value uncertainty. Analyzed in a real option framework, the theory suggests a potential explanation for why producers in states like Pennsylvania require significant grant funding to adopt the technology, namely, as monetary compensation for the uncertainty in the value of the completed project. The study presents an empirical application.

A stochastic dual model of investment under uncertainty is used to investigate structural adjustment in the Finnish hog industry. Value function restrictions are found to be comparable to those in existing dual models assuming deterministic state variables. The model also allows for an asymmetry in investment response during capital expansion and contraction phases. Empirical results show that investments respond negatively to increased uncertainty and that labor adjusts more slowly during contraction phases than during expansions. Results on economies of size, uncertainty effects, and adjustment rigidities have important implications for hog industry response to Finland's entry into the EU.

This paper examines the effects of local industry agglomeration on investments in equipment and machinery by businesses located in Maine. Descriptive analysis of the data indicates that a substantial amount of the investments in nonmetropolitan counties and small towns occurred in high-agglomeration county-industries. However, econometric results imply that, while positive, the effects of agglomeration on investment are somewhat modest. Further analysis of industry-specific descriptive statistics provides mixed evidence on the connection between business investment and local industry agglomeration. These results suggest that local policymakers should proceed with caution when implementing cluster-based economic development strategies.