IDEAS home Printed from https://ideas.repec.org/p/zbw/cefswp/20121.html
   My bibliography  Save this paper

Do investors value cash flow stability of listed infrastructure funds?

Author

Listed:
  • Bitsch, Florian

Abstract

I analyze cash flow characteristics of listed infrastructure investment companies and funds and compare this unique infrastructure sample with a non-infrastructure reference group. I confirm that infrastructure investment provide more stable cash flows than non-infrastructure investments. However, I do not find that investors positively value this cash flow stability. Instead, more volatile cash flows are valued with a premium. On the other hand, earnings management proxied by accrual volatility is valued with a discount. My paper offers evidence that higher infrastructure investments in general are valued with a positive 'infrastructure premium' that is not driven by more stable cash flows. I find additional indications that transparent financial and governance structures as well as regulatory risk play a significant role for the valuation of infrastructure investment companies and funds.

Suggested Citation

  • Bitsch, Florian, 2012. "Do investors value cash flow stability of listed infrastructure funds?," CEFS Working Paper Series 2012-01, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    • Handle: RePEc:zbw:cefswp:20121
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/55145/1/684665379.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mark H. Lang & Karl V. Lins & Darius P. Miller, 2003. "ADRs, Analysts, and Accuracy: Does Cross Listing in the United States Improve a Firm's Information Environment and Increase Market Value?," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 317-345, May.
    2. Licht, Amir N. & Goldschmidt, Chanan & Schwartz, Shalom H., 2007. "Culture rules: The foundations of the rule of law and other norms of governance," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 659-688, December.
    3. Fang, Vivian W. & Noe, Thomas H. & Tice, Sheri, 2009. "Stock market liquidity and firm value," Journal of Financial Economics, Elsevier, vol. 94(1), pages 150-169, October.
    4. Djankov, Simeon & La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei, 2008. "The law and economics of self-dealing," Journal of Financial Economics, Elsevier, vol. 88(3), pages 430-465, June.
    5. Paul Gompers & Joy Ishii & Andrew Metrick, 2003. "Corporate Governance and Equity Prices," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 107-156.
    6. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2006. "What Works in Securities Laws?," Journal of Finance, American Finance Association, vol. 61(1), pages 1-32, February.
    7. Degeorge, Francois & Patel, Jayendu & Zeckhauser, Richard, 1999. "Earnings Management to Exceed Thresholds," The Journal of Business, University of Chicago Press, vol. 72(1), pages 1-33, January.
    8. Bitsch, Florian & Buchner, Axel & Kaserer, Christoph, 2010. "Risk, return and cash flow characteristics of infrastructure fund investments," EIB Papers 4/2010, European Investment Bank, Economics Department.
    9. Mark Lang & Jana Smith Raedy & Michelle Higgins Yetman, 2003. "How Representative Are Firms That Are Cross‐Listed in the United States? An Analysis of Accounting Quality," Journal of Accounting Research, Wiley Blackwell, vol. 41(2), pages 363-386, May.
    10. Yakov Amihud & Baruch Lev, 1981. "Risk Reduction as a Managerial Motive for Conglomerate Mergers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 605-617, Autumn.
    11. Georg Inderst, 2009. "Pension Fund Investment in Infrastructure," OECD Working Papers on Insurance and Private Pensions 32, OECD Publishing.
    12. Leuz, Christian & Nanda, Dhananjay & Wysocki, Peter D., 2003. "Earnings management and investor protection: an international comparison," Journal of Financial Economics, Elsevier, vol. 69(3), pages 505-527, September.
    13. Rountree, Brian & Weston, James P. & Allayannis, George, 2008. "Do investors value smooth performance?," Journal of Financial Economics, Elsevier, vol. 90(3), pages 237-251, December.
    14. Kaserer, Christoph & Lahr, Henry & Liebhart, Valentin & Mettler, Alfred, 2010. "The time-varying risk of listed private equity," Journal of Financial Transformation, Capco Institute, vol. 28, pages 87-93.
    15. Hyun-Han Shin & Rene M. Stulz, 2000. "Firm Value, Risk, and Growth Opportunities," NBER Working Papers 7808, National Bureau of Economic Research, Inc.
    16. Inderst, Georg, 2010. "Infrastructure as an asset class," EIB Papers 3/2010, European Investment Bank, Economics Department.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ben Ammar, Semir & Eling, Martin, 2015. "Common risk factors of infrastructure investments," Energy Economics, Elsevier, vol. 49(C), pages 257-273.
    2. Frédéric Blanc-Brude & Timothy Whittaker & Simon Wilde, 2017. "Searching for a listed infrastructure asset class using mean–variance spanning," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 31(2), pages 137-179, May.
    3. Ben Ammar, Semir & Eling, Martin, 2013. "Common Risk Factors of Infrastructure Firms," Working Papers on Finance 1307, University of St. Gallen, School of Finance.
    4. Teti, Emanuele & Tului, Stefano, 2020. "Do mergers and acquisitions create shareholder value in the infrastructure and utility sectors? Analysis of market perceptions," Utilities Policy, Elsevier, vol. 64(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ugur Lel, 2019. "The role of foreign institutional investors in restraining earnings management activities across countries," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(6), pages 895-922, August.
    2. Smith, Deborah Drummond & Gleason, Kimberly C. & Kannan, Yezen H., 2021. "Auditor liability and excess cash holdings: Evidence from audit fees of foreign incorporated firms," International Review of Financial Analysis, Elsevier, vol. 78(C).
    3. Kamarudin, Khairul Anuar & Ariff, Akmalia M. & Jaafar, Aziz, 2020. "Investor protection, cross-listing and accounting quality," Journal of Contemporary Accounting and Economics, Elsevier, vol. 16(1).
    4. Bruno, Valentina & Claessens, Stijn, 2010. "Corporate governance and regulation: Can there be too much of a good thing?," Journal of Financial Intermediation, Elsevier, vol. 19(4), pages 461-482, October.
    5. Jing Zhou & On Kit Tam & Wei Lan, 2016. "Solving agency problems in Chinese family firms – A law and finance perspective," Asian Business & Management, Palgrave Macmillan, vol. 15(1), pages 57-82, February.
    6. Sarkissian, Sergei & Schill, Michael J., 2012. "The nature of the foreign listing premium: A cross-country examination," Journal of Banking & Finance, Elsevier, vol. 36(9), pages 2494-2511.
    7. Christian Leuz, 2010. "Different approaches to corporate reporting regulation: How jurisdictions differ and why," Accounting and Business Research, Taylor & Francis Journals, vol. 40(3), pages 229-256.
    8. Rountree, Brian & Weston, James P. & Allayannis, George, 2008. "Do investors value smooth performance?," Journal of Financial Economics, Elsevier, vol. 90(3), pages 237-251, December.
    9. Gordon, Elizabeth A. & Hsu, Hsiao-Tang & Huang, Huichi, 2020. "Peer R&D disclosure and corporate innovation: Evidence from American depositary receipt firms," Advances in accounting, Elsevier, vol. 49(C).
    10. Hail, Luzi & Leuz, Christian, 2009. "Cost of capital effects and changes in growth expectations around U.S. cross-listings," Journal of Financial Economics, Elsevier, vol. 93(3), pages 428-454, September.
    11. Nuno Fernandes & Ugur Lel & Darius P. Miller, 2008. "Escape from New York: the market impact of SEC Rule 12h-6," International Finance Discussion Papers 945, Board of Governors of the Federal Reserve System (U.S.).
    12. Fernandes, Nuno & Lel, Ugur & Miller, Darius P., 2010. "Escape from New York: The market impact of loosening disclosure requirements," Journal of Financial Economics, Elsevier, vol. 95(2), pages 129-147, February.
    13. Uribe-Bohorquez, María-Victoria & Martínez-Ferrero, Jennifer & García-Sánchez, Isabel-María, 2018. "Board independence and firm performance: The moderating effect of institutional context," Journal of Business Research, Elsevier, vol. 88(C), pages 28-43.
    14. Allayannis, George & Lel, Ugur & Miller, Darius P., 2012. "The use of foreign currency derivatives, corporate governance, and firm value around the world," Journal of International Economics, Elsevier, vol. 87(1), pages 65-79.
    15. Feifei Zhu, 2014. "Corporate Governance and the Cost of Capital: An International Study," International Review of Finance, International Review of Finance Ltd., vol. 14(3), pages 393-429, September.
    16. Christian Leuz & Peter D. Wysocki, 2016. "The Economics of Disclosure and Financial Reporting Regulation: Evidence and Suggestions for Future Research," Journal of Accounting Research, Wiley Blackwell, vol. 54(2), pages 525-622, May.
    17. Dechow, Patricia & Ge, Weili & Schrand, Catherine, 2010. "Understanding earnings quality: A review of the proxies, their determinants and their consequences," Journal of Accounting and Economics, Elsevier, vol. 50(2-3), pages 344-401, December.
    18. Georgieva, Dobrina & Jandik, Tomas, 2012. "Alternative paths of convergence toward U.S. market and legal regulations: Cross-listing vs. merging with U.S. bidders," Journal of Multinational Financial Management, Elsevier, vol. 22(5), pages 230-251.
    19. G. Andrew Karolyi & Dawoon Kim & Rose Liao, 2020. "The Theory and Practice of Investor Relations: A Global Perspective," Management Science, INFORMS, vol. 66(10), pages 4746-4771, October.
    20. Fidrmuc, Jana P. & Korczak, Adriana & Korczak, Piotr, 2013. "Why does shareholder protection matter for abnormal returns after reported insider purchases and sales?," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1915-1935.

    More about this item

    Keywords

    infrastructure funds; cash flow volatility;

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:cefswp:20121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwtumde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.