Impacts on Agency Cost Theory

Impacts on Agency Cost Theory The main purpose of this research is to investigate how the determinants of the capital structure (leverage) and the dividend payout policy impact the agency cost theory. Literature review part picked up the relevant material related to agency theory, leverage, and dividends payout policy. The literature review section goes through the agency cost literature, and explores the financial policies; the capital structure (leverage), and the dividend payout policy and that these policies would influence the agency cost theory. 2.1 Agency theory Literature The notion of the agency theory is widely used in economics, finance, marketing, legal, and social sciences; Jensen and Meckling (1976) initiated and developed it. Capital structure (leverage) for the firms is determined by agency costs, i.e., costs related to conflict of interests between various groups including managers, which have claims on the firm’s resources (Harris and Raviv, 1991). Jensen and Meckling (1976) defined the agency relationship as â€Å"a contract under which one or more persons (the principal) engage another person (the agent), to perform some service on their behalf which involves delegating some decision making authority to the agent† pp.308. Assuming that both parties utility maximizes, the agents are not possible to act in the best interest of the principal. Furthermore, Jensen and Meckling (1976) contended that the principal can limit divergences from his interest by establishing appropriate incentives for the agent, and by incurring monitoring costs (pecuniary and non pecuniary), which are designed to limit the aberrant activities of the agent. Jensen and Meckling (1976) argued that the agency costs are unavoidable, since the agency costs are borne entirely by the owner. Jensen and Meckling (1976) contended that the owner is motivated to see these costs minimized. Authors who initiated and developed the agency theory have argued that if the owner manages a wholly owned firm, then he can make operating decisions that maximise his utility. The agency costs are generated if the owner manager sells equity claims on the firms, which are identical to his.  It also generated by the divergence between his interest and those of the outside shareholders, since he then bears only a fraction of the costs of any non-pecuniary benefits he takes out maximizing his own utility (Jensen and Meckling, 1976). Jensen and Meckling (1976) suggested two types of conflicts in the firm; First of all, the conflict between shareholders and managers arises because managers hold less than a hundred percent of the residual claim. Therefore, they do not capture the entire gain from their profit enhancement activities, but they do bear the entire cost of these activities. For example, managers can invest less effort in managing firm resources and may be able to transfer firm resources to their own, personal benefit, i.e., by consuming â€Å"perquisites† such as a fringe benefits. The manager bears the entire cost of refraining from these activities but captures only a fraction of the gain. As a result, managers over indulge in these interests relative to the level that would maximize the firm value. This inefficiency reduced the large fraction of the equity owned by the manager. Holding constant the manager’s absolute investment in the firm, increases in the fraction of the firm financed by debt increases the manager’s share of the equity and mitigates the loss from conflict between the managers and shareholders. Furthermore, as pointed out by Jensen (1986), since debt commits the firm to pay out cash, it reduces the amount of free cash flow available to managers to engage in these types of interests.  As a result, this reduction of the conflict between managers and shareholders will constitute the benefit of debt financing. Second, they also suggested that the conflict between debt holders and shareholders arises because the debt contract, gives shareholders an incentive to invest sub optimally. Especially when the debt contract provides that, if an investment yields large returns, well above the face value of the debt, shareholders capture most of the gain. However, if the investment fails, debt holders bear the consequences. Therefore, shareholders may benefit from investing in very risky projects, even if they are under valued; such investments result in an adverse in the value of debt. Lasfer (1995) argued that debt exacerbates the conflict between debt holders and shareholders. Shareholders will benefit from investments in risky projects at the expense of debt holders.  If the investment yields higher return than the face value of debt, shareholders capture most of the gain, however, if the investment fails, debt holders lose, given that. Therefore, shareholders protected by the limited liability. On the other hand, if the benefits captured by debt holders reduce the returns to shareholders, then an incentive to reject positive net present projects has created. Thus, the debt contract gives shareholders incentives to invest sub optimally. In addition, Myers (1977) argued that the firms with many growth opportunities should not be financed by debt, to reduce the negative net value projects.   Furthermore, some of arguments have been debated that the magnitude of the agency costs varies among firms. It will depend on the tastes of managers, the ease with which they can exercise their own preferences as opposed to value maximization in decision making, and the costs of monitoring and bonding activities. Therefore, the agency costs depend upon the cost of measuring the manager’s performance and evaluating it (Jensen and Meckling, 1976). (Jensen, 1986) either points out that when firms make their financing decision, they evaluate the advantages that may arise from the resolution of the conflicts between managers, shareholders and from long run tax shields.   In addition, Lasfer (1995) argues that debt finance creates a motivation for managers to work harder and make better investment decisions. On the other hand, debt works as a disciplining tool, because default allows creditors the option to force the firm into liquidation. Debt also generates information that can be used by investors to evaluate major operating decisions including liquidation (Harris and Raviv, 1990). Jensen (1986) debated that when using debt without retention of the proceeds of the issue, bonds the managers to meet their promise to pay future cash flows to the debt holders. Thus, debt can be an effective substitute for dividends. By issuing debt in exchange for stock, managers are bonding their promise to pay out future cash flows in a way that cannot be accomplished by simple dividend increases. Consequently, managers give recipients of the debt the right to take the firm to the bankruptcy court if they do not maintain their commitment to make the interest and principle payments. Thus, debt reduces the agency costs of free cash flow by reducing the cash flow available for spending at the discretion of managers. Jensen (1986) claimed that these control effects of debt are a potential determinant of capital structure. In practice, it is possible to reduce the owner manager non pecuniary benefits; by using these instruments external auditing, formal control systems, budget restrictions, and the establishment of incentive compensation systems serve to identify the manager’s interests more closely with those of the outside shareholders (Jensen and Meckling, 1976). Jensen (1986) suggested that leverage and dividend may act as a substitute mechanism to reduce the agency costs. Agency cost models predict that dividend payments can reduce the problems related to information asymmetry. Dividend payments might be consider also as a mechanism to reduce cash flow under management control, and help to mitigate the agency problems (Rozeff, 1982, and Easterbrook, 1984). Therefore, paying dividends may have a positive impact on the firms value. â€Å"Agency theory posits that the dividend mechanism provides an incentive for managers to reduce the costs related to the principal agent relationship, one way to reduce agency costs is to increase dividends† Baker and Powell (1999). They also claim that firm use the dividends use as a tool to monitor the management performance. Moreover, Easterbrook (1984) and Jensen (1986) argue that agency costs exist in firms because managers may not always want to maximize shareholder’s wealth due to the separation of ownership and control. Jensen (1986) addresses the free cash flow theory, in terms of this theory the conflict of interest between managers and stockholders is rooted in the presence of informational and self interest behavior. He defines the free cash flow as â€Å"cash flow in excess of that required to fund all projects that have positive net present value when discounted at the relevant cost of capital† (Jensen,1986). Within the context of the free cash flow hypothesis, firms prefer to increase their dividends and distribute the excess free cash flow in order to reduce agency costs. Consequently, markets react positively to this type of information. This theory is attractive because it is consistent with the evidence about investment and financing decisions (Jensen, 1986, Frankfurter and Wood, 2002). 2.2 Leverage Literature This section reviews the determinants of capital structure by different relevant literatures. Titman and Wessels (1988) study is considered to be one of the leading studies in the developed markets. They tried to extend the empirical work in capital structure theory by examining a much broader set of capital structure theories, and to analyze measures of short term, long term, and convertible debt. The data covers the US industrial companies from 1974 to 1982, and they used a factor analytic approach for estimating the impact of unobservable attributes on the choice of corporate debt ratios. As a result, the study confirms these factors, collateral values of assets, non-debt tax shields, growth, and uniqueness of the business, industry classification, firm size, and firm profitability. They also found that there is a negative relationship between debt levels and the uniqueness of the business. In addition, short term debt ratios have a negative relationship to firm size. However, they do not provide support for the effect on debt ratios arising from non debt tax shields, volatility, collateral value of assets, and growth. In Jordan, Al-Khouri and Hmedat (1992) aimed to find the effect of the earnings variability on capital structure of Jordanian corporations from the period from 1980 to 1988. They included 65 firms. The study used a multivariate regression approach with financial leverage as the dependent variable measured in three ways; first, long term debt over total assets, secondly, short term debt over total assets, and finally, short term debt plus long term debt over total assets. The standard deviation of the earnings variability and the size of the firm measured as independent variables. They concluded that the firm size is considered as a significant factor in determining the capital structure of the firm, and insignificant relationship between the earning variability and financial leverage of the firm. Furthermore, they suggest that the type of industry is not considered as a significant factor in determining the capital structure of the firm. Rajan and Zingales (1995) provided international evidence about the determinants of capital structure. They examined the capital structure in other countries related to factors similar to those that influence United States firms. The database contains 2583 companies in the G7 countries. They used regression analysis with the firm’s leverage (total debt divided by total debt plus total equity) as the dependent variable. Tangible assets, market to book ratio, firm size, and firm profitability used as independent variables. They found that in market bases firms with a lot of fixed assets are not highly levered, however, they supported that a positive relationship exists between tangible assets, and firms size, and capital structure (leverage). On the contrary, they confirmed that there is a negative relationship between leverage and the market to book ratio, and profitability. From the capital structure literature, Ozkan (2001) also investigated that the determinants of the target capital structure of firms and the role of the adjustment process in the UK using a sample of 390 firms. The multiple regression approach (panel data) was used to measure the debts by total debt to total assets, on the one hand. He also used in his model, non debt tax shield, firm size, liquidity, firm profitability, and firm growth as an independent variables. He confirmed that the profit, liquidity, non debt tax shield, and growth opportunities have a negative relationship to capital structure (leverage). Finally, he supported that there is a positive effect arising from size of firms on leverage. The study provided evidence that the UK firms have long term target leverage ratios and that they adjust quickly to their target ratios. The study by Booth et al. (2001) is considered as a one of the leading studies in the developing countries. It aimed to assess whether capital structure theory is applicable across developing countries with different institutional structures. The data include balance sheets and income statements for the largest companies in each selected country from the year 1980 to 1990. It included 10 developing countries: India, Pakistan, Thailand, Malaysia, Zimbabwe, Mexico, Brazil, Turkey, Jordan, and Korea. The study used multivariate regression analysis with dependent variables; total debt ratio, long term book debt ratio, and long term market to debt ratio. The independent variables are; average tax rate, tangibility, business risk, firm size, firm profitability, and market to book ratio. Booth et al. found that the more profitable the firm the lower the debt ratio, regardless how the debt ratio is defined. In addition, the higher the tangible assets mix, the higher is the long term debt ratio but the smaller is the total debt ratio. Finally, it concluded that debt ratios in developing countries seem to be affected in the same way by the same set of variables that are significant in developed countries. Voulgaris et al. (2004) investigated the determinants of capital structure for Greek manufacturing firms. The study used panel data of two random samples one for small and medium sized enterprises (SMEs) including 143 firms and another for large sized enterprises (LSEs) including 75 firms for the period from 1988 to 1996. It used a leverage model as a dependent variable (short run debt ratio, long run debt ratio, and total debt ratio). On the other hand, It used firm size, asset structure, profitability, growth rate, stock level, and receivables as independent variables. The study suggested that there are similarities and differences in the determinants of capital structure among the two samples. The similarities include that the firm size and growth opportunities positively related to leverage. While, they confirm that the profitability has a negative relationship to leverage. Moreover, they pointed out the differences that the inventory period, and account receivables collection period have been found as determinants of debt in SMEs but not in LSEs. Liquidity doest not affect LSEs leverage, but it affects the SMEs. Finally, they also suggested that there is a positive relationship between profit margins and short term debt ratio only for SMEs. Voulgaris et al. (2004) have debated this arguments as; ‘‘the attitude of banks toward small sized firms should be changed so they provide easier access to long-term debt financing’’. In addition, â€Å"enactment of rules that will allow transparency of operations in the Greek stock market and a healthier development of the newly established capital market for SMEs will assist Greek firms into achieving a stronger capital structure’’. 2.3 Dividends payout ratio literature Dividend payout ratios vary between firms and the dividend payout policy will impact the agency cost theory. Rozeff (1982) investigated in his study that the dividends policy will be rationalize by appealing the transaction cost and agency cost associated with external finance. Moreover, Rozeff (1982) had found evidences supporting how the agency costs influence the dividends payout ratio. He found that the firms have distributed lower dividend payout ratios when they have a higher revenue growth, because this growth leads to higher investment expenditures.  This evidence supports the view of the investment policy affect on the dividend policy; the reason for that influences is that would the external finance be costly. Conversely, he found that the firms have distributed higher dividends payouts when insiders hold a lower portion of the equity and (or) a greater numbers of shareholders own the outside equity. Rozeff (1982) pointed out that this evidence supports that the dividend payments are part of the firm’s optimum monitoring and that bonding package reduces the agency costs. Moreover, if the agency cost declines when the dividend payout does and if the transaction cost of external finance increases when the dividend payout is increased as well, then minimization of these costs will lead to a unique optimum for a given firm. In addition, Hansen, Kumar, and Shome [HKS], (1994) pointed out the relevance of the monitoring theory for explaining the dividends policy of regulated electric utilities. From an agency cost perspective, they emphasized their ideas that the dividends promote monitoring of what they call the shareholders regulator conflict. Therefore, it is a monitoring role of dividends. On the contrary, Easterbrook’s (1984) has noted that the dividends monitoring of the shareholders managers conflict. They also have observed that the utilities firms have a discipline of monitoring mechanism for controlling agency cost, depending on the relative cost effectiveness of those costs (Crutchly and Hensen, 1989). The regulator process will impact the conflict between the shareholders and mangers, by mitigate the managers’ power to appropriate shareholders’ wealth and consume perquisites (Hansen et al. 1994). On the other hand, they argued this issue by the cost-plus concept, regulators may set into motion of managerial incentive structure that potentially conflicts with shareholders interests, this concept solve the shareholders-regulators concept since the sources of the conflict lies in differences in the perceptions of what constitutes fair cost plus. Therefore, the regulation can control some of the agency cost while exacerbating others. In their study, they conduct also that the managers and shareholders of unregulated firms have a several mechanisms whether, internal or external, for controlling agency cost. In addition, they observed that the dividend policy to reduce the agency theory is not limited, depending on their findings they suggested that the cost of dividend payout policy might be below the costs paid by other types of firm. In fact the utilities company maintain high debt ratio that would maintain as well as equity agency costs. Aivazian et al. (2003b) compare the dividend policy behaviour of eight emerging markets with dividend policies in the US firms in the period from 1980 to 1990. The sample included firms from; Korea, Malaysia, Zimbabwe, India, Thailand, Turkey, Pakistan, and Jordan. They found that it is difficult to predict dividend changes for such emerging markets. This is because the quality of firms with reputations for cutting dividends is somehow similar to those who increase their dividends, than for the US control sample. In addition, current dividends are less sensitive to past dividends than for the US sample of firms. They also found that the Lintner model[1] does not work well for the sample of emerging markets. These results indicate that the institutional frameworks in these emerging markets make dividend policy a weak technique for signaling future earnings and reducing agency costs than for the US sample of firms. Furthermore, Omran and Pointon (2004) investigated the role of dividend policy in determining share prices, the determinants of payout ratios, and the factors that affect the stability of dividends for a sample of 94 Egyptian firms. They found that retentions are more important than dividends in firms with actively traded shares, but that accounting book value is more important than dividends and earnings for non-actively traded firms. However, when they combined both the actively traded and non-traded firms, they found that dividends are more important than earnings. In the determinants of payout ratios, they found that there is a negative relationship between the leverage ratio and market to book ratio, tangibility, and firm size on the one hand, to the payout ratios in actively traded firms. On the contrary, they also found that there is a positive relationship between the business risk, market to book and firm size (measured by total assets) to payout ratios in non-actively traded firms. Furthermore, for the whole sample, leverage has a positive relationship with payout ratios, while firm size (measured by market capitalization) is negatively related to payout ratios. Finally, the stepwise logistic regression analysis shows that decreasing dividends is associated with lack of liquidity and overall profitability. In addition, increasing dividends is associated with higher overall profitability. 2.4 Summary In this chapter the relevant literatures addressing the reviews of the agency cost theory related to the financial policies. It also gives a theoretical background on how the conflicts of interests arise between the agents (managers) and the principal (shareholders). The second and third sections present the determinants of leverage and dividend payout policy. The following chapter will go through the description of data, and data methodology was employed for this dissertation. 3. Methodology, Research Design and Data Description The aim of the current study is to investigate firstly, the empirical evidence of the determinants of leverage and dividend policy under the agency theory concept for the period 2002-2007. The majority of the previous studies in the field of capital structure have made in the context of developed countries such as USA and UK. It is important to investigate the main determinants of leverage and dividend policy in developing countries where, capital markets, are less developed, less competitive and suffering from the lack of compatible regulations and sufficient supervision This chapter will explain the research methodology of this study. This chapter also identifies the sample of the study. Moreover, it presents an illustration of the econometric techniques that have been employed. In addition, this chapter gives a brief explanation of the specification tests used in the study to identify which technique is the best for the data set. This chapter structured as follows; Section (3.1) presents data description.  Section (3.2) presents the sample of the study. Section (3.3) discusses the econometric techniques employed in the study. Finally, Section (3.4) provides a brief summary. 3.1 Data Description The data used in the study are secondary data for companies listed at Amman Stock Exchange (ASE) for the period of 2002-2007. The data was extracted from the firm’s annual reports, and from Amman Stock Exchange’s publications (The Yearly Companies Guide, and Amman Stock Exchange Monthly Statistical Bulletins). Data is readily available in the form of CD and on the website of the Amman Stock Exchange. The reason for the study period selection was to minimize the missing observations for the sample companies. Moreover, a different reporting system has been used since 2000. The application of the new reporting system was the result of the transparency act which was launched in 1999, and forced all companies listed in Amman Stock Exchange to disclose their financial information and publish their annual reports according to the International Financial Reporting Standards. In other words, this data series for the period from 2002-2007 was chosen in terms of consistency and comparability purposes. 3.2 Sample of the study The sample of the study consists of the Jordanian Manufacturing companies listed on the Amman Stock Exchange for the period of 2002-2007. The total number of the companies listed in ASE at the end of year 2007 was 215. Officially, these companies are divided into four main economic sectors; Banks sector, Insurance sector, Services sector and finally Industrial sector. Moreover, this study is concerned only with Jordanian manufacturing companies that their stocks are traded in the organized market. It is important to note that the capital structure of financial firms has special characteristic when compared to the capital structure of non financial firms, they also have special tax treatment (Lester, 1995). On the other hand, the financial firms have a higher leverage rate, which may tend to make the analysis results biased. Moreover, financial firms their leverage is affected by investor insurance schemes (Rajan and Zingals, 1995). For these reasons, the potential sample of the study consists of non financial (Manufacturing) companies that are still listed in Amman Stock Exchange. The total number of industrial companies listed in ASE at the end of year 2007 was 88 companies, which are 40.93% of the total number of the companies listed in that market. The study conducts the following criteria in selecting the sample upon the Jordanian manufacturing companies by excluding all the firms that was incorporated after year 2002, and all the firms that have merged or acquired during this period, further, the firms have liquidated or delisted by the Amman Stock Exchange, and finally, the study have also excluded the firms that have information missing for that period. The application for those criteria has resulted in 52 samples of manufacturing companies. The data for the variables that are included in the study models is tested using three different econometric techniques which will be discuss briefly in the next sections. 3.3 Econometrics techniques Hairs et al. (1998) argued that the application of econometrics technique depends on the nature of data employed in the study, and to what extent it would be realised to the research objectives. In order to find a best and adequate data model, the current study employs pooled data technique and panel data analysis which is usually estimated by either fixed effect technique or random effects technique.  The following sections provide a brief discussion on the econometrics techniques that the current study uses to estimate the empirical models. 3.3.1 Pooled Ordinary Least Square (OLS) technique All the models used in the study have been tested by the pooled data analysis technique. The pooled data is the data that contains pooling of time series and cross-sectional observations (combination of time series and cross-section data) (Gujarati, 2003). The pooled data analysis has many advantages over the pure time series or pure cross sectional data. It generates more informative data, more variability, less collinearity among variables, more degrees of freedom, and more efficiency (Gujarati, 2003). The underlying assumption behind the pooled analysis is that, the intercept value and the coefficients of all the explanatory variables are the same for all the firms, as well as they are constant over time (no specific time or individual aspects). It also assumes that the error term captures the differences between the firms (across-sectional units) over the time. However, (Gujarati, 2003) has pointed out that these assumptions are highly restrictive. He argues that although of it is simplicity and advantages, the pooled regression may distort the true picture of the relationship between the dependent and independent variables across the firms. Pooled model will be simply estimated by Ordinary Least Square (OLS). However, OLS will be appropriate if no individual (firm) or time specific effects exist. If they exist, the unobserved effects of unobserved individual and time specific factors on dependent variable can be accommodated by using one of the panel data techniques.   According to (Gujarati, 2003) panel data is a special form of pooled data in which the same cross-sectional unit is surveyed over time. It helps researchers to substantially minimize the problems that arise when there is an omitted variables problems such as time and individual-specific variables and to provide robust parameter estimates than time series and (or) cross sectional data. All the empirical models that have been tested by using pooled data analysis and tested again on the basis of panel data analysis techniques (Fixed Effects and Random Effects).   3.3.2 The fixed effects model (FEM) Fixed effects technique allows control for unobserved heterogeneity which describes individual specific effects not captured by observed variables. According to Gujarati (2003) the fixed effect model takes into account the specific effect of each firm â€Å"the individuality† by allowing the intercept vary across individuals (firms), but each individual’s intercept does not vary over time. However, it still assumes that the slope coefficients are constant across individuals or over time. Two methods used to control for the unobserved fixed effects within the fixed effects model; the first differences and Least Square Dummy variables (LSDV) methods.  For the purposes of the current study, (LSDV) was used where; two sets of dummy variables (industry, and year dummy variables). The additional dummy variables control for variables that are constant across firms but change over time. Therefore, the combine time and individual (firm) fixed effects model eliminates the omitted variables bias arising both from unobserved factors that are constant over time and unobserved factors that are constant across firms. However, fixed effects model consumes the degrees of freedom, if estimated by the Least Square Dummy Variable (LSDV) method and, too many dummy variables are introduced (Gujarati, 2003). Furthermore, with too many variables used as regressors in the models, there is the possibility of multicollinearity. It is worth noting that OLS technique used in estimating fixed effects model. 3.3.3 The Random Effects Model (REM) By contrast, fixed effects model, the unobserved effects in random effects model is captured by the error term (ÃŽ µit) consisting of an individual specific one (ui) and an overall component (vit) which is the combined time series and cross-section error. Moreover, it treats the intercept coefficient as a random variable with a mean value (ÃŽ ±0) of all cross-sectional (firms) intercepts and the error component represents the random deviation of individual intercept from this mean value (Gujarati, 2003). Consequently, the individual differences in the intercept values of each firm are reflected in the error term (ui). On the other hand, the Generalized Least Square (GLS) used in estimating random affects model.  This is because the GLS technique takes into account the different correlation structure of the error term in the Random Effect Model (REM) (Gujarati, 2003). 3.3.4 Statistical specification tests The study uses three specification tests to identify which empirical method is the best. These tests are used for testing the fixed effect model versus the pooled model (F-statistics), the random effect model versus pooled model (Lagrange Multiplier test) (LM), and the fixed effect model versus the random effect model (Hausman test). The following sub-sections offer brief disc Impacts on Agency Cost Theory Impacts on Agency Cost Theory The main purpose of this research is to investigate how the determinants of the capital structure (leverage) and the dividend payout policy impact the agency cost theory. Literature review part picked up the relevant material related to agency theory, leverage, and dividends payout policy. The literature review section goes through the agency cost literature, and explores the financial policies; the capital structure (leverage), and the dividend payout policy and that these policies would influence the agency cost theory. 2.1 Agency theory Literature The notion of the agency theory is widely used in economics, finance, marketing, legal, and social sciences; Jensen and Meckling (1976) initiated and developed it. Capital structure (leverage) for the firms is determined by agency costs, i.e., costs related to conflict of interests between various groups including managers, which have claims on the firm’s resources (Harris and Raviv, 1991). Jensen and Meckling (1976) defined the agency relationship as â€Å"a contract under which one or more persons (the principal) engage another person (the agent), to perform some service on their behalf which involves delegating some decision making authority to the agent† pp.308. Assuming that both parties utility maximizes, the agents are not possible to act in the best interest of the principal. Furthermore, Jensen and Meckling (1976) contended that the principal can limit divergences from his interest by establishing appropriate incentives for the agent, and by incurring monitoring costs (pecuniary and non pecuniary), which are designed to limit the aberrant activities of the agent. Jensen and Meckling (1976) argued that the agency costs are unavoidable, since the agency costs are borne entirely by the owner. Jensen and Meckling (1976) contended that the owner is motivated to see these costs minimized. Authors who initiated and developed the agency theory have argued that if the owner manages a wholly owned firm, then he can make operating decisions that maximise his utility. The agency costs are generated if the owner manager sells equity claims on the firms, which are identical to his.  It also generated by the divergence between his interest and those of the outside shareholders, since he then bears only a fraction of the costs of any non-pecuniary benefits he takes out maximizing his own utility (Jensen and Meckling, 1976). Jensen and Meckling (1976) suggested two types of conflicts in the firm; First of all, the conflict between shareholders and managers arises because managers hold less than a hundred percent of the residual claim. Therefore, they do not capture the entire gain from their profit enhancement activities, but they do bear the entire cost of these activities. For example, managers can invest less effort in managing firm resources and may be able to transfer firm resources to their own, personal benefit, i.e., by consuming â€Å"perquisites† such as a fringe benefits. The manager bears the entire cost of refraining from these activities but captures only a fraction of the gain. As a result, managers over indulge in these interests relative to the level that would maximize the firm value. This inefficiency reduced the large fraction of the equity owned by the manager. Holding constant the manager’s absolute investment in the firm, increases in the fraction of the firm financed by debt increases the manager’s share of the equity and mitigates the loss from conflict between the managers and shareholders. Furthermore, as pointed out by Jensen (1986), since debt commits the firm to pay out cash, it reduces the amount of free cash flow available to managers to engage in these types of interests.  As a result, this reduction of the conflict between managers and shareholders will constitute the benefit of debt financing. Second, they also suggested that the conflict between debt holders and shareholders arises because the debt contract, gives shareholders an incentive to invest sub optimally. Especially when the debt contract provides that, if an investment yields large returns, well above the face value of the debt, shareholders capture most of the gain. However, if the investment fails, debt holders bear the consequences. Therefore, shareholders may benefit from investing in very risky projects, even if they are under valued; such investments result in an adverse in the value of debt. Lasfer (1995) argued that debt exacerbates the conflict between debt holders and shareholders. Shareholders will benefit from investments in risky projects at the expense of debt holders.  If the investment yields higher return than the face value of debt, shareholders capture most of the gain, however, if the investment fails, debt holders lose, given that. Therefore, shareholders protected by the limited liability. On the other hand, if the benefits captured by debt holders reduce the returns to shareholders, then an incentive to reject positive net present projects has created. Thus, the debt contract gives shareholders incentives to invest sub optimally. In addition, Myers (1977) argued that the firms with many growth opportunities should not be financed by debt, to reduce the negative net value projects.   Furthermore, some of arguments have been debated that the magnitude of the agency costs varies among firms. It will depend on the tastes of managers, the ease with which they can exercise their own preferences as opposed to value maximization in decision making, and the costs of monitoring and bonding activities. Therefore, the agency costs depend upon the cost of measuring the manager’s performance and evaluating it (Jensen and Meckling, 1976). (Jensen, 1986) either points out that when firms make their financing decision, they evaluate the advantages that may arise from the resolution of the conflicts between managers, shareholders and from long run tax shields.   In addition, Lasfer (1995) argues that debt finance creates a motivation for managers to work harder and make better investment decisions. On the other hand, debt works as a disciplining tool, because default allows creditors the option to force the firm into liquidation. Debt also generates information that can be used by investors to evaluate major operating decisions including liquidation (Harris and Raviv, 1990). Jensen (1986) debated that when using debt without retention of the proceeds of the issue, bonds the managers to meet their promise to pay future cash flows to the debt holders. Thus, debt can be an effective substitute for dividends. By issuing debt in exchange for stock, managers are bonding their promise to pay out future cash flows in a way that cannot be accomplished by simple dividend increases. Consequently, managers give recipients of the debt the right to take the firm to the bankruptcy court if they do not maintain their commitment to make the interest and principle payments. Thus, debt reduces the agency costs of free cash flow by reducing the cash flow available for spending at the discretion of managers. Jensen (1986) claimed that these control effects of debt are a potential determinant of capital structure. In practice, it is possible to reduce the owner manager non pecuniary benefits; by using these instruments external auditing, formal control systems, budget restrictions, and the establishment of incentive compensation systems serve to identify the manager’s interests more closely with those of the outside shareholders (Jensen and Meckling, 1976). Jensen (1986) suggested that leverage and dividend may act as a substitute mechanism to reduce the agency costs. Agency cost models predict that dividend payments can reduce the problems related to information asymmetry. Dividend payments might be consider also as a mechanism to reduce cash flow under management control, and help to mitigate the agency problems (Rozeff, 1982, and Easterbrook, 1984). Therefore, paying dividends may have a positive impact on the firms value. â€Å"Agency theory posits that the dividend mechanism provides an incentive for managers to reduce the costs related to the principal agent relationship, one way to reduce agency costs is to increase dividends† Baker and Powell (1999). They also claim that firm use the dividends use as a tool to monitor the management performance. Moreover, Easterbrook (1984) and Jensen (1986) argue that agency costs exist in firms because managers may not always want to maximize shareholder’s wealth due to the separation of ownership and control. Jensen (1986) addresses the free cash flow theory, in terms of this theory the conflict of interest between managers and stockholders is rooted in the presence of informational and self interest behavior. He defines the free cash flow as â€Å"cash flow in excess of that required to fund all projects that have positive net present value when discounted at the relevant cost of capital† (Jensen,1986). Within the context of the free cash flow hypothesis, firms prefer to increase their dividends and distribute the excess free cash flow in order to reduce agency costs. Consequently, markets react positively to this type of information. This theory is attractive because it is consistent with the evidence about investment and financing decisions (Jensen, 1986, Frankfurter and Wood, 2002). 2.2 Leverage Literature This section reviews the determinants of capital structure by different relevant literatures. Titman and Wessels (1988) study is considered to be one of the leading studies in the developed markets. They tried to extend the empirical work in capital structure theory by examining a much broader set of capital structure theories, and to analyze measures of short term, long term, and convertible debt. The data covers the US industrial companies from 1974 to 1982, and they used a factor analytic approach for estimating the impact of unobservable attributes on the choice of corporate debt ratios. As a result, the study confirms these factors, collateral values of assets, non-debt tax shields, growth, and uniqueness of the business, industry classification, firm size, and firm profitability. They also found that there is a negative relationship between debt levels and the uniqueness of the business. In addition, short term debt ratios have a negative relationship to firm size. However, they do not provide support for the effect on debt ratios arising from non debt tax shields, volatility, collateral value of assets, and growth. In Jordan, Al-Khouri and Hmedat (1992) aimed to find the effect of the earnings variability on capital structure of Jordanian corporations from the period from 1980 to 1988. They included 65 firms. The study used a multivariate regression approach with financial leverage as the dependent variable measured in three ways; first, long term debt over total assets, secondly, short term debt over total assets, and finally, short term debt plus long term debt over total assets. The standard deviation of the earnings variability and the size of the firm measured as independent variables. They concluded that the firm size is considered as a significant factor in determining the capital structure of the firm, and insignificant relationship between the earning variability and financial leverage of the firm. Furthermore, they suggest that the type of industry is not considered as a significant factor in determining the capital structure of the firm. Rajan and Zingales (1995) provided international evidence about the determinants of capital structure. They examined the capital structure in other countries related to factors similar to those that influence United States firms. The database contains 2583 companies in the G7 countries. They used regression analysis with the firm’s leverage (total debt divided by total debt plus total equity) as the dependent variable. Tangible assets, market to book ratio, firm size, and firm profitability used as independent variables. They found that in market bases firms with a lot of fixed assets are not highly levered, however, they supported that a positive relationship exists between tangible assets, and firms size, and capital structure (leverage). On the contrary, they confirmed that there is a negative relationship between leverage and the market to book ratio, and profitability. From the capital structure literature, Ozkan (2001) also investigated that the determinants of the target capital structure of firms and the role of the adjustment process in the UK using a sample of 390 firms. The multiple regression approach (panel data) was used to measure the debts by total debt to total assets, on the one hand. He also used in his model, non debt tax shield, firm size, liquidity, firm profitability, and firm growth as an independent variables. He confirmed that the profit, liquidity, non debt tax shield, and growth opportunities have a negative relationship to capital structure (leverage). Finally, he supported that there is a positive effect arising from size of firms on leverage. The study provided evidence that the UK firms have long term target leverage ratios and that they adjust quickly to their target ratios. The study by Booth et al. (2001) is considered as a one of the leading studies in the developing countries. It aimed to assess whether capital structure theory is applicable across developing countries with different institutional structures. The data include balance sheets and income statements for the largest companies in each selected country from the year 1980 to 1990. It included 10 developing countries: India, Pakistan, Thailand, Malaysia, Zimbabwe, Mexico, Brazil, Turkey, Jordan, and Korea. The study used multivariate regression analysis with dependent variables; total debt ratio, long term book debt ratio, and long term market to debt ratio. The independent variables are; average tax rate, tangibility, business risk, firm size, firm profitability, and market to book ratio. Booth et al. found that the more profitable the firm the lower the debt ratio, regardless how the debt ratio is defined. In addition, the higher the tangible assets mix, the higher is the long term debt ratio but the smaller is the total debt ratio. Finally, it concluded that debt ratios in developing countries seem to be affected in the same way by the same set of variables that are significant in developed countries. Voulgaris et al. (2004) investigated the determinants of capital structure for Greek manufacturing firms. The study used panel data of two random samples one for small and medium sized enterprises (SMEs) including 143 firms and another for large sized enterprises (LSEs) including 75 firms for the period from 1988 to 1996. It used a leverage model as a dependent variable (short run debt ratio, long run debt ratio, and total debt ratio). On the other hand, It used firm size, asset structure, profitability, growth rate, stock level, and receivables as independent variables. The study suggested that there are similarities and differences in the determinants of capital structure among the two samples. The similarities include that the firm size and growth opportunities positively related to leverage. While, they confirm that the profitability has a negative relationship to leverage. Moreover, they pointed out the differences that the inventory period, and account receivables collection period have been found as determinants of debt in SMEs but not in LSEs. Liquidity doest not affect LSEs leverage, but it affects the SMEs. Finally, they also suggested that there is a positive relationship between profit margins and short term debt ratio only for SMEs. Voulgaris et al. (2004) have debated this arguments as; ‘‘the attitude of banks toward small sized firms should be changed so they provide easier access to long-term debt financing’’. In addition, â€Å"enactment of rules that will allow transparency of operations in the Greek stock market and a healthier development of the newly established capital market for SMEs will assist Greek firms into achieving a stronger capital structure’’. 2.3 Dividends payout ratio literature Dividend payout ratios vary between firms and the dividend payout policy will impact the agency cost theory. Rozeff (1982) investigated in his study that the dividends policy will be rationalize by appealing the transaction cost and agency cost associated with external finance. Moreover, Rozeff (1982) had found evidences supporting how the agency costs influence the dividends payout ratio. He found that the firms have distributed lower dividend payout ratios when they have a higher revenue growth, because this growth leads to higher investment expenditures.  This evidence supports the view of the investment policy affect on the dividend policy; the reason for that influences is that would the external finance be costly. Conversely, he found that the firms have distributed higher dividends payouts when insiders hold a lower portion of the equity and (or) a greater numbers of shareholders own the outside equity. Rozeff (1982) pointed out that this evidence supports that the dividend payments are part of the firm’s optimum monitoring and that bonding package reduces the agency costs. Moreover, if the agency cost declines when the dividend payout does and if the transaction cost of external finance increases when the dividend payout is increased as well, then minimization of these costs will lead to a unique optimum for a given firm. In addition, Hansen, Kumar, and Shome [HKS], (1994) pointed out the relevance of the monitoring theory for explaining the dividends policy of regulated electric utilities. From an agency cost perspective, they emphasized their ideas that the dividends promote monitoring of what they call the shareholders regulator conflict. Therefore, it is a monitoring role of dividends. On the contrary, Easterbrook’s (1984) has noted that the dividends monitoring of the shareholders managers conflict. They also have observed that the utilities firms have a discipline of monitoring mechanism for controlling agency cost, depending on the relative cost effectiveness of those costs (Crutchly and Hensen, 1989). The regulator process will impact the conflict between the shareholders and mangers, by mitigate the managers’ power to appropriate shareholders’ wealth and consume perquisites (Hansen et al. 1994). On the other hand, they argued this issue by the cost-plus concept, regulators may set into motion of managerial incentive structure that potentially conflicts with shareholders interests, this concept solve the shareholders-regulators concept since the sources of the conflict lies in differences in the perceptions of what constitutes fair cost plus. Therefore, the regulation can control some of the agency cost while exacerbating others. In their study, they conduct also that the managers and shareholders of unregulated firms have a several mechanisms whether, internal or external, for controlling agency cost. In addition, they observed that the dividend policy to reduce the agency theory is not limited, depending on their findings they suggested that the cost of dividend payout policy might be below the costs paid by other types of firm. In fact the utilities company maintain high debt ratio that would maintain as well as equity agency costs. Aivazian et al. (2003b) compare the dividend policy behaviour of eight emerging markets with dividend policies in the US firms in the period from 1980 to 1990. The sample included firms from; Korea, Malaysia, Zimbabwe, India, Thailand, Turkey, Pakistan, and Jordan. They found that it is difficult to predict dividend changes for such emerging markets. This is because the quality of firms with reputations for cutting dividends is somehow similar to those who increase their dividends, than for the US control sample. In addition, current dividends are less sensitive to past dividends than for the US sample of firms. They also found that the Lintner model[1] does not work well for the sample of emerging markets. These results indicate that the institutional frameworks in these emerging markets make dividend policy a weak technique for signaling future earnings and reducing agency costs than for the US sample of firms. Furthermore, Omran and Pointon (2004) investigated the role of dividend policy in determining share prices, the determinants of payout ratios, and the factors that affect the stability of dividends for a sample of 94 Egyptian firms. They found that retentions are more important than dividends in firms with actively traded shares, but that accounting book value is more important than dividends and earnings for non-actively traded firms. However, when they combined both the actively traded and non-traded firms, they found that dividends are more important than earnings. In the determinants of payout ratios, they found that there is a negative relationship between the leverage ratio and market to book ratio, tangibility, and firm size on the one hand, to the payout ratios in actively traded firms. On the contrary, they also found that there is a positive relationship between the business risk, market to book and firm size (measured by total assets) to payout ratios in non-actively traded firms. Furthermore, for the whole sample, leverage has a positive relationship with payout ratios, while firm size (measured by market capitalization) is negatively related to payout ratios. Finally, the stepwise logistic regression analysis shows that decreasing dividends is associated with lack of liquidity and overall profitability. In addition, increasing dividends is associated with higher overall profitability. 2.4 Summary In this chapter the relevant literatures addressing the reviews of the agency cost theory related to the financial policies. It also gives a theoretical background on how the conflicts of interests arise between the agents (managers) and the principal (shareholders). The second and third sections present the determinants of leverage and dividend payout policy. The following chapter will go through the description of data, and data methodology was employed for this dissertation. 3. Methodology, Research Design and Data Description The aim of the current study is to investigate firstly, the empirical evidence of the determinants of leverage and dividend policy under the agency theory concept for the period 2002-2007. The majority of the previous studies in the field of capital structure have made in the context of developed countries such as USA and UK. It is important to investigate the main determinants of leverage and dividend policy in developing countries where, capital markets, are less developed, less competitive and suffering from the lack of compatible regulations and sufficient supervision This chapter will explain the research methodology of this study. This chapter also identifies the sample of the study. Moreover, it presents an illustration of the econometric techniques that have been employed. In addition, this chapter gives a brief explanation of the specification tests used in the study to identify which technique is the best for the data set. This chapter structured as follows; Section (3.1) presents data description.  Section (3.2) presents the sample of the study. Section (3.3) discusses the econometric techniques employed in the study. Finally, Section (3.4) provides a brief summary. 3.1 Data Description The data used in the study are secondary data for companies listed at Amman Stock Exchange (ASE) for the period of 2002-2007. The data was extracted from the firm’s annual reports, and from Amman Stock Exchange’s publications (The Yearly Companies Guide, and Amman Stock Exchange Monthly Statistical Bulletins). Data is readily available in the form of CD and on the website of the Amman Stock Exchange. The reason for the study period selection was to minimize the missing observations for the sample companies. Moreover, a different reporting system has been used since 2000. The application of the new reporting system was the result of the transparency act which was launched in 1999, and forced all companies listed in Amman Stock Exchange to disclose their financial information and publish their annual reports according to the International Financial Reporting Standards. In other words, this data series for the period from 2002-2007 was chosen in terms of consistency and comparability purposes. 3.2 Sample of the study The sample of the study consists of the Jordanian Manufacturing companies listed on the Amman Stock Exchange for the period of 2002-2007. The total number of the companies listed in ASE at the end of year 2007 was 215. Officially, these companies are divided into four main economic sectors; Banks sector, Insurance sector, Services sector and finally Industrial sector. Moreover, this study is concerned only with Jordanian manufacturing companies that their stocks are traded in the organized market. It is important to note that the capital structure of financial firms has special characteristic when compared to the capital structure of non financial firms, they also have special tax treatment (Lester, 1995). On the other hand, the financial firms have a higher leverage rate, which may tend to make the analysis results biased. Moreover, financial firms their leverage is affected by investor insurance schemes (Rajan and Zingals, 1995). For these reasons, the potential sample of the study consists of non financial (Manufacturing) companies that are still listed in Amman Stock Exchange. The total number of industrial companies listed in ASE at the end of year 2007 was 88 companies, which are 40.93% of the total number of the companies listed in that market. The study conducts the following criteria in selecting the sample upon the Jordanian manufacturing companies by excluding all the firms that was incorporated after year 2002, and all the firms that have merged or acquired during this period, further, the firms have liquidated or delisted by the Amman Stock Exchange, and finally, the study have also excluded the firms that have information missing for that period. The application for those criteria has resulted in 52 samples of manufacturing companies. The data for the variables that are included in the study models is tested using three different econometric techniques which will be discuss briefly in the next sections. 3.3 Econometrics techniques Hairs et al. (1998) argued that the application of econometrics technique depends on the nature of data employed in the study, and to what extent it would be realised to the research objectives. In order to find a best and adequate data model, the current study employs pooled data technique and panel data analysis which is usually estimated by either fixed effect technique or random effects technique.  The following sections provide a brief discussion on the econometrics techniques that the current study uses to estimate the empirical models. 3.3.1 Pooled Ordinary Least Square (OLS) technique All the models used in the study have been tested by the pooled data analysis technique. The pooled data is the data that contains pooling of time series and cross-sectional observations (combination of time series and cross-section data) (Gujarati, 2003). The pooled data analysis has many advantages over the pure time series or pure cross sectional data. It generates more informative data, more variability, less collinearity among variables, more degrees of freedom, and more efficiency (Gujarati, 2003). The underlying assumption behind the pooled analysis is that, the intercept value and the coefficients of all the explanatory variables are the same for all the firms, as well as they are constant over time (no specific time or individual aspects). It also assumes that the error term captures the differences between the firms (across-sectional units) over the time. However, (Gujarati, 2003) has pointed out that these assumptions are highly restrictive. He argues that although of it is simplicity and advantages, the pooled regression may distort the true picture of the relationship between the dependent and independent variables across the firms. Pooled model will be simply estimated by Ordinary Least Square (OLS). However, OLS will be appropriate if no individual (firm) or time specific effects exist. If they exist, the unobserved effects of unobserved individual and time specific factors on dependent variable can be accommodated by using one of the panel data techniques.   According to (Gujarati, 2003) panel data is a special form of pooled data in which the same cross-sectional unit is surveyed over time. It helps researchers to substantially minimize the problems that arise when there is an omitted variables problems such as time and individual-specific variables and to provide robust parameter estimates than time series and (or) cross sectional data. All the empirical models that have been tested by using pooled data analysis and tested again on the basis of panel data analysis techniques (Fixed Effects and Random Effects).   3.3.2 The fixed effects model (FEM) Fixed effects technique allows control for unobserved heterogeneity which describes individual specific effects not captured by observed variables. According to Gujarati (2003) the fixed effect model takes into account the specific effect of each firm â€Å"the individuality† by allowing the intercept vary across individuals (firms), but each individual’s intercept does not vary over time. However, it still assumes that the slope coefficients are constant across individuals or over time. Two methods used to control for the unobserved fixed effects within the fixed effects model; the first differences and Least Square Dummy variables (LSDV) methods.  For the purposes of the current study, (LSDV) was used where; two sets of dummy variables (industry, and year dummy variables). The additional dummy variables control for variables that are constant across firms but change over time. Therefore, the combine time and individual (firm) fixed effects model eliminates the omitted variables bias arising both from unobserved factors that are constant over time and unobserved factors that are constant across firms. However, fixed effects model consumes the degrees of freedom, if estimated by the Least Square Dummy Variable (LSDV) method and, too many dummy variables are introduced (Gujarati, 2003). Furthermore, with too many variables used as regressors in the models, there is the possibility of multicollinearity. It is worth noting that OLS technique used in estimating fixed effects model. 3.3.3 The Random Effects Model (REM) By contrast, fixed effects model, the unobserved effects in random effects model is captured by the error term (ÃŽ µit) consisting of an individual specific one (ui) and an overall component (vit) which is the combined time series and cross-section error. Moreover, it treats the intercept coefficient as a random variable with a mean value (ÃŽ ±0) of all cross-sectional (firms) intercepts and the error component represents the random deviation of individual intercept from this mean value (Gujarati, 2003). Consequently, the individual differences in the intercept values of each firm are reflected in the error term (ui). On the other hand, the Generalized Least Square (GLS) used in estimating random affects model.  This is because the GLS technique takes into account the different correlation structure of the error term in the Random Effect Model (REM) (Gujarati, 2003). 3.3.4 Statistical specification tests The study uses three specification tests to identify which empirical method is the best. These tests are used for testing the fixed effect model versus the pooled model (F-statistics), the random effect model versus pooled model (Lagrange Multiplier test) (LM), and the fixed effect model versus the random effect model (Hausman test). The following sub-sections offer brief disc

Parkson Corporation Analysis

Parkson Corporation Analysis The objectives of this report is to present the findings of the strategic analysis conducted for Parkson Corporation Sdn Bhd and recommend the key strategies that the organization should implement in order to against with their competitor. So, the report begins by examining the general environment that affect the growth of organization, industry condition by using Porters Five Forces Analysis. The discussion part will describe the three stakeholders that affect the decision making of company and organization direction. Next, review the strength, weakness, opportunities and threats which can call SWOT analysis. The SWOT analysis determines and specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective for company. Lastly, discuss about the key selection criteria and recommendations for Parkson Corporation Sdn Bhd. to identify their strategies to against their main competitiv e and maintain its market share, market value and also their company reputation. 1.3  Scope of the report This report had covered the operations of Parkson Company in China, Vietnam and Malaysia. For information, the report had analyzed the internal and external environment and also its industrial conditions and competitors which are the factors of operation growth for Parkson Corporation Sdn Bhd. Moreover, the online research such as online article, online magazine, online newspaper that related to Parkson Corporation Sdn Bhd is the major information sources for the analysis. 1.4 Limitations Parkson Corporation Sdn Bhd has their limitation too. Firstly, not all customers know the strategy of Parkson Corporation Sdn Bhd. It causes them to lose their confidence towards the company. For example, from the operations of Parkson Company in China, it was showed that the market shares drop significantly. It highly depend on China causes customers to lose confidence because of their lack of the information about the company. Besides, the company sometimes showed some uncertain of their real performance and problems. The reason behind is sometimes the actions do not reflect what the report have mentioned so called transparency issues. Furthermore, Parkson Corporation Sdn Bhd cannot purchase their products through online. It show the inconvenient to the customers when they are not free or busy. In addition, it has their limited target market. They only focus more on the high income ladies. Therefore, it shows that it has no obvious competitive advantage compare with other competito rs. Thus, without the important information, the company will face lots of difficult problem. In order to solve their problems for their company, they must try to improve their operation management. 2.0 Background Of The Organization Parkson was one of the well known shopping malls. There was a lot of Parkson outlet can be found around the world. In other country such as China and Vietnam, there was a lot of Parkson outlet were available to be shop. Parkson was one of the largest department store company in China and Parkson currently has 35 outlets in Malaysia.Parkson branded department stores was divided into 36 brand and 2 Xtra branded. Parkson was established in the year of 1987. In Malaysia, the founder of Parkson was the retailing arm of the Lion Group and it is rapidly became one of the largest shopping malls in Malaysia. As an example, we can find Parkson outlet in Kuala Lumpur such as Subang Parade, Pavilion and other stated as well in Malaysia. Inside the Parkson, it has divided into few departments. The departments were strategically divided into different market segments and locations. The main purpose of the segmentations was preventing the customer to be confusing as the stores are categorized into 3 tiers depending on suitability of market and location. Since the Parkson was one of the successful shopping mall, it has been given a lot of achievements as their growing from strength to strength. Parkson always strive to do away with the conventions and to bring a fresh perspective to the retail industry. As an example, Parkson has been given a title of Malaysia Most Valuable Brands in 2009 or known as MMVB. MMVB is a part of a national brand valuation study commissioned by an Association of Accredited Advertising Agents Malaysia and conducted by Interbrand. Other achievement such as Certificate of Excellence Awarded to Parkson Pavilion being the Overall Best Retail Outlet in 2009/2010 and achievements that had achieved by Parkson. Parkson has its own moving forward target or mission. Parkson will constantly stays true to the needs and aspirations of the consumers. It has promises to continue to improve themselves in order to stay relevant. Parkson has emergence of younger age c onsumers who are well travelled, brand or image conscious and lifestyle-oriented will be the key of Parkson considerations which will lead Parkson lead the Parkson brand strategy. 4.0 Strategic Options Based on the situation analysis conducted, several strategic options or alternatives are proposed for the organisation. These strategic options include: 1. Set target customer higher We suggest Parkson Holdings upgrade their operation system and relocation their business direction by set their target customer among medium class income and upper class income customer. Parkson Holdings also can invite more branded company such as Gucci, LV and other come set their shop lot. There are few shopping center that sell luxury goods in Malaysia and previously Parkson Holdings image in public already is a high cost expenses shopping center. So now, we suggest Parkson Holdings try to upgrade their image and specific their customer segment, which medium and high classes income customers. 2. Refurbishing and Construct a new building For example, Parkson renovate the whole buildings by upgrade its store image and profile. Parkson can refine all the merchandise to higher income products and brand mix. This indirectly can enhance the productivity of retail space. Besides revamp the whole buildings, we would suggest that Parkson re-construct the building for instance let Mahkota Parade to be the Parkson Holdings shopping complex. Parkson will do all their business activities inside the shopping complex. Besides that, they also can rent their shop lots to other suppliers or clients to earn profits. 3. Preserving cash for potential MA opportunities and retail property acquisition Table 1. Major MAs Announced During 2006 MA Value (RM Billion) Parkson Retail Group, Lion Diversified Holdings Bhd, and Amalgamated Containers Bhd 4.3 Source: PWC Research As we can see from the Table 1 above, when Parkson Retail Group merged with Lion Diversified Holdings Bhd, and Amalgamated Containers Bhd, it can create the value of RM4.3 billion. Thus, we suggest that Parkson can choose to preserve some cash for potential mergers and acquisition opportunities and retail property acquisition. As mentioned in the first strategy, we suggest Parkson target medium and high classes income customers. Therefore, Parkson can choose to merge with Cold storage producers that sell high quality products like organic foods and used organic production method. We select organic foods as green products and services are now becoming the center attention of consumers. 4. Diversified product line to other industry and Retail space We suggest Parkson to invest in hotel industry other than just Parkson shopping centre complex. For example: we can refer to Hatten square which have their own buildings for retail shopping complex and also hospitality service suites in addition come out the ideas of Information Technology (IT) in their buildings. In addition, according to Parkson, it will target to expand its retail space by 15% 20% each year or 9-12 new stores in the countries where it operates. Hence, we suggest that Parkson can target country like India as India now is a fast growing country. If globalization success, this indirectly can helps in the formation of international financial system. 5. Go green projects For example, we can convey to Parkson Subang Parade, Parkson Corporation Sdn. Bhd. by implemented the No Plastic Bag Day Every Saturday green campaign  to reduce plastic bags in response of Environmental Social Responsibility (ESR). However, this strategy only covers in Selangor State. Thus, we suggest that this strategy can be further implemented to all parts of Malaysia. Furthermore, we also could follow the step of 1 Utama shopping mall in Petaling Jaya by come out a secret garden which has the system that reduces its usage of treated pipe water by 30%, and a building automation system with sensors that automatically adjust lighting and temperature. Moreover, we also can could followed the step of Tesco Greener Living by come out green gifts which using recycle material to handmade products. 6. Involve in Charity Apart from that, money that we earn from the Green projects will donate to the society for charity work. Parkson can also join charities and support groups that concentrate on eco-friendly lifestyles and choices. Parkson can donate items to schools, churches, city clubs and organizations. Parkson can promote themselves at eco-friendly events and give away items like free gifts or sample at school fairs, carnivals, or local cities farmers market. Involved in such events and can help people can become aware of contributing to the health of our planet and indirectly to help Parkson build a superior images in market. Key selection criteria According to Brundtland Commission (1987), sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development is a worthy goal for small and big businesses everywhere, especially for globalization organization. As members of various communities, we know that society, the environment, and the economy are interconnected. In order to maintain sustainable image and revenue, Parkson will appear few strategies that try to create and more focus on awareness, reputation, make profit and efficiency when making strategies. Profit maximisation is the aim of the owners and shareholders. Company will try to make the most profit as possible. One of the essential factors for Parkson needs to focus its sales growth. Parkson need make as many sales as possible. This may be because we believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale. In order to this cases, Parkson will attempt to upgrade its store image and profile, diversified product line to other industry and also can merger or joint-venture with other sector industry. When Parkson struggle to merger with other sector industry or use differentiation strategy, it can help Parkson establish good reputation by thrust business into the limelight and open doors for Parkson. Besides, it also can assist Parkson to partner with a larger company such as Lion Diversified Holdings Bhd  [1]  , and Amalgamated Containers Bhd to access their large list of customers and it will frankly improve   Parkson profitability and EPS. Parkson can share the risks with partner and help to gain higher competitiveness; nevertheless it can be rigid Parkson to enter the new market and it will become barrier to entry for Parkson. Pay attention to the environmental impact of our economic practices, and try to ensure that our communities are healthy, pleasant places to live. Nowadays, organizations started to paying attention and actively producing greener products and services to create a center of attention consumers. Parkson Corporation Sdn. Bhd. actively involved in sustainable development and follows the pace to adopt environmentally sound business principles and translate these into action. Parkson Corporation CEO raises awareness and reputation at this time, and he believes that the positive impact for the environment is immense for 2011 and well into the future. He adopt this approach because he believe and aware that operating a green business is not only good for the environment but good for their businesss bottom line because conserving resources and cutting down on waste saves money However, Parkson Corporation Sdn. Bhd. promotes No Plastic Bag Day only covers in Selangor State initially, it haven i mplement in other states. Environmentalism is no enough for certain places; it should engage numerous metropolitan areas and every branch in promoting the use of eco friendly bags in order to get more efficient and successful effects. Even thorough Parkson Corporation Sdn. Bhd. had implement eco-friendly, nevertheless it still no adequate to contributing to a healthy world and healthier place for us and for the future. Parkson should put more improvement and enhancement to implement eco-friendly. For example, we can follow the step of Tesco Greener Living by come out green gifts which using recycle material to handmade products. We also can put more focus of store on the eco-friendly category. Parkson can let customers see that there are practicing what their sell. If customers feel like you have a true passion about the environment, it will help them purchase these items with confidence. If customer is interested in an item, try to offer them a similar item that is eco-friendly. It not merely can make contribution to making the world a better place; it also straightforwardly can enhance and create awareness to customers and build customer loyalty. In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. Parkson need to carefully establish unique value proposition and strategies compared to competitors, executed through operations that provide different and tailored value to customers and drives continual improvement within the organization and moves it toward its vision in order to become market leaders in market. 6.0 Recommendation Key Questions Option/Hypothesis/ Recommendation Decision Criteria Pros Cons (i)Parkson had started to pay attention to the environmental impact of our economic practices, and try to ensure that our communities are healthy, pleasant places to live. (i)Parkson should propose the shop outlet to have a zero plastic bag day in order to archive a green environment target. (ii)Zero plastic on Saturday was not enough to influence the customer to be more green environmental minded but should apply to other day as well. (i)No plastic bag was given to the customer whenever the customers purchase their stuff in Parkson during Saturday period. (ii)The customers who really or ask for the plastics bag will be charge for 20 cent each. (i) A green business able to provide a better environment and also a good for their businesss bottom line because conserving resources and cutting down on waste saves money. (ii) Able to prevent damaging the environment from the chemicals in cleaning products that are sprayed out into the air. (i)There will be some of the customer dislike the strategy of the Parkson (ii)The customer might be dislike to shop on Saturday. (iii)The non given plastic bag strategy might cause the sales of the Parkson drops. (iv)Other competitors might gains advantages on Parkson strategy and increase their sales. Since everyone of the shopping mall had started to pay attention on the green environment activities, the Parkson also had started the move on it. Most of the shopping complex had their own strategy like no plastic bag will be provide to the customer who purchase stuff or item on Saturday. We believe that it is not enough for Parkson to active on this program. As a result, Parkson can improve it by having more zero plastic bag days for the week. Nevertheless, it is important for the shop outlet in Parkson to be corporate with them as well. The shop outlet also can propose not to provide plastic bag to the customer. In directly, it can help our environment to be a better place and also can help them to save their cost. (ii) How Parkson time to times change improve their Parkson images and environment of the shopping complex? (i) Parkson can create their own super market and no need other super market or hyper market such as Cold Storage. With this, Parkson can have a better environment and gain more competitive advantages. (ii) Once Parkson have their own brand name, they can try to sell their product at other shopping mall in order to have a different shopping environment for the customer. (i)Parkson always construct or renovate their building As an example in Malacca( Mahkota Parade had relocate the shop location and paint their building. (i) Parkson able has a better management for the shop. (ii) Parkson able to generate new image, give new shopping feels and attract more customer to shopping. (iii) They also can rent their shop lots to other suppliers or clients to earn profits. (v) Parkson upgrade their operation system and relocation their business direction. (i)It might comsume a lot capital for the renovation and building construction in order to have a new building. (ii)Is hard to find a new place or location to construct a new building (iii)When there is a renovation, it might disturb the businesses which are going on. (iv)When there is a renovation, A lot of space consuming will be required. Such as the place to store the renovation stuffs and parking lots. When time past, the customer might be started to get bored due to the unchangeable environment or shop in the Parkson. As a result, Parkson had started to change their image and the shopping environmental. As we can see, most of the Parkson had reconstructs their building, painting their building and so on. I believe that it is not enough to satisfy the customer needs. Parkson can try to create their own super market or hyper market instead of renting their space to the Cold Storage or Giant. It can help them to gain more competitive advantage and have a better shopping environment for the customers. It might include a lot of capital but we believe that Parkson able to generate more profit in the future. By that time, Parkson no longer depend to other super market or hyper market but it has it own brand or name of the super market. (iii)What capability should Parkson develop to ensure the success? (i)High diversification to increase the profit. (ii) Since Parkson have their own member card or member day, Parkson should have more attractive reward which can redeem by the customer with the bonus link point. (iii) Parkson should attract more investor to invest in to their share as well. With a huge capital provide from the investor, Parkson can develop more their shopping more or maybe have a better management. (i)High diversification. (ii)Differentiation strategy. (iii)Focusing on their product line. (i)Less risk with the premium pricing and increase retail consumer market. (ii) Parkson able to gain more competitive advantages. (iii) With a interesting or attractive reward, it can indirectly influence the customer to spend more on their products. (i)Economic downturn. (ii)Competitor strategy to counter the Parkson strategy. (iii) If investment by the Parkson fail will cause the investor occurs loss. (iv) The cost of the reward to member might include a huge capital. Parkson was one of the famous shopping mall. In every department of the Parkson, we can find a lot of product sell by them and it has show Parkson product is highly diversified. It is one of a good strategy to increase the profit. But there is a weakness among them. Most of the product sell by them were more to the female department comparing with department. Parkson should implement differentiation strategy and make the diversification in to more wide area. Focus more on the product line and make it balance well be one of the great solutions for this matter.

Europeans and Disease: Allies in Conquering Continents :: European Europe History

Europeans and Disease: Allies in Conquering Continents Chinese proverb claims that the rat is the most clever and strongest survivor of all animals. The rat proved itself in the beginning of time when god held a race for all of his animals; the rat was clever enough to hide in the ear of a large beast, and at the last second he leapt out of the beast's ear and crossed the finish line before the beast. Disease tells a similar history, in which it has been able to spread itself through out the entire world, through the naà ¯ve and unknowing help of humans and animals. Earlier in history, Europe seemed to be an epicenter for disease. This was rooted in the fact that the Europeans, more so than any other population, lived intimately with their livestock. Farmers and the surrounding aggregate nations survived harsh winters and hot summers where it was necessary to share indoor space with animals. Additionally, they had excessive contact with them and little understanding of what hubs of nastiness their fury friends were or what control centers for disease they themselves would become. Humans have historically shown a deep affinity for livestock and continue to do so, currently, in New Zealand there are more sheep kept than there are people on the island. In fact, in some cases, people seemed to have developed such a tenderness for their animals that they resort to practicing bestiality. Several common human diseases are closely related to animal diseases. Smallpox developed from cowpox and measles is closely related to rinderpest (another bovine dise ase). But whether it is through cuddling, milking or whipping our animals, we have managed to remain intimately involved over the centuries; and disease has lovingly appreciated it by spreading itself far and wide. The populations of the American continents however, did not experience the same spread of disease that the Europeans did. They kept almost no domestic animals. Consequently, their immune systems had few antibodies developed to combat even the weakest strings of disease. Also, they did not live in crowds the way that Europeans did. Early in the middle ages the Europeans had not only settled and become dependent on their agriculture and livestock, but they had developed large cities like London where thousands of people lived in close quarters, and had given little thought to the disposal of waste. Native Americans did live in tribes but did not have permanent living quarters that compared to the size of some of the European cities.

How Important was the My Lai Massacre in Generating Support for the Peace Protest Movement? :: American America History

How Important was the My Lai Massacre in Generating Support for the Peace Protest Movement? The Peace Protest Movement was a time in the Vietnam war when people disagreed with it. This was because of a number of things. The amount of money it was costing, The amount of people killed, but it originated largely from the massacre at My Lai. The reason that the happenings in My Lai, 1968 were so unpopular is because it was the first time that people back home, in USA and all around the world saw what was actually happening to innocent citizens who had done nothing wrong, as a result of Search and Destroy missions. The My Lai Massacre was the first incident to be televised during the war and therefore, it was only then that people realised what was actually happening in Vietnam. This caused a major uproar, which many people were involved in. Students played a major role, running demonstrations against the War, Veterans from the war threw their medals away in disgrace at what was happening, as well as a few more individuals, Richard Nixon, Coretta King, Dr Spock, Roger Laporte and Norman Morrison, who all did their own thing to symbolise the wrongs of the war. Teach-ins on why the USA should leave Vietnam, Railway Blocks with human barricades, Campus Demonstrations, Huge Public Demonstrations, Burning Draft Papers and even to the drastic case of burning themselves to death. Not all Americans supported the peace protest movement, if they lived with the enemy, they were the enemy and deserved what they got. Did My Lai harden the support for the War effort? I don't think so, but some people argue that it did. The thing that worried people is they didn't know how long that this sort of thing had been going on, without them knowing. The protests were not only aiming to try to stop the Vietnamese War, but also to remember all the other innocent civilians killed in other wars that weren't televised before Vietnam. I think that the main reason that the My Lai Massacre caused such an uproar was because it was the first time that anything of the sort had been televised and had so much media coverage, but could the peace protest movement have happened if the media were not involved? I think that it would have, but not to the same extent. How Important was the My Lai Massacre in Generating Support for the Peace Protest Movement? :: American America History How Important was the My Lai Massacre in Generating Support for the Peace Protest Movement? The Peace Protest Movement was a time in the Vietnam war when people disagreed with it. This was because of a number of things. The amount of money it was costing, The amount of people killed, but it originated largely from the massacre at My Lai. The reason that the happenings in My Lai, 1968 were so unpopular is because it was the first time that people back home, in USA and all around the world saw what was actually happening to innocent citizens who had done nothing wrong, as a result of Search and Destroy missions. The My Lai Massacre was the first incident to be televised during the war and therefore, it was only then that people realised what was actually happening in Vietnam. This caused a major uproar, which many people were involved in. Students played a major role, running demonstrations against the War, Veterans from the war threw their medals away in disgrace at what was happening, as well as a few more individuals, Richard Nixon, Coretta King, Dr Spock, Roger Laporte and Norman Morrison, who all did their own thing to symbolise the wrongs of the war. Teach-ins on why the USA should leave Vietnam, Railway Blocks with human barricades, Campus Demonstrations, Huge Public Demonstrations, Burning Draft Papers and even to the drastic case of burning themselves to death. Not all Americans supported the peace protest movement, if they lived with the enemy, they were the enemy and deserved what they got. Did My Lai harden the support for the War effort? I don't think so, but some people argue that it did. The thing that worried people is they didn't know how long that this sort of thing had been going on, without them knowing. The protests were not only aiming to try to stop the Vietnamese War, but also to remember all the other innocent civilians killed in other wars that weren't televised before Vietnam. I think that the main reason that the My Lai Massacre caused such an uproar was because it was the first time that anything of the sort had been televised and had so much media coverage, but could the peace protest movement have happened if the media were not involved? I think that it would have, but not to the same extent.

Educational Support In Rural Zimbabwe Education Essay

Cash Transfer system is presently a popular discourse in poorness decrease. Originally designed as an intercession scheme under dearth and exigency conditions, hard currency transportation has now been applied as a wide spectrum instrument in poorness decrease including kids ‘s public assistance. Inspired by Sens ‘ Entitlement Approach, hard currency transportation is a demand side intercession aimed at stimulating demand for services through administering hard currency to the mark population. Cash transportations are a non-contributory grant such as income support, kid grants, Foster attention grants and scholarships. Focus of this paper is limited to whether such grants are conditional or non. Conditional Cash transportations have been used to advance instruction in Latin America. Disbursement of hard currency was made on status that school traveling kids in the family are enrolled or attend school or both. This attack seems to estrange instruction from other family dem ands and do it alone to kids. However, repressing the family factors that led to under demand for instruction by enforcing conditions might non be the best solution in bettering entree to instruction. An apprehension of how instruction can be promoted in the background of family demand forms and resource allotment determinations seems believable. The focal point is on the family for two grounds. First, Most kids live in families and families are an of import establishment in supplying kids with primary demands. In this position, family operation ( the extent to which all it needs are met ) is of import in run intoing kids ‘s demands. Second, the demands of families are by and large linked and complementary to each other, in which instruction is one. Therefore, run intoing kids ‘s primary demands such as wellness and instruction through hard currency transportations is most likely to be sustainably achieved through a family attack. This essay reviews the literature enviro ning the usage of hard currency transportations in advancing orphans and vulnerable kids ( OVC ) instruction, while concentrating on how rural Zimbabwe families can be instrumental in guaranting sustainable demand for instruction.Children and instruction in ZimbabweThe demand for instruction in Zimbabwe has been greatly affected by the HIV/AIDS pandemic and intensifying poorness. In 2004, Catholic Relief Services estimated that about 30 % of kids were orphans[ 1 ]. AIDS related Orphan population is estimated to hold reached 1.1 million in 2010[ 2 ]. A big figure of orphans are populating in drawn-out households largely in rural countries. Bettering entree to instruction for orphans and other kids made vulnerable by poorness therefore requires a wider attack that besides caters for loss in support. The Basic Education Assistance Module ( BEAM ) revived in 2010 under the Ministry of Education Sports and Culture to supply educational subsidies towards OVC has an mean coverage of merely 7.8 % ( Mushunje and Mafico. 2010 ) . The net registration rate for primary school is approximates 90 % harmonizing to UNICEF statistics[ 3 ]. However, attending has been greatly affected by the intensifying economic crisis. With unemployment rate good above 80 % , instruction aid is needed.Cash transportation and instructionCash transportation has been used in human development through advancing entree to wellness, nutrition and formal instruction particularly aiming vulnerable kids. Success narratives in Latin America have strengthened the thought that conditional hard currency transportation can be employed across Africa in advancing formal instruction for kids. Registration and attending were used as indexs for success. However, enrolment entirely is non sufficient in bettering instruction. Consistency in go toing school seems to be a comprehensive index for programme impact. Conditional hard currency transportation based programmes such as The Red de Proteccion Social Programm e in Nicaragua resulted in an mean addition of 18 per centum points in registration and 23 per centum points in attending ( against a baseline of 70 % registration in the mark population ) between 2000 and 2003[ 4 ]. The Bolsa Familia Programme in Brazil has shown a lessening in school dropout and an addition in enrolment even though the sum of the hard currency transportation was less than that realised from child labor ( Chapman 2010 ) . The betterments in entree to instruction hold been attributed to handiness of hard currency for school fees and sometimes to worsen in child labor through increased household income. Several hard currency transportation programmes aimed at increasing the demand for instruction have besides been carried out in Africa. Kenya ‘s first stage of Cash Transfer Programme was launched in 2004 in 3 territories with each family having about USD 6.50 per month ( Bryant 2009 ) . Absenteeism declined by 16 % during the first 9 months in Kalomo territory Zambia where unconditioned hard currency transportation was implemented ( GTZ 2005 )[ 5 ]. Very few surveies have been documented about the usage of hard currency transportation in advancing instruction in Zimbabwe. However, a correlativity between an addition in income and an addition in puting instruction has been established in other hard currency transportation undertakings. The 2006 Zimbabwe Emergency Cash Transfer Pilot Programme aimed at bettering nutrient security in 3 territories of Zimbabwe indicated that some part of the money distributed was used to purchase educational equipment such as books ( Roman 2010 ) .Theoretical footing of hard currency transportationsCash transportation is fundamentally based on the Entitlement Approach ( OXFAM 2006 ) . Sen ( 1981 ) used the entitlement attack to explicate the dearth that occurred in Bengal in 1943.According to Sen ( ibid ) , people did non decease because of deficiency nutrient but ‘lacked the ability [ †¦ ] to command nutrient through the legal agencies available in the society ‘ , i.e. , entitlement failure ( ibid. :167 ) . They may besides hold failed to utilize this ability if it was present. Sen ( ibid. ) described two signifiers of entitlement failure, â€Å" pull † and â€Å" response † failures. Pull failures represents inability to demand, for illustration through pay loss in unemployment. Response failures represent inability to provide to run into demand, i.e. the inaccessibility of nutrient on the market. The hard currency transportation attack is fundamentally a demand -side intercession aimed at ex tenuating the pull failures. In other words, the attack assumes that kids are out of school because instruction is non adequately demanded due to miss of service fees. The entitlement attack consists of three related constructs ; the gift set, entitlement function, and the entitlement set. The gift set is defined as resources owned by a individual ( legal ) both touchable and intangible for illustration land, knowledge/skill and labor power. It is these resources that either through exchange or production enables a individual to obtain other trade goods needed for endurance through agencies that are considered legal by the society in which 1 is portion of ( Osmani 1993 ) . Entitlement mapping refers to the procedure of change overing 1s gift into agencies possible to obtain trade goods packages of one ‘s pick. Therefore, laborers ‘ sale their labor to obtain rewards for purchasing trade goods while husbandmans sells their green goods to acquire hard currency for exchange with other trade goods. Social security falls within this procedure. Entitlement set ( trade good package ) , refers to the existent trade goods which people chose to hold for fulfilling their demands. The entitlement set besides includes goods and services obtained through public provisioning such as free instruction. Several advantages have been identified by pro hard currency transportation assistance coders in nutrient security ( e.g. OXFAM 2003 ) . These include reduced response clip, flexibleness and expanded picks for donees and cost effectivity in term of absence of procurance costs. Using conditional hard currency transportation in instruction seems to fall short of some of the above advantages, family picks are really limited, and costs per donee are likely to lift due to supervising costs. Even when statements point out that conditioning improves effectiveness particularly when a specific group within the family such as kids are targeted, effectivity still rest on the health professionals ‘ pick to take part or honor the conditions. The undermentioned subdivision analyse family from the entitlement attack position.Locating families within the Entitlement Approach Framework.A ‘household ‘ fundamentally consists of people populating in the same home and have common agenci es for endurance. A family might non be household but assorted household composed of members from more than one household. Cash transportations are a manner of giving families capacity to demand services. Families make picks or ‘map ‘ on the services depending on their demands. The procedure of entitlement function at the family degree determines whether instruction as a ingestion good will be portion of the entitlement set, unless conditions are imposed. In a state of affairs of really limited resources under poorness conditions, demands that are considered most of import are more likely to acquire attending foremost. This suggests a additive relationship among demands. Besides needs that complement each other tend to be located closer to each other in the relationship. Therefore, a closer appraisal of overall family demand form is of import before an effort to excite demand for instruction. Sing the fact that a family operation is indispensable for kids ‘s public assistance, a comprehensive bundle may be necessary to do such intercession sustainable. Traditional microeconomic theoretical accounts assume that families consist of person who are a public-service corporation maximising ( Cornia and steward 1995 ) . The family make corporate determinations and income is allocated in the best manner to run into the demands of the family. A family is merely limited by the entire budget at its disposal ( Vermeulen 2002 ) . Under the public-service corporation theoretical account, even if the hard currency is disbursed to a family without any specific targeting, every member of the house is assured of a just portion from the corporate appropriation procedure. However, Individuals of course have different penchants or at least differ in precedences. When I was turning up at that place were infinite times when I would desire money to travel to a film house merely to be told that the few dollars left were for my male parents ‘ conveyance to work ( likely budgetary restraints ) , or that I would instead inquire for a new brace of school places ( precedence ) . Samuelson ( 1956 ) made an effort to explicate the inevitableness of single penchants and suggest that at least family members argue for their ain personal penchants and make a consensus to aggregate their public-service corporations. Becker ( 1974 ) unlike Samuelson, suggest the being of a benevolent family caput through which corporate public-service corporation is achieved. On the other manus, the bargaining theoretical account assumes a bargaining procedure among family members. The ultimate allotment of resources depends on the bargaining power of each person or groups within the family ( Cornia and steward 1995 ) . In this theoretical account, kids are expected to dicker for demands like school fees and other rudimentss. The above family theoretical accounts are an of import measure in understanding family ingestion forms. Concentrating on the rural Zimbabwe in a scenario of really limited resources, it is most likely that the demands ( including instruction ) would be prioritised in a superior order with the topmost needs having financess before those lower in rank. Assuming that kids will hold much dickering power particularly in an drawn-out household family might be an simplism. Demand for instruction is largely possible when it is considered a family demand and the budget license. The diminution in absenteeism rates in non-conditional hard currency transportations in Kalomo Zambia suggests that the demand for instruction might non needfully necessitate to be induced, but increased ingestion on other demands is positively correlated to ingestion on instruction.Targeting Children within the familyMost kids exist in families, and have entree to basic demands such as nutrient, shelter, and instructi on by virtuousness of being household members. Children who separate from a family might lose some basic demands such as shelter and nutrient. Children populating on the streets are a good illustration. Targeting kids in a manner that recognises this relationship is hence of import. This logically translate to the thought that a balance should be stuck among the viing demands within the family whether through public-service corporation maximising or dialogue. Targeting kids presents a challenge in poorness intercessions. If our position is that a family is necessary for kids ‘s endurance, we are most likely to accept that realization of kids ‘s entree to instruction is achieved when the family is working good ( i.e. affording most of its basic demands ) . On the other manus, if we hold the position that the family has failed to supply entree to basic demands for kids, we tend to estrange kids from the family and seek solutions that are limited to kids. Even if a plan is designed to references direct costs of instruction, the kids can merely go to school if the family attains some degrees of satisfaction on its other demands, for illustration, lower limit nutrient demands. It is hence of import to see the adequateness of the sum of hard currency transportation in intercessions. Beneficiaries in Kalomo District in Zambia indicated that the size of the hard currency transportations given were non plenty to run into the basic family demands ( Wietler 2007 ) , neither USD 6.50 per month transportations in Kenya might be sufficient to convey sensible alteration in a family ‘s economic status. Regularity of income is besides of import. The success of the Bolsa Familia programme is partially attributed to dependability of regular income even though the transportations where less than incomes form child labor ( Chapman 2010 ) . Other obstructions in aiming kids are deserving to see. During the choice of the mark population there are a scope of factors that might exclude/omit meriting families or kids to be donees. For illustration, deficiency of designation paperss or the clip interval between choices of donees. The choice of donees does non take topographic point every twenty-four hours for logistical grounds, while kids are invariably falling vulnerable from assorted grounds. Excessive coverage happens when people who do n't run into the standards for inclusion benefits form an intercession. Cornea and Stewart ( 1995 ) working in the country of nutrient subsidies argued that the chance of inordinate coverage lessenings when most of the people in a population meets the standards for inclusion. Sing the figure of out of school kids populating below the poorness threshold in rural Zimbabwe, coders should non go much disquieted about mark preciseness. Otherwise the cost of supervising for conformity will go e xpensive and lead to an addition in costs per donee. In a survey of 15 Sub Saharan states, Kakwani and Son ( 2005 ) discovered that the Pro-Poor Policy Index differences were non important in conditions of perfect aiming and cosmopolitan targeting, particularly where degrees of poorness were really high. Entree to instruction is non merely determined by the ability to run into direct costs of instruction. Other factors that need to be established through a situational analysis are of import before make up one's minding whether hard currency transportations ( conditional or non-conditional ) provides the best solution or non. The perceptual experience held the family on instruction may play a function. For illustration, ingestion on instruction may depend on whether it is considered an investing or ingestion good ( Kakwani et. Al. 2006 ) . The impact of instruction proviso besides depends on the quality of instruction. Consequently, supply side needs attending in footings of instructor preparation, educational installations and equal equipment. Success of the Red de Proteccion Social Programme in Nicaragua is besides attributed to fillips received by instructors for each kid who attend school and half of the sum was used to secure school stuff ( Chapman 2006 ) .DecisionCash transporta tions primary aim is by and large to cut down poorness and exposure and besides to increase affordability of trade goods. This nonsubjective can be achieved rather easy by utilizing non conditional assortments of hard currency transportations. Some literatures suggest that conditional hard currency transportations are the most effectual in advancing kids ‘s human capital development. However, the justification of utilizing conditions on hard currency transportations is unfastened to debate and unfavorable judgment. Conditional hard currency transportations cut down picks for families and might non needfully reflect the pending demands people have. Even though conditional hard currency transportations can be introduced to hike weak demand in instruction, an apprehension of state of affairss taking to less than expected ingestion on instruction is required. This entails apprehension of local family economic and societal functionalities. Evidence of an addition in investing in in struction under non-conditional hard currency transportation suggests that instruction is a family demand. Therefore, advancing kids ‘s instruction within the family model is most likely to be sustainable. All the same, household ingestion degrees on each demand tend to be related, complemented, or may be partly influenced by ingestion of another. Policy shapers besides need to see a web of grounds why families sometimes fail to adequately demand instruction in rural Zimbabwe. Considerations must be taken to see if hard currency transportation in its assorted signifiers can be used as a primary instrument or as a complement to other more relevant schemes particularly against a background of intensifying educational crisis.

Cafes monte bianco case analysis Essay

This course focuses on the strategic nature of management accounting and emphasizes the critical role that information plays in decision-making, strategy execution, and overall enhancement of a firm’s value. Primarily taught through case studies, this course will utilize and build upon the concepts studied in prior Management Accounting courses, and allow the students an opportunity to see how these concepts fit together. Selected readings from textbooks and business periodicals will be used to blend in appropriate theory for newer subjects that may be the focus of some case studies. The world of business continues to change dramatically. As a result, the role of managerial accounting is very different than it was even a decade ago. Today, managerial accountants serve as internal business consultants, working side-by-side in cross-functional teams with managers from all areas of the organization as they make decisions towards defining and implementing strategy. To complete their knowledge of managerial accounting, students must understand how managers are likely to use and react to information provided by management accounting. On the other hand, managers must understand the basis of the financial information provided by management accountants. We will explore both sides during our discussions. The course is divided into three major parts. The first part covers fundamental concepts, including activity-based management, and provides an overview of managerial accounting. The second part discusses concepts and methods useful for managerial decision making, such as CVP and differential analysis. Finally, in the third part, we concentrate on planning and performance evaluation of business segments as they strive to execute the firm’s strategy. In this part, we also discuss measurement and incentives (compensation) of managers. As indicated above, this is a case-based course to illustrate the applications of managerial accounting concepts in real-life situations. While preparing these cases, students should read about basic concepts on their own, using any of the textbooks mentioned later in this syllabus. However, I do intend lecturing on some of the relatively advanced topics (e. g. activity-based costing, variance analysis, pricing, target costing and allocations) at appropriate times during the quarter. TARGET AUDIENCE The course is general enough to benefit both MAcc and MBA students. A basic knowledge of financial and managerial accounting should suffice as a pre-requisite for the course. Both sets of students will enhance their understanding of Managerial Accounting topics by seeing how they are applied to real-life situations. In addition, MBA students will find that the course integrates several of the concepts they have learned in their curriculum. MAcc students will welcome the exposure to Strategy, and see how important Managerial Accounting is towards its (Strategy) implementation. ABOUT YOUR INSTRUCTOR With over 30 years of experience in industry, Mr. Mulchandani brings extensive knowledge of the â€Å"real world† towards teaching in the Business curriculum. Joining Rockwell International soon after obtaining his MBA, Mr. Mulchandani had assignments in several functional areas of the Company, including Finance, Accounting, Materials/Logistics and Manufacturing. After three years as a Division General Manager, he was named President of the Commercial Vehicle Systems Business ($3.5 billion in Revenue), from which he retired in December 2000. During his tenure in industry, Mr. Mulchandani actively participated in several global joint ventures, some of which he was instrumental in setting up. In addition, he has experienced being part of a spin-off into a separate automotive company, which later merged with another company for economic scale. In Spring 2001, Mr. Mulchandani entered the Masters of Accounting (MAcc) program at The Ohio State University, which he completed in June 2002. As a faculty member of the AMIS Department since then, Mr. Mulchandani teaches, or has taught, undergraduate financial and managerial accounting courses, Managerial Accounting in the MBA core, an MBA elective (Implementing Corporate Strategy), and the MAcc/MBA Elective (AMIS 823) at the Fisher College of Business.