Friday, December 27, 2019

Finance Dissertations - Corporate Payout Policy - Free Essay Example

Sample details Pages: 33 Words: 9775 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? 1. Introduction: The market system in the UK and the US has emphasized the role of the stock market in the Anglo-American capitalist system. Shares and bonds have become very common tools of investment in the capital system. Don’t waste time! Our writers will create an original "Finance Dissertations Corporate Payout Policy" essay for you Create order Investors buy shares and bonds in the hope of getting capital gains plus income from their investments. Shares offer investors capital gains/losses and dividends, share are very attractive investment tools for people who are prepared to risk their principle and get less than the amount that they have invested. Bonds offer limited return on investments, Bonds offer investors the same principle. Financial managers usually pay off their shareholders using two methods: Dividends: dividends are share of the capital that investors receive in return for investing their money in the company. Share repurchase/buyback: some financial managers choose to buyback the shares of the company if they feel that they company’s shares are undervalued, buying part of the shares will boost the remaining outstanding share prices. Over the last twenty five years, companies have become less prone to distribute funds to shareholders. This noticeable increase in dividends is accompanies by share repurchases in the US. Since Margaret Thatcher came to the power in the UK, the United Kingdom has adapted a very similar economic path to the US. These developments in the US have been followed by very similar developments in the UK. British companies are trying to concentrate on share buyback rather than pay dividends. In this assignment, we will try to find out why companies are heading towards share buyback. 2. What determines the payout policy of the company?: Miller and Modigliani (1961) were the first two scientists to challenge that fact that high dividends payout leads to higher value of a company. It is apparent that companies’ payout policy does not affect the value of the company. The reason that made Miller and Modigliani think that the payout policy of the firm does not af fect the value of the firm is that fact that in a frictionless economy investors could make their decisions rationally with no or minimum stochastic factors. Investors will be able to see that distributing too much dividends means that the company is missing investment opportunities and that its future cash flows will be substantially less than now. While if the company retained its earnings in order to invest into projects, investors will think that the company has over invested and so that the return on its capital will be substantially less than the market average. Miller and Modigliani thought that companies could not create the impression that they are better than what they are in reality. For several reasons, there are many people nowadays that do not believe in Miller and Modigliani, one of the possible reasons for that is the fact that financial markets are not frictionless and investors are not totally rational. In the financial markets, there are many short- sighted investors that prefer to get profit as soon as possible without paying any real value to the future cash flow of the firm. But the supporter of Miller and Modigliani argue that institutional investors watch the payout policy of the firm very carefully and analyze the activities of the firm in a very good way so institutional investors do know the value of the firm exactly. Although Miller and Modigliani do not see any difference in the value of the firm no matter what payout policy the firm follows; there are many people who think that having high payout policy is much better than retaining funds because high payout policy attracts institutional investors who are able to monitor the company and give a more precise valuation to the value of the company and its credit quality. Trojanowski, G(2004) thinks that the company is really in typical type I error and type II error dilemma, if the company adapted high payout policy towards so it became cash constraint the compa ny might miss profitable investment opportunity( type II error), but if the company retained cash and invested in unprofitable projects this will be type I error. Trojanowski, G(2004) thinks that this high payout policy is considered the price that should be paid to institutional investors in order to get things right and be able to give precise valuation to the company. There are several factors that determine the payout policy of a firm; we can summarize these factors as: Valuation of the company’s value, taxes, information asymmetries and contract incompleteness. 2.1 Valuation of the Firm’s shares: The value of the firm itself play a substantial role in the payout policy for any company, if the firm’s shares are undervalued, companies’ tend to buyback their share prices in order to make use of the undervalued share price, this will improve the share price and encourage investors to invest more in the shares of the particular company. Sha re buyback play the merger acquisition impact on share prices, in the case of merger and acquisition, a company comes forward to buy the shares of an undervalued company, this normally leads to a hike in the share prices of both companies. In the case of share buyback, the company itself comes forward to buy its own shares, this leads as well to a hike in the share price. The rise in share prices resulting from share repurchases will make it more difficult to other companies to buy the shares of the undervalued company because buying the shares of the undervalued company will require additional premium. The success of the share buyback process is directly related to the number of investors who come forward to sell their shares. The number of investors who come forward to sell their shares is related to the price at which the shares were bought. If the price of the bought shares was high and then fell dramatically, the buyback process will not be enough to compensate f or the full loss of the invested money; Investors will rather prefer to change the management and hold it accountable for the poor results of the company. If the fall in the price of the shares was modest and share buyback compensated the loss that investors have incurred and/or made capital gains, many investors will prefer to sell their shares and that is how the buyback process becomes successful. 2.2 Tax: According to Miller and Modigliani (1961): dividends do not affect the value of the firm: This result is based on many assumptions: taxes, The tax system of any country will affect the payout policy of most of the companies in the world. The research that has been done on this issue refers to two facts: The first one is that companies tend to change their payout policy if the tax law changed. The second one is that: according to Kalay (1982) and Stiglitz, J, E (1983) individual investors do rebalance their portfolios quickly enough in response to tax law changes; this school of thought thinks that investors always try to follow tax avoidance strategies in order to maximize their wealth by â€Å"dividend laundering† In other words, investors will try to put pressure on their company in order to pay them in the most tax efficient way that maximizes their wealth and the value of the company. Share repurchases are very attractive way of distributing the profits of the company because they could happen at any time of the year; investors try to put pressure on the company to choose a suitable time for most of them. Share repurchases give investors the flexibility and the choice in participations, investors might choose to participate in the share repurchase if they feel that their overall tax liabilities will become less. Investors could defer their tax payments to make their own decision of when to sell in order to maximize their total wealth. Of course, shareholders can sell their shares in the market if they want cash as a tax Advantaged substitute for either share repurchases or cash dividends. In the law, the tax paid on capital gains is deferred until the shares are sold whereas any income tax on dividends is paid annually. The deferral of the capital gains tax reduces its present value. Broadly speaking dividends in the UK enjoy a less favourable tax regime than share repurchases which may give rise to something of a Dividend Policy Puzzle. Although dividends do not enjoy the same tax treatment that share repurchases have, most of the companies in the UK are still paying dividends because most of the investors are tax-exempt and companies listen to their shareholders in the UK. This point will be researched in more detail in the coming sections 2.3 Financial Structure: When companies decide to buyback their shares, they change their financial structure. Share buyback is accompanied with significant debt/equity ratio. Share repurchase does not only reduce equity but also increases debt. The leverage ratio will increase after the buyback period. The financial structure of the company has a profound impact on the payout policy. In order to understand how the financial structure affects the payout policy we need to understand the concept pf â€Å"block holders†. Block Holders are few numbers of investors who own the majority of the shares of the company. The economic literature is increasingly enforcing the fact that block holders could play a positive role in monitoring the performance of the companies that they invest in because they have a big interest in preserving and growing the capital that they have invested. Unlike small investors, block holders power is very important in keeping the management of the company doing the best it can in order to maximize the wealth of the shareholders. When companies use share buyback, it is expected that minority shareholders will sell their shares to the issuing company and no t the block holders. When that happens, small shareholders numbers will decrease and there power will be less. This will open the door for bloke shareholders to use their power in imposing what they want without listening to the minority shareholders who have less power in the board room than bloke shareholder. In that sense, we can say that changing the financial structure of the company can have a negative impact on the minority shareholders who choose to sell some of their shares to the issuing company. In many countries such as Germany, France, Italy and Hong Kong, the volume of shares to be repurchased must not exceed 10% of total shares outstanding. Firms from such countries can therefore not use repurchase programs to increase their debt-to-capital ratio dramatically and to transfer value from debt holders to shareholders. 2.4 Cash Flow: Public companies have shares that could be traded on the stock exchange, as illustrated above; investors expect return on their investments in the shape of dividends. If the company did not meet investors’ expectations, share prices will go down. Share buyback happens when the company has cash that is in excess of the company’s needs. If the company cannot pay its investors good return on their investments, it is better to return the money to the investors in the shape of share buyback. Jagannathan, Stephens and Weisbach (2000) showed that companies with excessive operating cash flows tend to distribute dividends while companies with limited operating cash flow tend to repurchase their shares. Companies with temporary excessive cash flow tend to repurchase its shares in order to distribute the excess cash flow. Companies with temporary excess cash flow tend to distribute its excess cash because the company wants to smooth its dividends policy, it is not in the company’s best interests to increase the volatility of its dividends because dividends are very important signaling tools that the market use in valuing the shares of the company, when dividends increase because of temporary excess cash and them decrease later one, share prices will become volatile and investors will try to avoid the shares of that particular company. 2.5 Agency Problem: The industrial revolution has contributed significantly to the separation of management from ownership. There is a constant crisis of trust between management and the shareholders of any public company. Under perfect conditions, the management is supposed to be working for the best interests of the shareholders, but what happens in reality is something different, the management is constantly trying to maximize its own benefits and wealth on the expense of the shareholders. The relationship between management and shareholders is not always a cooperative relationship; the relationship might well prove to be a competitive relationship. Managers and company directors might misuse the fund s of the shareholders; directors might use the money of the shareholders in increasing their salaries, pensions and other allowances instead of paying this money to the shareholders in the form of dividends or share buyback. When company directors choose to use the excess funds that they have in buying back the shares of the investors or in other words returning their money, the trust between the investors and the company directors increases significantly. Share buyback proves that there is a wise management in that particular organization; investors will see this move as maintenance to the resources of the investors. Company directors that choose to invest the excess cash that they have in non-profitable projects will be seen in the financial markets as not reliable; investors will know that the top management of that company is not sound. Some school of thoughts claim that share buybacks are bad for the minority shareholders if they are not accompanied with the selling of the shares of the directors. The reason for that is the fact that company directors own shares and share options in the company and if the company made a share buyback, the share of directors and managers in the company will increase and this will open the door for possible misuses. Many economists recommend that share buyback has to be accompanied by the selling of the shares of the directors in order to keep a sound management system in the corporation, Siu, J Weston, F(2002). Finally, Share repurchases can violate the interests of the last majority of uninformed shareholders when only inside shareholders have information about the exact timing of repurchase transactions and the amount that the issuing company will purchase. Insiders could use that knowledge to dispose of their shares at a higher price than under normal market conditions, IKENBERRY/VERMAELEN 1996. This illegal action would cause a wealth transfer from outside shareholders to inside shareholders and if anticipated by outside shareholders should lead to a negative announcement effect. 2.6 Signaling: Share buyback are used a signaling tool, dividends convey information about the future cash flow of the company. Motivations are normally in line with shareholders’ interests; this includes the attempt by management to convey to investors that the true value of their corporation’s equity exceeds its current market value. Such a signal might be based on management’s believe that the true mean of the probability distribution of the firm’s future cash flows is actually higher than perceived by the market or alternatively, that the true variance of future returns is higher than expected, holding the distribution mean constant, DANN (1981) We have two cases depending on the prices of the financial assets of the company: In the first case, all of the firm’s risky securities appear to be undervalued. In the latter case, only equity c laims appear to be undervalued, whereas claims in the form of risky debt might in fact be overvalued. Share repurchases could actually lead to a re-distribution of debt holders’ wealth to the benefit of shareholders. It is typically assumed that insiders which are the company’s management and directors know a lot more information about the company’s cash flow situation than insiders. However, any straight public announcement by the board of directors that it considers its firm’s shares to be undervalued generally lacks credibility because there might be other hidden motives to the management. Outside investors cannot distinguish between true and misleading announcements because they do not have all the information about the company. They will perceive of all undervaluation announcements as try to hide the truth about share repurchases unless the company produces evidence that undervaluation is the real motivation for share repurchases. S hare repurchase announcements cause two types of costs to overvalued firms. Firstly, firms that repurchase overvalued shares must understand that the share price will decline to its true intrinsic value as soon as possible, so that the company would have paid too much for its shares. Secondly, firms that announce to repurchase shares but then decide not to do so might see their general reputation for honest capital market communication deteriorate because the company’s public relations status with the company will be shaken. Depending on the legal and regulatory restrictions for share repurchase programs, such firms also risk that authorities initiate investigations of price manipulation. Given these potential costs, share repurchase announcements can be used as a clear signal to enhance the reputation and the credibility of an undervaluation signal. Such credible signals should then lead to an appreciation in stock price and benefit the investors who are welling to sell their shares. Share buyback will convey a message to investors that the company has few good projects (NPV0) and in turn less cash flow and that is why the company is returning its money to investors. Share buyback indicate that the financial situation of the company is not strong enough in order to meet the expectations of the investors. When the company chooses to pay its investors by distributing dividends, it gives the signal that it has many good projects (NPV0), and the company believes that it could create capital gains to investors without seeking refuge to share buyback. 2.7 Employee incentive plans: The company might seek to purchase its own shares in order to finance its employee incentive plans. In the current capitalist system, many companies realized that empowering employees is the best way to align the interests of the employees with the interest of the company. Through the history, the management and the employees were always at odds and t hat caused many strikes and struggle within the company. Many companies found out that the future organizations of the companies should depend on giving employees the initiative and turning them into an asset rather than looking at them as a liability or an expense. This process has been triggered by the introduction of new technologies that enabled top managements to cut the middle management and give the authorities of the middle management to the employees that the technology will help them to perform their tasks in a more efficient way without the direct supervision of the middle management. This process could not be achieved without giving employees shares in the company and make them real partners in the organizations. When employees get share of the profit they will work harder than before and that will benefit the whole organization and the society. Share repurchases are one of the best ways to turn the employees into an asset since share repurchases happen wh en the share price is relatively cheap, share repurchases provide a very cheap way to finance the employee share scheme and create a wholly new organization that depends on mutual trust between management and employees rather than struggle between them. 2.8 Convertible bonds execution: Convertible bonds are defined as bonds that pay a regular coupon for their buyer, the price of bonds will depend on two main things: interest rates and credit quality of the issuer. Convertible bonds combine the feature of bonds and shares at the same time. We all know that companies give their investors the option to convert their bonds into common shares at any time they want in order to make their bonds more attractive to investors and give investors the flexibility in choosing the investment tools that they foresee suitable to their investment strategy. We all know that shares and bonds are two different products that offer two different profit and loss opportunities. Most of the times, shares and bonds markets work at odds. When interest rates are low share prices seem to be a better investment opportunity than bonds because they offer better return on investment. When interest rates are high bonds seem to be a better investment opportunity than shares because they offer better return on capital. Many companies encourage investors to invest with them by giving them the option( this option is called call option) to convert their bonds to shares. When the company has a shortage of shares the company will have to buy them directly from the market in order to meet its investor’s requirements of converting bonds into shares. 2.9 Trade shares: Trading shares might be the motive for share repurchases in the UK and elsewhere in the developed world. When the market is depressed and the share prices reflect less than their fair value many companies will resort to buying their own shares in order to sell them later at a higher price. When big companies believe that their shares are under-estimated, they invest the excess cash that they have in themselves in order to encourage more investors to buy their shares and when the market prices of the shares goes up the issuing companies will resell them at profit. Investors will benefit from this share repurchase by two ways: Investors will be able to sell some of their shares at higher price and make profit from that. Investors will benefit from the higher dividends that their company will pay them as a result of re-selling the shares at higher price. Share repurchase might aim as well to reduce the volatility of the share and stabilize its price. Share trading s not as easy as it might seem, there are regulations that govern the ability of the company to buy/sell its own stocks. 2.10 Destroy shares: There are two reasons to destroying shares: The first one is to change the ownership structure and the second one is to increase the wealth of the shar eholders. Change the ownership structure: When the company buys its own shares in order to destroy them, it destroy with the shares the voting right, we all know that owning one share means owning one vote, this means that destroying one share means destroying one vote. According to Pindur, D Lucke, M (no date given) the management might find it very cost effective to have homogenous shareholders rather than heterogeneous shareholders, that’s why the company offers share repurchases and destroys shares. In that case, the company will offer investors what is called a â€Å"controlled premium†, which is a premium that is paid above the market price in order to lure investors to sell their shares. Wealth creation for investors: The best measure to wealth creation is the Economic Value Added; Economic Value Added is defined as the operating after tax profit minus a charge for the opportunity cost of the invested capital. When the company wants to maxi mize its shareholders wealth by buying and destroying the shares directly from the market the company will resort to the following measures: Decrease the weighted average cost of capital (WACC): we all know that the weighted average cost of capital depends on two major elements which are shares and bonds: the average cost of bonds is the interest rate that is paid to the bondholder, the average cost of shares will depend on the risk premium that is required by shareholders to compensate them for the risk of losing their invested principle; when the company buys its own stock it reduces the weight of equity in the mix of capital, so the weighted average cost of capital will be less and that is how the wealth of the shareholders will increase if the company bought the shares from the market and destroyed them; reducing the weighted average cost of capital means that producing the same profits or more with less costs of capital, this is a real sign of improvement in the situation of the company, the issuing company has to be careful that reducing the number of outstanding shares might mean that share prices will go up in ord er to satisfy the demand on the shares of the company, especially when shares get less, the dividends get better, this might increase the demand on shares, that is why management is always advised to reduce the amount of shares and debt in the same percentage in order to leave prices of shares and bonds relatively stable, the opposition to share buyback comes from debt holders especially those with unsecured debt, the reason for that is the fact that when shares decreases this means that capital has decreased and this means that if the company went bankrupt there will be no enough capital to cover the value of the debt, while shareholders will be the least losers from bankruptcy, again that is another reason why companies are advised to buy shares and bonds at the same time and keep its leverage ratio stable during the time, A third and final reason for advising companies to buy shares and bonds at the same time is the reason that many companies offer convertible bonds which could b e converted at any time to certain number of shares, if the company did not buy shares and bonds at the same time and share prices went up, convertible bond investors might find it more profitable to convert their bonds to shares and in this situation the company will find itself in front of two options the first one wither buying more shares to convertible bond investors from the market and that would mean paying high prices for them or issuing new shares again and that would make share repurchases pointless. Increase the return on invested capital (ROIC): this idea is very related to what we explained before about type I error and type II error, in other words the company will take decisions regarding the best investment opportunities that are available, it is assumed that the company will select the projects that maximize the return on invested capital and return the excess cash to the investors in the shape of share repurchases, this process will maximize the return on equity to the maximum, we all know that the marginal propensity to capital will increase rapidly at the beginning of the investment and after that the amount of increase will de-accelerate until it the marginal propensity to capital reaches zero and then it starts to decline. Increase the growth rate: when the right amount of capital has been allocated to the most profitable projects the growth rate of the company should be maximum. 2.11 Legislative reasons: Sometimes companies in a particular country find very difficult to repurchase their stocks even if there is tax benefit from repurchasing the stock rather than distributing dividends. In the US for example, companies did not repurchase their shares until after the mid-eighties. According to Grullon, G Michaely, R(2000:PDF page 5), one of the possible reasons for that is â€Å"the risk of violating the anti-manipulative provisions of the Securities Exchange Act of 1934, Indeed, after the SEC adopted a safe–harbor rule (Rule 10b-18) in 1982 that guarantees that, under certain conditions, this agency will not file manipulation charges against companies repurchasing shares on the open market, repurchase activity experienced an upward structural shift†. Grullon, G Michaely, R(2000) says that one year after the change of the SEC rule the amount of earnings that have been distributed as share repurchases tripled. In Germany for exampl e, share repurchases are still very difficult because they need the approval of the shareholders that should be got in the Annual General Meeting. We can see clearly that regulation is a very important too in encouraging and discouraging share repurchases. 2.12 Dilute earnings: Many analysts think that share options have helped in aliening the directors’ interests with the interests of the shareholders but few people investigated how stock options change the behavior and choice of directors to distributing earnings. There is increasing evidence that executive compensation that is usually granted in the form of stock option has a lot to do with share repurchases in the UK and the US. Accounting rules make compulsory on companies to reflect the value of the stock options that are given to directors and managers. We all know that writing an option on the shares of the company is equivalent to increasing the number of the outstanding shares. When company dire ctors want to exercise their options, there need to acquire actual shares of the company and that would make Earnings per Share less for everybody; that is called â€Å"diluting the earnings†. Earnings per Share are the total earnings divided by the number of outstanding common shares and common shares equivalents. When earnings per share become actually less; the company will try to repurchase the shares from the market. Earnings per share will not only be less but also will cause a decline in share prices later on because EPS is used in valuing the shares. The cash that is actually used to repurchase the shares will not be deducted from the total earnings and that the company will keep its total earnings unchanged after the repurchase of the shares from the market. In order to illustrate this point further, there is a difference between EPS and diluted EPS. Diluted EPS is the total earnings of the company subtracted from the cost of share options and warra nts divided by the number of outstanding common shares and equivalents. When analysts value shares they look at EPS but not diluted EPS. After share repurchases, EPS will be the same as before share repurchase EPS. So companies try to repurchase their own shares because they try to hideout the cost of share option costs. If we look at the empirical studies that have been done in this area we find that most of the studies found a correlation between stock repurchases and executive’s share options. According to Lambert, Lanen, and Larcker (1989), Option grants in general are associated with increased payouts and decreased earnings retention. The larger is the executives’ holding of stock options, the more apt the firm is to retain more earnings and curtail cash distributions. This finding is consistent with Fenn and Liang (2000) that   there is a well-documented finding of negative relationship between dividends and managerial stock options and. The relationship does not appear to be explained by differences in investment opportunities across firms. This result supports the agency hypothesis, namely that the distribution decision of a firm is influenced by executive compensation. It also suggests that any option-induced dividend reductions to enhance the value of executives’ options have primarily been used to retain more earnings. 3. Share Buybacks vs. Dividends: There is an argument for dividends and there is an argument against dividends. The argument for dividends is that: Dividends create discipline in the company: when the company issue shares, it becomes owned by the shareholders that monitor the work of the company and its managers. The shareholders participate in the annual meetings of the company and put the managers and the directors accountable for their actions and ask the directors to set new targets that would achieve sufficient level of return to the stockholders. Having shareholder s means more discipline by the managers and the directors of that particular company. If the company decided to buyback its shares this means that the company will have fewer shareholders monitoring the company’s actions. Dividends attract long-term investors; investors who invest in share in order to get paid an income from dividends are long-term and committed investors. It is important for every company to have long-term investors, committed investors stand by the company in the good and bad times. If the company is in bad situations, investors will try to support the company in re-correcting its mistakes and re-drawing its strategy. Uncommitted investors increase the volatility of the share price because they sell at high prices and buy at low prices, and they always try to push the company to pay them by stock buyback, so they are not committed to the long-term future of the company. Dividends are preferred to share repurchases because share repurchases involve a large amount of expenses that have to be paid to investment bankers and brokers in order to make the share repurchase successful. Many analysts argue that dividends are more efficient than share repurchases because they do not waste the money of the investors so they go directly to the investors. Share repurchases are criticized because they often benefit short-term investors rather than long-term investors. According to Barclay and Smith (1988), in their paper ‘Corporate Payout Policy: Cash Dividends versus Open Market Repurchases, the two researchersargued that there is a cost associated with open market repurchases which may outweigh any tax disadvantage of dividends. Managers’ repurchase activity will be governed by managers’ superior information. Market makers, recognising that they are at a disadvantage in regard to information, will set the share’s bid-ask spread at such a level as will compensate them for the risk of dealing with the better informed. This raises the company’s cost of capital and reduces firm value. Empirical support for the theory is mixed. However, Brockman and Chung, the two researchers find in Hong Kong the fact that bid-ask spreads usually widen during repurchase periods as market participants respond to the presence of informed managerial trading. Hong Kong has a very similar economic system to Britain so what is true for Hong Kong is likely to be true for Britain. Moreover,   Ginglinger and Hamon, in their article ‘Actual share repurchases and corporate liquidity’, (2003) find that for the French market share repurchases have an adverse effect on liquidity on the trading day concerned as measured by bid-ask spread and depth. Moreover, In the current capitalist system, many investors buy and sell shares quite often, stock repurchases will benefit this type of short term investors who have not stood by the company long enough to deserve this money t hat easily. Share repurchases are criticized that they might cause re-distribution of earnings between investors. There are always investors who want to sell and get their money back but there are investors who want to hold to their shares, this means that these investors will get less earnings than the ones who accepted selling their shares to the issuing company. While dividends create justice to the investors because every investor get the same amount of dividend for each share they hold. The argument against dividends: The tax on dividends is higher than the tax on share buyback, tax makes share less attractive to investors and push them to ask the company to pay them by share buybacks. Dividends are criticized because they cause confusion in the market especially when the amount of profits goes down and the dividends that each share gets down as well. In order to explain more about this point we have to look at what happens to the share price when dividends g o down: When dividends come out to be lower than expected the market will react negatively to the news, and share prices will go down. Share repurchases are always interpreted positively, because investors do get rewarded and they do not feel negatively towards the company so share repurchase are always good news for the market. 3.1 Dividends, Share repurchases and Cash flow: According to Jagannathan, Stephens and Weisbach found that, for US companies, repurchase and dividends are used at different times from one another by different kinds of firm. Firms buy its shares when its share prices are undervalued and there is an excess cash that would be distributed. While companies distribute dividends when there is a stable steady stream of earnings to the company. In other words, shares are repurchased when the company wants to smooth dividends and share price, this usually sends the wrong message to small investors. What is the alternative? Some large UK comp anies found the alternatives to the share repurchasing problem by issuing redeemable ‘B’ shares on a pro-rata basis as an alternative to a repurchase or a one-off special dividend. For example, in the year 2002 MS announced that it will restructure its share capital, and that would involve the creation of a new holding company (www.marksandspencercom). Existing shareholders were given a the choice of a mixture of new ordinary shares and redeemable B’ shares, The redeemable shares can be claimed for cash at certain dates in the future. The amount of money that the company pays out to investors is treated as a capital gain, so this method gives investors the freedom in choosing the tax brackets that they want to be into. Offering more than one redemption date gives shareholders the ability to spread their capital gains over a certain time. 3.2 Payout policy and taxes in the UK: The tax system in every country justifies the choice of the payout channel in the company. The difference in the tax system between the US and the UK explains the discrepancies in the observed patterns of payout between the US and the UK. 3.3 Dividends and Taxes: In the US, dividends are subject to two taxes: Dividends are taxed before the company distributes them to investors via corporate tax; dividends are taxed again after the distribution of the dividends to investors via income tax. This system of taxing dividends twice is the reason behind the rise in cash buyback in the US. In the UK, it is a slightly different story: The UK has an imputation tax system; the imputation tax system tries to avoid the drawbacks of the classical tax system. The difference between the classical tax system and the imputation tax system is that the imputation tax system avoids the double taxation that the classical tax system has. The imputation tax system repays part of the tax back to share investors in the shape of tax credit. Acco rding to Renneboog, L Trojanowski,G(2005: P 8): â€Å"The UK has used a partial imputation tax system since 1973, In that system, part of the firm’s payment of corporation tax is taken into account when calculating shareholder’s liability to income tax on company dividends. Hence, that tax treatment of dividends is more favorable than in a classical tax system†. According to the British imputation tax system, corporations pay their share investors dividends net of the imputed amount, companies pay to the Inland Revenue Advance Corporation Tax, Renneboog, L Trojanowski,G(2005). Normally, the shareholders receive his net cash dividends in addition to his tax credit. The tax credit is equivalent to the basic rate of income tax on dividends; these tax credits are normally used to offset income tax liabilities. Tax laws gave full tax refund to charities and pension funds until 1997. After 1997, tax authorities cancelled the full tax refund clause of th e corporate tax law, this has made many institutional and personal investors indifferent between receiving tax in dividends or share repurchases. This explains the difference between shares repurchases in the UK and the US, in the UK the motivation to be paid by share repurchases is much less than the US. Compared to the US, the vast majority of UK firms pay dividends, Fama, E and French, K (2001). 3.4 Share repurchases tax treatment in the US: Regarding the US tax treatment of share repurchases, as compared with cash dividends, which are subject to the tax rates for individuals. Share repurchase profits in the US are subject to capital gains tax system. Capital gains tax in the US have seen gradual decline in the recent year. For example, in the year 2001, capital gains tax declined from 39.6% to 39.1%( https://www.kssmallbiz.com/articles/article_127.asp). The tax law of the year 2001 makes clear that capital gains tax will be reduced gradually to 35% by the year 2006. Capital gains tax can be charged at a rate of 20% if the gains qualify for long term capital gains tax, the long term capital gains tax save investors about 19%, which is 39%-20%(inland revenue website). 3.5 Share repurchases tax treatment in the UK: The UK imputation system has its impact on share buybacks; in order to understand how we need to explain the following two ideas: The first one is the off-market repurchase: this is the case when the share investor knowingly sells his shares to the same company that has issued them. The second one is the open market repurchase: the second case when the investor sells his shares to other entities or bodies that are separate from the issuing firm. In the open market repurchase case, investors get their realized profits taxed at the prevailing UK capital gains tax law. In the Off-market repurchase case; investors get tax credit for the â€Å"distribution element†. The â€Å"distribution elementâ €  is defined as the difference between market value of the share repurchase and the book value of corresponding paid-in capital. According to Renneboog, L Trojanowski,G(2005: P10) â€Å"the difference between the original subscription fee and the and the investor cost base which is the price at which he purchased the share plus inflation allowance is considered a capital loss†. This capital loss can only be set off against capital gains. It is natural to conclude that small investors would prefer share buybacks should they make capital gains from selling to the issuing company. 3.6 Ways of Share Repurchase Activities: Companies usually use three methods in share repurchasing: Fixed price tender offers (FPT) give shareholders an in- the-money put option. Fixed price tender could be defined as well as a one-time offer announced for a specific period of time to purchase a stated number of shares at a price above the stock’s current market price, sa y at a tender premium. Put option is the right but not the obligation to sell an underlying at a pre-agreed price; investors will exercise their put option if they could make profit from exercising their put option. If the company wanted its fixed price tender offer to be successful the strike price should be high enough in order to lure as many investors as possible to sell their shares to the issuing company. If the strike price was not high enough some investors might not find it profitable to sell their shares and that is how the Fixed Price Tender Offer fails. When setting the exercise price, the issuing company should take into its consideration the price that investors have bought the share for. The issuing company should make investors make profits when setting the exercise price. That is what we mean by in-the-money put option, an in-the-money put option makes profit to its owners. The reason for using put option is to give the investors the right to re alize their profits in a way that suit their tax liabilities (as mentioned above). Normally, companies will extend their repurchase offer if it did not find a satisfactory response from investors to the tender. The fixed price tender offer might be done either by deciding in advance the number of shares that the company wants to buy or the amount of money that they company is prepared to spend. If the company decides to buy a certain number of shares and that the tender did not look appealing to too many investors, the company might try to increase the tender price in order to buy the number of shares that it wants to buy. Dutch auctions (DA) is designed to give shareholders a put at a range of prices, some of them are in-the-money. Dutch auctions are a very flexible way of luring investors into selling their shares to the issuing company. The difference between Dutch auctions and Fixed Price Tender is the fact that Dutch auctions give investors a range of exercise prices. The reason for giving investors a range of exercise prices is again suit the investors’ varying tax needs. As we have already shown that investors differ from each other in terms of their tax liabilities and the price that they purchased their shares at, so having different exercise prices will lure more investors to selling their shares to the issuing company. Open market share repurchase (OMR) announcements create a valuable exchange option which permits a firm to exchange cash for the market value of its shares at times selected by management. 3.7 More recent motives for stock repurchase: In the above paragraphs, we have explained the traditional reasons for stock repurchases, in this section I will try to explain more recent trends that stand behind stock repurchase, most of these reasons are immoral and I tried to sum most of them up here in this section: According to a study done by Comment and Jarrell (1991), share repurchase are significantl y lower when companies’ directors and managers are not at risk of being ousted by share holders. This is a very significant finding; I think that the opposite is true as well which means that when companies’ directors and managers are at risk of being ousted by shareholders they try to buy the company’s stocks in order to create an exit for the unsatisfied shareholders. In that sense, share repurchases are a very good way to get rid of the responsibility of the decline of many companies. This might cause a crisis and prejudice against small shareholders that are unaware of the real purpose of share buyback. In this case, share buybacks are immoral way of lifting share prices because they might create a false sense of improvement in the financial position of the company to many small and unprofessional investors. 3.8 Increase stock options values: Most company directors are offered massive salaries every year and most of them are offered share o ptions. Some companies’ directors might be reluctant to repurchase the shares of the company in order to increase the price of shares of their companies so they can exercise their options and make profits. In fact, this is difficult to happen in the actual world because most of the companies are monitored by institutional investors and analysts from all over the world but of course, there are some exceptions from time to time and illegal things do happen in big and small companies. This could only happen if the institutional investors are engaged in the same way as the issuing company that is when analysts collaborate with some companies in order to cover these facts Moreover, some companies’ directors who have shares in the companies that they manage might use share repurchases in order to dilute the control rights of other shareholder groups. Even if these other shareholders are not willing to sell their shares to the firm the transaction costs associa ted with such an attempt might have a negative value impact. 3.9 The response of the market to share repurchases: Market response to share repurchases news is always mixed and depends on the understanding of the market to the reason or the motivation of the management to share repurchases: If the market thinks that share repurchases intend to improve the overall position of the company and it is in the best interests of the shareholders, the stock prices will go up. What happened if the company repurchased its shares in the intension of increasing its EPS (Earnings per Share)? If the market is aware of the fact that the company’s shares are undervalued and that the company intends to increase its EPS, the market will buy the shares of that company so the price of the shares will go up and the move will lose its effectiveness. In this case, that total earnings will decline by the same percentage value as the number of shares outstanding because the company wi ll use the earnings in order to buy the shares. Earnings per share (EPS) will therefore remain unchanged. As a consequence, firms that solely buy back shares to increase their EPS ratio should not be able to achieve this goal. This means that the company will use its assets (earnings) to buy its liabilities and that the relative position of the assets and liabilities will remain the same. In the second case, when the market is not aware of the fact that the company want to buy its shares to increase its EPS, market participants will not rush to buy the shares of the company and that means that share prices will remain unchanged and that the company will buy them undervalued and that will increase EPS for all the remaining outstanding shares. The second case is an ideal case in perfect financial markets where there are no insiders and there is no leak of information to outsiders. 4. The difference between share repurchases in the US, UK, France and Germany: I have c hosen to compare between the US and German laws regarding stock repurchases; the US represents the Anglo-American system and Germany stands for the Franco-Germanic system. This comparison will allow us to understand the differences between the two competing systems and will help us expect and/or speculate on the new motivations of stock repurchases in the UK because the UK model is very much like the US model: The German laws regarding share repurchase plans differ significantly from the laws and regulations that govern share repurchase transactions in the US For example, managers of German firms are required first under the law to obtain approval for a specified share repurchase program on their annual shareholder meeting and must then publicly announce any coming share repurchase, the company has to announce the number of shares that it wants to buy, the annual general meeting has to decide the duration of the repurchase and the way of the repurchase and the repurchasing dur ation that should be a maximum of eighteen months, Hackethal, A Zdantchouk,A(2005). After the share repurchase and exactly on the shareholder meeting that is after the share repurchase, management should justify to its shareholders the reason of the share repurchase, its volume and the price paid per share. In contrast, US firms need only obtain an approval from their company board and are only required to publicly announce the establishment of a repurchase program. Under the US laws and regulations, US firms are not required to announce the details of the proposed or actual share repurchase transactions to the financial authorities or to shareholders, Hackethal, A Zdantchouk,A(2005). This means that the door is open for the board of directors to decide for itself the reasons for the share repurchase; this means that share repurchases are subject as illustrated above to the way that the directors are rewarded. Most of the few studies that have been made before about the motivations of US open market share repurchases reveals strong evidence that many US firms announce repurchasing programs to convey a message to investors that the share are undervalued and that it is the right time to buy them for cheaper than their real value. Most of the analysts used to think that tax issues are the most important driver for share repurchases; now its is widely believed that share repurchases are increasing because of director rewards issues; the next generation of the studies is coming to shed the light about directors rewards issues. In the UK, the purchase of shares means that the shares will be cancelled automatically and that these shares will not be banked or be put in the treasury. France has very similar laws to Germany the French do not give freedom to the directors of the company to decide on the duration and the amount of the share repurchase in France. Like Germany, French shareholders have to agree on the share repurchase in the gen eral meeting. â€Å"The French law n ° 98-546 of July 2, 1998,† authorized open market stock repurchases for public firms. Shares can be sold, bought or kept within the limit of 10% of the capital of the firm for a maximum period of 18 months. With the authorization given at the special meeting of shareholders, shares may be cancelled within a 10 % limit of existing capital for a 24-month period†, Reference number 20 In France, the motivation of the share repurchase is known because the issue will be discussed with the share holders before the share holders approve it and that what makes the classification of the share repurchases motivations easier than in the Anglo-American System. 5. Propensity to pay in the UK: I have talked about the work of Renneboog, L Trojanowski,G because they have tested the substitution hypothesis and rejected. According to Renneboog, L Trojanowski,G( 2005: PDF page 23) : â€Å"The overwhelming majority of UK firms (85%) d o pay dividends over the 1990s Moreover, the proportion of dividend payers in the UK does not decrease over 1992-1998 (if anything, a modestly increasing trend can be observed). In any of the sample years, approximately five out of every six firms pay cash dividends. This result contrasts with the existing US evidence for the same period: only less than 24% of the American firms paid dividends† Again according to Renneboog, L Trojanowski,G( 2005) companies in the UK pay their earnings in the form of dividends rather than share repurchases because that is consistent with the wish of the shareholders that the fast majority of them are tax-exempt. On average less than 6 % of the analyzed firms repurchase their shares. According to Renneboog, L Trojanowski,G( 2005) â€Å"In the US the proportion of share repurchasing companies has increased from 70% to 90% over the 1990s†. According to Renneboog, L Trojanowski,G( 2005), In the first half of the 1990s, If we look a t the frequency of the share repurchases in the UK market, we find the frequency to be very low for those companies which chose to repurchase their shares before. According to Renneboog, L Trojanowski,G( 2005), In the second half of the 1990s, we witnessed an increase in the number of share repurchases but the number of companies who repurchase shares is really small compared to the number of shares that distribute dividends. The two economists, Renneboog, L Trojanowski,G, rejected the substitute hypothesis. 6. Payout policy and Investment policy: I would like to show the relationship between the payout policies of the firm with its investment decisions. In the Anglo-American system companies tend to payout more earnings to its investors; this could affect the level of investment in the company because investors want their money in the quickest possible way with no consideration to the long-term future of the company. From what we have seen above, company directo rs and managers of the Anglo-American system want to protect themselves by buying their companies’ shares in a defensive move to prevent any MA. This means that company directors in the Anglo-American system are more likely to waist the money of their share-holders on fruitless issues rather than spend the money in the right place. The overall result of this way in distributing earnings would be less investment in the whole economy in the long-run if that trend persisted. If we look at the Franco-Germanic model we see easily that the share repurchase issue is well regulated and the directors of any company cannot take the decision of buying its own shares without discussing the issue with most of its shareholders in order to get their approval. When a company takes a decision in this way, it uses its funds in the best way because it gives equal opportunity to all the shareholders to participate and reach a compromise about the share repurchase. The shareholders of the company, in the Franco-Germanic model, will not approve a share buyback if the purpose of the share buyback is to save the bad-performing directors or to dilute earnings. In turn, this makes investment in the whole economy healthier because the funds of the shareholders are not wasted. 7. Conclusion: From the above research, we can easily find that stock repurchases happen because of a variety of reasons such as signaling, cash flow, stock options, taxes, diluting, when company’s directors are at risk of being ousted. The most important factors that contribute to the movement of stock repurchases are taxation, stock options, diluting and taxes. 8. Reference: Barclay and Smith, ‘Corporate Payout Policy: Cash Dividends versus Open Market Repurchases, Journal of Financial Economics, (1988) pp61-82 Brockman and Chung, Journal of Financial Economics, 61(3)2001 pp417-448 Comment, Robert, and Gregg A. Jarrell, 1991 â€Å"The Relative Signaling Power of Dutch- Auction and Fixed-Price Self-Tender Offers and Open-Market Share Repurchases Journal of Finance, 46, (No. 4, September), PP 1243-1272. DANN, L. (1981): Common stock repurchases: an analysis of return to bondholders and stockholders, Journal of Financial Economics, VOL 9, pp. 113-138. Fama, E and French, K(2001): Disappearing dividends: Changing firm Characteristics or Lower propensity to pay?, Journal of Financial Economics VOL.60, PP. 3-43. Fenn, G and Liang, N (2000):† corporate payout policy and managerial stock incentives† Journal of Financial Economics, Vol 60, PP 45-72. Ginglinger and Hamon, ‘Actual share repurchases and corporate liquidity’, ssrn.com (2003) Grullon, G Michaely, R(2000): â€Å" Dividends Share Repurchases and the Substitution Hypothesis†, journal of finance, August 2002 Hackethal, A Zdantchouk,A(2005): â€Å"signaling power of open market share repurchases in Germany† URL: www.ebs.de/fileadmin/redakteur/funkt.dept.finance/ hackethal/WP/Signaling_Power_of_OMR_Germany_Feb_2005.pdf IKENBERRY, D. VERMAELEN, T. (1996) â€Å" the option to repurchase stock, Financial management, Vol. 25, pp. 9-24 Jagannathan, S and Weisbach (2000): ‘Financial flexibility and the choice between dividends and stock repurchases’ Journal of Financial Economics, pp335-384. Lambert, Richard A, William N. Lanen and David F. Lacker (1989) â€Å"Executive Stock Option Plans and Corporate Dividend Policy† Journal of Financial Quantitative Analysis VOL 24, PP 409-425. Miller and Modigliani (1961) : ‘Dividend Policy, Growth, and the Valuation of Shares’, Journal of Business,Vol. 34, pp. 411-433. Pindur, D Lucke, M (no date given): Riding the Hat Curve-why shareholders should tender their shares in fixed price tender repurchase programs, URL Link: https://www.fmpm.ch/docs/6th/Papers_6/Papers_Netz/SGF615.pdf Kalay, A.(1980): ‘Signaling Information Content and Reluctance to Cut Dividends’ Journal of Financial and Quantitative Analysis VOL.15, pp, 1053-1070. Renneboog, L Trojanowski,G(2005:p8 p10): patterns in payout policy and payout channel choice of UK firms in the 1990s, finance Working Paper number 70/2005: publisher: European Corporate Governance Institute. Siu, J Weston, F(2002): Changing motives for share repurchases, https://www.anderson.ucla.edu/documents/areas/fac/finance/3-03.pdf Stiglitz, J, E (1983): ‘some aspects of the taxation of capital gains’ journal of public Economics, Vol.21, PP.257-296. Trojanowski, G(2004): ownership structure and payout policy in the UK, department of finance and center graduate school, Tilburg University, Netherland URL: papers.ssrn.com/sol3/papers.cfm?abstract_id=498023 20k No author name(2003): the use of Open-Market Repurchase Programs in France, internet document URL: https://207.36.165.114/Zurich/Papers/160013.pdf

Thursday, December 19, 2019

Sexuality and the development of a sexual selfhood is a...

Sexuality and the development of a sexual selfhood is a development that can occur during adolescence. While this categorical event may be universal, how it is experienced is unique based on personal, social, and contextual reasons. This development arises from an intertwining of physiological and psychological processes and is tightly related to identity. Historically, research on sexuality has been driven by a public health agenda, which is overshadowed by moral panic and bad outcomes of adolescent sexuality (i.e. STIs, unintended pregnancy, etc.). This perpetuated widespread abstinence policies in institutions in which adolescents were involved. This heteronormative and patriarchal society rested upon the assumption that women were†¦show more content†¦Missing from much of previous research on sexuality in adolescence is interplay between gender roles and the contemporary sexual culture. It is crucial to recognize the salient impacts of sexualization through the media, wh ich is perpetuated in many societal expectations of women. Television shows often stereotype gender through the sexualization of teenage girls. Furthermore, the music industry portrays females as subordinate to males through sexualization in music videos, which, in turn, is reflected in gender roles. Due to the fact that early adolescence brings with it a heightened sensitivity for media messages and influence, adolescents are very susceptible to idealized images and heterosexual relationships. Tolman and McClelland (2011) illustrate that often times, there are differing expectations of men and women to fulfill a â€Å"role† in a sexual context. For example, women tend to engage in more activities that they dislike in comparison to men. This difference can be attributed to the longstanding sexualization that has implicated a â€Å"female† gender-role and a certain set of sexual expectations. Based off of the gender schema theory, adolescent generally develop a sense of gender-appropriate and gender inappropriate behaviors in their respective cultures. Adolescents are internally motivated to act in accordance with societally prescribed gender norms. This intrinsic desire to conform can haveShow MoreRelatedThe Role Of Self Identity For Adolescents939 Words   |  4 Pageschanges that occur throughout individual’s lifespan. Adolescence is often classified as one of the most challenging and significant stage during life transition. In this phrase, the individuals not only developing physical and sexual maturation but also experiencing the development of identity and transitions into social and economic independence (WHO, 2014). This essay will discuss the different concept of self-identity for adolescents, the important predictable and unpredictable elements during the transitionRead MorePyschoanalytic Personalities Essay Notes9106 Words   |  37 Pagesthe central ways in which Adler’s views differed from those of Freud was the empha sis each placed on the origin of motivation. For Freud, the prime motivators were pleasure (remember that the id operates on the so-called pleasure principle) and sexuality. For Adler, human motivations were much more complex. Adler’s Individual Psychology Adler called his theory Individual Psychology because he firmly believed in the unique motivations of individuals and the importance of each person’s perceivedRead MoreCalculus Oaper13589 Words   |  55 Pages Adrienne Rich s essay constitutes a powerful challenge to some of our least examined sexual assumptions. Rich turns all the familiar arguments on their heads: If the first erotic bond is to the mother, she asks, could not the natural sexual orientation of both men and women be toward women? Rich s radical questioning has been a major intellectual force in the general feminist reorientation to sexual matters in recent years, and her conception of a lesbian continuum sparked especially intenseRead MoreFrom Salvation to Self-Realization18515 Words   |  75 Pages Boorstin thoughtfully sketches some moral and emotional dilemmas in the culture of consumption, but he ignores power relations. To him advertising is an expression of impersonal technological, economic, and social forces. Ewen, on the other hand, can see nothing but power relations. To him the consumer is the product of a conspiracy hatched by corporate executives in the bowels of the Ministry of Truth, then imposed with diabolical cleverness on a passive population. Neither Ewen nor Boorstin graspsRead MoreThe Doctrine Of The Trinity9485 Words   |  38 Pagesterminology to describe this mystery in Against Praxeas claiming â€Å"the Trinity† involved three ‘persons’ of one substance. This theology emerged from the Biblical witness, even though scripture offers no doctrine of the Trinity itself. Even more so, the development of the doctrine of the Trinity grew from the early church’s worship, witness and corporate experience. When faced with a mystery, heresies can’t help but emerge. Docetism and Arianism, Adoptionism and Monarchianism, Nestorianism and MonophysitismRead MoreKhasak14018 Words   |  57 PagesMonday, 26 October 2009 Preface This dissertation titled ART AS A RENDEZVOUS OF MYTH AND MIND: A PSYCHOANALYTIC AND MYTHOLOGICAL ANALYSIS OF O V VIJAYAN’S THE LEGENDS OF KHASAK explores how the judicious selection and use of literary theory can account for the universal appeal of The Legends of Khasak, a belated self translated rendering of a famous regional work in Malayalam, Khasakkinte Ithihasam authored by the eminent writer O V Vijayan, and thus assert its artistic value. Divided into fourRead MoreIdentity And The Search For The Self Among The Sub Continental Diaspora10173 Words   |  41 Pageswas based on the geographical location of home, the institution of marriage and the economical status of a person. By the Middle Ages with the dramatic technological developments, mass consumption, education, political development, ideals of liberty and subversion of the feudal system steered the Identity theory towards inner selfhood of an individual. The outward association of an individual with ancestral stat uses, religion and gender was trivialised by interest in the inner constituent of an individual’sRead MoreOrganisational Theory230255 Words   |  922 Pagesintellectual traditions that contribute to our understanding of organizations. Professor Tomas Mà ¼llern, Jà ¶nkà ¶ping International Business School, Sweden . McAuley, Duberley and Johnson’s Organizational Theory takes you on a joyful ride through the developments of one of the great enigmas of our time – How should we understand the organization? Jan Ole Similà ¤, Assistant Professor, Nord-Trà ¸ndelag University College, Norway I really enjoyed this new text and I am sure my students will enjoy it, too. It

Wednesday, December 11, 2019

Bank of America Mobile Banking free essay sample

Brown, who was responsible for the development and launch of mobile banking, reported on the current status, In less than three years we have four million mobile banking customers. Brown was hesitant to make the banks mobile app complex by adding more features. The added complexity could slow down the app and negatively affect user experience. He explained, App comple xity has led to some high-profile failures in the marketplace. This carries a huge risk. It was also unclear if users were ready to sign up for mortgages or credit cards on their mobile phones. Carrel reminded them, Dont forget that competitors view mobile as yet another platform to differentiate themselves. Just last month, Citi integrated credit card account information in its iPhone app. Citi customers can even track their credit card rewards on their mobile devices now. Carrel floated a second option, Why not create different apps for different target groups, say an app for Merrill Lynch brokerage, or for small business customers? Citi and Wells Fargo have done this, feeling they can provide users a more customized solution. We will write a custom essay sample on Bank of America Mobile Banking or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page (See Exhibit 1 for mobile banking apps for major players. ) McDonald, Brown and Carrel agree that they have to come up with a new strategy on mobile banking. Financial Services Industry The U. S. financial services industry was fragmented, with thousands of banks offering retail and wholesale banking services. In 2009 the 10 largest banks held 46. 4% of total deposits, with BofA the largest U. S. bank holding company, followed by JP Morgan Chase, Citigroup, and Wells Fargo. In 2008-2009, the financial services industry went through the most stressful times in recent history. The collapse of the U. S. real estate and subprime mortgage markets caused a dramatic fall in the value of mortgage -backed securities, which led to a deep recession in the U. S. and financial troubles abroad. In 2012 they situation in the banking industry has improved. Bank of America By 2009, BofAs businesses included retail banking (i. e. , deposits, debit and credit cards, mortgage loans), global wealth management, middle market lending, large corporate lending, global treasury services, and investment banking. By December 2009, BofAs markets covered 82% of the U. S. opulation, and the bank served over 53 million customers and small businesses. U. S. Mobile Banking Market Mobile banking was introduced in the U. S. in 2007. Consumers could access their bank accounts on the move from their cell phones. Many banks saw it as yet another channel to differentiate themselves from competitors and engage customers that could potentially lead to both higher income and increased customer re tention. While mobile banking introduced some new capital investment and operational costs, analysts projected it to be one of the least costly banking channels. Since almost all banks had a well established online presence, this was the easiest option for banks. Slow browser speed on many mobile phones coupled with small phone screens made this option less appealing to some users. The emergence of smartphones, such as iPhone, Android, and BlackBerry, allowed banks to provide a richer experience to users through apps. By optimizing the user interface specifically for these devices, apps had the potential to engage users. Smartphones were expected to grow in use from 10% in 2008 to 46% of the total U. S. mobile phone market by 2012. App development costs could range from $40,000 to several hundred thousand dollars. Research from Global Industry Analysts shows that mobile and internet banking are becoming increasingly intertwined. This is largely due to the success of smartphones, which afford consumers convenient access to internet banking. The global mobile internet market will continue to drive the expansion of the mobile banking services sector. Financial institutions are responding by launching downloadable applica tions and encouraging consumers to bank online and through mobile devices by rolling out mobile and internet banking services. Market Size and Consumer Adoption In 2009, an estimated 10 million consumers used mobile banking in the U. S. ; by 2014 this number was expected to grow to 37 million, representing 30% of the total expected online banking users in the U. S. Total annual transactions for mobile banking services were expected to increase from about 180 million in 2008 to 2. 4 billion in 2014. Improvement in mobile devices and networks, better features from banks, and increasing awareness among users were the main drivers of growth. Most banks required customers to be registered online banking users before they could sign up for mobile banking. However, a 2009 survey of 500 mobile users showed that almost 60% of consumers not currently using online banking would be interested in using at least one mobile banking service. In early 2010, Wells Fargo allowed customers to sign up for its mobile banking service, regardless of their online usage. In spite of increasing interest, mobile banking was still relatively small compared to other banking channels. According to an American Bankers Association survey, only 1% of respondents considered mobile as their preferred banking method, compared to 25% for online banking, 21% for branches, and 17% for ATM.

Tuesday, December 3, 2019

Strategies for a University and Strategies for an Organization free essay sample

It is important for representatives from all areas of college or university t9o identify and discuss alternative strategies that could be benefit faculty, students, alumni, staff and other constituencies. As you complete this exercise, notice the learning and understanding that occurs as a people express different opinions. Recall that the process of planning is more important than the document. STEP 1 Key External Factors of University Opportunities 1. Provide education to women 2. Offers a wide range of courses . New campus 4. Day care centre 5. Number of permanent faculty members 6. Offers online university degree Threats 1. Transportation 2. Technolgy advances required innovation 3. Lack of faculty 4. Increase in number of universities Key Internal Factor of University Strength: 1. First aid facility 2. Well Reputation 3. Many computer labs 4. Increasing Revenues 5. Construction of new departments 6. Mosque for student’s prayers 7. First women bank limited branch Weaknesse s 1. Administration is not efficient 2. Un availability of multimedia . Management not solves the problem of students. We will write a custom essay sample on Strategies for a University and Strategies for an Organization or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page 4. Availability of class room. 5. Problem in submission of fee. 6. PCO (Public call office) does not provide full time service to students. STEP 2 Alternative Strategies that could benefit my university: 1. University should arrange their own busses and to provide pick and drop service to the students 2. Allow the students to submit their fee in other branch of first women bank limited located outside the university to over come the load and save the time of students and staff. 3. Construct separate new labs for all the departments with the availability of all required instruments. 4. Atleast one new campus of the university should be located in different provinces of Pakistan. 5. Increase in number of permanent faculty member to make the administration more efficient. 6. New interns should also provide with a facility to teach in the university with their new ideas and capabilities. 7. Make a separate department which not only listen the problems of student but also sort out these problems. 8. Introduce M. phil department with a wide range of courses. 9. To arrange all activities on time, management staff should give all necessary information according to their work. 10. Student should given a chance to participate in more events held outside the university. 11. Teachers should not allow taking classes after 4. 00 pm. 12. Every class has its own multimedia to teach the students in more efficient way. 13. New technology should introduce which help the administration to do their work in more efficient way. 14 Duties of workers on PCO should divide into two shifts which will help the student to take the benefit of full time service. Now a day’s educational institutions are using strategic management techniques and concepts more frequently. This process could enable them to enhance their performance. Through involvement in strategic management activities staff members of the university achieve a better understanding of university’s priorities. Strategic management allows organization to be efficient and allows them to be more effective the strategic planning does not guarantee organizational success it allows the organization to make proactive decision. It also needs the full cooperation and support of all the staff members working in the organization, this can represent a new beginning to a firm. I have share the class result with the administrator of our university and he say that this is a good procedure to identify those factors of university which has negative impact on our organization and they are working on some of those top scoring strategies and trying to implement them as soon as possible, and they’ll also think about the remaining strategies. This exercise focus on how risky various alternative strategies are for organization to pursue. Different degrees of risk are based largely on varying degrees of externality, defined as movement away from present business into new markets and products. In general, the greater the degree of externality, the greater the probability of loss resulting from Un expected events. High risk strategies generally are less attractive then low risk strategies   Number vertically from 1 to 10. DiversificationAdding new or un related products or services 2Horizontal diversificationAdding new or un related products or services for present customers. 3 Backward integrationSeeking ownership or increased control of a firm suppliers 4Product developmentSeeking increased sale by improving present products or services or developing new ones 5liquidationSelling all of company assets, in parts, for their angible worth 6Market penetrationSeeking increased market share for present products or services in present markets through great market efforts 7Market developmentIntroducing present products or service into new geographic area 8Joint ventureWhen two or more companies form temporary partnership for the purpose of capitalizing on some opportunity 9Forward integrationGaining ownership or increased control over distributors or retailers 10 Horizontal integrationSeeking owner ship or increased control over competitors

Wednesday, November 27, 2019

Prison Inmates, Are Some Of The Most Maladjusted People In Essays

Prison inmates, are some of the most "maladjusted" people in society. Most of the inmates have had too little discipline or too much, come from broken homes, and have no self-esteem. They are very insecure and are "at war with themselves as well as with society" (Szumski 20). Most inmates did not learn moral values or learn to follow everyday norms. Also, when most lawbreakers are labeled criminals they enter the phase of secondary deviance. They will admit they are criminals or believe it when they enter the phase of secondary deviance (Doob 171). Next, some believe that if we want to rehabilitate criminals we must do more than just send them to prison. For instance, we could give them a chance to acquire job skills; which will improve the chances that inmates will become productive citizens upon release. The programs must aim to change those who want to change. Those who are taught to produce useful goods and to be productive are "likely to develop the self-esteem essential to a normal, integrated personality" (Szumski 21). This kind of program would provide skills and habits and "replace the sense of hopelessness" that many inmates have (Szumski 21). Moreover, another technique used to rehabilitate criminals is counseling. There is two types of counseling in general, individual and group counseling. Individual counseling is much more costly than group counseling. The aim of group counseling is to develop positive peer pressure that will influence its members. One idea in many sociology text is that group problem-solving has definite advantages over individual problem-solving. The idea is that a wider variety of solutions can be derived by drawing from the experience of several people with different backgrounds. Also one individuals problem might have already been solved by another group member and can be suggested. Often if a peer proposes a solution it carries more weight than if the counselor were to suggest it (Bennett 20-24). Further, in sociology, one of the major theories of delinquency is differential association (Cressey 1955). This means some people learned their ways from "undesirable" people who they were forced to be in association with and that this association "warps" their thinking and social attitudes. "Group counseling, group interaction, and other kinds of group activities can provide a corrective, positive experience that might help to offset the earlier delinquent association" (Bennett 25). However, it is said that group counseling can do little to destroy the power of labeling (Bennett 26). The differential-association theory emphasizes that a person is more likely to become a criminal if the people who have the greatest influence upon them are criminals (Doob 169). Most of today's correctional institutions lack the ability and programs to rehabilitate the criminals of America. One can predict that a prisoner held for two, four, eight or ten years, then released, still with no educationling, there is disadvantages. For instance, members of the group might not be as open or show emotion because they want to appear "tough." Also the members might not express their opinions openly because the others might see it as "snitching." For the group to work it takes a dedicated counselor (Bennett 22-23). Another type of correctional center used for rehabilitation is halfway houses. Halfway houses are usually located in residential communities and are aimed to keep offenders in the community. The name comes from the fact that they are "halfway between the community and the prison" (Fox 60). The "rationale" behind halfway houses is that criminal activity originates in the community, so the community has a responsibility to try to correct it. Also, sending a person who has deviant behavior and who has been associated with criminal influences, to prison would just make the problem worse (Fox 61). "The best place for treatment is in the community; this prevents the breaking of all constructive social ties" (Fox 61). Programs in halfway houses usually involve work release or study release and group sessions for therapy and counseling. Most programs vary greatly depending on the administrator. Generally, the purpose is to "reintegrate" members back into the community. There are three systems generally used in programs and in the process: "change by compliance, client-centered change, and change by credibility in that it 'makes sense." (Fox 73). The compliance model is designed to make good work habits. The client-centered model focuses on a high understanding of the person. The credibility model emphasizes making decisions and getting back into the community. These programs are made to avoid institutions as much as possible (Fox 73). On the other hand, many inmates think the government does not want to rehabilitate criminals. The reason behind this thinking is that prisons

Sunday, November 24, 2019

Edgar Allan Poe’s “The Tell-Tale Heart” Research Paper Example

Edgar Allan Poe’s â€Å"The Tell Edgar Allan Poe’s â€Å"The Tell-Tale Heart† Paper Edgar Allan Poe’s â€Å"The Tell-Tale Heart† Paper A Guilty Conscience Shown in Edgar Allan Poe’s â€Å"The Tell-Tale Heart† The Tell-Tale Heart by Edgar Allan Poe is an intellectual murder story told from a first-person perspective of an eccentric narrator who kills a man because he is so frightened of the man’s eye. The mad narrator ultimately is unable to maintain his innocence to the deed. The narrator is obsesses with the vulture eye of the old man who he lives with. He describes the eye as evil, like the eye of a vulture, a pale blue eye, with a film over it. The narrator has a good relationship with the old man but decides that he must kill him in order to rid himself of the eye forever. During the events of the story it is obvious that the narrator is a man in fear of the evil eye with conscience eating away at him in the events of killing the old man. Even though the narrator focuses on the evil eye and tries to justify his actions, in the end he cant escape his own conscience. The narrator has a loving and friendly relationship with the old man. He states I loved the old man. The old man had never wronged him nor insulted him and he had no desire for the old mans money. He says For his gold I had no desire. The narrator is also sure to state to the readers that he was kind to the old man, I was never kinder to the old man than during the whole week before I killed him. He was careful not to disturb the old mans sleep each of the seven nights that he watched him and every morning he spoke courageously to him, called him by name in a hearty tone, and inquired how he had passed the night before. The old mans evil eye seems to have power over the narrator. He states I think it was his eye! Yes, it was this! He had the eye of a vulture Whenever it fell upon me, my blood ran cold. For an unknown reason, the old mans evil eye has provoked insanity in the narrator though the narrator argues that he is not crazy. He says You fancy me mad. Madmen know nothing. But you should have seen me. You should have seen how wisely I proceeded with what caution with what foresight with what dissimulation I went to work! And have I not told you that what you mistake for madness is but over-acuteness of the sense? The narrators obsession with the evil is shown by his extreme precision on how he watched the old man in order to catch a glimpse of the vulture eye. Every night at midnight he would turn the latch of the old mans door and opened it oh so gently. When he had made a sufficient opening for his head he put in a closed dark lantern so that no light shone in, then he thrust his head in, I moved it slowly very, very slowly and It took (him) and hour to place (his) whole head within the opening so far that (he) could see him Then when his head was well in the room he undid the lantern cautiously-oh, so cautiously cautiously (for the hinges creaked) I undid it just so much that a single thin ray fell upon the vulture eye. And this I did for seven long nights every night just at midnight And on the eighth night he describes a watchs minute hand as being quicker than his own. All of this shows how the narrator used such vigilance in how he went about carrying out his plan to kill the old man. The extreme precision and mindfulness that he went about doing these things in order to see the old man’s vulture eye illustrates the extent of the narrator’s obsession and fear of the evil eye. Although the narrator is so cautious about how he goes about killing the old man he begins the story by letting the reader know that he was very nervous about what he had planned to do. The narrators first sentence says TRUE! nervous very, very dreadfully nervous I had been and am. This is the first indication to the reader that the narrator does have a conscience. He even says that his idea to kill the old man haunted him day and night. When the narrator is hearing what he believes to be the old mans heart beating he is really just so nervous that he is hearing the beat of his own heart. The beat becomes so loud that he begins to worry; But the beating grew louder, louder! I thought the heart must burst. And now a new anxiety seized me the sound would be heard by a neighbour! After the killing is done and the officers have not found anything suspicious they sit over the dead body and begin in chat. As they are chatting the narrator, now the killer, grows anxious and his guilty conscience begins to overwhelm him. He says I felt myself getting pale and wished them gone. This caused him to begin to hear his own heart beat louder and louder again. The noise drove him to agony and he began to think the officers were making a mockery of his horror. His guilty conscience overwhelmed him so much that he couldnt bear it any longer until he finally admitted to doing the deed to the officers. Edgar Allan Poe indicates that the narrator is a mentally ill man with an extreme fear of the old mans vulture eye. Or should he be viewed as a mentally ill, mad man? Throughout the events of the story, the narrator is unaware that his plan to kill the old man simply to rid himself of the evil eye is wrong. Poe wants readers to see that this man, the narrator, does indeed have a conscience though. It just doesnt overpower his obsession with the eye and his plan to get rid of it. The evidence of the narrator’s existing conscience throughout the story shows that his natural instincts were present in knowing that even the idea of killing the old was wrong. In the event of the officers sitting and chatting for such a long period of time after he has killed the old man, the narrators guilt and anxiety becomes an extreme factor overwhelming him and causes his big plan to hurt himself in the end by telling the officers what he has done. Subconsciously the narrator hurts himself in the because of the decisions that he made to carry out his plan as a result of his guilt. : Poe, Edgar Allan. â€Å"The Tell-Tale Heart. † Literature, Reading, Reacting, Writing. Eds. Laurie G. Kirszner and Stephen R. Mandell. Compact 7th Edition. Mason, OH: Cengage, 2009. Print.

Thursday, November 21, 2019

Biomedical tecneque and cell biology Essay Example | Topics and Well Written Essays - 1750 words

Biomedical tecneque and cell biology - Essay Example Animal or plant cells have the tendency to grow if they are kept under specific conditions and grown with the required and exact nutrients that are suitable for growth. If this kind of process is carried out under laboratory supervision it is called as cell culture. Chaudry, Arshad [2004] has to say that â€Å"the culture process allows single cells to act as independent units, much like micro organism such as bacterium or fungus†¦these cells an continue to grow until limited by some culture variable such as nutrient depletion†. Generally speaking a cell culture is carried out with the intentions of either to study the metabolic activity, or to analyze the effect of chemicals and medicine on the cell types. [i]. Producing antibodies: One of the antibodies that is produced using cell culture is the monoclonal antibodies. These anti bodies are very useful in treating human diseases. This could be done by obtaining hybridoma cells from animals. The fusion of two to three more cells of hybrid form derived from animals is capable of producing a single type of antibodies in a continuous fashion. These anti bodies are further useful in diagnostic and therapeutic value. Now a days some bio technicians tried analyzing the activities of the amino acids in the typical mammalian cells. [ii]. Recombinant proteins: these are huge and complex structure proteins that could be produced in bacteria, which later develop the tendency to add sugar to these collected protein. In this method the defensive protein is produced in virto through recombinant method and applied for blistered skin. This is called protein therapy. This could be also applied in correcting deficiency like diabetes, enhance immune response, dissolve blood clots etc. This was done previously by culturing extracts form tissues, urine and blood. [ii]. Virus Vaccinations: The basic cause for the vaccines production werwe found to be