Coalitions in Europe Essay Example | Topics and Well Written Essays - 1500 words

Coalitions in Europe - Essay Example Discussing the history of coalitions, it is important to look through and analyze all the pros and cons of this approach. Analyzing the examples of two countries, the given paper will prove that coalition is not the best form of government for all the European states. Considering the importance of coalitions in Europe, it is essential to discuss the experience of England. Twice in its history England had to make difficult choice related to the formation of coalition government. The first time was after the World War II and the second in 2010, when David Cameron was the Prime Minister of the UK. Speaking about the after war period, it is essential to mention that human factor played a very important role, when the consequences of war such as great panic were considered. Introducing changes into the governmental system seemed the only correct and appropriate decision. According to David Cameron, the economic setback was the reason or motive force for this decision. No one can state for sure that this method or change could be beneficial for country in general. However, â€Å"the coalition could, and should, embark on new reforms, chipping away at the green belts that constrain development around big cities, for example. But its main task is to see through the revolution that it started in 2010. The programme is hugely ambitious, especially given the lack of money available. It is also broadly right—and some reforms that are not right, such as the elected police commissioners, cannot now be reversed. Even health reform can be rescued. Finishing the job would be good for Britain† (Britain’s coalition government. Divided they fall) Zakocs and Edwards state that in case when single party does not gain the majority during the elections, the variant with creating a different parties coalition and as a result provide the parliamentary support is the best one. Coalition is the most typical form of governments in Europe. This tendency is pretty unders tandable as all the political powers tend to fight for every seat in the parliament and by the means of coalition they obtain the possibility to get most of them. Ireland, Italy and Germany have the coalition government. The main dispute that arises is what is more favorable for country and what type is the most suitable. â€Å"Quite generally, a priori indices of voting power aim to illustrate the influence of actors deriving from weighted voting schemes. In their more traditional forms, they do not attempt – as this sometimes appears to be assumed – to provide a measure for the â€Å"effective power† of actors in a specific policy situation and policy domain. This latter aim can generally better be pursued by approaches related to the spatial theory of voting, assuming specific constellations in the distribution of preferences among actors and institutions† (Bilal & Hosli, 1999). Analyzing England as an example it is possible to make a conclusion that i n difficult times the tendency to create coalitions appeared in order to overcome these difficulties. Certainly, there are explanations for such behavior or pattern. One of them is wish or necessity to work or better to say to interact with one another, like one team. According to Marie Hojnacki, â€Å"This [strategic engagement in coalitions] is especially true today because the growth in the number and diversity of organized interests in national politics has made it more difficult for any one group to dominate the decisions made within a particular policy area. To be effective, rational group leaders must choose strategies that enhance their chances for advocacy success.†

Consumers Activities and Consumption Assignment

Consumers Activities and Consumption - Assignment Example Anthony Giddens has theorized consumption as a concurrent basis and therapeutic response to the predicament of identities, originating from the pluralization of societies, their values as well as knowledge within the post-traditional social universe. Other post-modernists consumption researchers, like Baudrillard, have theorized consumption and the practices of consumer society as the semiotic system whereby signs are consumed and not just the products. For instance, societies are recognized by the institution and expansion of exchange networks by which individuals acquire essential goods plus services. This is evident in the messages in which firms convey, such as the Scotland Food & Drink Ltd vision which states that in order to make Scotland globally acknowledged as a place of quality food and drink, they bring together their clients to discuss the organization successes, its problems, and ideas. Hence, the firm harness the combined resources of its entire supply chain and the con sumer s within the general public so as to celebrate their products. According to Don Slater, the consumer culture is an engine for redirecting any reflection of critical consciousness towards product desires, whereby the trouncing of consciousness is characterized by manipulation as well as persuasion. Furthermore, the consumption and consumer society is theorized as an opulent and materially satisfying consciousness that has replaced the real society with desires which are more purposeful to capitalism.

Puritan Essay Example for Free

Puritan Essay During the 1630s to 1660s, Puritans to a vast extent powered the ideas and values on the New England colonies through the political, economical and social development with their belief in religion. Politcally, the did not divide the difference between the government and church. Economically, obtained a work ethic that allowed them to grow, and socially they expanded the knowledge of their religion and education. The Puritans had migrated to New England because they were unsatisfied with the Anglican Church in England and the forming of the Protestant religion. After immigrating to New England a majority settled in Massachusetts forming the Massachusetts Bay Colony along with many other Puritan colonies. They came here in hopes of creating a theocracy, a way to have a new form of government and society. They wanted to escape the Catholic influence they had in Great Britain. They did have some political involvement with town meetings for the townspeople which they did not have in England. The line between church and state was unclear. Many of the colony’s laws were based on the people’s behavior and the Puritan values. As Nathaniel Ward believed state laws should go together with the morals of the church. In the views of Puritans, the government should not have all the power because tribulations will occur and all order should be under the church. As Reverend John Cotton explicated, giving more power to man than is needed will only allow them to misuse it; therefore, they should only allow as much power that God gives to them by his word. God is seen to be the leader, so the church displayed religious rules of the church which the colonies willingly followed. They would not accept anything less from the people other than to serve God and be under his obedience for they lived life for Him. Puritans did not like the idea of freedom of religion. They wanted to be seen as only one religion because they believed having more than one religion would only cause conflict and disagreement. Puritans did not like the idea of freedom of religion; however, Roger Williams saw flaws in the Puritan views of the relationship with church and state. He believed that they should be separate which caused him to be expelled from the church. They did not accept anything other than the belief that church was more important. Politically, Puritans carried their faithful obedience to God and brought government under the church. As they began to settle, their towns began to grow. Churches and schools sprang up to expand the knowledge of their religion. Schools were built to teach the children about the Bible and the importance of it in their lives. The people promised to put all their knowledge of God into the children and servants to the best of their ability (Doc C). With the churches they wanted to expand their theocracy. John Winthrop, the leader in the Massachusetts Bay Colony, wrote that they must all work together as one and help each other so that the could be led to the right path by God. Winthrop says that they are the â€Å"city upon a hill. † With everyone eyes on them they needed to demonstrate the level of their Christianity. If they all have faith together and rejoice together, with the will to better their community God will present help for them. Puritans believed everyone should believe in God. They looked to advance the education in New England with learning because of the effect it would have. They wanted to educate their ministers to stress religion so they built Harvard, the first college. They wanted to stress religion so they tried to teach it to those in school. The Puritans used the educational level of society to influence others of their strong religious beliefs. Puritans believed that a greater outcome will come if they worked hard. They thought prosperity and success would only come if this was done. A hard working ethic was established due to this view and many gained determination. This allowed them to establish a strong commercial economy. They worked mostly on farms, which many were established in the colonies, and traded goods for other goods they did not obtain. Winthrop did fear that his people would have more satisfaction for the wealth rather than the â€Å"piety† that was presumed to bring financial plunder. Many built their economy with the trade of their goods and the farming techniques. Farming took months due to the hard work that came with it and the short growing season. The Puritan commercial economy grew and many gained wealth from this, but they still looked to work hard and for piety for their success. The ideas and values of the Puritans separated them from other forms of people. Their way of thinking and views set up for a religious society was drastically diverse. The political, social, and economical development structured their way of living and their prosperity.

How Investment Opportunities Affect Cash Holdings

How Investment Opportunities Affect Cash Holdings Introduction In recent years the interest of financial researches raised to firms cash policy, cash positions; if more accurate they are paying more attention why do firms hold so much cash. These issues have a long history and are the basis of corporate finance.  Indeed, from the day to day operations to finance long-term investments, own funds are just the most important source of funding. In particular, observers have recently serious doubts about the validity of so much cash.  This problem has led to important research aimed at clarifying the multifaceted aspects of monetary policy firms.  Although the rapid development of significantly enriched our understanding of the factors that stocks of companies the funds, the literature has paid little attention in the form of cash policys real impact on the daily activities of firms. In the 2007-2008 credit crunch business leaders and the media have made the phrase cash is sovereign back in vogue.  Although the firms internal cash flows decline, the stock markets collapsed and the credit markets nearly frozen, the lack of money has become a reality for many firms.  For example, General Motors (GM), based in the U.S. automaker, announced on 7 November 2008 that he could escape from the liquidity, despite the ongoing restructuring process. GM eventually reorganized through bankruptcy, but their fate was to demonstrate the importance of cash holdings.  Although the reduction of cash flows, as a rule, inevitable in many industries during the economic downturn, the symptoms can be removed by a sufficient amount of cash as a buffer to the crisis.  Nevertheless, for several reasons shareholders do not always want to see the firm to save money and sit on it.  The shareholders outlook on firms cash holdings and the cost they place on it will be examined in this research. The determinants and consequences of corporate cash holdings have attracted enlarged interest of scientists over the past ten years.  One key issue was that the relationship between cash and the value of the company.  Broadly speaking, two main factors in the equation of the advantages of liquidity of the company and the agency cost of managerial discretion.  Both these arguments have their supporters. For example, Myers and Majluf (1984) argue that costly external financing means that firms must maintain a sufficient cash reserve, which provides liquidity to take advantage of new projects a positive NPV.  However, according to Jensen (1986) the agency costs of managerial consolidation means that large amounts of cash should be paid to shareholders to keep managers overinvesting negative NPV projects.  Apparently, there is no single truth, which will apply to all companies at once, as the needs of both the firm and its managers are not uniform. Understanding the value of cash is of interest not only for researchers and scientists, but even more so for practitioners.  Equity analysts, financiers and corporate chief financial officers must all be very interesting to know which factors affect the cost of cash holdings in the company and why. Most equity analysts simply add cash to the top of the value of the company, without giving attention from what could be the reason why money should not be evaluated at face value. However, researches show, markets, monetary values in different firms in different ways, and, consequently, analysts may be too especially if the company has a large amount of liquid assets.  For corporate financiers situation is somewhat different, because they often give the conclusion that the value of the target firm is the acquirer, thereby eliminating the influence of the prevailing corporate governance and financial policies.  Nevertheless, it can be valuable to understand the value of cash when as sessing the market value of the firm.  Finally, the financial department of a firm must know why their cash cannot be appreciated at face value, and that they could do if they want.  This allows us not only to understand the preferences of shareholders, but perhaps an opportunity to meet them. Problem Statement In this research I want to find answers to the questions like: What is the reason of holding so much cash than needed? What kind of effects it could cause? How the financing constraints and investment opportunities together affect the value the shareholders place on cash? How firms investment opportunities affect the marginal value of firms cash holdings? How firms the state of external capital markets affect the marginal value of firms cash holdings? 1.3 Research objectives The aim of this work is the approach to the cost of cash holdings of firms in two directions. First, subsequent to Faulkender and Wang (2006), who studied the cross-section changes in the marginal value of corporate cash, which arises from differences in corporate financial policy. Secondly, inspired by the credit crunch of 2007-2008, I examine how changes in the external capital markets affect the cost of money over time.  As far as I know there have not been previous studies on the time changes in the value of cash.  There are several reasons why the loan should affect any results related to the companys cash holdings.  First, Almeida et al.(2004) show that financially constrained firms maintain a significantly higher proportion of their cash flow, the following adverse macroeconomic shocks than before.  This means that the relationship between the preserve cash flow and earnings of the company is dynamic and may change over time.  Second, the importance of cash is emphasized in a recession.  When a loan is becoming more rationed, the company in which a lot of cash does not need to worry about the inability to finance daily operations.  Intuitively, firms with more cash are less likely to be downgraded credit rating and are able to maintain acce ss to capital markets.  In addition, these companies can take advantage of the plight of the weaker firms, which may be less liquid assets, through active competitive actions and acquisitions.  Thus, it seems appropriate to us a treasure load of cash in good times to be able to strike when the economy turns.  Finally, as credit becomes more and more rationed, it also becomes more expensive.  This is especially true for financially constrained firms. I use a sample of around 1000 Malaysian firms for the last decade from 1999 to 2009 to test the hypothesis in Faulkender and Wang (2006), impact of investment opportunities on the value of cash, and the change in value of cash over the economic cycle. The usable observations begin from 1999 because for most of the variables I require a change throughout a fiscal year. The extraordinary state in the financial markets during 2007-2008 allows me to study how it may have impacted the value of cash. The following terms interchangeably I use in this thesis. First, in a few ways, mainly as cash holdings, cash reserves, or simply cash I refer to firms cash holdings. Nevertheless, cash level is used to refer to cash ratio (cash to net assets). Second, I use the value of cash, the marginal value of cash, value of additional cash, value of an extra dollar of cash, and the value the shareholders place on cash while referring to the value of firms cash holdings. Third, since most of the previous studies have been done with U.S. data, I discuss the value of a dollar in the introduction. However, my data are from Malaysia, and therefore in the empirical part I am examining the value of a ringgit. I review the related literature in the next section. Section 3 develops theoretical framework of the study, the main hypothesis, illustrates the methods and details the sample selection. LITERATURE REVIEW The literature on market value of cash can be divided into research focus on the benefits of liquidity, or agency costs.  The former approaches through the studies of financial policy and corporate decision making of companies, whereas the latter evaluates the degree of agency conflicts on the basis of corporate governance factors.  Despite the general division between the two issues, both are at least implicitly always present during the tests and conclusions. Although much effort has recently been devoted to studying the determinants of cash policy of firms, data on the impact of reserves firms cash remains relatively small.  However, there are a few notable exceptions.  Blanchard, Lopez-de-Silanes and Shleifer (1994), who studied a small sample of companies that received cash windfalls from lawsuits, and Harford (1999), studied the acquisition of the company with unusual cash, the document that managers with weaker incentives to maximize  value, tend to spend large amounts of cash is inefficient. Opler, Pinkowitz, Stulz and Williamson (1999) argue that corporate cash can be attributed to a compromise, the theory of financial hierarchy and agency theory.  Kim, Mauer and Sherman (1998) develop a model of compromise and argue that the optimal amount of corporate cash holdings is determined by the tradeoff between lower income and benefits to minimize the need for costly external financing.  Almeida, Campello and Weisbach (2004) believe that corporate cash holdings affected by financial difficulties.  Pinkowitz and Williamson (2001) believe that the bank authorities can affect the cash holdings of Japanese firms.  Faulkender and Wang (2006) consider changes in the marginal value of corporate cash holdings related to differences in corporate financial policy.  Foley, Hartzell, Titman and Twite (2006) offer tax-based explanations of corporate cash. Most of the literature to evaluate the relationship between financial policy and the exact market value cash holding focused on companies in the United States of America (USA) Pinkowitz and Williamson (2004), Faulkender and Wang (2006), and Denis and Sibilkov (2007) all  study how the financial characteristics of the company, and the cost of cash to play together. Pinkowitz and Williamson (2004) show that the average market value of the dollar held by a firm at roughly $ 1.20, which indicates that shareholders believe that the benefits outweigh the potential liquidity problems of the agency associated with it.  Faulkender and Wang (2006), using different methodologies to find the market value of the dollar at $ 0.94 on average.  Their results suggest that the potential costs of institutions, as well as tax effects outweigh the benefits to the average firm.  Denis Sibilkov (2007) focus on the financial difficulties of the company and the investment opportunities and find consi stent results.  Nevertheless, there is significant cross-section changes in the market value of money, thus focusing on the mean values shows only a little about the relationship between fiscal policy and the value of cash. The other branch of value of cash literature focuses on the effect of corporate governance.  For example, Dittmar and Mahrt-Smith (2007) use U.S. data show that the additional $ 1 cash for badly managed companies worth between $ 0.42 to $ 0.88, while good governance doubles the value.  Pinkowitz et al.  (2006) used a cross-border data and found that an additional $ 1 is associated with an increase in company value of $ 0.29 to $ 0.33, depending on the criteria of corporate governance in countries with weak protection of shareholders, while an additional $ 1 in cash  associated with an increase of $ 0.91 to $ 0.95 in the value of the company in countries with good shareholder protection.  In addition, Kalcheva and Lins (2003) found that a minority of investors who are not very well protected by applicable discounts for firms in high levels of cash.  This is consistent with the findings Fresard and Salva (2009), which show that the value of $ 1 of excess cash of typical non -US companies is U.S. $ 0,58, while it is $ 1.61 for the firms listed in the U.S. through exchanges means that  investors discount the value of corporate cash reserves when they are at high risk of turning into private profit. RESEARCH DESIGN AND METHODS Theoretical Framework Here I will talk about the early literature related to the value of cash holdings of the company, as well as provide relevant theory.  I begin with outlining the background to understand why firms hold cash. It is necessary to identify with why firms hold cash in order to understand how the shareholders determine the importance they attach to the cash.  Then I will present before the relevant studies and conclusions contained in the value of the cash literature. 3.1.1 Cash holding motives If all firms operating in the world of perfect capital markets, cash holdings will have no value.  If the firm was in need of cash for operations or investments, it can raise funds at zero cost. While there is no liquidity premium in such a world, holdings of liquid assets have no possibility of cost.  Consequently, if a company borrows money and invests it in liquid assets, shareholder wealth is unchanged. Nevertheless, in the real world markets are not perfect and the holding of liquid assets has its costs.  Thus, a firm must strike a balance between the marginal cost of holding liquid assets and the marginal benefit of holding these assets. Here, I present five theories of why firms hold cash and which have been shown in earlier literature. 3.1.1.1 The transaction motive Transactions motive for holding cash is due to the cost of converting money substitutes into cash.  According to Keynes (1936), a company can save on transaction costs by using cash to make payments without liquidation of assets.  Miller and Orr (1966) model the demand for cash to finance daily operations, and the required level of cash.  The company short of liquid assets has to raise funds in capital markets, liquidate existing assets, reduce dividends and investment, the revision of existing financial contracts, or use a combination of these actions.  Since there are both fixed and variable costs in increasing cash, the company must hold a buffer of cash to avoid raising cash often, and thus to avoid the associated fixed transaction costs. Myers and Majluf (1984) argue that the increase in external financing is more costly than using internal resources in the presence of asymmetric information.  Since outsiders know less than the management, they may discount the price of securities more than management was willing to accept.  Thus, the management may find it more profitable not to sell securities, and even reduce the investment.  For this reason, it may be optimal for companies that conduct a certain level of cash to meet the needs of investment spending. 3.1.1.2 The agency motive Jensen (1986) argues that entrenched managers have incentives to retain cash rather than an increase in payments to shareholders, even if the firm has limited opportunities for investment.  Opler et al.  (1999) tender reasons why managers can use the optimal cash policies.  First, managers can accumulate funds to pursue their personal interests.  Cash allows managers to invest in external capital markets would not be willing to finance.  They usually spend one dollar in cash in hand, even if they cannot raise financing from the markets.  Consequently, they could make investments that may have a negative impact on the value of the company.  Jensens (1986) free cash flow problem predicts that managers with surplus cash are probably to overinvest.  Thus, a one dollar increase in cash holdings of firms can lead to significantly less than one dollar increase in the value of the company.  As the outsiders do not know, whether managers are accumulating cash to increase the value of the company or pursue their own goals, the cost of external capital is likely to increase. 3.1.1.3 The tax motive In recent studies by Foley et al. (2007) shows that U.S. companies which will bear the tax consequences associated with the repatriation of foreign earnings hold a high level of cash. Affiliates referring to the highest tax consequences of repatriating also have the highest level of cash.  This means that multinational companies are more likely to accumulate cash.  The extent this applies to the Malaysian firms has yet be studied. 3.1.1.4 The theory financing hierarchy The theory of financing hierarchy implies that there is no optimal amount of cash, based on arguments similar to the hierarchy theory of capital structure (Opler et al. (1999)).  According to theory, firms are not willing to issue shares, because it is too expensive because of the asymmetry of information.  They sell the debt when they do not have sufficient resources, and when they can do so.  When they have sufficient resources to invest in profitable opportunities available, they pay the debt which becomes due, and to accumulate more cash or else.  The theory assumes that the cash holdings of firms are less strategic choice but more a result of a dynamic, endogenous process. 3.1.1.5 Investment opportunities and the value of cash Pinkowitz and Williamson (2004) were the first who studied the market value of cash holdings.  They focus on firms investment and financing opportunities.  They find that the growth of the company have the possibility of a positive attitude to the market value of money.  Firms with greater investment opportunities have a higher cost of cash.  They also show that firms with higher uncertainty of investment have a higher valuation.  In addition, firms in a difficult financial situation have lower valuation on cost. Faulkender and Wang (2006) confirm this conclusion, as they show that firms with lower leverage, a proxy for financial distress, have higher value put on cash.  Finally, Pinkowitz and Williamson (2004) argue that access to capital markets does not affect the market value of cash.  However, they note that their proxy for access to capital markets, company size may not be perfect. Consequently, Faulkender and Wang (2006) show that the difficulties in obtaining ac cess to capital markets play an important role in the market value of cash.  Liu and Chang (2009) show similar proof on the impact of financial constraints on the market value of cash.  Faulkender and Wang (2006) also show that the marginal cost of cash reduces with the amount of cash holdings.  They argue that this is associated with an increase in the probability distribution of cash to shareholders, and consequently incurring transaction costs and taxation, to reduce the cost of cash. Hypothesis After I studied the theory of the value of cash holdings, I turn to the empirical predictions.  I present hypotheses for the impact of financial policy and investment opportunities on the value of cash.  These hypotheses relate to previous work in the field of corporate finance and the value for cash. Hypothesis 1: The marginal value of cash is decreasing in the level of the firms cash position After Faulkender and Wang (2006), I initially hypothesize that the marginal value of the shareholders place on cash holdings of the company reduces as the level of cash holdings increases.  The reasons are based on agency and tax considerations.  As firms cash level rises it becomes more likely to distribute the cash to shareholders who then as a result incur a dividend tax.  In addition, the company with high cash holdings becomes more vulnerable to face agency costs as shareholders begin to worry about the interest and ability of managers to invest in positive NPV projects.  Thus, the marginal cost of cash should reduce as the cash level of the company increases. Hypothesis 2: An extra ringgit of cash holdings is less valuable for shareholders in highly levered firms than in firms with low leverage. The second hypothesis from Faulkender and Wang (2006), which I test in my Malaysian sample, is the negative relation marginal cost of cash and firms leverage.  The cost of cash for shareholders in high levered firms is likely to be less than in firms with low leverage as contingent claims analysis predicts that most of the value of these firms is in the hands of debt holders. Additional ringgit is likely to go mostly to increase the value of debt and therefore, the value for shareholders is low. Hypothesis 3: An extra ringgit of cash holdings is more valuable for shareholders in financially constrained firms. The last hypothesis which follows Faulkender and Wang (2006) is that the simplicity of accessing to external capital markets should have an impact on the value of cash.  Access may be limited for various reasons, but often associated with asymmetric information about the state of the company, which may occur for smaller firms, firms without any credit rating or equity research coverage and the firms that do not pay dividends.  These firms can be considered as financially constrained and can be thought of having higher costs in raising external funds.  Thus, with its own funds, i.e. cash in hand, should be more valuable to these firms than financially unconstrained firms, which are likely and able to obtain external financing. Hypothesis 4: An extra ringgit of cash holdings is more valuable for firms with good investment opportunities. I examine whether firms with better investment opportunities have a higher valuation on their cash holdings than firms with weaker growth potential by following Pinkowitz and Williamson (2004).  Pinkowitz and Williamson argue that the main theoretical determinant of the value of cash holding should be the investment opportunity set of the firm.  First, liquidity is important, because without liquid assets of the firm will be forced to abandon a positive NPV project (Myers and Majluf (1984)).  This should increase the cost of cash as it is expected to increase in value of assets.  Secondly, Jensens (1986) free cash flow problem arises when the firm has a few good opportunities for investment.  If a company with sufficient cash reserves has positive NPV investment opportunities, it is likely to use these advantages instead of wasting money on unproductive ventures.  Intuition is that when two identical firms except that one has a positive NPV investment opportunities and th e other one does not have the opportunity to invest, it is likely that the first firm will spend its cash in ways more valuable to the shareholders. Hypothesis 5: The marginal value of cash is high for financially constrained firms with good investment opportunities. One of the arguments in Faulkender and Wang (2006) having a higher marginal value of cash for financially constrained firms is that when firms have positive NPV investment opportunities. The higher the cost of raising external capital is, the more likely these opportunities are foregone. Though, they do not test for it empirically. I hypothesize that the reason why financially constrained firms and firms with better investment opportunities have a higher value placed on cash when examined separately, is in fact due to the combined effect of these two criteria.  A financially constrained firm without investment opportunities is unable to make return for the cash, while a financially unconstrained firm with good investment opportunities can simply increase external funding when it needs to. Thus, financially constrained firms with good investment opportunities should have a high value placed on their cash holdings by their shareholders compared with other firms. Hypothesis 6: Firms cash holdings, on average, decrease when the cost of external capital increases. When conditions in the corporate credit market deteriorate, it often leads to a reduction in the economy (Fisher (1933)).  As firms generate less internal cash flows and at the same time, corporate credit becomes more expensive and rationed, cash reserves of firms, on average, should decline.  It was also suggested by Opler et al (1999). Hypothesis 7: When the cost of external capital is higher an extra ringgit of cash holdings is more valuable. As the supply of credit becomes more rationed and therefore more expensive, the cost of raising capital increases.  The increase in the cost of capital makes firms more likely to give up positive NPV projects due to lack of funding.  Therefore, when a credit is more rationed, cash holdings should become more valuable because they can help companies take advantage of positive NPV investment opportunities without incurring high costs of raising external capital. Methods I follow Faulkender and Wang (2006) who developed a methodology which estimates the extra value the market incorporates into equity values that result from changes in the cash position of firms over the fiscal year to measure the impact of corporate financial policy on the value of cash holdings. Since stock returns are influenced by the common risk factors, as well as changes in firm-specific characteristics it is necessary to control for both to be able to estimate the magnitude change attributed to the change in cash. The change in the value of a firm is measured by the excess return for the firm i during fiscal year t less the return of stock is benchmark portfolio during fiscal year t. Then the excess returns are regressed on changes in the characteristics of the firm.  In this case the main interest is in the estimated coefficient corresponding to the variable measuring the ratio of unexpected changes in cash of the firms lagged equity value.  Since the dependent and indepe ndent variables are standardized by lagged market value of equity, the coefficient measures the dollar change in shareholder value resulting from a change of one dollar of cash held by the firm. Faulkender and Wang (2006) methodology is in effect a long-term event study, in which event is unexpected changes in cash holdings, controlled for other factors that may impact returns over the assessment window of one year. 3.3.1 Controlling for risk-related market-wide factors To control for risk-related factors excess returns are examined that may impact a firms discount rate and return. Fama and French (1993) show that size and the book-to-market of equity clarifies ordinary variation in stock returns. To arrive at the estimate of the excess return I use the 25 Fama-French portfolios (Fama and French (1993)) formed on size, measured as market capitalization, and book-to-market value of equity ratio (BE/ME henceforth) as my benchmark portfolios. First firms are sorted by size and divided in five size groups, and then firms are sorted by BE/ME ratios and divided in five BE/ME quintiles for each year. Then I group every firm into one of BE/ME portfolios and 25 size based on the intersection between the BE/ME and size independent sorts. Firms excess return is calculated by subtracting the firm is benchmark portfolio return during fiscal year t from the firm is stock return during fiscal year t. The fiscal year, or yearly, returns are calculated using the monthly returns. Hence, the dependent variable for the baseline regression is (1) where ri,t is the stock return for firm i during fiscal year t and is stock is benchmark portfolios return during the corresponding fiscal year t. 3.3.2 Controlling for firm-specific factors It is necessary to control for variables that could be correlated with both change and returns in cash holdings to be able to examine how much the change in cash holdings impacts the change in equity value. Hence, in addition to change in cash should be regressed the excess stock return over the fiscal year on changes in a firms profitability, investment policy, and financing policy. The subsequent equation describes baseline regression: = (2) where the ΔX term indicates unforeseen change in variable X. The dependent variable is described above. The independent variables are firm-specific factors that control for sources of value other than cash or may be correlated with cash holdings. The dependent variable was described above.  Independent variables are firm-specific factors that control the sources of value, except for cash and can be correlated with cash holdings. ΔCi,t is the unforeseen change throughout fiscal year t in firm is cash holdings in balance sheet and the most significant variable in the regression. I suppose that the unforeseen change in cash holdings equals to the realized change in cash holdings throughout the fiscal year. ΔEi,t is the change throughout fiscal year t in earnings before interest and extraordinary items, and controls for profitability of firm. Firms investment changes policy are controlled by ΔNAi,t, the change throughout fiscal year t in total assets net of cash, and ΔRDi,t, the change throughout fiscal year t in RD expenditure. The financing policy is controlled by ΔIi,t which is the change throughout fiscal year t in interest expense, ΔDi,t which is the change during fiscal year t in sum dividends, Ci,t-1 which is firm is lagged cash holdings at time t-1, Li,t which is market leverage at the of fiscal year t, and finally NFi,t which is the firms net financing throughout the fiscal year t. As the stock return is also by definition divided by Mi,t-1, the standardization allows for understanding the estimated coefficients as the dollar change in value for a one-dollar change in the relevant independent variable. Sample Selection For my empirical analysis of the marginal value of cash in Malaysia and how it may have changed over time with the availability of capital from the external market I use a sample of publicly listed Malaysian firms from 1999 to 2009. The sample includes both active and inactive firms to avoid a survivorship bias. In this section I describe how I calculate the variables and from where I obtain the data. Here I will first describe how the dependent variable is calculated, and then describe the independent variables in detail. 3.4.1 Dependent variable The dependent variable is the excess return of a firms stock (Eq. (1)). The stock return for a firm i through fiscal year t, ri,t, is calculated using Total Return Index (item ReturnIndex) from Thomson Reuters Datastream database (referred as Datastream after this). The index regulates for stock splits and dividends, and therefore the most accurate measure of increase in firm equity value. 3.4.2 Independent variables The change is basically the difference between fiscal years t and t-1. In addition, all variables excluding for leverage and net financing are deflated by one-year holdup market value of equity. The variables used in Eq. (2) are measured as below: a) Ci,t and Ci,t-1 One-year holdup cash holdings and cash holdings are measured as cash and short-term investments (CashAndSTInvestments). Ever since this is the most important variable, it should be noted that firms cash holdings are considered to include marketable securities and cash in majority of academic studies. Depending on the source, these can be listed as cash and equivalent, cash and short-term investments or marketable securities and cash. Though, in addition to cash the definition can include items such as commercial papers, treasury bills and other money market investments. In general databases adjust the reported records from firm financial statements in order to make the data comparable across the firms. b) Ei,t Earnings before interest and extraordinary items are calculated as earnings before extraordinary items (IncomeBefExtraItemsCFStmt) plus interest expenses (InterestExpenseOnDebt). c) NAi,t Total assets net of cash or net assets, are calculated as total assets (TotalAssets) minus cash holdings (CashAndSTInvestments). d) RDi,t RD expenditure is simply RD expenditure (ResearchAndDevelopmentExpense). It is set to zero if missing. e) Ii,t Interest expense is measured as interest expenses on debt (InterestExpenseOnDebt). f) Di,t Total dividends are measured as common dividends paid (CommonDividendsCash). g) Li,t Ma

Wetland Ecosystem Essay -- Environment, Sustainable Development

1. Introduction Wetland ecosystem is one of the most productive ecosystems on this planet delivering massive goods and services to human society. However, due to poor awareness of their values and underestimation of their contribution, many wetlands have been converted to farmland or urban areas, or influenced by pollution due to agricultural and industrial activities. Consequentially wetland ecosystems have severely declined and degraded globally during the past decades. In order to restore and protect wetlands, hence ensure a sustainable supply of wetland goods and services, it is important to recognize their values. Vital to this is the development of valuation methods that explicitly link wetland values, the capital base of the ecosystem, to the design of policies (Pearce and Atkinson, 1993; Dasgupta and MÃ ¤ler, 2000; Arrow et al, 2004; Maler et al, 2008; Dasgupta, 2010). For a typical wetland ecosystem, its values can be accounted in terms of the populations of its species, fish harvested per day, the amount of carbon stored per year, or the annual number of recreational visits. These are generally categorised as values from wetland production, regulating or cultural services (MA, 2005). Proper and accurate estimation of these values enables comparative analysis of intervention practices and therefore contributes to the improvement of the design of policies (Barbier, 1993; Barbier et al., 1997; Turner et al, 2000). Quality is a critical factor in determining the values of wetlands. A healthy and functioning wetland may provide rich ecosystem services (Zedler and Kercher, 2005; Maltby, 2009). The quantity of the wetland valuation practice has increased in relatively recent years. In the review by Heimlich et al. (1998), 33... ...s. Since the values derived with a benefit transfer method are not strictly primary studies, we therefore deleted those items. Subsequently, the values that are not of a single service, but a total economic value (TEV) or marked as ‘various’, had to be moved from the list for consistence. Finally, 70 data items from 27 articles remain in the analysis. The cross tables based on the data are given in Tables 1 and 2. Table 1 shows the relationship between eco-services and wetland types in terms of the number of study cases, while Table 2 shows the relationship between the services and the methods used for their valuation. The most studied services are food and raw materials which happen mainly at wetlands unspecified by the authors or at floodplains; the most used valuation methods are the direct market pricing method, there are 41 data items out of the total 70.

A Beautiful Mind :: Movie Film Beautiful Mind Schizophrenia Essays

A Beautiful Mind The movie "A Beautiful Mind" tells the story of Nobel Prize winner John Nash's struggle with schizophrenia. It follows his journey from the point where he is not even aware he has schizophrenia, to the point where Nash and his wife find a way to manage his condition. The movie provides a lot of information and insight into the psychological condition of schizophrenia, including information on the symptoms, the treatment and cures, the life for the individual and for the individual's family. The movie is effective at demonstrating various concepts related to schizophrenia, and provides an insight into the disease of schizophrenia.   Ã‚     Ã‚  Ã‚   The movie accurately portrays the nature of schizophrenia using John Nash as a perfect example, who exhibits many of the key symptoms of the disease. An inability to communicate is one of the main symptoms of schizophrenia, one which takes its toll on interpersonal relationships and intimacy. The movie does an excellent job showing the problems that Alicia had as she tries to help her husband seek treatment and recover from the disease. A Beautiful Mind directly shows a medical definition of schizophrenia. Nash exhibits many of the key symptoms of the disease: hallucinations (he has a roommates but he lives in a single dorm room), delusions (thinks he works for the government), ideas of reference, poor social skills (mumbles, doesn’t talk much to strangers), awkward gestures and facial expressions, and jumbled speech. I do, however, feel it is impossible for a film to convey the exact experience of a schizophrenic or to cover all the elements of the illness. Nash showed much change in the way he was functioning through the movie. After treatment, it seemed like he had his disease under control, but he still had problems disbelieving in his hallucinations by still acting on them. For example, he still thought he was working for the government by helping them decode secrete codes in the newspapers. He tried to hide this from his wife by keeping all his work hidden in a shed. Eventually, Nash's life is seen as he returns to the college to teach and continues completing his mathematics work, while still seeing the delusions. This life is clearly far from normal. But for Nash, it also seems the best option. Nash was still experiencing his disease at the end of the movie. Because it showed the people that he was hallucinating about, meaning that he could still see them and interact with them if he chooses to.

Federal Reserve Paper

Federal Reserve Paper Alex Layer Macroeconomics On October 23 and 24 the Federal Reserve Open Market Committee held a meeting to discuss what they need to do or continue to do to stimulate the economy. According to the statement consumer spending has increased, but investment in companies has continued to decrease. They also said that inflation has increased which causes energy costs to go up, but the expectations are looking good. The Fed decided that continuing to buy securities would be a good idea since they are trying to lower the long-term interest rates.Their plan is to continue purchasing these mortgage backed securities until the labor markets improve. They will also plan on purchasing more assets if that is the case. The Committee wants to continue extending the holding of Treasury securities, and it is keeping the policy of reinvesting principal payments from the holding of agency debt and agency mortgage-backed securities. Their goal by doing this is to keep the Federal f unds rate between 0 and . 25%. All of this will increase securities held in the long run. They influence the interest rates by buying securities through open market operations.The Committee decided that the economy is getting better but too slowly so that is why they decided to take these actions to try and increase the speed. According to The New York Times article , they want to max out employment and price stability, which will help stimulate the economy. After reading the Committee’s statement I have concluded that they are using expansionary policies or â€Å"easy money policies†. I figured they are doing this since they are buying and holding their securities in an attempt to raise the aggregate demand.I do agree with what the Fed is planning to do in an attempt to stimulate the economy. I this it is a good idea since our economy is still in somewhat of a slump to use the easy money policies to increase the aggregate demand by changing the interest rates. Overall I agree with what they plan to do seeing that it should give us a positive outlook on the economy in the time to come. Sources http://www. nytimes. com/2012/10/25/business/economy/fed-affirms-low-rates-and-sees-moderate-growth. html? hp&_r=1& http://www. federalreserve. gov/newsevents/press/monetary/20121024a. htm