City Life Essay

Hello! I have a request for you to give me a feedback on my essay. Thanks in advance. Essay on city life see more:city living vs country living The migration from the countryside to city areas is merely a new phenomenon. This is a historic transformation on a global scale that consists of village culture being rapidly replaced by urban culture. Nowadays more than half of the world’s population lives in the cities. The majority of the people migrate of the better employment opportunities, the medical and educational facilities but there are also other reasons like the fun attractions of city life. City life is far more interesting and appealing to young people than rural life with its theaters, cinemas, night clubs, restaurants, shopping centers, places where you can practice some sport and get a professional to help you out with it and all sorts of other things you can imagine. Nevertheless urban life has its disadvantages too.Those ensue from the fact that inevitably life becomes more and more rapid in the city and that results in the way people act. They walk through life hurriedly without noticing the important things in life that are family and nature. They become more and more distant and loose their way to nature which leads to more and more medical conditions ensued by withdrawing from nature. Life in our cities will become more perturbed in the future. The main problem will be overpopulation therefore the streets will become crowded with people, it will take hours to get anywhere. Even if the traveling issues are solved overpopulation will result in many homeless people because there isn’t enough space for everybody even if skyscrapers are built to the sky. Other than that new technologies will develop even more and make life easier than today. In conclusion city life is very appealing but its developing rates are harmful for man’s survival and future. Future generations will have to solve this problem.

Ownership Structure, Managerial Behavior and Corporate Value

Journal of Corporate Finance 11 (2005) 645 – 660 www. elsevier. com/locate/econbase Ownership structure, managerial behavior and corporate value J. R. Daviesa, David Hillierb,T, Patrick McColganc a University of Strathclyde, UK b University of Leeds, UK c University of Aberdeen, UK Received 21 November 2002; accepted 6 July 2004 Available online 20 April 2005 Abstract The nonlinear relationship between corporate value and managerial ownership is well documented. This has been attributed to the onset of managerial entrenchment, which results in a decrease of corporate value for increasing levels of managerial holdings. We propose a new structure for this relationship that accounts for the effect of conflicting managerial incentives, and external and internal disciplinary monitoring mechanisms. Using this specification as the basis for our analysis, we provide evidence that the managerial ownership–corporate value relationship is co-deterministic. This finding is at odds with recent work which reports that corporate value determines managerial ownership but not vice-versa. D 2005 Elsevier B. V. All rights reserved. JEL classification: G32 Keywords: Ownership structure; Capital expenditure; Corporate value; Tobin’s Q 1. Introduction In a market without agency problems, corporate managers will choose investments that maximise the wealth of shareholders. In practice, competing objectives which are incompatible with the shareholder wealth-maximising paradigm may also be pursued. T Corresponding author. Leeds University Business School, University of Leeds, Maurice Keyworth Building Leeds, LS2 9JT, UK. Tel. : +44 113 3434359; fax: +44 113 3434459. E-mail address: d. j. [email  protected] c. uk (D. Hillier). 0929-1199/$ – see front matter D 2005 Elsevier B. V. All rights reserved. doi:10. 1016/j. jcorpfin. 2004. 07. 001 646 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Following Jensen and Meckling (1976), a large literature has developed that examines how managerial behavior impacts upon firm performance. A vibrant strand of this literature concerns the relationship between managerial ownership levels, the direct investment decisions made by management and the inherent value of the firm, as proxied by Tobin’s Q ratio. Morck et al. 1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) provide evidence of a significant nonlinear relationship between corporate value and managerial ownership. Specifically, value increases with managerial holdings for low levels of ownership. At some level, managers become entrenched within the firm resulting in a decrease in firm value. However, whereas Morck et al. (1988) and Hermalin and Weisbach (1991) document further changes in the corporate value–managerial holdings relationship at high levels of equity ownership, McConnell and Servaes (1990) report no such change. Recent work has built upon the findings of Demsetz and Lehn (1985) who argue that levels of managerial ownership will be determined endogenously in equilibrium. Moreover, Cho (1998) and Himmelberg et al. (1999) have shed doubt upon the earlier findings of Morck et al. (1988) and McConnell and Servaes (1990) by controlling for the effects of endogeneity and unobservable (to the econometrician) firm characteristics in their analysis. After controlling for the effects of endogeneity in the corporate value– managerial holdings relationship, they showed that managerial ownership had little or no effect on corporate value and investment. Short and Keasey (1999) and Faccio and Lasfer (1999) utilize a cubic specification to model the corporate value–managerial holdings relationship and both report a significant nonlinear functional form, similar to Morck et al. (1988), for British companies. However, neither study fully examines the misspecifying impact of endogeneity on their results. In this paper, we propose a new structure to the managerial ownership–corporate value relationship which captures a more complex characterisation of the evolving behavior of managers. We argue that at high levels of managerial ownership when external market discipline becomes neffective, there will be a resurgence of entrenchment behavior. With equity holdings around 50%, managers will have implicit control of their company, but still do not have objectives completely aligned to external shareholders. Only at very high levels of managerial holdings are incentives akin to other shareholders. When this model is applied to a l arge sample of firms incorporated in the UK, managerial ownership is seen to have a significant impact on corporate value. This relationship is endogenous, and consistent with Cho (1998) and Himmelberg et al. (1999), corporate value has a corresponding effect on managerial holdings. We also find that although ownership levels are affected by firm level investment, there is no evidence of the reverse occurring. In the next section we outline our model of the managerial ownership–corporate value relationship. We present empirical results in Section 3 and conclude in Section 4. 2. The model In this section, we propose an alternative structure to the managerial holdings–corporate value relationship and argue that the cubic, or simpler representations, used in earlier J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 647 studies1 are unnecessarily restrictive and misspecified. The model that is presented here captures further nonlinearities in this relationship at high levels of managerial holdings and has a quintic specification. Management is faced with both negative and positive incentives to ensure that they follow objectives which maximise shareholder wealth. The effectiveness of these incentives is potentially a function of the level of managerial ownership in the firm. We view the propensity of management to maximise shareholder wealth to be a function of three unobserved factors: external market discipline, even if it is weak, internal controls and convergence of interests. Moreover, the strength of each factor can be viewed as a function of the level of managerial ownership in the firm. 2 2. 1. Low levels of managerial ownership For low levels of managerial ownership, external discipline and internal controls or incentives will dominate behavior (see Fama, 1980; Hart, 1983; Jensen and Ruback, 1983). Empirically, Morck et al. (1988), McConnell and Servaes (1990) and Hermalin and Weisbach (1991) report results consistent with this behavior for the relationship between managerial holdings and corporate value. However, there is also the possibility that lower levels of ownership within this range have endogenously arisen from performance related compensation packages, such as stock options and stock grants rather than increased ownership in itself leading to higher Q ratios. 2. 2. Intermediate levels of managerial ownership At intermediate levels of managerial ownership, management interests begin to converge with those of shareholders. However, with greater ownership comes greater power in the form of voting rights. Managers may, at this level of holdings, maximise their personal wealth through increasing perquisites and guaranteeing their employment at the expense of corporate value. In addition, while low managerial ownership levels may have arisen through the vesting of compensation plans, it is unlikely that such plans will provide management with a moderate ownership stake in the firm. Moreover, even though external market controls are still in place, these and the effect of convergence of interests are not strong enough to align the behavior of management to shareholders. Managerial labour markets operate on the principal that poorly performing 1 See Morck et al. (1988), McConnell and Servaes (1990), Hermalin and Weisbach (1991), Cho (1998) and Himmelberg et al. (1999) for US companies and Short and Keasey (1999) and Faccio and Lasfer (1999) for UK companies. 2 For example, since compensation packages such as stock options are a transfer of wealth from shareholders to management, their value will lessen as managerial ownership increases. External market discipline is also a function of managerial ownership. Large shareholdings by top management act as a deterrent for takeovers because of the greater ability to oppose a hostile bid or drive up premiums to the point where bidders no longer view the target company as a positive net present value investment Stulz (1988). Finally, internal controls in the form of monitoring from large shareholders and corporate boards should reduce the scope for managers to diverge greatly from the interests of shareholders. Again, however, such discipline is likely to be inversely related to managerial control Denis et al. (1997). 648 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 anagers can be removed and appropriately disciplined. Studies by Denis et al. (1997) in the US and Dahya et al. (2002) in the UK both find an inverse relation between topmanagement turnover and managerial ownership. This lack of discipline provides evidence of a deficiency in incentives for managers to maximise shareholder value at this level of owners hip. Franks and Mayer (1996) also report that hostile takeover targets in the UK are not poorly performing firms, which is in contrast to the findings of a disciplinary role for corporate takeovers in the US by Martin and McConnell (1991). In this context, Franks and Mayer (1996) provide significant evidence that takeovers in the UK may not act to remove a self-serving board even when they are performing poorly. This lack of disciplinary control over poorly performing management may strengthen management’s ability to pursue sub-optimal corporate policies at intermediate ownership levels. 2. 3. High levels of managerial ownership (less than 50%) As levels of managerial equity ownership grow, objectives converge further to those of shareholders. At ownership levels, below 50% management do not have total control of the firm and external discipline still exists. While perhaps no longer being subject to any major discipline from external takeover markets, it is likely that even at these levels of ownership, managers are still subject to discipline from external block shareholders. This is particularly true in the UK, where because of strong informal ties between institutions (Short and Keasey, 1999), a lax regulatory environment concerning the ownership of listed companies (Roe, 1990) and low monitoring costs (Faccio and Lasfer, 1999), institutional activism is stronger than in the US. This view is also consistent with Franks et al. (2001) contention of strong minority protection laws in the UK, whereby large shareholders cannot transact with related companies without the consent of the firm’s minority shareholders. The UK regulatory framework stands in contrast to US corporate law which limits minorities to seeking redress after the related party transaction has taken place. Combined with monitoring from UK institutions, this may allo w external shareholders to impose some form of control on management even at elatively large levels of managerial ownership. 2. 4. High levels of managerial ownership (greater than 50%) At levels above 50% ownership, management has complete control of the company. Although atomistic shareholders are unlikely to have been able to in influence managers at far lower levels of ownership than this, there is always a possibility that a cartel of blockholders, allied with minority shareholder’s rights under UK company law, may be able to mount a challenge to management if they fail to make decisions in shareholders’ best interests. For a more in-depth discussion of the institutional differences and similarities between the United Kingdom and United States, see Short and Keasey (1999) and Faccio and Lasfer (1999). 3 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 649 At greater than 50% managerial ownership, this is no longer likely to be a serious issue to management. Furthermore, with majority ownership, the probability of a hostile takeover effectively becomes zero. The failure of external discipline combined with a lack of blockholder incentives above 50% may result in a decrease in corporate value for a small window of managerial holdings above this level. This fall in corporate value is consistent with the theoretical predictions of Stulz (1988). 2. 5. Very high levels of managerial ownership Finally, as managerial shareholdings rise to very high levels, management effectively become sole owners of the company. This would lead to value-maximising behavior as predicted by Jensen and Meckling (1976). Consistent with Morck et al. 1988), Short and Keasey (1999) and Faccio and Lasfer (1999) at above a certain level of ownership, corporate managers are faced with such severe financial penalties for failing to maximise the value of their companies that they are forced to make decisions which will maximise firm value, regardless of how this affects their private benefits of control. 2. 6. Summary Our characterisation of a highly nonlinear relationshi p between managerial equity holdings and corporate value is in contrast to earlier studies (Morck et al. , 1988; McConnell and Servaes, 1990; Hermalin and Weisbach, 1991; Cho, 1998; Himmelberg et al. 1999)4, which posit fewer turning points in their analysis. There is little theoretical basis on which the individual turning points can be determined, and the findings of Kole (1995) suggest that these will be in influenced by the size of the firms in the sample. However, it is expected that the second local maximum will be in the region of 50% managerial ownership reflecting the stage at which management gain total control of the company. In the next section, the main tests of our hypotheses will be carried out. 3. Empirical results 3. 1. Description of the data We use data on managerial and external block ownership for 1995 from the MacMillan London Stock Exchange Yearbook for 1996 and 1997. The Yearbook provides summary accounting data including a consolidated balance sheet, information on company directors, legal information on the company’s lawyers, auditors and stockbrokers, principle activities, company history, capital and dividend payments, and industrial sector for the McConnell and Servaes (1990) modelled the corporate value–managerial ownership relationship as a quadratic function, which by construction has only one turning point. 650 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 vast majority of all quoted companies and securities. 5 We restrict our attention to nonfinancial companies only and require that each firm has complete managerial and external ownership data for 1995, which leaves 802 industrial companies in our sample. 6 Data on capital expenditures, to tal assets employed, after tax profits, depreciation, leverage, equity market values, and research and development costs are collected from Datastream. We estimate Tobin’s Q ratio (our proxy for corporate value) using the formula below: Q? MVEQ ? PREF ? DEBT BV ASSETS ? 1? where: MVEQ=the year-end market value of the firm’s common stock; PREF=the yearend book value of the firmTs preference shares (preferred stock); DEBT=the year-end book value of the firmTs total debt; and BV ASSETS=the total assets employed by the firm, which is measured as total assets minus current liabilities. Our measure is consistent with the modified version of the formula as used by Chung and Pruitt (1994) who find that 96. 6% of the variability in the popular Lindenberg and Ross (1981) algorithm of Tobin’s Q is explained by their approximation. Our method also avoids the data availability problems which arise from using the more rigorous algorithms proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997) in order to estimate the replacement cost of assets. We use book values of preferred stock and long-term debt, rather than the market values proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997). In the UK, there is a far less active market for the trading of corporate debt than that which exists in the US, forcing us to rely on book values for these variables. In a final stratification of our sample, we mitigate the problem of potential outliers and trim 25 firms with the largest and smallest Tobin’s Q measure, leaving a final sample of 752 firms. 7 Table 1 presents descriptive statistics for our sample data. The mean managerial ownership stake of all board members is 13. 02%, which is similar to comparable US studies, but slightly lower than Faccio and Lasfer (1999) who report mean ownership of 16. 7%. Tobin’s Q is slightly higher than that reported for related US work with a mean value of 1. 96. The standard deviation of Tobin’s Q is 1. 21, which is also greater than other studies. However, it is substantially less than the mean of 2. 47 reported by Doukas et al. (2002) and is relatively similar to the mean value of 1. 86 that Short and Keasey (1999) report for their market valuation ratio. 8 The mean blockholder ownership is 37. 34% and is on a par with that reported for US firms by McConnell and Servaes (1990) (32. 4%) and 34. 57% reported by Faccio and Lasfer (1999) for UK firms. The full range of firm sizes is included in the sample with the 5 To establish the reliability of the summary ownership data, we carried out a correlation analysis of a subsample of 422 firms from he original data set of 802 companies (52. 62%) for which we were able to obtain company annual reports. The yearbook data and company accounts data exhibited a correlation of 0. 90, with a pvalue of 0. 00. We also establish the robustness of our data by re-estimating the model using data for 1997. This result is discussed later in this section. 6 Recently listed, merged or acquired firms are not included. 7 This is a larger sample than that used by Morck et al. (1988)—371 firms, Cho (1998)—326 firms and Himmelberg et al. (1999)—maximum 427 firms in any 1 year. Measured as the market value of equity divided by the book value of equity, minus any intangibles. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 1 Descriptive statistics Variable Management ownership Blockholder ownership Largest stakeholder Capital expenditures Total assets employed After tax profits less depreciation/assets employed Debt/assets employed Market value of equity Research and development Tobin’s Q Mean 13. 02% 37. 34% 18. 82% 21,221 255,642 0. 1425 0. 1411 335 2918 1. 9647 S. D. 18. 06% 23. 57% 21. 64% 75,317 1,583,274 0. 4763 0. 252 1399 44,108 1. 2092 Minimum 0. 00% 0. 00% 0. 00% 7 268 A10. 977 0. 0000 0. 68 0 0. 4502 651 Maximum 79. 90% 100. 00% 100. 00% 1,024,200 37,774,000 3. 4207 4. 8358 26,224 1,198,988 7. 0997 Managerial own ership data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Capital expenditures (thousands), total assets employed (thousands), after tax profits, depreciation, leverage, equity market values (millions) and research and development costs (thousands) are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. mallest company having an equity market capitalization of o680,000 and the largest company’s equity valued at approximately o26 billion. The mean market capitalization of firms in the sample is o335 million. Table 2 provides the distribution of sample statistics grouped by managerial ownership. A very large proportion of the sample (62%) have managerial ownership levels less than or equal to 10%. However, a larg e fraction of companies (11%) also in the sample had boards Table 2 Breakdown of sample by managerial ownership Manager level Ownership Number of firms 464 87 75 41 34 26 21 4 Blockholder ownership, % 43. 34. 5 34. 4 24. 0 22. 7 13. 0 12. 7 5. 8 Tobin’s Q 1. 952 2. 033 1. 736 2. 109 2. 113 2. 257 1. 933 1. 808 Total assets employed 393,861 44,093 26,186 34,322 35,864 28,190 14,234 10,127 Capital expenditures/ assets employed 0. 106 0. 161 0. 124 0. 117 0. 114 0. 100 0. 099 0. 114 Liquidity 0. 130 0. 129 0. 157 0. 194 0. 194 0. 177 0. 169 0. 239 0VMOb10% 10VMOb20% 20VMOb30% 30VMOb40% 40VMOb50% 50VMOb60% 60VMOb70% 70VMOb100% Managerial ownership (MO) data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder ownership measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Capital expenditure (thousands), total assets employed (thousands), after tax profits and equity market values (millions) are collected from Datastream. Liquidity is measured as cashflow divided by total assets employed. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. 652 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 3 Regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 85 28. 14 0. 017 MO 0. 12 3. 23 MO2 A0. 013 A3. 08 F MO3 4. 63A10 2. 82 2. 651 A4 MO4 A6. 73A10 A2. 53 A6 MO5 3. 36A10A8 2. 24 The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e where Q is Tobin’s Q and MO is managerial ownership. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. which owned at least 40% of all outstanding equity. As would be expected, outside blockholder ownership decreases with managerial ownership. At managerial ownership levels of 30%, blockholder ownership is slightly less at 24%. It is probable that external discipline, as provided by blockholders, would still be strong at these levels of managerial holdings, particularly where informal coalitions among blockholders are more prominent (Short and Keasey, 1999). At higher levels of managerial holdings, blockholder ownership decreases sharply leading to a collapse in the power of blockholders. Managerial ownership is a decreasing function of company size, which is consistent with Demsetz and Lehn (1985). Although firm sizes in the UK are considerably smaller than US firms, the ratios in Table 2 are similar to summary statistics provided in Morck et al. (1988), McConnell and Servaes (1990), Cho (1998) and Himmelberg et al. (1999). Table 2 also illustrates the nonlinear relationship between Tobin’s Q and managerial holdings. Visual inspection indicates two maximum points in the region of 10% to 20% and 50% to 60%, respectively. The convergence of managerial interests to those of shareholders at very high levels of ownership is not apparent at this stage because of the small number of companies with managerial holdings above 70%. However, the statistics for all other groupings are consistent with our theoretical motivation. 3. 2. Estimation of ownership breakpoints In order to model the Tobin’s Q–managerial ownership (MO) function as having two maximum and two minimum turning points, we specify a quintic function, as follows: Q ? 0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e ? 2? For the nonlinear relationship discussed in Section 2 to be valid, the coefficients in Eq. (2) must have the following signs: a 0N0; a 1N0; a 2b0; a 3N0; a 4b0; a 5N0. The estimated values of the coefficients in Eq. (2) are given in Table 3. 9 The intercept coefficient, which is an estimate of Tobin’s Q i n firms with no managerial holdings, is 1. 85. Each slope coefficient is of the correct sign and statistically significant at the 5% level. Although the It is clear that Tobin’s Q will be in influenced by more than just managerial ownership. However, the objective of this paper is to investigate whether the standard quadratic and cubic specifications used in previous studies are too simplistic. To maintain parsimony, we therefore omit other factors from this specific model. Other relevant factors are incorporated into the analysis in a later table. 9 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 653 Estimated Relationship between Tobin's Q and Managerial Ownership 2. 40 2. 20 2. 00 1. 80 1. 60 1. 40 1. 20 0 0. 1 0. 2 0. 3 0. 4 0. 5 0. 6 0. 7 0. 8 0. 9 Tobin's Q Insider Ownership Fig. 1. Estimated relationship between Tobin’s Q and Managerial Ownership. Tobin’s Q was modelled as a quintic function of insider ownership using ordinary least squares regression. The estimated regression line is: Q=1. 85+0. 12IOA0. 013OI2+4. 63A10A4IO3A6. 73A10A6IO4+3. 36A10A8IO5. adjusted R 2 is low, it is similar to that found in comparable US studies. The use of this model as a basis to estimate managerial ownership turning points leads to four critical values: 7. 01%, 26. 0%, 51. 4%, 75. 7% and is illustrated in Fig. 1. To establish the robustness of our regression model, the spline approach as applied by Morck et al. (1988), Cho (1998) and Himmelberg et al. (1999) to estimate breakpoints was carried out using our generated turning points. Table 4 presents the coefficients resulting from the piecewise linear regression. Similar to Table 3, each coefficient has the expected sign and all but one variable is statistically significant at the 5% level. The only variable that is not significant, MOover 76% , has the correct sign. The probable cause for the lack of significance is the small number of firms in this managerial ownership grouping. An examination of these results suggests that Tobin’s Q increases in firms for managerial ownership levels up to 7% and then declines to ownership levels of 26%. This is almost identical to the turning points in Morck et al. (1988) and Himmelberg et al. (1999) (5% and 25%, respectively) and is comparable to Cho (1998), who uses breakpoints of 7% and 38%. However, it differs from the UK studies of Short and Keasey (1999) and Faccio and Lasfer (1999) who each reports two turning points of 12. 99% and 41. 99%, and 19. 68% and 54. 12%, respectively. Earlier studies limited the turning points to two but in our extension, it is clear that there are another two turning points at much higher levels of managerial ownership. It also appears that market discipline has an influence on managerial objectives up to the point where the board takes complete control (51%). Tobin’s Q then decreases until ownership levels reach 76%, after which Q increases. Denis and Sarin (1999) argue that cross-sectional studies may be subject to bias, whereby they fail to account for events with potentially large valuation consequences. 10 10 Examples of such events may include receiving a takeover bid, top management turnover, etc. 654 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 4 Spline regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 854 28. 38 0. 012 MOup 0. 056 2. 93 to 7% MO7% to 26% MO26% 0. 0187 2. 57 2. 769 to 51% MO51% A0. 053 A1. 99 to 76% MOover 0. 624 1. 12 76% A0. 020 A2. 62 F The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MOup to 7% ? a2 MO7% to 26% a3 MO26% to 51% ? a4 MO51%to 76% ? a5 MOover 76% ?e where Q is Tobin’s Q and MOup to 7%=managerial ownership if managerial ownership b7%, =7% if managerial ownershipN7%. MO7% to 26%=0 if managerial ownership b7%, =managerial ownership minus 7% if 7%bmanagerial ownershipb26%, =26% if managerial ownershipN26%. MO26% to 51%=0 if managerial ownershipb26%, =managerial ownership m inus 26% if 26%bmanagerial ownershipb51%, =51% if managerial ownershipN51%. MO51% to 76%=0 if managerial ownership b51%, =managerial ownership minus 51% if 51%bmanagerial ownershipb76%, =76% if managerial ownership N26%. MOover 76%=0 if managerial ownershipb76%, =managerial ownership minus 76% if managerial ownershipN76%. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. As a further test of robustness, we carried out the quintic analysis for managerial ownership and Tobin’s Q for the same sample of available firms in 1997. 11 Again, each coefficient was significant with the correct signs and the turning points from the estimated model were relatively stable at 7. 9%, 26. 5%, 55. 2% and 86. 2%. . 3. Endogeneity of managerial equity ownership, investment and corporate value To analyse the effects of endogeneity in the managerial ownership, investment and corporate value relationship, we follow Cho (1998) and carry out a simultaneous equations analysis using two-stage least squares. Cho (1998) and Himmelberg et al. (1999) showed that once endogeneity was controlled, the perceived impact of managerial ownership on corporate value d isappeared. Moreover, corporate value was found to positively affect levels of managerial ownership. It is possible that if the model specification employed by these studies is wrong, what appears to be a lack of statistical significance in the endogenous variables in the simultaneous equations analysis may actually be due to errors in variables arising from the intermediate regressions. We re-run the two-stage least squares analysis of Cho (1998) using our more complex specification. 12 The control variables in our regression are the same as in Cho (1998). Namely, managerial ownership, investment and corporate value are Some firms fell out of the sample because of mergers, delisting, and being taken over. Cho (1998) also attempts to control for specification error by re-estimating his simultaneous regression analysis using managerial ownership as a linear variable and again finds no relationship between managerial ownership and corporate value. However, if indeed there is a nonlinear relationship between ownership and corporate value, such an approach would fail to capture this. 12 11 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 655 defined to be endogenously determined by each other as well as some additional relevant exogenous variables. That is: Managerial Ownership ? ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? Corporate Value ? g? managerial ownership; investment; leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial ownership; corporate value; volatility of earnings; liquidity; industry? For comparability, we define each of the above vari ables as in Cho (1998). For each company, industry dummy variables are set equal to one for each Financial Times Industry Classification (FTIC) grouping that sample firms lie within, and zero otherwise. In addition to the variables used by Cho (1998), we include blockholder ownership and largest stakeholder in the corporate value regressions to reflect the potential impact of blockholder discipline in the UK and the role of a founding or dominant individual on corporate value. All accounting and market variables are taken at the financial year-end from Datastream. In Table 5, we report results from the simultaneous equations analysis. Taking the managerial ownership regression first, all variables with the exception of investment have coefficients with the expected sign. Managerial ownership is negatively related to the market value of equity, which reflects the fact that wealth constraints and risk-aversion will prevent managers from holding substantial stakes in large firms. Firm level liquidity is shown to be positively related to managerial ownership, which is a stronger result than Cho (1998) who reported no significance for this variable. Importantly, Tobin’s Q is found to be significant and positively related to the level of managerial ownership. This is consistent with Cho (1998) but is opposed to Demsetz and Villalonga (2001), who find the opposite effect. This result suggests that managers tend to hold larger stakes in firms that are successful or have higher corporate value. This may also be indicative of successful managers benefiting from equity-related compensation policies. The investment variable, which has a negative impact on managerial ownership is surprising as theory predicts that firm level investment will be positively related to managerial ownership. Himmelberg et al. (1999) contend that firms with high investment spending will have high managerial ownership to alleviate the monitoring problem caused by discretionary managerial spending. However, Jensen (1986) argued that firms may overinvest as a result of an earnings retention conflict, rather than underinvest as Jensen and Meckling’s (1976) moral hazard theory would predict. When a firm is in this situation, managers may be able to maximise their size-related compensation by overinvesting, but are aware that this may ultimately reduce the value of their shareholdings. Although tentative, this could in part explain the negative relation between investment and ownership. Cho (1998) also finds a negative (but insignificant) coefficient on the investment variable using both capital and research and development expenditures. 56 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 5 Simultaneous equations analysis of managerial ownership, corporate value and investment Variable MVEQ Tobin’s Q Volatility Liquidity Investment Leverage Asset size Largest stakeholder Blockholder ownership MO MO2 MO3 MO4 MO5 Industry dummies Adj. R 2 F Managerial ownership A1. 8A10 (A3. 74) 0. 127 (4. 63) A1. 0A10A6 (A0. 74) 0. 035 (2. 24) A1. 314 (A2. 67) A5 Corporate value Investment 0. 073 (2. 35) 3. 89A10A6 (A2. 86) 0. 013 (1. 01) Yes 0. 045 8. 014 5. 136 (2. 23) 1. 088 (4. 36) 3. 33A10A8 (1. 17) A0. 20 (A0. 06) A0. 837 (A2. 60) 1. 588 (3. 07) A0. 395 (A2. 22) 0. 037 (1. 64) A0. 001 (A1. 14) 1. 9A10A5 (0. 76) Yes 0. 033 3. 497 A0. 035 (A0. 46) 0. 018 (0. 72) A0. 003 (A0. 92) 1. 72A10A4 (1. 03) A3. 12A10A7 (A1. 07) Yes 0. 009 2. 497 Results from a simultaneous equations analysis of managerial ownership, corporate value and investment for 752 firms, using the two-stage least squares method to estimate the following equations: Managerial Ownership ? f ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? CorporateValue ? g? anagerial ownership; investment; financial leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial owner ship; corporate value; volatility of earnings; liquidity; industry? In the above equations, managerial ownership measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Investment is defined as capital expenditure divided by total assets employed, leverage is the ratio of total debt to total assets employed and liquidity is measured as cashflow divided by total assets employed. Capital expenditure, total assets employed, after tax profits, depreciation, leverage, equity market values and profit volatilities are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. t-Statistics are in parenthesis. The estimated coefficients from the corporate value regression are given in the second column of Table 5. Corporate value is shown to be positively related to investment and leverage. While the investment coefficient is as expected, the sign of the leverage variable requires more discussion. Morck et al. 1988) find that leverage has a negative but insignificant impact on corporate value and attribute this to the possibility of managers in highly levered firms holding a higher than average level of ownership. However consistent with our results, McConnell and Servaes (1990) report a positive significant coefficient for leverage. Leverage can have various effects on firm value. The notion that high debt levels lead to greater corporate value has been argued by Modigliani and Miller (196 3) with respect J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 57 to valuable tax shields, Ross (1977) and Myers (1977) with respect to a signalling hypothesis and Jensen’s (1986) free cashflow hypothesis. Ultimately, leverage is one way of imposing external discipline on management and if it is effective, will lead to increased corporate value. Alternatively, Demsetz and Villalonga (2001) interpret a negative association between leverage and firm value as being due to relative inflation between the current time period and the earlier time period where companies had issued much of their debt. We view the most important result from the corporate value regression as being the significance of the managerial ownership variables. Our results indicate that although managerial ownership levels are determined by corporate value, corporate value itself is determined in part by managerial ownership. This finding is at odds with Cho (1998) and Himmelberg et al. (1999) but consistent with the classical view of Jensen and Meckling (1976) and empirical work by Morck et al. (1988) and McConnell and Servaes (1990). An interesting result is that blockholder ownership is shown to negatively impact Tobin’s Q. This result is consistent with Faccio and Lasfer (1999, 2000). McConnell and Servaes (1990) suggest that this could be due to a conflict of interests, which results from blockholders being forced into aligning themselves with managers so as not to jeopardize their other dealings with the firm. Alternatively, the negative coefficient may be explained by the strategic alignment hypothesis, which argues that blockholders and managers find it mutually beneficial to cooperate with each other. Finally, such findings may be consistent with the arguments of Burkart et al. 1997) in that too much block ownership will overly constrain management and reduce their ability to take value-maximising investment decisions. The investment regression coefficients presented in column three of Table 5 show a significant positive effect of corporate value on investment and a negative effect of profit volatility on investment. The finding that corporate value has a positive effect on investment is consisten t with the arguments of Cho (1998) that highly valued firms will have large investment opportunities. Also, firms with variable earnings will be reluctant to invest if future income is uncertain. Managerial ownership is found to have no impact on firm level investment. However, this may reflect optimality in that investment policy may be one way in which managers affect value, but not the only means. Ultimately we view our findings of a causal relation between ownership and firm value as being of greater significance than the lack of a relation between ownership and investment. These results are consistent with Cho (1998) but slightly stronger, in that volatility of earnings is significant in our regressions but insignificant in Cho (1998). . Conclusions Debate as to the relationship between corporate value and managerial ownership in the US is still unresolved. Studies such as Morck et al. (1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) document a nonlinear relation between these two variables. More recent work by Cho (1998), Himmelberg et al. (1999), and Demsetz and Villalonga (2001) shows that when controlling for endogeneity, managerial ownership is determined by corporate value but not vice-versa. 658 J. R. Davies et al. Journal of Corporate Finance 11 (2005) 645–660 We argue that even accepting that corporate value and managerial ownership are endogenously related to each other, misspecification of the managerial holding–corporate value relationship may lead to spurious conclusions concerning the direction of causality. Applying a quintic structure, we present results which suggest that the correct form of this relationship is a double humped curve. This is in contrast to other studies that have assumed a cubic or quadratic specification and by construction only one hump. The second hump or local maximum is attributed to a collapse in external market discipline at or around the point where managers take overall control of their firm. At this point, which is around 50% ownership, the management is not sufficiently akin to owners but have sufficient power to disregard any form of external monitoring or discipline. This has a detrimental affect on corporate value for a short window of managerial holdings. At high levels of managerial ownership, managers are effectively majority owners of their firm leading to a convergence of interests with other outside shareholders. Utilizing the quintic specification for managerial ownership, we show that even when controlling for endogeneity, not only is corporate value a determinant of managerial ownership but managerial ownership is also a determinant of corporate value. This finding is consistent with the classical work of Jensen and Meckling (1976), as well as the early empirical work of Morck et al. (1988) and McConnell and Servaes (1990) who do not control for endogeneity in their analysis of corporate value and managerial ownership. We believe our analysis to have several important contributions to the literature on the relationship between managerial ownership and corporate value. First, our quintic specification extends previous work in this area and successfully captures the complex nonlinear relationship between corporate value and managerial ownership. Second, by analysing a completely different market which is similar in structure to the United States, we strengthen the power and insights gained from earlier comparable US studies. Third, we provide evidence that corporate value, firm level investment and managerial holdings are interdependent with each other. This has implications for the debate on the effectiveness of compensation policies involving stock options for top managers. Moreover, our findings suggest that some levels of managerial ownership may not be beneficial to outside shareholders even when these levels are high. At the very least, this paper has served to add to the debate concerning the importance of managerial ownership on corporate value by providing evidence that even controlling for endogenous effects, managerial ownership and stock compensation schemes do have a significant influence on corporate value. Our research has provided an initial step towards a more accurate characterisation of the corporate value–managerial ownership relationship. While we do not posit that our specification can be applied to every given data set, we argue that previous research may be misspecified where it has failed to fully explore alternative specifications of the managerial ownership–corporate value relationship. Future work in this area may focus on other structural forms, which more effectively reflect the interdependence of managerial ownership and corporate prospects. The nonlinear endogenous impact of blockholders on corporate value and managerial ownership would also provide interesting insights on the external discipline that is faced by firm managers and the impact this has on corporate value. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 659 Acknowledgements The authors would like to thank John Capstaff, Scott Linn, Andrew Marshall, James Wansley and seminar participants at the Financial Management Association International (2001), European Financial Management Association (2002), Dublin Economics Workshop, the University of Strathclyde and an anonymous referee for their valuable comments on earlier versions of the paper. The normal caveat applies. References Burkart, M. , Gromb, D. , Panunzi, F. , 1997. Large shareholders, monitoring, and the value of the firm. Quarterly Journal of Economics 112, 693 – 728. Cho, M. H. , 1998. Ownership structure, investment, and the corporate value: an empirical analysis. Journal of Financial Economics 47, 103 – 121. Chung, K. H. , Pruitt, S. W. , 1994. A simple approximation of Tobin’s Q. Financial Management 23, 70 – 74. Dahya, J. , McConnell, J. J. , Travlos, N. G. , 2002. The Cadbury committee, corporate performance and top management turnover. Journal of Finance 57, 461 – 483. Demsetz, H. , Lehn, K. , 1985. The structure of corporate ownership: causes and consequences. Journal of Political Economy 93, 1155 – 1177. Demsetz, H. , Villalonga, B. , 2001. Ownership structure and corporate performance. Journal of Corporate Finance 7, 209 – 233. Denis, D. J. , Sarin, A. , 1999. Ownership and board structures in publicly traded corporations. Journal of Financial Economics 52, 187 – 223. Denis, D. J. , Denis, D. K. , Sarin, A. , 1997. Ownership structure and top executive turnover. Journal of Financial Economics 45, 193 – 221. Doukas, J. A. , McKnight, P. J. , Pantzalis, C. , 2002. Security analysis, agency costs and UK firm characteristics. Working Paper. Faccio, M. , Lasfer, M. A. , 1999. Managerial ownership, board structure and firm value: the UK evidence. Working Paper. Faccio, M. , Lasfer, M. A. , 2000. Do occupational pension funds monitor firms in which they hold large stakes? Journal of Corporate Finance 6, 71 – 110. Fama, E. F. , 1980. Agency problems and the theory of the firm. Journal of Political Economy 88, 288 – 307. Franks, J. , Mayer, C. , 1996. Hostile takeovers and the correction of management failure. Journal of Financial Economics 40, 163 – 181. Franks, J. , Mayer, C. , Renneboog, L. , 2001. Who disciplines management in poorly performing companies? Journal of Financial Intermediation 10, 209 – 248. Hart, O. D. , 1983. The market mechanism as an incentive scheme. Bell Journal of Economics 14, 366 – 382. Hermalin, B. Weisbach, M. , 1991. The effects of board composition and direct incentives on firm performance. Financial Management 20, 101 – 112. Himmelberg, C. P. , Hubbard, R. G. , Palia, D. , 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Econ omics 53, 353 – 384. Jensen, M. C. , 1986. Agency costs of free cashflow, corporate finance and takeovers. American Economic Review 76, 323 – 329. Jensen, M. C. , Meckling, W. H. , 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305 – 360. Jensen, M. C. , Ruback, R. S. , 1983. The market for corporate control: the scientific evidence. Journal of Financial Economics 11, 5 – 50. Kole, S. , 1995. Measuring managerial equity ownership: a comparison of sources of ownership data. Journal of Corporate Finance 1, 413 – 435. Lewellen, W. G. , Badrinath, S. G. , 1997. On the measurement of Tobin’s Q. Journal of Financial Economics 44, 77 – 122. 660 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Lindenberg, E. , Ross, S. , 1981. Tobin’s Q ratio and the industrial organization. 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5 Study Tips to Improve Your SAT Weaknesses

You’re a pro at one section of the SAT, but you just can’t seem to nudge your score up in the other.   How can you develop skills to master weak areas? Read on for five tips for improving your SAT weaknesses. You can’t measure improvement or hone weak areas if you don’t know where you’re starting. Take a diagnostic test to find out where you are. ’s diagnostic test identifies specific strengths and weaknesses within each skill set and area the test measures. The PSAT can also give you an early indication of where you should focus your efforts. When you receive your score report, you’ll not only be able to view your overall scores for each section, but you’ll also see sub-scores for individual skills: Command of Evidence, Words in Context, Expression of Ideas, Standard English Conventions, Heart of Algebra, Problem Solving and Data Analysis, and Passport to Advanced Math. That way, you’ll be able to know if, say, problem solving was the specific weakness that contributed to a lower score in the Math section, and recognize that that’s where you should focus your attention. To better understand your PSAT scores, read What Does My PSAT Score Mean? . Remember that the PSAT doesn’t necessarily correlate to your future performance on the SAT. You’ll take more classes and expand your breadth of knowledge before you take the SAT; the PSAT can serve as an indication of what you should aim to improve before the actual test. Taking a diagnostic test early gives you time to prepare and retake the test if you need to. As you take more practice tests, you’ll become more familiar with the layout of the test. If you start preparing later, some of the aspects and feature of the test might trip you up, since you won’t be as used to them. Starting early means you’ll gain the ability to work within time constraints, understand the structure, and become familiar with the skills you need to master to conquer individual sections. For instance, the Reading section requires strong critical thinking skills, vocabulary, and ability to use context clues to determine the meaning of a passage. As you read more passages on practice tests, you’ll become adept at knowing how to deconstruct the text and pulling out important information. You’ll also gain insight into your own habits and the mistakes you routinely make. When practicing and scoring, pay attention to the types of questions you routinely get wrong. For instance, perhaps you’re not reading word problems on the Math section carefully enough. Missing key words because you’re rushing can mean the difference between a correct and incorrect answer. After enough practice, you’ll know what mistakes to be on the lookout for as you check your work. Our students see an average increase of 250 points on their SAT scores. Once you know your weak areas, develop creative ways to hone your skills. For example, using apps are a great way to practice, and you can focus on specific types of questions. Khan Academy, Daily Practice from College Board, and The Official SAT Question of the Day are some great apps to use. Are you having trouble with particular math problems and wasting time flipping back and forth to the formulas page? Institute a â€Å"formula of the day† policy, focusing on a specific formula to memorize each day. Or, if vocabulary is an issue, have a â€Å"word of the day† to memorize. Study with friends—if you’re each stronger in different areas, you can share strategies to help each other master weaker areas. Time management is key to doing well on the SAT. Understanding the components of the test and how much time you’re allotted for each part will help you prepare. Components include: Reading: 52 multiple-choice questions, 65 minutes. Writing and Language: 44 multiple-choice questions, 25 minutes Math—No Calculator: 15 multiple-choice questions, 25 minutes Math—With Calculator section: 55 minutes, 30 multiple-choice questions and 8 grid-in questions Tip: Break down your time as follows For more tips on planning out how much time to spend on each section on the SAT, check out How to Pace Yourself on Every Section of the SAT. When studying, simulate this testing environment at least a few times so you can practice working within the time constraints. Tutors can help you develop competencies in weaker areas. Since they know the test, they know what it’s measuring—and what you need to do to improve. They can also provide resources and materials such as practice tests to help you study.

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TED talks - Essay Example As a means of understanding the speakers approach, this particular essay will focus upon a brief summary and analysis as well as discussion of the tactics employed by Charlie Todd and seeking to analyze whether the author agrees or disagrees with such tactics and based upon what grounds. It is the hope of this author that such a level of analysis will help the reader to integrate a more solid understanding and integration with the approach that Charlie Todd takes and whether or not such an approach is applicable within society and if so – to what degree. Furthermore, the analysis will seek to determine whether or not Todd’s approach is necessarily right or wrong. Ultimately, Charlie Todd moved to New York City as a means of kick starting an acting career. Seeing that entering the entertainment industry in New York City was much harder than he had anticipated, Todd sought to begin improv performances at various locations throughout New York as a means of integrating such a level of active acting participation directly with society; who he believed were ultimately the target market for any acting that takes place. In such a way, the â€Å"Improv Everywhere† group was born. ... Accordingly, the overall level of passion that Todd brings to the performances is ultimately infectious and helps to engage fellow shareholders within the participatory nature of his improv. A fact that strikes the viewer as odd in an ear that is so typically driven by greed and the level of money that any form of leisure or entertainment can ultimately be defined by. The joining activity which Todd relates to the viewer is ultimately the very crux of the point that he is trying to make. Rather than merely exhibiting a series of funny videos and situations to elicit a few laughs, the participatory nature of the entire experience is, according to Todd, what helps it to all make sense and be funny not only to the onlookers but also to the participants. This strikes at a central issue which helps to differentiate what Todd and his group do as compared to so many comedians within the current system. Whereas the comedian is interested in making people laugh by integrating them with jokes and/or funny situations, Todd’s improv allows both the participant and the recipient of the situation to realize and appreciate the funny and/or amusing aspects of what is taking place. Whereas Todd wanted to begin his career in New York City as an actor integrating with a traditional audience, he relates to the viewer the sudden and rather unexpected means by which this dream transformed in order to reveal his true talents and interest in the improve groups he was able to establish and direct. With regards to an analysis and statement of agreement with regards to the actions undertaken by Charlie Todd, it is the belief of this author that the improv group is ultimately a highly positive idea. Firstly, it allows individuals who would otherwise be hapless bystanders to take an active and

Climate Change Effects on Operations of Saint Lucie Reactor Case Study

Climate Change Effects on Operations of Saint Lucie Reactor - Case Study Example From this paper it is clear that the recent accidents at Chernobyl, Three mile islands and Japan have opened the eyes of the global public and currently many studies are going on to assess the climate change effects on operations of nuclear reactors. â€Å"The threat of global climate change has pushed governments around the world to consider alternative energy sources, including nuclear energy. As the interest in nuclear power increases, serious discussions on safety must resume before moving forward†. St. Lucie Nuclear Power Plant is a nuclear power station located on St. Lucie County in Florida. It is a twin unit commissioned in 1976 and operating with pressurized water reactors. This nuclear power plant is located near the ocean and has two nuclear reactors. The current nuclear reactor accidents caused in Japan due to tsunami attack have raised many concerns about the effects of climate changes on Nuclear power plants such as St. Lucie Nuclear Power Plant. This paper analy ses the possible climate change effects on St. Lucie Nuclear Power Plant. From the above statistics, it is evident that St. Lucie nuclear power station consists of two pressurized water reactors each having electrical output of 839MWe. Pressurized water reactors are normally comes under the light water reactor (LWR) category. In all forms of pressurized water reactors, water is used as coolant which is pumped at a high pressure to the reactor’s core in order to convert it into heated water using the heat energy liberated by the fission reaction or chain reaction. It should be noted that the high pressure helps water prevents the water from becoming steam at this juncture.  

Additional pages payment Essay Example | Topics and Well Written Essays - 500 words

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Nutrition in Home Care Essay Example | Topics and Well Written Essays - 1750 words

Nutrition in Home Care - Essay Example This essay will discuss principles of nutrition, give potential problems for lack of nutrition and talk about therapeutic diet. It will highlight safety in handling food, discuss fluid balance and talk about community resources on nutrition. 2. Key principle of nutrition. According to Gibson (2005, p. 25), adhering to principles of nutrition gives the client strength and helps to maintain body weight. It replaces lost minerals and vitamins, boosts the immune and enhances response after treatment. The client should eat a variety of foods from the following groups; carbohydrates, protein, minerals, fats, vitamins and sugars. The foods should be taken in correct amount to maintain weight and should avoid dehydration by drinking plenty of fluids. The client can have regular exercise. Three main meals in a day with plenty of snacks in between can be adopted. Ingram and Lavery (2009, p. 218) note that, the body is composed of water, minerals, protein, fats, carbohydrates and refuse. Food t hat is taken builds the body. Food is important in giving the body energy, warmth and retaining heat and energy. Implementing nutritional principles enable a person to have energy, good health, and reduce sickness. Eat plenty of fruits and vegetables for good health. Increase water intake. Take seasonal foods since they enhance nutrition. Take a wide variety of diverse foods and ensure food is taken in moderation. Whole food nutrition is better than separate nutrition element. Taking supplements is not an equivalent to replacing food. Take food that is good for eating and not poisonous or contaminated. It is important to discipline self to eat food in the right amount. Good nutrition can prevent and at times reverse illnesses. If nutritional principles are followed the cost of care is reduced since ailments subside. 3. Potential nutrition problems. Birchenall and Streight (2012, p. 19) mention that, home healthcare clients can experience nutritional problems despite paying attention to getting adequate food. One of the common problems is under nutrition which leads to weight loss. Weight loss can be easily identified and treated with balanced diet, correct food and beverage quantities. However, medication effects and depression that a client experience can lead to weight loss. The problem is solved by introducing feeding tubes to avoid under nutrition of protein energy. Another problem is deficiency of pyridoxine, folate, vitamin D and minerals like zinc. The deficiency of nutrients hinders healing of wounds and contributes to low immune. Additionally, failure to take adequate fluids causes dehydration. Furthermore, post prandial hypotension can occur and inevitably cause the home care client to have aspiration pneumonia. Aspiration pneumonia can cause a fall. 4. Therapeutic diets. Therapeutic diets refer to foods that are modified to meet the specific health and physical needs of a client. The modification is recommended by a nutritionist or a medical profess ional. The objective is to adjust the content of calories, texture or nutrients to the most appropriate depending on the client’s condition (William and Schlenker, 2003, p. 17). Therapeutic diets require patience and convincing to the client. This is because they may have body weakness, sickness, lack of appetite or self pity. It is easier to make them understand the use of diet by explanation. Therapeutic diet include food

Weighwood Case Essay Example for Free

Weighwood Case Essay When Wedgwood started his business, pottery industry is already established, comprises many small players around the country. He started with a small production facility, incorporated his experience from working in family business and many years in the industry. His passion and innovative ideas helped him expand his business and grew to become a big player in potter industry. Wedgwood was a differentiator company, specifically a late mover in the industry. Wedgwood gained competitive advantages through innovation, creativity, and strong marketing strategies. Innovation and creativity were the key to Wedgwood success, including the invention of creamware and white pottery. Josiah focused on bringing new ideas to the design of his products, finding new raw materials to help producing better products, and building/creating machines with latest technology to help with efficiency and uniformity. His wife specialized in pottery design and coloring which help their products differentiate from other plain pottery products in the market. Moreover, the sustained competitive advantage Wedgwood had, was the result of good marketing strategies with help from Josiahs partner, Bentley. Base on the reading, marketing strategies Wedgwood used were establishing showroom, inertia selling strategy, and promotion through high class people (Queen). Wedgwood was also the first one in the industry have brand name on every products. Wedgwood were so successful in England until its number of productions exceed the number of sale which cause the company to stock up a very high inventory. This opportunity caused Wedgwood to expand internationally to many countries in Europe and China. Wedgwood leverage its competitive advantage through demand side scope economy. Firstly, company needed new outlet for products that overproduced for local market. The example from class discussion would be Coke case. Coke and Pepsi competed with each other until the market were fully saturated, then Coke started to go global to exploit other markets in other countries. Wedgwood introduced its products to many countries in Europe and to China. Wedgwoods products were new to international market because of their design, coloring, uniformity. Wedgwood also used inertia selling strategies which company send products to consumer in a package with invoice and consumers can either buy or return the products at no cost to them. This strategy was to create demand for company products. Secondly, there were potential benefits to company to expand internationally because of the increasing spending on nonessential or luxury goods around European countries. Shipping methods also became more secured and convenience. As a result, Wedgwoods products were sold internationally to meet the demand in the form of luxury or nonessential goods. To better understand of how above strategies would work internationally and how Wedgwood sustained its competitive, the products were global products. All of the products were produced in home country, England, and then ship to other countries to retail store or direct sell to consumers. Wedgwood also established showroom in many countries to display its products, and make people wants its products. Wedgwood was not adapt to local market in different countries but to sell its home products and position their image just as intended. The example that relates to this idea was the discussion in class about the case which Apple open an Apple Store in Beijing. Apple products are also global products. Apples positioning strategy is uniform all around the world. Wedgwoods products were also uniform and mass produced in England and they do not need to be modified to fit to foreign market.

Service Recovery In The Hotel Industry

Service Recovery In The Hotel Industry Abstract Aiming at the actuality that the article about service recovery in the hotel industry. Handling complaints, resolving problems, retain the customers and to avoid undesirable outcomes such as negative thinks of the customers for the services. Fortunately significant progress has been made in the hotel industry to service recovery in the last few years. This article based on the literature view, environment and marketing mix strategies to identify what changes has been made in the recent year of hotel industry to achieved maximum customer satisfaction level. We adopt marketing mix 7Ps in the service recovery and analysis what changes has been made in to minimize the service failure in the hotel industry. The confirmatory result shows that the scale service processes to better reliability and validity level, and the basic need of the customer services recovery expectation includes recovery attributes, service failure attributes and empowering employees for problem solution in the hotel industry. Introduction Hotel industry one of the fastest growing industry in the current scenario .The demand of hotel industry has been increase in recent time and now days tourists want highly specialized as well as customized services from hotel industry. In addition, competition in the field of hotel industry and tourism has always been extremely on top and it is always difficult for newcomers to adopt the new trends and demand their own market share. Therefore, Hotel industry professionals need to focus on offering better quality services at affordable prices for the customers. The main goal of the industry is to obtain customer satisfaction in terms of services and money and maintain stable relationship with customers in long term basis. Services recovery is the action that the services provider should adopt for the services failure (Gronroos,1988,p.10-13) Researches indicated that the service recovery could enhance customers perceptive value, satisfactory feeling, loyalty and credit, and the satisfactory service recovery is propitious to reduce customers conversion intention and fluidity (Bitner, 1990, Lewis, 2004, Cong, 2007). McColloughs service recovery paradox even pointed out that customers satisfaction after service recovery would exceed customers satisfaction without service failure, which more showed the importance of service recovery (Boshoff, 1999, P.236-249) However, Satisfying a customers is a very difficult job for any industry especially when it comes to services industry. Earlier studies have shown that consumers level of satisfaction is generally lower for the services than product (Andreasen Best,1977). When it comes for hotel industry, where customer want high level of services and personal interaction with many departments and services failure is sometimes difficult to avoid by the industry. Services recovery is a important marketing tool which provide a another chance for the hotel industry to satisfy the consumers demands. The outcomes of services recovery will strongly influence the customers opinion of the hotel industry. This essay focuses to identify and evaluate previous services recovery process with the current process in the hotel industry. It is also show that services recovery in the hotel industry has influence on the tourism and the images of a location. Furthermore, essay will show how the services recovery experience affects consumers behavior for hotel industry. Literature Review Services recovery The necessity for the service recovery is brought about by services failure. Services failure is define as those situations when the services fails to live up to the customers expectations (Michel,2001) or according to Maxham (2001), any services-related mishaps or problems (real and/or perceived) that occur during a consumers experience of the firm. Services recovery has all those actions which is taken by the a services provider in order to resolve the all problem that caused the services failure in the industry( Gronroos,1990) Agenda is not only to resolve the problems but try to find out the source of the problem. A good recovery will reduce customers negative aspect for the industry and increase the services quality level to meet customers expectation. However as Smith et al. (1999) state, service recovery includes situations in which a service failure occurs but no complaint is lodged by the customers (p. 359), it means services recovery also includes that situations where some time customer not able to expressed a complaint or discomfort but the services provider has to indentify or recognized the failure in their services and take initiated a recovery procedure. In addition, studies show very few unhappy or dissatisfied customers actually complain about the services. So its very important for the services recovery system to indentify the fault with in the process and rectified on time to betterment for hotel industry. However service recoverys major importance is increase customer satisfactions and makes long term relation with the customers. Customers satisfaction with the service recovery will directly affect on the customer intentions toward the industry and they will might be think about to repurchase and recommend the service provider for other customers. This is very important for the service industry in term of increase own and industry marker share. Justice Theory in service recovery Justice theory is majorly used in services recovery studies to help analyze customers perceive the entire recovery process. With the help of it we can identified which elements affect the customers image of the locations. In the terms of services industry, inputs can be defined as the costs (economic, time energy cost etc.) that is service failure in the industry and outcomes after process will services recovery tactics (e.g. cash refunds ,apology, replacement etc.) In addition customer will determine whether a recovery attempts was fair or not in terms of services recovery or they will satisfied with the changes has been done by the recovery system. There are three dimensions are :- à ¢Ã¢â€š ¬Ã‚ ¢ Distributive justice (focusing on the outcome of the recovery process) à ¢Ã¢â€š ¬Ã‚ ¢ Procedural justice (examining the process undertaken in order to arrive at the final outcome) à ¢Ã¢â€š ¬Ã‚ ¢ Interactional justice (referring to the manner in which the process is implemented and the customer is treated) (Hoffman et al., 2000; Tax, Brown Chandrashekaran, 1998) Image of the destination Image of the destinations is very important aspect in hotel industry and here we have to linkup between customers satisfactions with the services recovery and the image of the destinations. It is very new aspect in the services recovery process. In the current scenario destinations image is very important to increase the profit margin of the industry. For example any destinations where consumers get satisfied with the hotel services and all then defiantly he will going to share his experience about particular destinations and talk about the hotel services . That will generate more demand and more people get attracted to visit those locations. Lots studies measures that there is difference between the pre- trip and post -trip image of the destination. Some time its positive and some time negative. Post trip behavior Post trip behavior is important component of service recovery process. Its very useful for continues improvement in the services. Most of the services and especially hotel industry use that tool very effetely for example customer feedback form after service offered ,and always ready to take customer suggestion and opinion about their services. Its also important to retain the customers for the next time because find a new customer is very difficult and crucial task in hotel industry rather than continue with the same customers .If customers will be satisfied with the services then it might be possible they can bring few more customer for them. That is mouth publicity which is very useful and effective in marketing without investing money. Macro Environment Macro environment include the following element are Technological, Political, Economical, Social-Culture. It is also called PEST. For more precision the term PESTET is also used. Find here the PEST framework for the environment auditing in terms of the service recovery. What influence it has on the service recovery in hotel industry to achieved customer satisfaction. Hotel industry has to be consider all the factor before going to make any service recovery process. POLITICAL/LEGAL FACTORS: Legislative Structure Government and political stability Taxation Policies Pressure groups Monopolistic restrictions Political orientations Trade Union Power Environmental protection legislation Foreign trade legislations Employment legislation ECONOMIC FACTORS: Business Cycles Money Supply Inflation Rates Investment levels Unemployment Energy Costs GNP trends Patterns of ownership SOCIO-CULTURAL FACTORS: Demographics Lifestyles Educational Levels Social Mobility Attitudes Consumerism TECHNOLOGICAL FACTORS: Levels and focuses of government and industrial RD expenditure Speed of technology transfer Product Life Cycle Joint Ventures Technological Shift The (change)costs of technology Table 1.1 PEST frameworks for the environment auditing (Source: Wilson, R. M. and Gilligan, C.2003) Environment:- Green environment is very important factor when it come services industry or hotel industry. There has been so many changes happened in the last few years. In the recent time service recovery highly depend on the environment policy to provide customer satisfactions. In addition, consumer looking for environment free service to protect the environment and services recovery also use it as a tool to reduce service failure and create brand value in the market. Concept of STP After focusing on the environmental analysis, now we will discuss market related segmentations, Targets and Position of the industry. These are very important tools of the services recovery process to identified best strategies to come up with the failure. The following figure shows the eight stages of STP process. 1. Identify the current position, capabilities, objectives and constraints.. Situation Analysis 2. Identify the segmentation of variables and segment of the markets for their services 3. Develop profiles of each segment according to requirement Market Segmentation 4. Evaluate the potential and attractiveness of each segment and try to minimize the services failure. 5. Select the target segment(s). Market Targeting 6. Identify the positioning concept within each target segment in terms of customer satisfaction. 7. Select and develop the appropriate positioning concepts to achieved 100% services level. Product Positioning 8. Develop the marketing mix strategy for service recovery in the industry. The Marketing Mix Table 1.2 The eight stages of the segmentation, targeting and positioning process (Source: Wilson, R. M. and Gilligan, C. 1998) Marketing Mix Strategies:- Marketing mix is a very important tool of marketing and it is very helpful in the decision making process. Once we evaluate the industry services level and market scenario e.g. internal and external issue and segment the target market for a particular product, industry will think about their strategies to achieve the target and for that management need to design strategic plan to get enter the into the market by using marketing mix tool e.g. price place product and promotion to recover from the failure in services. 2.1 Elements of marketing mix There is still a debate about the how many elements involve in marketing mix. Mainly management focuses on four elements price, product, place and promotion. Service industry is also considering people, process and physical evidence because it is very important for them. Generally people know the 4-Ps of marketing. Which are acts as a guideline for a management to implement their marketing strategies for the company or the industry. According to Kotler et al. (1999) the mix is a set of controllable tactical marketing tools that the firm blends to produce the response it wants in the target market. 2.1.1 The 4-Ps of marketing mix The traditionally marketing mix contain of 4 major elements. But we will discuss 7-Ps of marketing Product: Product has to be categorized one is physical food that means tangible and other is intangible for illustration Automobile industry has car as a physical product which they can sell in the market and Hotel industry like Lemiridien they have service as a product which is intangible. Price: -This is more critical and difficult element of marketing mix and management has to put lots of efforts to finalize the product price especially in services industry. For every industry it will vary time to time and circumstances. The price of the product is made on the basis of three factors as shown in the figure below: Figure 1 Factors influencing pricing decisions by the managers (Source: Liao, M. 2005) Promotion: In the current scenario promotional activity is very important to increase the market share and make awareness about changes in the services. It shows the visible face of the industry and its products in front of customer. It creates awareness about the product in the consumer mind. These are the ways which are used by the industry to communicate with the target customer in present time. Advertising (TV, News Paper, Radio, Internet) Personal Selling Sponsorship Publicity Exhibitions Sales Promotion Point of Sales Place: This element plays major role when we discuss about services recovery in hotel industry. How effective they are connected with consumer and offer them their best deal in the market. People: Employees are the key assets of the organization and all business depends on the people. How well they are playing their role in the organization. Especially when we will discuss about the services industry. Service industry always tries to take feedback from the consumer about their employees services and give them training and motivation to improve their interpersonal skill to minimize services failure in the industry. Process: Process means proper system to do the things in plan way. Follow the roles and instruction and procedure by which the service is acquired. For illustration computer function means for any operation which is perform by computer goes through pre-define process and then result will be displayed on the screen. Every process has some steps. Physical evidence: It is shown that the physical appearance of the industry is to deliver their services to the consumer like hotel building, public hospitals and school colleges. These all are contain similar types of logo or design to specified company existence. Its very important for the services industry. Evaluate the influence of 7Ps in context of service recovery in hotel industry. After having an overview of marketing mix including environment analysis, now we have to discuss all contents in terms of service industry market strategy for service recovery. Product: In the service industry product are intangible and industry had made too many changes to recover from the service failure. Now industry has different range of product in the market to offer best quality of service and minimize the service failure in the industry. Industry introduces different range of service in their product to satisfied customer demand. Now days hotel have some entertainment zone for the relaxation of the customer. Price: After service failure in the hotel industry .Pricing is very important factor in service recovery process. Customer satisfaction highly depends on the price of the services and facility. Hotel industry has different price range to cover all segments with different range in service quality. It has all basic prices and customer has paid more to get additional features in the current service level. Company has to meet the competitors price and also offer some extra benefit to satisfied consumer like free food and transports etc. price is mostly depend on the what service they are offering for the customers and now hotel have different pricing strategies to attract more customers. Place: Place is very important aspect in terms of the service recovery for hotel industry as we discussed earlier image of the destination. Where we are operating and what services we are offering for the client. Some time industry didnt understand what they have to offer for the customers for their satisfaction. Now industry analyses shows its very important for the service industry to identify the locations and its service requirement in that destinations. Promotion: Its most important factor for in services recovery of hotel industry. Promotions offer and schemes play wider role to recover from the service failure earlier consumer dont know about the services of the hotel where customer going to stay. In the recent time, consumer become more active and aware about the services just because of the promotional activates and they knows what service they will receive. Now days industry has very strong promotional system in the world. With the help of this system industry easily transfer all information about destinations and their services with the different range of price. Customer know about new event, campaigning and promotional schemes. All results have an integrated marketing approach so that every employee of the industry could deliver the same image and services of the industry to achieve customer satisfaction with the service. In addition, some company has its call centres and informational centres to guide the customer about pro duct and its proper use. Most of the promotional budgets are spend in communicating towards advertising the product through Television, radio, press and internet. Hotel industry uses E-marketing tools to promote their new and existing service product in the market and try to improve their position in front of consumer and also have e-store facility, by which the customers could book the rooms and other service. People: People are most important part of services industry. Services industry highly depends on the people. Because there is no physical product and what ever they are charging its totally based on what services level they are offering for their customer. Earlier most of the services failure comes from here and most of the dissatisfaction in the industry based on the people behaviour on job. Now industries have better option to hire highly skills employees. so they know how to satisfied customer and how to meet their requirement. Process:- Process of hotel industry has been totally changed in the recent years. Now industry become more professional and qualifies. They know what customer wants and how to deliver it to achieved 100% customer satisfaction. Industry has standard process to fulfil the customer demand and minimize services failure with in the industry. Physical Evidence: Physical evidence is very important for any industry but its quite difficult to understand in the hotel industry. Because of there is no tangible product so industry not able to show what will the offer for the customer .But in the recent time hotel can show their services for the customers what they will offer and what facility they have for the customers . Evaluate effective marketing strategies for services recovery in hotel industry. Product Strategies:-The hotel industry has variety of right mix product for every market segment with best feature and services. Now days hotel industry has very focused segmentation e.g. lower to upper range product and services according to that. They have target audience and positioning strategies. Industry has flexible product so if a customer wants to add some services in existing facility then they can add on few package in that. Such kind of strategies easily satisfied the customer requirement. Promotional strategies:- Hotel industry profit more depend on the promotions strategies as compare to earlier time and its very important tool of recovery and generate maximum profit from the market. Internet play wider role in to promote hotel industry through out the world customer can book the room in advance and they have all information about the locations and services which will they get in the hotel .Internet easily transform information to customers. Hotel industry is spending million of dollars to increase the market value with the help of promotional scheme. All hotels provide all the details about their product and services on their company official website and also highlights the best feature about the product. Process: Hotel industry is one of the best industries in the world. Service recovery in the process also has been changed a lot. In the recent years industry become more professional and structured. They follow its own process to meet customer demand and satisfied them with services. Conclusion: In this article, we are tried to find service recovery in hotel industry on the basis of marketing mix. Where they are change their strategies to achieve customer satisfaction and come up with the failure which happened earlier in the market. The article use marketing mix approach to identify the market scenario and fault in the market in terms of services and where they made changes to recover from the failure. This model intended to expand the impact of 7Ps on the services recovery from the service provider. Putting the article into the practice its shows service provider made so many changes to recover from loses in the industry in terms of marketing afford and strategies. After analysis of marketing mix model in hotel industry its clearly show that industry had too many changes to become more profitable industry. Now it has more flexible service product in the market and trying to become more flexible as per the customer demand. Industry also effectively using technology to achie ved their target and objective. However service industry dont have physical product which they can show to the customer so they have to more effective and fast service offer for the customer to take positive feedback from the customers. In addition, industry also takes responsibility to build a strong image of the destination so that it attracts other customer to visit there. Hotel services in very important to maintain the positive image of the destination. 7 Ps of marketing is very effective to evaluate the service of the hotel industry. Where promotions activities is more important factor to improve the service level and differentiate between earlier and existing service in the industry. Hotel industry introduces some other new service to improve customer satisfaction. Therefore, in this article we discuss about the changes in service level people role in the system and how well they are involve to improve the service of the hotel industry in order to customer satisfaction and increase the profit margin. .