Impact of the Internet on a Small Business Research Paper

Impact of the Internet on a Small Business - Research Paper Example Today a business without the use of the computing power of a computer, or the use of the internet, is sure to be left behind and age very quickly. Competition in the business world is fierce and business is all about marketing and who can reach the consumer first. Today’s computers and internet play a vital role in accomplishing this task. It is impossible for modern business groups to think about a world without internet at present. This was not the case a mere twenty years ago when the internet was in its infancy. Irrespective of large scale, medium scale or small scale, all types of businesses are highly dependent on internet related technologies in today’s perspectives. Through the internet, a business of any size can compete in the global marketplace. In fact, on the internet, the size of an organization's operation makes little difference because the internet is an open environment. Similar companies compete against one another while being only a click of the mous e away. In other words, a buyer can locate numerous sellers offering similar merchandise, similar prices and similar offers in a very short time period. As more people and businesses become comfortable with the internet, the marketing landscape will continue to evolve quickly in the coming years (The Influence of Internet on Modern Business, 2009). The arrival of internet related technologies helped small scale industries immensely. The internet lent a hand in small companies competing on a global level. This also factored in a small business growing into great proportions at incredible speeds never experienced in history ever before. Many of the traditional business concepts were given way for internet related business strategies because of the arrival of computers and internet. For example, internet helped the business world to convert many of the offline market spaces into online market spaces. Moreover, outsourcing, off shoring like modern business principles were evolved out be cause of the developments in internet related technologies. Since a company could outsource, so easy is it to have its down fall, on many Americans who loose there job to overseas areas that had cheaper labour and less taxes. We can see this with a majority of companies at a minimum outsourcing their phone tech support. Many of these companies have tech support online twenty four hours a day and three hundred sixty five days a year. Advertising is another in which internet helps small scale industries immensely. Social networks are used extensively by the businesses for marketing and advertising purposes. This can be seen by looking at any internet search engine today from Google, Yahoo, or any other of the one hundred and seventy search engines available. If you go to any search engine like Google or MSN you will see advertisements on the right hand side, or on top of the page. These are seen by millions of people today. These ads are cheap and easy to acquire to the point where an y person or business can advertise for pennies on the click. At the same time, internet has the potential to affect small businesses in a negative way too. For example, internet helped globalization in many ways, but it also lent way to sites like Angie’s list to see if the business is reputable or garbage. It should be noted that globalization helped corporate companies to expand their business all over the world. The intrusion of corporate compani

Use of the path-goal theory

Use of the path-goal theory Use of the path-goal theory The Reasoning for the Use of the Path-Goal Theory in the Jeanne Lewis Case Jeanne Lewis, by any measure of the imagination is any prospective employers dream team member. She was committed, articulate, productive, smart, sensitive, motivated, and responsive to challenges. According to Peter Drucker (1998), â€Å"Effective leadership is not about making speeches or being liked; leadership is defined by results, not attributes† (Hersey, Blanchard Johnson, 2008, p. 109). Lewiss team tripled direct product profitability (DPP) and invigorated sales of under-performing stores. All these and much more were demonstrated time and time again throughout Lewiss career at Staples. The Leadership Behaviors that Lewis Used with Her Employees Lewis engaged in different types of leadership behaviors depending on the situation at hand. Her approach to situations and the type of behavior she used further supports Marian Andersons statement that â€Å"Leadership should be born out of the understanding of the needs of those who would be affected by it† (Hersey, Blanchard Johnson, 2008, p. 108). Shortly after Lewis assumed the position of the marketing manager at Staples, she assessed the situation regarding low performance of the stores, and she quickly came to the conclusion that strong leadership was lacking. As a result, she substituted 25 store associates over a 12-month period, which turned around the stores performance for better. Achievement-oriented leadership behavior was what Lewis utilized to achieve this result. Secondly, the tripling of the direct product profitability (DPP) by Lewiss team was another area where Lewis demonstrated a different type of leadership behavior-participative. Lewiss direct report s and peers appreciated her thoroughness when it came to getting her to support their position. The fact that her team members understood this much about her indicated she carried her team along while making decisions. Another way Lewis demonstrated a different type of leadership behavior was duringthe time she tried to foster relationships between the marketing organization and the in-house advertising agency. Her bimonthly meeting was met with stiff resistance. Realizing this was not a good strategy, Lewis changed the meeting to a one-on-one type that yielded results. Here, Lewis demonstrated a supportive type of leadership behavior, since this is what appeared to be desirable to the team members at this point. Also, Lewis used a directive leadership style when she warned her staff she would want to â€Å"ride shotgun† with them. She made it clear to the team what her expectations were. This leadership behavior typically results in improved satisfaction and performance. The director of marketing administration was satisfied with Lewiss strategy to such an extent that she set up one-on-one meetings between her team members and Lewis. Lewiss Leadership Behavior as it Relates to the Characteristics of Path-Goal Theory Path-Goal theory was premised not only on explaining which leadership style was effective, but why the leadership style was effective. House and Mitchell (2008) described path-goal theory as how a leader influences a followers perceived work goals, personal goals, and path to goal achievement. House and Dessler (1974), described path-goal theory as the effective leadership behavior needed in any instance which depends on the characteristics of the situation and the followers characteristics. Theresult Lewiss team was able to achieve as a result of her strategy change could have influenced her team members work goal, thus prompting them to perform well. Secondly, the tripling of the direct product profitability (DPP) by Lewiss team was another area that showcased path-goal theory. Lewiss team members and peers appreciated her thoroughness when it came to getting her to support their position. The fact that her team members had this level of understanding about her clarified the path to their goal, which then showed on the DPP result. Another way Lewis demonstrated characteristics of the pat-goal theory occurred duringher initial days as the vice president of retail marketing, where she set up several one-on-one meetings with her direct reports so that she could understand what part of the marketing puzzle each of them constituted. The marketing administration director saw something in this strategy, which led her to make a move to setup one-on-one meeting between Lewis and each of her own team members. This could have been as a result of the fact that Lewiss behavior was motivating to the extent that this director saw it could influence the attainment of her goal. Furthermore, the productivity that ensued after Lewis changed her strategy to be having a one-on-one status meeting with her team members after her initial bimonthly meeting approach flopped exemplified path-goal theory in that her team members could have gotten their work done due to the fact that th ey saw a clear path to them achieving their goal. The Behavior of Employees in Relation to Lewiss Leadership Style Several of Lewiss direct reports commented on her behaviors. One of them said: â€Å"Jeannes charm could be disarming. She worked really hard, and her personality motivated you. She tended to manage tightly at first, then loosened the reins. She challenged us a lot, and invited us to challenge each other†(Suesse Hill, 2005, p. 86). The directive leadership behavior Lewis used when she warned her staff she would want to â€Å"ride shotgun† with them was well accepted-as shown by the reaction of the marketing administration director. She was so satisfied with Lewiss strategy that she setup one-on-one meeting between her team members and Lewis. Employeeswarmlywelcomed Lewiss supportive leadership style as depicted with her change in strategy after the time she tried to foster a relationship between the marketing organization and the in-house advertising agency. Even though her bimonthly meeting was met with stiff resistance, her one-on-one meetings yielded good results. Thirdly, the participative leadership style used by Lewis during the tripling of the direct product profitability (DPP) was received well by employees. Initially they had mixed feelings about Lewiss leadership behavior, which one of them first felt was micro-managing before realizing that Lewis was just someone who liked to promote dialogue and debate to ensure that the best decision was arrived at. The fact that Lewis and her team in marketing while she was a manager there were able to invigorate sales performance within a 12-month period was an indication that she carried them along well and they were pleased with the things that they were able to archive together. This is consistent with achievement-oriented leadership behavior. Aspects of the Relationship of Employee Behavior as it Relates to the Characteristics of the Path-Goal Theory Path-Goal theory explains leaders effectiveness and the impact that leaders have on the followers motivation. The framework of instrumentality theory and path-goal theory suggest that the effectiveness of any leader at any given point depends on the characteristics of the situation and the characteristics of the follower. Several instances of this were observed throughout Lewiss carrier at Staples. It was repeated time and time again that Lewis had a personality that many may have misconstrued because of its confrontational nature. During her early days at Staples, Lewis herself acknowledged that she might not be able to work across the organization. At this point, she had barely been appointed a leader. One could then infer that all the zeal and the willingness to get things done was as a result of the belief that her hard work would someday get her into a management position, which she highly valued. The rejection that Lewis received when she started a bimonthly meeting was not a result of the ineffectiveness of the new structure she was trying to put in place; it was due to the fact that this did not influence her team members expectations, and their work and personal goal perhaps did not hinge on this. The same structure when changed to a one-on-one status meeting yielded the desired results. According to the observation made by one of the managers about the one-on-one status meetings, â€Å"She asks the kind of questions that provoked real interaction, so it really is a joint discussion† (Suesse Hill, 2005, p. 86). The South Africa studies around participation, individual differences, and job satisfaction among black and white employees results are better explained by the path-goal theory. Contrary to the expected conclusion that participative leadership is positively related to the individual differences, the theory concluded that participative leadership actually depends on the attributes of the task regardless of the predispositions of the subordinates. In the same vein, a study of the subordinates achievement (NACH) and affiliation (NAFF) needs as moderators of leader path-goal relationship conducted in Pennsylvania State University, drawn several interesting conclusions. One of the findings is that high NACH individuals prefer leaders with good strategies, policies, and rules who clarify paths to achievement (Orpen Ndlovu, 1977).

Safe Learning Environment :: Education, Preventing Bullying

In this reflective account I will discuss and explain the key policies and legislations which are put together to promote a quality provision for young children. I will also examine the different strategies and practices used to promote young children’s learning. Policies I have collected three different policies from my setting, behaviour, safeguarding and equal opportunities. The main aim of this behaviour policy is: teachers and children respecting each others, preventing bullying, children learning discipline, taking action on bad behaviour, teachers creating a safe and learning environment for children. Children who have done well during the week will have their names announced at a special assembly. â€Å"emotional and social competence and well-being has a wide range of educational and work success, improved behaviour, increased inclusion, improved learning , greater social cohesion, increased social capital and improvements to mental health† (SEAL Weare and GRAY 2003), no page number). There are no legislations used in this policy but when this policy will be updated, the setting can look at other national policies and pedagogies to help them provide quality provision. Such as Every Child Matters agenda, SEAL, EPPE, As change for children paper (2003) has implemented five outcomes for children to achieve, these are â€Å"be healthy, sta y safe, enjoy and achieve, make positive contribution, and achieve economic well being†(ECM: CC, pg 9). This policy is promoting good 'quality' in giving children opportunities in making relationships, good level of achievements, good learning environment and learning boundaries. EPPE (2003) has defined quality as having good qualified staff, giving equal opportunities, partnership with parents. Safeguarding policy uses different guidance (see appendix). There are no legislations used in this policy, but by reading this policy it links within ECM agenda. ECM has designed â€Å"five key themes†, providing services to parents and children, early intervention, affordable services, quality provision and â€Å"strong foundations in the early years†( Pugh 2010, pg9). This policy can be referred to children act 2004. the main aim of this Act is To develop all the services for children, support â€Å"early intervention†, have good level of leadership in every services and multi – agency work. (CYPP, no year, page 1). Section 13 – 16 of children act 2004 outlines the importance of having local safeguarding child board for every setting, LSCB 's role is to promote every child's well being, and to protect children from harm and abuse.

Analysis of an Ethical Dilemma Essay

One very debatable ethical dilemma in today’s society is euthanasia. Euthanasia, like any other medical treatment should be seen as a choice. As a society, there are obligations to the sick that should be up held, but morally and legally may not be supportable. There are many aspects that go with this choice besides the obligation. There are also stakeholders to consider as well as social values, morals and religious implications. Euthanasia is Greek for good death which translates into English as easy death or mercy killing. It was accepted by the ancient Greeks and Romans. Three Asian religious traditions accept euthanasia: Buddhism, Shintoism, and Confucianism. It was rejected by the 3 main monotheistic religions: Christianity, Judaism and Islam. It has its supporters and opponents in all countries. Two types of patients are involved in euthanasia: (a) a patient in a persistent vegetative state who is awake but is not aware of self or the environment. Such a patient has no higher brain functions and is kept alive on artificial life support (b) patient in terminal illness with a lot of pain, psychological suffering and loss of dignity. The patient may or may not be on life support. There are different types of euthanasia. Active euthanasia, an act of commission, is taking some action that leads to death like a fatal injection. Passive euthanasia, an act of omission, is letting a person die by taking no action to maintain life. Passive euthanasia can be withholding or withdrawing water, food, drugs, medical or surgical procedures, resuscitation like CPR, and life support such as the respirator. The patient is then left to die from the underlying disease. Sometimes a distinction is made between normal nutrition and hydration on one hand and medical nutritional support involving intravenous and naso-gastric feeding on the other hand. Euthanasia can be by the patient or by the health care giver. Euthanasia can be voluntary when the pat ient takes the decision, non-voluntary when the decision is made by another person for an unconscious patient and involuntary when the decision is made contrary to the patient’s wish. There are ethical implications of European and American arguments for and against euthanasia. Two arguments are made for active euthanasia: (a) mercy killing because of pain, psychological and physical suffering (b) the utilitarian argument is that euthanasia is desirable because it relieves the misery of the terminally ill. Two arguments are made against active  euthanasia: (a) killing is morally wrong and is forbidden by religion (b) unexpected cures or procedures may be discovered to reverse the terminal condition. Nurses are the gatekeepers of the healing facility, although they may have their own outlooks based on their own ethical, cultural, and religious views (LeBaron, 2010). There are always value conflicts when it comes to euthanasia, which can be demonstrated by examining utilitarianism and rights. The nursing practice should be to keep patients alive, do no harm, do everything possible to save the life, and do good to everyone by respecting the right or autonomy of the individual patient. Although most of Americans presently think that physician-assisted suicide should be legal and no existing federal laws prohibiting the practice of euthanasia in United States, voluntary/assisted euthanasia is yet considered illegal and killing in all of the States but in Oregon, Washington, and soon Montana (Webster, 2009). First, Oregon and recently Washington passed a Death with Dignity Act and are actually the only places where euthanasia in terminally ill patients is legally and openly authorized (Blizzard, 2012). In 2009’s Baxter v. Montana case, the Montana Supreme Court declared that no law in state constitution stops patients from practicing voluntary/assisted euthanasia (O’Reilley, 2010). Any time the legislature can act to join Oregon and Washington in the public arena. According to both States’ laws, an adult competent patient must address three witnessed solicitations, two verbally and one in writing, to his/her attending physician for a fatal medica tion. Then the patient administers the dose on her/ his own. Obviously, the Death with Dignity Act unambiguously bans assisted euthanasia that obliges another person than the patient to take part in administering the medication (Exit International Australia, 2012). As euthanasia is observed from a diversity of different perspective, the stake holders’ opinions are considered. In front comes the patient who wishes and requests to discontinue her/his life in respect to human right to select the time and manner of death when she/ he is terminal ill by stopping unwanted, burdensome and/or futile medical treatment. Other people entrusted with the euthanasia dilemma include physicians/healthcare professionals, the family, insurance companies, religious groups, and the government. The second stakeholder is families that have to admit and follow the desires of their loved one to die in nobility. The involvement in this kind of decision  may be an unbearable load for some families who would be would be either not ready to let their darling one go, which could generate a catch-22 mainly if they are bending patient’s wishes, or emotionally scarred by the death. Other stakeholders in this situation are physicians and other practitioners who might come across a real impasse because the euthanasia breaches the â€Å"do no harm† Hippocratic Oath. The insurance companies may drive the patient in opting for death to conserve the money on an individual who does not hope of staying alive. Some religious groups are against euthanasia and consider it a suicide. Lastly the government intervenes in the stake holder in this state of affairs in defensive position for citizen from illegal measures. Voluntary/assisted euthanasia is an ethical dilemma, and creates issues and disagreements amongst those involved (Gore, 2012). Netherland and Belgium are the two countries in the world to legalize euthanasia. In the US, Oregon and Washington also legalized euthanasia. The main barriers to legalize euthanasia are the government, religion, fear, education and the media. More religious people are against euthanasia. Education also plays a major role in euthanasia. The more education a person has he/she believes all individuals have the right to autonomy and therefore the person has the right to decide to end their life. Euthanasia has pros and cons. Pros include relief from pain, relief from low quality or vegetative state of life, relief from financial strain on health care system and the resources can be used for other people. The cons include family members can kill another family member if they don’t like them or reduce financial burden, loss of respect of human life and according to religious view God can only choose when to end life. In Euthanasia legalized countries, such as palliative care nurses in Belgium have important roles and responsibilities in working with euthanasia requested by patients and their families. The nurse involvement starts when the patient requests to euthanasia and ends by supporting family and loved ones. They are in key positions to provide valuable care to the patient and family. Nurses assist the health care team after the life threatening procedure. Pain management and comfort care are their main goals at that time. Nurses are open-minded and have unique relationships with the patient and family. â€Å"In the twentieth century, a number of social and technological changes made euthanasia a morally acceptable choice to growing numbers of people† (Wells, 2006). There are two  types of ethical theories that are going to be focused on. The first is utilitarianism, which is an action that is morally correct if its consequence is good for the greatest numbers. It generally focuses on the greatest good for the greatest number, and neglects the individual rights. The other theory is called deontology, which takes into consideration the way something is to be done and not just on the consequences of that action. One may tell a lie to the doctor, just to save a friend but doesnâ₠¬â„¢t think of the grave consequences they have to suffer later on. A person making a voluntary euthanasia uses the utilitarianism theory when making such a judgment. One might choose to voluntarily do euthanasia if the person has reached an all-time low and the only other option is to the act. The person has to have thoroughly thought about the consequences and make sure his or her judgment is not biased or is not taken personal. There are certain conditions that apply for one to request voluntary euthanasia. Conditions are an unlikelihood of recovering from a cure, suffering from a terminal illness, and most importantly, they must have a voluntary wish to die. As can be seen by the multiple views of the authors, euthanasia is not an easy topic to side on. Due to many religious beliefs, one may feel euthanasia is wrong. But as a nurse that sees suffering every day, this same person would support euthanasia if not condemned by his/her religion. With the support of the ‘do no harm’ belief, it can also be construed that assisting in euthan asia is not doing harm, but preventing harm for those with chronic severe pain. There is no nationwide movement for the majority of the states to legislate for euthanasia, but thankfully there are two, soon to be three compassionate states that have in-acted this law. References Blizzard, R. (2002). Right to die or dead to rights? Retrieved from http://www.gallup.com/poll/6265/Right-Die-Dead-Rights.aspx?version=print Euthanasia: The nurses role (2011). Issues in nursing. Retrieved on 10/3/12 from Nursing students 417.wordpress.com Exit International Australia (2012). Death with Dignity in Oregon (soon to be Montana. Retrieved from http://www.exitinternational.net/page/USA Gore, J. (2011) Stakeholders in Euthanasia. Retrieved from http://jacktgore.edublogs.org/2011/08/03/stakeholders-in-euthanasia/ LeBaron Jr, G. (2010). The ethics of euthanasia. Retrieved October 3, 2012, from http://www.quantonics.com/The_Ethics_of_Euthanasia_By_Garn_LeBaron.html Purtilo, R., & Doherty, R. (2011). Ethical dimensions in the health professions (5th ed.). St. Louis, MO: Elsevier. Task Force on the Nurse’s Role in End-of-Life Decisions, 2011. (2011). Journal of Social Work Values and Ethics, 8(1). Webster, B. (2009). Assisted Suicide/Voluntary Euthanasia. International debate education association. UK. Retrieved from http://www.idebate.org/debatabase/topic_print.php?topicID=55 Wells, K. R., Frey, R. (2006). The gale encyclopedia of nursing and allied health ed. In J. L. LONGE (Ed.), (2 ed., Vol. 2, pp. 993-996). DETROIT, GALE

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. 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Crime Scene Television-Portrayal of Women essays

Crime Scene Television-Portrayal of Women essays Throughout motion picture history, women have experienced more transition in their roles, as a result of changing societal norms, than any other class. At first, both society and the movie industry preached that women should be dependent on men and remain in the home, in order to guarantee stability in the community and the family. As time passed and attitudes changed, women were beginning to be depicted as strong willed, independent minded characters, who were eager to break away from convention. The genre of the crime film represents such a change in the roles handed to women. Two films that can be contrasted, in order to support this view, are: The Public Enemy by William Wellman (1931) and Bonnie In The Public Enemy, women are portrayed as naive and/or objects of carnal pleasure by men. In this period, women were often categorized as mothers, mistresses, sisters, or ladies. Ma Powers (played by Beryl Mercer), the lead character Tom Powers(played by James Cagney) mother, is easily fooled by Toms fake stories about where he get his money and doesnt believe that her "baby boy" could be a vile gangster. At one point during prohibition, when Tom brings home a barrel of beer, she doesnt even question where he obtained it, but rather takes a drink for herself. Ma Powers is the prototypical mother of the 1930s. She is blind to the ways of the world and doesnt see the danger of things, even in regard to her own children. She is a widow who does not work, but is supported by her sons. She is even blind to the fact that her sons hate one another. Even though, her Tom was sadistic killer and gangster, she always welcomes him back lovingly with open arms. At the end of the movie, she get s a phone call saying that Tom will be coming home from the hospital, where he had been treated for a gunshot. She rushes upstairs to make his bed and get his room ready, when the doorbell ring...

Book review on The things they carried

Book review on The things they carried The Things They Carried- Book ReviewIn The Things They Carried, author Tim O'Brien conveys his experience and feelings about the Vietnam War through a collection of stories. Each narrative is comprised with vivid description telling us about one of the soldiers of the Alpha Company in Vietnam. One of the significant concepts in this novel is the importance of certain objects or feelings carried and used by the soldiers to survive the war. Several of these things are intangible, including guilt and fear, while others are specific physical objects, including matches, morphine, M-16 rifles, and MM's candy. Tim O'Brian releases his fear, sadness, and anger felt due to the war, and illustrates to us the power ordinary objects may have on one, solely through sentimental valueTim O'Brien was born on October 1, 1946 in Worthington, Minnesota. After graduating in 1968 from McAlester College in St. Paul with a degree in Political Science, O'Brien was drafted into the army.If I Die in a Combat Zone, Box Me Up and Ship Me H...His college years, however, were spent trying to ignore the Vietnam War or railing against it he attended peace vigils and war protests, and aspired to join the State Department. This was a horrid, confused, and traumatic period for Tim O'Brian. While serving at the South Vietnamese village of My Lai, he was wounded and returned home with Purple Heart, a Bronze Star for Valor, and a Combat Infantry Badge. After his return, O'Brien entered a Ph. D. program in Government at Harvard University. During the time he spent at Harvard, O' Brien spent two summers working as a reporter for the Washington Post. In 1975, O'Brien published his first novel, Northern Lights. Since then, he has published quite a few fictional novels based on the Vietnam war including, If I Die in a Combat Zone, Box Me Up and...

Make Singing Cake (Cooking Science Project)

Make Singing Cake (Cooking Science Project) This is the recipe for a singing cake. The cake sings while baking and then it is ready to eat! Difficulty: Average Time Required: 1 hour Heres How: Preheat oven to 350F.Grease and flour an angel food cake pan.Melt the 2 squares of chocolate, set aside.In a clean bowl, beat the egg whites until stiff and set aside.Cream butter and sugar.Stir in the egg yolks.Stir in the melted chocolate.Add 1 cup raisins.Stir 2 tsp. cinnamon, 1 tsp. cloves, and 4 cups sifted flour into the mixture.Stir in 1 cup chopped nuts and 1 cup jam.Now add the baking powder to the buttermilk and quickly stir into the cake mixture.Fold in the stiffly beaten egg whites.Bake at 350 degrees until cake stops singing, about 45 minutes.Mmmm... tasty warm cake! Singing Cake Ingredients 1 cup butter2 cups brown sugar3 eggs, separated2 square bitter chocolate1 cup raisins1 cup nuts2 teaspoons  cinnamon1 teaspoon cloves1 cup strawberry jam4 cups sifted flour2 tsp baking powder1 cup buttermilk

Genetics Essay Example | Topics and Well Written Essays - 750 words - 1

Genetics - Essay Example This was done to obtain the RAD51+/- cells (EMBO, 1998). Then, the RAD51+/- cells have been transpected with conditional human Rad51 expression constructs to obtain RAD51+/- cells carrying the constructs at random sites on the chromosome (RAD51+/-/HsRAD51)." (, 1998) Finally, the RAD51 construct that contained the blasticidin was then transpected into "several RAD51+/-/HsRAD51 clones to isolate RAD51-/-/HsRAD51 clones." (EMBO, 1998) The targeting process is shown in figures one and two. In order to target the necessary genes, a probe and southern blot analysis were used to indicate the knockout constructs. Samples of the cells and genetic material were loaded onto five different lanes and were combined with SDS-polyacrylamide gel. The three samples were the wild-type DT40, which was loaded onto lane 1, the RAD51+/-, which was loaded onto the second lane, a RAD51+/- clone that contained the human Rad51 transgene, which was loaded onto the third lane, #110 RAD51-/- clone was placed onto the fourth lane, and a human B lymphocyte line Ramos was loaded onto the fifth lane (EMBO, 1998). The targeting probe was constructed of A chicken RAD51 (GdRAD51) cDNA, and this probe was used to isolate the genomic clones that were of the RAD51 locus. These clones were, in part, sequenced to determine the position of the exons. Approximately "5.5 kb of the GdRAD51 locus was then amplified by long-range PCR using genomic DNA from DT40 as a template." (EMBO, 1998) Targeting events were determined by using southern blot analysis. From the targeting process, we also have found out that when RAD51 is deleted, a buildup of cells occurs in the g2/m phase, and the cells then die (EMBO, 1998). - Propose an alternative conditional targeting strategy for the Same paper (250 words 20%) Another tactic could have been used to target the RAD51 gene and could possibly achieve the same results in the experiment. This is known to researchers as siRNA. Though this technology is fairly new, it is effective at targeting certain genes, nonetheless. According to a particular FAQ concerning siRNA, it is stated that siRNA is an effective technology in knocking out genes, as well as testing resistance or sensitivities to certain drugs. Just like the method of gene targeting, certain gene sequences can be achieved in humans or in mice, so long as these genes are correctly aligned ( While a bit less labor intensive, the same results can possibly be achieved in the experiment using siRNA. After all, the technology has been designed to reach a common goal. This goal is to experiment and further the research in genetics. - Discuss advantages and disadvantages of siRNA versus Gene Targeting as tools for Reverse Genetics (500 words 30%) When working with reverse genetics, there are two tools that are known for their effectiveness. These tools are siRNA and gene targeting. Both of these tools use in depth technologies to aid in

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Marketing Environment of the Financial Services Industry - Essay Example Modification of this law recognizes the comparative development of the DIFC and strengthens its autonomy from onshore legislators. These legislative alterations with regard to DIFC examine what can be anticipated in terms of future regulations inside UAE financial services segment. This will significantly aid in encouraging business in the area. The significant bodies of the DFIC are maintained which have distinct pecuniary units with independent budget lines. The new amendment also clarifies the governance and executive structures of the three significant bodies. The new duties are to instigate, standardize and develop an independent payment structure in connection with the UAE fundamental Bank to advance massive wholesale disbursement, including multi-nation, and currency clearance deals. It clears the capability to clear and mend payments and to implement a structure accordingly (Campbell, p. 1). Current havoc in financial markets with regard to the sub-prime financial catastrophe calls for the integration of chattel liquidity into contemporary risk management components. The definitive target is to execute advanced financial modelling elements and sound regulations for the monetary, service industry in the UAE. The Amended Law indicates further advancement of the DIFC and Dubai as a retreat of tranquillity, order and superb governance. The DIFC society and stakeholders promote this amendment since it aims at enhancing the legislative obligation to subsidize DIFC’s contribution to global financial services sector as might be necessary to sustain effectiveness, transparency and veracity. 2 Global Financial Services Industry Leverages on enhanced De-risking Strategies The comprehensive international outlook aims at changing the financial services sector. Rapid recovery has been recorded in varied sections such as banking and coverage from the present economic meltdown. This is expected to guide the international monetary services in the short or medium terms. Transaction safety, operational effectiveness, regulatory conformity, business stability planning, re-engineering, client service and business peril management will probably advance market development in the approaching years. The financial services segment is significant consumer of varied business services and items. It is an economic authority that drives other enterprises undertakings, setting principles as it provides the monies required to advance these enterprises. It is the spotlight of other sections of the market. It is a sector significantly susceptible to market alterations. The initiation of niche players enhances the sector, although, there have been declines in the number of financial affiliations. The emergence of non-financial institutions into this sector is significantly altering the sector. Escalating competition and flooded markets has forced massive actors in the global banking sector to explore upcoming markets. These changes in the financial segment wi ll significantly increase profits, improve clients’ confidence and advance the entire business progress (GIA, p.1). Consolidation has been extremely significant in the financial services segment in present years. These structural alterations in the sector have produced the liberal strategic turbulence that has challenged senior administration

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Discuss Why Risk Management is not a Good Objective for the Criminal Justice Process - Essay Example Risk in the criminal justice system is widely associated with young offenders. There are those who have a lot of risk factors such as truancy, the low achievers and those from a single-parent family. The children who have less parental supervision are also vulnerable to anti-social behavior that may lead to criminal activities. In fact, crime statistics chow that the youth are more susceptible to involvement in criminal activities than adults. This correlation between crime rate and age does not only apply to the offenders, but also to the victims of those criminal activities (Kemshall, 2003). The process of assessing and managing risk has, therefore, become a prime issue for discussion in every criminal justice system. In the assessment of risk in a criminal offence, the character of the individual is evaluated to determine whether there is the possibility for them to commit other acts of violence. Because risk management requires the consideration of both situational and psychologi cal factors, it requires constant modification and review so that public safety is ensured. The management of dangerous offenders in the recent past has brought about a lot of concern the world over. This concern has been mostly reflected in the media and other social forums (Armstrong, 2004). One of the areas that have sparked too much concern from the public is area of sexual offences. This type of crime has led to the outcry in the media where there have been campaigns against sexual offences in the society. In these campaigns, the media seeks to identify the sexual offenders, publish their names and shame them so that they do not repeat the same habit again. The campaigns also encourage the use of vigilante justice as well as the formation of a punitive attitude in the public towards sexual offenders. In the long run, such a campaign would lead to the isolation and stigmatization of sexual offender who would be expected to seek rehabilitative programs and reforms (Kemshall, 2003 ). A lot of articles in the media today contain news about sexual offences. Sexual crime has been dominating the media headlines probably because of the prevalence rate of the crime. This type of crime has, therefore, provoked public outcry because of the publicity it receives. This publicity generated by the media has, however, caused a number of negative effects on the perspective of sexual offences and offenders. It has affected the public’s opinion on sexual crimes as well as their perception on the necessary measures that should be taken in cases of sexual crime (Kemshall, 2000). The general perception created is that of a looming danger to all women and children. They are continually reported as the target group for sexual monsters. When the media concentrates on only one category of sexual offenders, they create the impression that pedophilia, for example, is increasingly rampant. Media may also influence a punitive attitude in the public in relation to sexual criminal s. Increased political and media outcry on this subject provokes the public to assume activities like vigilante policing. The attitude of the public towards sexual offenders as well as heightened hysteria is also provoked. It is these attitudes formed towards sexual offenders that necessitate the management of risk. The public should, therefore, be protected from sexual offenders at all costs (Phoenix, 2010). The concept of risk management in the criminal justice system has been

Analyzing Marketing Opportunities Essay Example | Topics and Well Written Essays - 1000 words

Analyzing Marketing Opportunities - Essay Example GVA online defines market demand as the "total volume purchased in a specific geographic area by a specific customer group in a specified time period under a specified marketing program (GVA Online GVA, 2003/2004)." In the case of Qantas market demand is indicated by the total number of travelers and individuals who patronize the services that they offer, having the resources to pay for the bill charged by the company. When assessing the total demand for the company's product and services, the company takes into account only those people who can afford to pay them, excluding those who won't be able to afford those that they offer or those who don't intend to take a trip by plane. Market demand, market potential, and sales forecast are interrelated. It is due to the fact that market demand is utilized to generate an accurate sales forecast and sales potential. As defined above, market demand is the historical demand for a good or service by customers backed by purchasing power. Sales forecasting is a very essential tool in assessing the health of a business entity. The accuracy of sales forecast can also give decision makers in the company the required information to come up with precise and useful strategies that will boost the revenue and profit of the business in the long run. Companies that implement accurate sales forecasting processes reap benefits such as enhanced cash flow, knowledge on timing and quantity of inventory to be purchased, in-depth knowledge of customers and the products that they prefer, the ability to plan production and required capacity, an insight on the trend and pattern of sales, determination of the value of business above the value of current assets, and the ability to determine the expected return on investment (Conduct a Sales Forecast, 2000). These benefits in turn, will help the company maximize its revenue and efficiency, minimized costs and further boost customer retention. In sales forecasting, the company come up with a sales volume which the company expects to generate in the future. Since the forecast is based on past sales of the company, it is necessary to know the dollar sales volume of the firm for the past several years. If not enough sales data have been recorded, it may be necessary to improvise (Conduct a Sales Forecast, 2000). In the case of Qantas, sales forecasting can be done by gathering data on how the company performed during the past years. Historical data of number of passengers should be gathered according to the time-frame needed. In its other line of businesses like food service, it can utilize the historical data on dollar sales. Sales forecasting can be employed to predict the short-term and long term sales of the company. For a short-term forecast, it is usually enough to know the sales for the past few weeks or months in comparison with the corresponding period of the year before. If sales for the past 4 weeks were 8 percent more than the corresponding 4 weeks of the preceding year, sales for the next few weeks can reasonably be expected to be 8 percent ahead of the corresponding period a year ago (Conduct a Sales Forecast, 2000). Adjustments have to be made, of course, for any known or predicted conditions

Discussing the ancient hebrews and AT LEAST one other ancient culture Essay

Discussing the ancient hebrews and AT LEAST one other ancient culture - Essay Example This paper focuses mainly on the creation stories of the Hebrews, and compares it to the creation stories of the Greeks and Egyptians. The creation stories of these cultures are discussed and analyzed from their different historical contexts. The Hebrew culture is one of the major ancient cultures in the world. The early history of the Hebrews is recounted in the Bible in the form of patriarchal legends about Abraham, Isaac, and Jacob. These are considered the descendants of the Hebrew people. Nonetheless, the 12 sons of Jacob are considered the ancestors of the 12 tribes of Israel (see Genesis 29:31-30:24 and 35:16-18 and Exodus 1:1-7). The Hebrew Bible, which is the Old Testament comprises different Hebrew texts, which were collected and assembled by major Jewish scholars between the seventh to tenth centuries A.D. These were collected from codices and scrolls. Nonetheless, the old testament comprises two major creation stories of the Hebrew people. This is quite normal, as it is n ot a strange thing for one culture to have different accounts of creation stories. The two creation stories of the Hebrews are entirely different, and these are recounted differently. The creation story of the Hebrews is from Genesis 2:4 to 3:24 of the Hebrew Bible or the Old Testament. Different extensive analyses of the style and content of the Bible has led to the conviction that the first creation story in the Bible might have been written about the tenth Century B.C. This was around the time of the reign of King Solomon. During this period, the nation of Israel was strong and stable. On the other hand, the creation story of Genesis 1:1 to Genesis 2:3 was written three to four centuries later and under different circumstances2. The author of the creation story of Genesis 2:4 to 3:24 is known to scholars as "J.† There is no clarity whether the same author wrote all the two creation stories or whether it was two different authors, including J and P. Nonetheless, â€Å"Jâ₠¬  is considered the most primitive or rural author of the creation stories of the Hebrews. In addition, the exact characteristic of â€Å"J† is not well known by the Bible scholars. While some think that J might have been a poet, others consider J to have been a priest. It is also thought that J was probably recording his or her people's oral traditions in written form. Therefore, lack of clarity of the author of the Hebrew creation stories is quite a challenge. Similarly, since Hebrews have two different accounts of creation stories, people might find it challenging or confusion to believe both the creation stories. As the stories of creation of the Ancient Hebrews addressed the creation of human beings and the earth, other Ancient cultures too had creation stories, which addressed the origin of various phenomena, including humans and the earth, among others. First, the â€Å"Pericles' Funeral Oration† written by Thucydides can be considered a form of creation story among the Ancient Greek. Although this does not explain the origin of earth or humans, it qualifies as a creation story, as it explains the rebuilding of Athens after a major war with Persia, which had devastated the country, as well as the people therein, including the effects of a major plaque that killed many Athenians. Nonetheless, this is a historical account, which is however important in explaining how Athens got itself back together after a devastating situation. The

Health Care Reform Essay Example | Topics and Well Written Essays - 250 words - 1

Health Care Reform - Essay Example One disadvantaged group are the employers. They have to pay for medical coverage for all their employees. Additionally, there will be a major increase in the insurance price coverage for all employees. Illegal immigrants in the U.S will not be entitled to any medical coverage even if they use their own money (Jackson & Nolen, 2010). In the reforms, practices and individuals with the motive of carrying out abortion will not be provided with any medical insurance cover. After the reforms have been effected, DHHS (Department of Health and Human Services) agencies will have the task of ensuring that the implementation of the reforms is successful. Additionally, the agencies will have the mandate of providing guidelines to medical institutions, insurance institutions and the ordinary individuals on the requirements of the reforms (Holtz, 2008). The agencies will also be provided with the right of prosecuting individuals and institutions which fail to adhere to the reforms requirements. In the reforms, some legal issues have been added in regards to nursing. For instance, nursing practitioners have been cautioned on the carrying out of abortions. The health care reforms has also advocated for wage increases for nurses as well as inclusion on medical coverage from their employers (Holtz, 2008). In addition, several nursing agencies have been established to act on behalf of the welfare of all nurses in the Unites