Role Of Debt In Capital Structure Of Firms - Free Essay Example

Sample details Pages: 17 Words: 5080 Downloads: 9 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Capital structure has got importance in the literature of corporate finance. It provides insight about the role of debt in the capital structure of a firm. It is believed that firm endeavors to uphold optimal capital structure. Don’t waste time! Our writers will create an original "Role Of Debt In Capital Structure Of Firms" essay for you Create order In existing literature, however, there is no consensus among researcherà ¢Ã¢â€š ¬Ã¢â€ž ¢s about the level of optimal capital structure because of variation in proxies used to measure the same attribute, variation in industry norms (size, location and technology), agency cost (management ownership and competence) etc. The main objective of a firm is to maximize its profit and to give maximum return to its shareholders. For this purpose the company should use Optimal Capital Structure so as to achieve the desired targets, but usually when the time comes for the generation of capital, firms go with the more easiest way. The study investigates the relationship between the weighted average cost of capital (WACC) with Debt / Equity ratio of the firms in the Fertilizer Sector through, cross sectional analysis for the financial year 2010. The present study depicts that firms always keep in mind the tax shield. They usually prefer debt due to tax shield but some firms go with the more easies t way to raise capital, and the concept of optimal capital structure is set aside. In Pakistan, the interest rates are usually high as compared to developed countries. That is why, big firms usually prefer to raise funds through equity instead of debt. Since, financial institutions offer loans to profitable firms, at low rate keeping in view their credit rating and riskiness of operations, so these firms like fertilizer companies also include debt in their capital structure. The results are constructed with the literate review concluding that there is no consensus among researcherà ¢Ã¢â€š ¬Ã¢â€ž ¢s about the level of optimal capital structure because of variation in proxies used to measure the same attribute, variation in industry norms (size, location and technology), agency cost (management ownership and competence) etc. Further, maximization of stock return for different firms is debatable. Introduction Capital structure theories provide insights about the role of debt in the capital structure of a firm. In corporate finance literature, it is believed that firm endeavor to uphold optimal capital structure. In existing literature, however, there is no consensus among researcherà ¢Ã¢â€š ¬Ã¢â€ž ¢s about the level of optimal capital structure because of variation in proxies used to measure the same attribute, variation in industry norms (size, location and technology), agency cost (management ownership and competence) etc. Further, maximization of stock return for different firms is debatable. Various decisions taken by management include operating, financial and non- financial decisions. Financial structure (capital structure) decisions have gained importance in corporate finance, strategic management and financial economics literature. These decisions have implication for shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s value. Capital structure comprises of debt and equity, the choice of which is associated with different levels of benefit and controls. There have always been controversies among the researchers about the optimal capital structure of the firm because of significant variation with regard to capital structure of the firm because if significant variations with regard to capital structure existing in different industries and among firm within the same industry. Further, the different proxies may be used to measure the same attribute of a variable. Selection of these proxies may create biasness. Conventional determinants of capital structure in existing literature include collateral value of asset, non-debt tax shield, growth, uniqueness, industry classification, size volatility, and profitability. Use of debt in capital structure of a firm acts as a monitoring device over managerial actions. Use of debt puts pressure on managers to enhance the performance of a firm so that sufficient cash flows are generated to retire loan obligations. The main objective o f business firm is to maximize the wealth of shareholders in the long run, the management should only invest in projects which give are turn in excess of cost of funds invested in the projects of the business. The difficulty will arise in determination of cost of funds, if it raised from different sources and different quantumà ¢Ã¢â€š ¬Ã¢â€ž ¢s. The various sources of funds to the company are in the form of equity and debt. The cost of capital is the rate of return the company has to pay to various suppliers of funds in the company. There are variations in the cost of capital due to the fact that different kinds of investment carry different levels of risk which is compensated for by different levels of return on the investment. There are two main sources of capital for a company: shareholders and lenders usually debenture holders and financial institutionà ¢Ã¢â€š ¬Ã¢â€ž ¢s. The cost of equity and cost of debt are the rates of return that need too be offered to these two gro ups of suppliers of capital in order to attract funds from them. The cost of capital consist of four elements: Cost of Equity (Ke), Cost of Retained Earning (Kr), Cost of Preferred Capital (Kp) and Cost of Debt( Kd).The funds required for the project are raised from the equity shareholders which are of permanent nature. These funds need not be repayable during the life time of the organization. Hence ità ¢Ã¢â€š ¬Ã¢â€ž ¢s a permanent source of funds. The equity shareholders are the owners of the company. The main objective of the firm is to maximize the wealth of the equity shareholders. Equity share capital is the risk capital of the company. If the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s business is doing well the ultimate beneficiaries are the equity shareholders who will get the return in the form of dividends from the company and the capital appreciation for their investment. If the company comes for liquidation due to losses, the ultimate and worst sufferers are the equity shareholders. Sometimes they may not get their investment back during the liquidation process. The following methods are used in calculation of cost of equity. First is Dividend Yield Method. The Dividend per share is expected on the current market price per share. As per this method, the cost of capital is defined as à ¢Ã¢â€š ¬Ã…“the discount rate that equates the present value of all expected future dividends per share with the net proceeds of the sales (or the current market price) of a share.à ¢Ã¢â€š ¬? This method is based on the assumption that market value of shares is directly related to the future dividends on the shares. Another assumption is that the future dividend per shares is expected to be constant and the company is expected to earn at least this yield to keep the shareholders content. Second method is Dividend growth Model in which shareholders will normally expect to increase year after year and not to remain constant in perpetuity. In this method, an allowance for f uture growth in dividend is added to the current dividend yield. It is recognized that the current market price of a share reflect expected future dividends. The dividend growth model is also called as à ¢Ã¢â€š ¬Ã…“Gordon dividend growth modelà ¢Ã¢â€š ¬?. Third model is Price Earning Method which takes into consideration the Earning per share(EPS) and the market price of the share. It is based on the assumption that the investors capitalize the stream of future earnings of the share and the earnings of a share need not be in the form of dividend and also it need not be disbursed to the shareholders. It based on the argument that even if the earning are not disbursed as dividends, it is kept in the retained earnings and it causeà ¢Ã¢â€š ¬Ã¢â€ž ¢s future growth in the earnings of capital, the earning per share is divided by the current market price. Forth model is Capital Asset Pricing Model which divides the cost of equity into two components, the near risk-free return ava ilable on investing in government bonds and an addition risk premium for investing in a particular share or investment. This risk premium in turn comprises the average return on the overall market portfolio and the beta factor (or risk) of the particular investment. Putting this all together the CAPM assesses the cost of equity for an investment. Literature Review The empirical study done by Modigliani and Miller (1958) depicts the basis of capital structure. Under the assumption of market perfection, they argued that the value of firm is independent from its mode or source of financing. They believe that cost of capital had no influence on the capital structure, so according to them there exists no capital structure. The level of leverage may be different in the firm or within the same industry. In their point of view, the value of firm is not determined by however, the firm finances its assets but by the real assets possession is the actual value of a firm. Researchers have relaxed the unrealistic assumptions in Modigliani and Miller proposition. In real life there exists information asymmetry. Debt payments are subject to tax shield. Agency costs reflect a tradeoff model where decrease in agency cost of equity will cause an increase in agency cost of debt Jensen and Meckling (1976) They argue that agency costs, however, reduce because use of debt restricts issuance of equity, which in turn strengthens managerial ownership. It helps to reduce agency conflicts. Myers and Majluf (1984) argue that use of debt reduces agency problems. Further, leverage also bring its own agency cost that generates a conflict between agency cost of debt and equity. Jensen (1986) argues that use of debt constrains the free cash flow explanations give birth to its fixed nature of obligations. Since managerial compensation had controlled the positively related firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s to grow, therefore, investors may invest available cash flows optimally or utilizes the available cash flows to pay dividends or profits. When profits are paid at low rate due to some reason, it extremely impacts the shares market price. Use of debt generate limits to the managerial discretion to use such cash flows fully because of non-payment of profit on debt may take a firm bankruptcy. Further, firms that use debt faces extreme scanning by debt hold ers. These facts indulge managers to utilize their resources optimally which ultimately enriches firm value. The theoretical framework of capital structure begins with the seminal paper of Modigliani and Miller (1958) who postulate that capital structure of a firm is irrelevant in perfect capital markets. By using net operating income approach, they argue that the overall capitalization rate remain constant for any level of financial leverage. That is, the total risk of security holders of a firm remains unaffected for any change in capital structure. Therefore, value of a firm is independent of the capital structure of a firm. Their theory is based on unrealistic assumptions of no income taxes, no transaction costs, no information asymmetry, no bankruptcy and agency cost etc. They believe in the conservation of investment value. The researchers have relaxed the assumption of perfect capital market assumed by Modigliani and Miller. Following theories explain the relevance of capi tal structure under different market imperfection. Trade off theory relaxes the assumption of bankruptcy costs. It considers the cost of financial distress (bankruptcy cost, reorganization cost and non-bankruptcy cost). It elaborates the impact of financing cost and tax shield on debt. According to trade-off theory, increase in debt is positively related to marginal cost of debt and negatively related to marginal benefit of increase in debt. A firm focuses on trade-off between marginal benefit and cost of debt while deciding about the proportion of debt and equity in its capital structure with a view to optimize the overall value of the firm. A firm should borrow until the marginal tax advantage of additional debt is offset by the increase in present value of the expected costs of financial distress. This theory has been criticized by researchers on different grounds. For instance, Miller (1977) argues that firms pay large taxes frequently, whereas occurrence of bankruptcy is not recurring in nature. So, low weights are assigned to bankruptcy cost. Further, in reality, firms do not have higher weightage of debt in their capital structure. Pecking Order theory of capital structure is based on the costs of asymmetric information. It assumes relevance of asymmetric information only for external financing. It describes the sequence (internal financing to external financing) that a firm uses to finance its capital expenditures. According to pecking order, a firm having sufficient profits and cash flows use internal funds first. It will go for external financing if internal funds are not sufficient. While deciding about external financing, a firm will issue the safest security like bonds; debenture or term-finance certificates and equity will be used as the last option. Further, in case the internally generated cash flows exceed the capital investment requirements, these excessive cash flows will be utilized to repay debt instead of buying back equity. Milt on and Artur (1991) discussed the theory of capital structure grounded on four basic factors. Firstly, agency cost that shows conflicts among managers, equity holders and debt holders. Secondly, there is asymmetric information and it explains the possible capital structure. Thirdly, it is centered on the product/input market interactions with Capital structure. Fourthly, it describes theories driven by co-operate control consideration it shows the linkage between the market for co-operate control and for Capital structure. Peter and Gordon (2005) have discussed the importance of industry to firm-level financing and real its decisions. The findings of this paper were financial structure that depends on a firms position within its industry and In competitive industry, a firms financial control depends on its natural hedge the activities of other firms in this industry, and its status as entrant, current performance, or exiting firm. Financial control is higher and less discrete in concentrated industries, where strategic debt interactions are stronger, but a firms natural hedge is not significant. Our finding shows that financial structure, technology, and risk are jointly determined within industries. These findings are reliable with recent industry equilibrium models of financial structure. The analysis made by Laurence et al (2001), discusses the Capital Structures in developing countries uses a new set of data to assess whether capital structure theory is transferable across countries with different influential structures or not. In this analysis they used 10 developing countries and provided evidence that these decisions are affected by the same factors as in developed countries. However, there are persistent differences across countries, indicating that specific country factors are at work. their findings suggests that although some of the insights from modern finance theory are transferable across countries and much remains to be done to understand the impact of different institutional features on capital structure choices. This paper affirms the arguments on the tax shield valuation as it remains a hot issue in the financial literature. Basically, two methods have been projected to incorporate the tax benefit of debt in the present value computation: The adjusted present value (APV), and the weighted average cost of capital (WACC). This note clarifies the correlation between these two apparently different approaches by offering a formula for the WACC. Firms interest expenses are tax deductible. Therefore, debt increases the cash flows available to stockholders and bondholders by the amount of the tax reduction. Joseph Ignacio (2005), discusses the cost of debt is the market rate or unsubsidized rate for which an investor is willing to pay. In further detail debt creates and sustain its value when tax shield is applied and the rate is sustainable but if the rate of repayment is high then form the loan and at a low marke t rate then loan will be preferable as it is subsidized debt and no tax is applied, the firm would be a benefited with debt financing, and the unlevered and levered values of the cash flows would be unequal. And the optimal rate of return and WACC can be achieved if a firm follows the rules and take into account all sources of financing. Tom and Timothy (2004) assumes that the use of weighted average cost of capital (WACC) is better then the use of any other calculation because either it may be riskier or will not depict the true picture of the financial performance or the position of the firm. This paper encourages the usage of WACC in all the firms although it is difficult to calculate and had some mathematical complexities but after that it depicts a clear picture of the firm, as by using spreadsheets it is easy to present the findings of the company to its managers, clients, colleagues and shareholders. The WACC is a fundamental concept in corporate finance. Its basic defi nition is averaging the cost of capital coming from both the equity and the debt by Farber at el (2006) and it looks simple. But the fact is its practical implementation which has raised several questions, they are most likely the distinction between book value and the market value. This paper addresses more in depth the tax shield valuation and establishes a general formula that remains valid for any debt structure. In this context, there contribution allows not only to compare the usual WACC computation in a more rigorous way but also less synthetic one, and helps the firms to adapt the WACC approach to any chosen tax shield valuation model. In this sense, the WACC appears as a powerful and very adaptable concept. Greg (2004), discusses what is WACC and what are there components and how these components are calculated and are helpful in the calculation of WACC. The paper further discusses that what should be the minimum discount rate that make intuitive sense to invest or to ad d a firm in portfolio. It also explains that what is the cost of debt, cost of financing and the components of cost of financing. Myers and majluf (1984), argues that the use of debt reduces agency problems and further leverage also brings its own agency cost thatà ¢Ã¢â€š ¬Ã¢â€ž ¢s generates a conflict between agency cost debt and equity. Jenson (1986), states that the use of debt will restrict the cash flow projections due to its fixed rules. Since marginal benefits and control ità ¢Ã¢â€š ¬Ã¢â€ž ¢s positively related to firm development. Therefore management may invest available resources to obtain cash flows. When dividend are paid but at a low rate its adversely affect the share price in the market. The usage of debt limits the firm to invest else-where because the non-payment of the debt leads to bankruptcy. Lakshmi (1994), differentiates between the traditional capital structure models and the new pecking order theory model of the corporate financing. The basics of p ecking order theory model assumes that the debt financing driven by the internal financing, has much more time series explanatory power than a static trade of model, which predicts that each firm adjusts gradually toward an optimal debt ratio. And had shown in their results that the power to reject the pecking order against trade of theory. The model of (CAPM) given by William and John (1964,1965), gives evidence of the birth of asset pricing theory for which noble prize was given to sharpe in 1990. Forty years later CAPM is now publically used in estimating the cost of capital of the industry and evaluating the esteem to have the maximum profits from the portfolio invested in. The attractiveness in estimation of CAPM is that it offers a wide pleasing range of predictions about how to measure and ensure the risk and the relation between expected returns and risk. Unfortunately, some problems of CAPMs may reflect the theory may fails at some times, the result of many not be as per assumptions. But they may be caused by difficulties in implementation of valid tests to the model. Dan at el (2005) examine the entire associations between leverage, corporate and personal taxes, and the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s cost of equity to generate capital. Expanding the theory of Modigliani and Miller (1958, 1963), the cost of equity capital can be expressed as an impact of leverage and corporate and level taxes. The predictions that the equity cost will increase in leverage, but that corporate taxes shifts from leverage related risk premium, while the personal tax disadvantage of burden of debt reduces the profit. They examined the findings by using implied equity cost estimation system of the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s corporate tax rate and the personal tax gives a big advantage of debt. Their result suggests that the premium equity risk is linked with the profit, and if the entire profit is decreasing the corporate tax generates benefit. They also marked evidence that th e premium equity risk has relations with leverage, and increase in entire profit may give a results in increased in personal tax. Rodolfo (2008) sets forth the contribution to this long lasting debate on cost of capital, firstly by introducing the multiplicative model that helps to calculate the rate of WACC. Secondly, by making adjustments in the rate of governance risk. The older approach says that the cost of capital might be calculated by means of a weighted average of debt and capital. But this is not a correct way of calculation and that might bring misappropriation, whereas the multiplicative model not only calculate the linear approximation but also the joint outcome of expected costs of debt and stock, and its proportion in the capital structure of that firm. Nevins (1967), explains in reference to Modigliani and millers discussion that how leverage can be effective and efficient to increase the entire cost of capital of the industry or the firm. He also discusses in detail that when the account is taken of risk and is ruin an increasing cost of capital is perfectly the same with little arbitrage operations. Giving ways to the chances of bankruptcy is tantamount to relax the that entire stream of operating earnings Is independent from the entire capital structure. Robert (1988), argues the effect of corporate and personal taxes on the firms optimal capital structure and financing decisions under uncertain defined conditions. It further more discussion they discussed the entire capital structure model by categorizing them entire firms important investments decisions. The results suggests that when investment was allowed to adjust optimally the existing assumptions about the relationship between investment and debt related tax shields must be changed. Secondly, they discussed that the increases in investment related tax shields changes due to corporate tax code are not necessarily linked with reductions in profits at the individual and companyà ƒ ¢Ã¢â€š ¬Ã¢â€ž ¢s level. In cross sectional analysis, firms with bigger investment tax shield. Need not to have lower debt tax shields unless all the market utilize the same mechanism. Differences in production technologies in the entire market may query questions that why the empirical results cross-sectional analysis do not meet the expectations of the researchers. Alan reviewed the financial consumption and behavior of the company to increase their profits and wealth of their existing shareholders. They mainly focuses on the impact of personal income and capital gains and taxes, and discovered that in the presence of different taxation systems of dividends and capital gains, wealth maximization does not imply maximization of firm market value and the source of equity financing is not irrelevant. The approximate cost of capital in the presence of income taxes does not depend directly on either the dividend payout rate or the tax on dividends paid. Equity shares have a market v alue lower than the difference between the production cost of a companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s assets and the current market value of its debt obligations. Because of this capitalization, it need not be true that an economy without taking risks and uncertainty there would have no financing. The Hypothesis The detail literature review enabled us to construct the following hypothesis. H0: The firm with high debt/ equity ratio should have less cost of capital. H1: The firm with lower debt/ equity ratio should have higher cost of capital.. Research Methodology This chapter describes the methodology to investigate research problems in order to draw conclusion for the present study. Research methodology comprises of research method employed identification to the problem criteria for sample selection methods for data collection and construction for measuring instruments. It comprises of the brief description of variables and proxies used to measure those variables. It also describers research limitation and ethical concerns. 3.1 Research design and data description As stated earlier, the objective of the study is to explore the relationship between the Debt / Asset Ratio and the weighted average cost of capital. For this purpose we have targeted four companies of fertilizer sector from Pakistan into year 2010. Basically there are four companies in the Fertilizer sector listed under the roof of Karachi Stock Exchange, but three of them are selected at random. Therefore, the sample size comprises of almost cover 75% of the fertilizer sector. 3.2 Model Description As stated earlier the study has been under taken to investigate the relationship of Debt / Equity Ratio and weighted cost of capital in the industry. Following models are used to calculate the cost of capital. 3.2.1 Cost of debt The capital structure of a firm normally include the debt component. The debt may be in the form of Debentures, Bonds, Term Loans from Financial Institutionà ¢Ã¢â€š ¬Ã¢â€ž ¢s and Banks etc. The debt carries a fix rate of interest, irrespective of the profitability of the company. Because the coupon rate is fixed, the firm increases its earning through debt financing. Then after payment of fixed interest charges more surplus is available for equity shareholders, and hence EPS will increase. An important point to be remembered that dividends payable to equity shareholders and preference shareholders is an appropriation of profit, whereas the interest payable to debt is charged against profit. Therefore, any payment towards interest will reduce the profit and ultimately the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s tax liability will decrease. The phenomenon is called as tax shield. The tax shield is viewed as a benefit that accrues to the company which is geared. 3.2.2 Price Earning Method This method takes into consideration the Earning per share(EPS) and the market price of the share. It is based on the assumption that the investors capitalize the stream of future earnings of the share and the earnings of a share need not be in the form of dividend and also it need not be disbursed to the shareholders. It based on the argument that even if the earning are not disbursed as dividends, it is kept in the retained earnings and it causeà ¢Ã¢â€š ¬Ã¢â€ž ¢s future growth in the earnings of capital, the earning per share is divided by the current market price. We have selected price earning method as this method provides us the required results. Although there are various methods to calculate the cost of Equity but there are some limitations applied on them. 3.2.3 Debt / Equity Ratio The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholderà ¢Ã¢â€š ¬Ã¢â€ž ¢s equity and debt used to raise the companyà ¢Ã¢â€š ¬Ã¢â€ž ¢s capital. It is also known as Risk, Gearing or Leverage Ratio. The two components are often taken from the firms balance sheet or statement of financial position, but the ratio may also be calculated using market values for both, if the companys debt and equity are publicly traded, or using a combination of book value for debt and market value for equity financially. =Long Term Interests Bearing Debt/ Total Equity 3.3 Companies Included in the Study Following companies are included in this study from the Fertilizer sector for detailed analysis. Fauji Fertilizer Limited. (FFC) Fauji Fertilizer Bin Qasim Limited. (FFBL) Dawood Hercules Chemicals Limited. (DAWH) 3.4 Limitations of The Study Although there are various methods to calculate the Cost of Equity but there are some limitations. For instance, Gordon Growth Model cannot be applied because the firms in Pakistan do not pay dividends at perpetual constant growth rate. The other technique Capital Asset Pricing Model of calculating the Cost of Equity will create biasness due to real adjustment of inflation premium in real rate of interest to calculate the risk free rate of return. Further, the return on market portfolio requires a detailed analysis of stock returns with other financial indicators. Therefore, the study uses Price Earning Method due to availability of actual and exact data. Empirical Study Of Fertilizer Sector This chapter includes the descriptive results and detailed analysis. The detailed analysis of Fertilizer sector is given below. It includes Cost of Debt KD, Cost of Equity KE, the WACC and Debt / Equity Ratio of the three companies which fall in the fertilizer sector. Analysis The present study empirically investigates the relationship between the Weighted Average Cost Of Capital and Return On Assets. We have chosen three fertilizer companies listed in Karachi Stock Exchange. Name of Company WACC Debt/ Equity Ratio Fauji Fertilizer Limited 12.77% 24.72% Fauji Fertilizer Bin Qasim Limited 9.18% 37.16% Dawood Hercules Chemicals Limited 10.98% 20.91% After the detailed analysis, the study concludes that Fauji fertilizer has low debt / equity ratio as compared to Fauji Fertilizer Bin Qasim Limited and higher WACC. Which is consistent with our hypothesis that H0: The firm with high debt/ equity ratio should have less cost of capital. In the case of Fauji Fertilizer Bin Qasim Limited it has higher Debt / Equity ratio as compared to Dawood Hercules. So accordingly, its WACC is less than Dawood Hercules which is consistent with our Hypothesis. Further, when we compared Dawood Hercules with Fauji Fertilizer the study concludes that, though the debt / equity ratio of Fauji Fertilizer has greater Debt / Equity Ratio than of Dawood Hercules, but the WACC of Fauji Fertilizer is higher than Dawood Hercules. Which is not favorable according to hypothesis. This conclusion leads to the conclusion that while deciding about the capital structure, the firms always do not keep in mind the optimal capital structure which is subject to the availability of funds. Conclusion The present study depicts that firms always keep in mind the tax shield. They usually prefer debt due to tax shield but some firms go with the more easiest way to raise capital, and the concept of optimal capital structure is set aside. In Pakistan, the interest rates are usually high as compared to developed countries. That is why, big firms usually prefer to raise funds through equity instead of debt. Since, financial institutions offer loans to profitable firms, at low rate keeping in view their credit rating and riskiness of operations, so these firms like fertilizer companies also include debt in their capital structure. The results are constructed with the literate review concluding that there is no consensus among researcherà ¢Ã¢â€š ¬Ã¢â€ž ¢s about the level of optimal capital structure because of variation in proxies used to measure the same attribute, variation in industry norms (size, location and technology), agency cost (management ownership and competence) etc. Furthe r, maximization of stock return for different firms is debatable. REFERENCES

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Macro ad/as model Free Essays

Let us first understand the components of the AD/AS model, so we can determine and identify the factors which play a part in the level of output in the economy, and learn how the government intervenes in order to implement macro-policies in order to increase output, and the effects of these policies on the economy. The AD/AS model shows the combinations of both the aggregate demand curve and the aggregate supply curve. The aggregate demand curve shows the combinations of the price level and level of output at which both the money market and good market are in equilibrium, while the aggregate supply curve shows for each given price level the mount of out of output the firms are willing to supply. We will write a custom essay sample on Macro ad/as model or any similar topic only for you Order Now As mentioned in the 10th edition of macroeconomics by Mc Grawhill â€Å"the aggregate supply -aggregate demand model is the basic macroeconomic tool for studying output fluctuations† (Pg. 98, Macroeconomics, Rudiger Dornbush). Let us first understand the market equilibrium price of the product and then identify and analyze how factors such as change in demand and supply, elasticity, separating and pooling equilibrium, market structure determine the price of a good or service. In free market, equilibrium price is the price at which there is no surplus or shortage nd therefore quantity demanded equals quantity supplied (Sloman 2008). At equilibrium, any change in quantity demanded or quantity supplied will move the market towards disequilibrium Let’s work through an example. For this example, refer to . Notice that we begin at point A where short-run aggregate supply curve 1 meets the long-run aggregate supply curve and aggregate demand curve 1 . The point where the short-run aggregate supply curve and the aggregate demand curve meet is always the short-run equilibrium. The point where the long-run aggregate supply urve and the aggregate demand curve meet is always the long-run equilibrium. Thus, we are in long-run equilibrium to begin. Now say that the Fed pursues expansionary monetary policy. In this case, the aggregate demand curve shifts to the right from aggregate demand curve 1 to aggregate demand curve 2. The intersection of short- run aggregate supply curve 1 and aggregate demand curve 2 has now shifted to the upper right from point A to point B. At point B, both output and the price level have increased. This is the new short-run equilibrium. But, as we move to the long run, the expected price level comes into line with the ctual price level as firms, producers, and workers adjust their expectations. When this occurs, the short-run aggregate supply curve shifts along the aggregate demand curve until the long-run aggregate supply curve, the short-run aggregate supply curve, and the aggregate demand curve all intersect. This is represented by point C and is the new equilibrium where short-run aggregate supply curve 2 equals the long-run aggregate supply curve and aggregate demand curve 2. Thus, expansionary policy causes output and the price level to increase in the short run, but only the price level to increase in the long run How to cite Macro ad/as model, Papers

Business Rationale for Diversity Managementâ€Myassignmenthelp.Com

Question: Discuss About The Business Rationale For Diversity Management? Answer: Introduction CERA is one of the leading civil engineering consulting organizations based in Australia. The company was established in the year 2007. Since the establishment, the company management is enjoying highly profitable performances. The major vision of the organization is to lead the Australian civil engineering consulting industry through the integration of the quality strategic management approaches as well as the decision-making activities. The top-level officials at CERA focus on offering quality, structural and timely planning consulting services to the particular clients. However, the management has succeeded to launch a smart structure for the research and development professionals of the firms for better business management practices and activities. Most importantly, the firms always consider experienced staffs and employees in the decision-making process for better business performances. Despite the sustainable policy and strategy development processes, the human resource managem ent team of CERA is facing different strategy development related challenges as well as employee performance related challenges in the entire business operation management activities. Despite the development of different types of employee oriented strategy development activities, the decision makers of CERA is lacking effective diversity management and adequate employee management activities considering different cultural background and personality traits of the employees. According to the organizational policy, the decision makers of CERA always focus on the ideas of the employees to mitigate the possible risk factors as well as the ongoing organizational challenges. This particular report will significantly discuss different aspects related to the workplace diversity as well as human resource management activities. Discussion The Australian civil engineering consultation industry is competitive as well as saturated considering the growth of the business performances of the organizations as well as the growth of the challenges respectively. This is an important aspect of the management of the company to consider different types of strategic management approaches for the profitable business growth. Being one of the promising organizations within the Australian industry, the decision makers have developed some sustainable human resource management strategies in the business operation process. Moreover, the company also has developed a strong, skilled, competent and knowledgeable workforce. These are the major reasons behind the growing success rate of the organizations within the Australian civil engineering consulting industry (Adrichvi Yoon, 2014). Most importantly, the organizational decision makers of CERA has established and implemented these types of strategies in the trade management process for the purpose of the offering of differentiated and quality customer service to the target clients of the firm. In terms of the focus on the diversity management of the CEO of CERA, the human resource department of the company is facing some issues regarding the workplace diversity. This is indispensable for a company to implement cultural diversity in the workplace for better business management performances and business client satisfaction. The company already has developed a skilled workforce, but the lack of effective monitoring and lack of adequate approach towards the implementation of the cultural diversity management in the workplaces, the company is facing some critical challenges. All the senior employees of different organizational departments are responsible for effective deparemental performances (Beugelsdijk, 2010). This is identical that different employees and managers used to avail different thoughts and perceptions regarding the human resource management activities, employee engagement, employee management of the organization and decision making approaches. Rachel Amaro, the manager of the drafting office has different perceptions regarding employee engagement and workplace diversity. According to her, the human resource management of CERA has done several important activities and sustainable policy development processes, but some skilled manageress and senior employees are not that much satisfied and motivated due to lack of strong integration of the appropriate workplace cultural diversity and employee management. Therefore, the human resource management professionals, as well as the CEO of CERA, needs to adopt some important strategic management and sustainability approaches in the decision making and human resource strategy development process to overcome the possible challenges. The selected pathway and vision of the CEO for CERA is appropriate, but it is also vital for the CEO to evaluate whether the organization is getting success in maintaining workplace cultural diversity or not. Analysis and Assessment of Issues Related to Workplace Diversity Before going into the critical discussion and analysis, the researcher of this topic is responsible enough to introduce the concept of diversity. Diversity management of a company is recognized as a particular process of managing the similarities and differences of the employees within the particular company, which is developed based on the bunch of values. These values, differences and similarities are generally recognized as the effective strengths of a particular comp [any irrespective of different types of the business objective as well as any type of organizational culture and decision making an aspect of a company. Effective workplace diversity management assists a particular company to enhance knowledge management process (Bolman Deal, 2014). The multinational organizations used to face different types of diversity management issues, such as workplace inequality, employee management problems basis on the caste, culture, religion, gender, age group, wage rate etc. However, the human resource management of CERA is responsible for better workplace diversity management issues considering the employee engagement in the strategy establishment approaches for the better strategic outcome in the business management performance (Chen Huang, 2011). Despite the construction of the different types of sustainable human resource management values and the ethical approaches, the operation management team of CERA has identified several types of workplace diversity and employee performance management related issues. It can be argued from the above diagram that a particular company can ensure that the management is concerned about the workplace diversity through different organizational parameters, such as organizational values, mission, vision, goals, values, employee management processes, organizational culture etc. The organizational values, goals, objectives, culture, mission and vision of the company suggests that the human resource management, as well as top officials of CERA, are responsible for the effective workplace diversity management aspects. A company can adopt three different important types of the diversity management aspects in the business management activities. These three important types of the diversity management activities are strategic, operational and managerial. The human resource management along with the CEO of the company is rightly responsible for the maintaining of quality strategic and managerial diversity management activities (Collins, 2012). From the statement a nd perception of some employees, it has been identified that the management of the firm is facing some critical business operation challenges related to the operational diversity aspect as the management has failed to monitor the effectiveness of the operational diversity concept. Most importantly, the organization is committed for the employee engagement orientation in the strategy development process during the crisis period, but it has been alleged that top-level officials of the organization are facing some critical issues regarding providing effective employment opportunities to the experienced employees regarding performance appraisal and bonus distribution despite the existence of common performance bonus scheme for all the employees within the organization. Hence, it can be argued that the firm is facing operational issues and the CEO of CERA needs to monitor whether all the experienced stakeholders and employees are getting opportunities to participate in the strategy estab lishment process or not. This particular approach will easily assist the top-level decision makers to integrate into the operation management process for the better business outcomes. Impact of Human Resource Management Initiatives on Stakeholders The top-level leaders of CERA need to bring changes in the operation, managerial and strategic decision making orientation process of the company. The company is committed to taking sustainable employee management and workplace diversity approaches. Therefore, the company is strictly focused on some adequate leadership and value development approaches. Despite these facts, the human resource management professionals along with the employees of CERA are facing some challenges related to workplace diversity management processes. Hence, this is the prior responsibility of the human resource management officials of the company to take better sustainable measures to overcome the above-mentioned problems (Garud Gehman, 2016). Firstly, the human resource management professionals along with the top management officials need to recognize the job satisfaction and workplace motivation aspect of each and every employee employees irrespective of different cultural; orientation, different demographic factors and geographic factors (Giritli Oraz, 2014). Moreover, the decision makers of CERA need to include three important sections of the diversity management process in the human resource management strategic approaches, such as operational diversity management, managerial diversity management approaches as well as strategic diversity management approaches (Fransen et al. 2013). Consideration of these particular diversity management approaches can easily assist the organizational leaders of CERA to realize the major problems and demands of the important employees as long as employees are the real growth drivers of an organization like CERA within the Australian go to civil engineering consultation industry. This i s the major and prior human resource management aspect, which needs to be considered by the human resource department of the organization (Johns, 2008). Secondly, the human resource department needs to employ stakeholders engagement approaches in the strategy construction process of CERA as is it is accepted that stakeholders are an important part of a company. In addition, the stakeholder engagement approach can assist the human resource management professionals of CERA to ensure quality management processes in the business decision making activities, which will help CERA to recognize the demands and satisfaction level of the skilled employees of CERA. Most importantly, CERA needs to consider the stakeholder engagement approach in the business management process for better integrity, sustainability and corporate governance. The implication of the strategic, operation and managerial diversity management approach always needs to support of stakeholders. In order to do so, the organizational leaders and human resource management professionals of CERA need to engage employees and other important stakeholders in the decision-making proce ss. These inclusions and stakeholder integration aspect can effectively enhance the stakeholder value and stakeholder support aspect (Leonard Lang, 2010). The two above mentioned suggestions are related to the bringing and implementing changes in the workplace environment process. Most importantly, the human resource management professionals of CERA need to ensure some quality business management processes for better business outcome and consideration of the changes need some kinds of strategic support from the human resource management departments of the organization. Hence, lastly, the human resource management professionals of CERA needs to implement the Kurt Lewins change management model in the business management activities for the better change management in a workplace environment and adequate business outcome. Consideration of this particular change management in the entire business management activities will also assist the top level officials along with the human resource management professionals to enhance sustainable workplace changes, which will contribute to the mitigation of the challenges related to possible workplace diversity issues (Lunenburg, 2011). Thirdly, the change management model proposed by Kurt Lewin can be implemented for better diversity, stakeholder engagement and other change implication process. This change management model comprised of three important elements, such as unfreeze, change or freeze and refreeze. In the first stage, the CEO along with the human resource professionals of CERA need to adopt some important strategic management approaches and takes initiatives for the changes. Apart from these, in the unfreeze section; the leaders and d decision makers also need to be aware of what to be changed and how to change. Freeze or change is regarded as the second elements of this particular change management model and in this particular model, the top managers are responsible for communicating with the important stakeholders to participate in change management process (Mohr et al. 2012). In this process, effective communication with the stakeholders is an important responsibility of the human resource management professionals of a company. In addition, the human resource management professionals of CERA need to maintain a strong relationship with the stakeholders to effectively respond to the changing workplace environment. In the last stage, the important stakeholders and the human resource professionals need to refreeze the change management strategy collaboratively if they find out that the particular adopted strategy is not good for the management of the firm. Hence, in the refreeze stage, the communication is important for the employees. Therefore, it can be expressed that the human resource management professionals of CERA needs to adopt some important steps in the decision making processes, such as operation diversity management process, stakeholder engagement process and change management process to assist the important stakeholders of CERA to effectively respond to the changed workplace environment of CERA (Mooman, 2012). Relationship between Human Resource Strategies and Organizational Strategies Lastly, the researcher needs to analyze the important relationship between the human resource strategy and organizational strategy. This discussion will be based on the business performance and business operation process of CERA considering the important case facts. This has been identified that CERA has developed several sustainable and highly valued organizational and business operation process policies (Raducan, 2014). The human resource management professionals, as well as the decision makers of CERA, need to ensure the importance of the effective relationship between the human resource strategy and organizational strategy. Organizational strategy is nothing but the organizational objectives of a company, which reflects through the business objectives, organizational mission, organizational vision and corporate values. Alternatively, the human resource strategies can be considered as the managing of human resources by considering quality employee management activities, such as pe rformance management, performance appraisal, wage distribution, reward distribution, job satisfaction, workplace motivation and workplace diversity. Overall, it is acceptable that the effective human resource management strategies will generally assist the human resource management and decision makers of the company to meet the developed business operation management objectives quite adequately. Effective human resource management strategies can motivate the employees and effective decision makers to follow the certain values and principles to ensure positive business outcome (Teeratansirikool et al. 2013). In the case of CERA, it can be accepted that the management has constructed different types of adequate corporate values and sustainable business objectives. Therefore, this is the major responsibility of the firm to attend to this particular business operation management approaches. The organizational management needs to adopt the above mentioned strategies in the trade management process for the better business outcome as these particular approaches will significantly assist to meet the developed business objectives. It will also help to mitigate the workplace diversity-related challenges (Wilson, 2014). Conclusion CERA is one of the popular and leading go to civil engineering professional consultancy firm and the management has successfully developed a strong client base. Most importantly, the human resource management professionals, as well as the decision makers of CERA, have developed some important strategic approaches for sustainable business outcome keeping the employee engagement in mind. However, the firm has failed to management adequate workplace diversity to a some extent and the organization is highly responsible for this particular aspect due to poor monitor in., Therefore, it is recommended that the human resource management professionals along with the decision makers should integrate diversity management, change management and stakeholder engagement in decision development approaches for better sustainability and mitigation of the ongoing workplace sustainability-related challenges. References Ardichvii, A., Yoon, W. S. (2014). Designing Integrative Knowledge Management Beugelsdijk, S. (2010). Strategic Human Resource Practices and Product Innovation. Harvard Bolman, L., Deal, T. (2014). Leadership and management. Christian Youth Work in Theory and Practice: A Handbook,12(1), 245. Business Review, 29(8), 820-847. Chen, C., Huang, J. (2011).. Strategic human resource practices and innovation Collins, D. B. (2012). The effectiveness of managerial leadership development programs: A meta-analysis of studies from 1982-2001.Asia pacific Journal of Human Resource Management, 1(1), 256-312. Fransen, J., Weinberger, A., Kirschner, (2013). Team effectiveness and team development in CSCL. Harvard Business Review, 48(1), 9-24. Garud, R., Gehman, J. (2016). Theory evaluation, entrepreneurial processes, and performativity. Academy of Management Review, 41(3), 544-549. Giritli, H., Oraz, G. (2014). Leadership styles: some evidence from the Turkish construction industry. Construction Management and Economics, 22(3), 253-262. Human Resources, 11(3), 307-320. Johns, G. (2008). Organizational Behavior at Contemporary Era. A Journal of Human Leonard, H. S., Lang, F. (2010). Leadership Development via action learning. Advances in developing human resources, 20(10), 1-16. Lunenburg, F. (2011). Leadership versus management: a key distinctionat least in theory.International Journal of Industry Relations, 14(1), 1-4. Management, 2(3), 10. Mohr, D., Young, G., Burgess Jr, J. (2012). Employee turnover and operational performance: the moderating effect of group?oriented organisational culture. Human Resource Management Journal, 22(2), 216-233. Mooman, L. (2012). Organizational Behavior and Culture. A Journal of Occupational and Organizational management, 1(1), 17. performance-The mediating role of knowledge management capacity. 62(1), 104-114. Raducan, R. (2014). Leadership and Management. Procedia-Social and Behavioral Sciences, 149(1), 808-812. Resource Planning, 12(8), 7. Systems: Theoretical Considerations and Practical Applications. Advances in Developing Teeratansirikool, L., Siengthai, S., Badir, Y., Charoenngam, C. (2013). Competitive strategies and firm performance: the mediating role of performance measurement. International Journal of Personnel Psychology 62(2), 168-184. Wilson, R. (2014). Organizational Behavior. Asia pacific Journal of Human Resource

Knowledge on Commandments Gains Power an Example by

Knowledge on Commandments Gains Power by Expert Marvellous | 27 Dec 2016 Introduction essay sample Need essay sample on "Knowledge on Commandments Gains Power" topic? We will write a custom essay sample specifically for you Proceed Power is a complicated term that has the different meaning. It can be the ability to govern wherein it implies the influence of the ruler on its subordinates. Or it can be the ability to control the subsidiaries of the person in the high position. It can be the ability to initially influence the people around him. According to the story of Discipline and Punish by Michel Foucault, power was possessed by the sovereign in the eighteenth century. It was him who has the ultimate control of everything over his subordinates. It was he who decided on the things that could be done and the things that could not be done in a specific place. Also, it was he who gave punishments to the people who had committed a crime. He was also the one who decided the extent of the punishments to the criminals. And he is also the one that decides the date of the execution. He has the control of everything, all the things that concerned the society and the people where he is governing. The punishments those times as what Michel Foucault elaborated were brutal ones. The condemned man was being tortured. The body of the condemned man was being punished to the extent the physical pain that was being induced to him should leave a mark to its body for him to learn his lesson. The extent of the torture was being determined on how the sovereign wants the condemned man to learn his lessons. This kind of punishment was shown in the story of Franz Kafka, which is the In the Penal Colony. In this story there were four major characters namely: the officer, the explorer, the condemned man, and the soldier. In the story, the explorer went to a penal colony for a visit to honor the invitation of the new commander of the said penal colony. During his visit, he was supposed to witness an execution. But before the execution, the officer showed the explorer the machine that will be used in the execution of the condemned man. The condemned man was to be punished for he was asleep during his working hours and he was caught in the act by his superior. His superior sued him and wanted him to be punished so he was sent to the penal colony. He was prosecuted because of his actions. His prosecution will be done for him to learn from the wrong deed he had done. The process and the outcome of the prosecution are unknown to the condemned man. The only thing he knew was that he will be punished because of his action. He did not know the extent of his punishment and its outcome, which is death. This process was given an extra attention by the explorer and the ignorance of the condemned man of his punishment as well. The explorer continuously questioned the officer the regarding the severity of the punishment to the condemned man and as well the intensity of the punishment in reference to his offense. Also, the explorer questioned the officer if the punishment could teach the condemned man the lesson that he will not do the same offense in the future. The officer did not expect the condemned man to repeat the same offense for there was no second chance in such punishment. And in the end, after the long talk of the officer and the explorer, the officer freed the condemned man and prosecuted himself. Because the officer cannot accept the fact the punishment he was implementing was not applicable anymore to the society and the time that that punishment was still acceptable has already passed. The new commandant of the penal colony was not agreeing with the type of punishment. And for him, the officer, not to dishonor his past commandant who designed and made the prosecuting machine, he prosecuted himself instead. It was shown in this story of Kafka that the guilt of the condemned man was determined without a doubt. The guilt of the condemned man was determined when his superior filed the case against the condemned man. The condemned man did not have the chance to defend himself from the accusation that he was facing and all he could do in the end was to face the punishment that was put to him by the officer. This story can be related to the work of Foucault where the guilt of a condemned man is determined without a doubt by the sovereign in the eighteenth century. And people are being punished without any mercy in front of the public showing to all the power of the sovereign is ultimate. The condemned people were being penalized without any investigation. They were being punished depending on the vision of the sovereign about their offense to the law that was also set by the sovereign. The head is the law. That was the belief of the people back then. All the things that were said by the sovereign were absolute that time. Also, it was on the belief of the sovereign that all his words were the commandment in his place that no one will ever try to break it. And once broken, the law, he will put his punishment out of his vengeance to the condemned man. He will seek great vengeance to the condemned for he somewhat made fun of the things that the sovereign supposed in his place. And without any further investigation, his verdict is final supported by all the assumptions he had. And the punishment will be given as a public execution, with all the subordinates of the sovereign watching. This thing only shows that the sovereign is showing the people his power and how he exercise it and as well the victory of his law. Eventually as time passed, the concept of punishment has already changed, from a brutal way of punishment to a more just one. It was discussed in the story Foucault that the view of the people on punishment in time changed that they no longer favor the cruel way of punishing the wrong doers. The punishment was no longer directed to the body of the condemned man in the form of torture but to a form where the man and the society will learn. And to start the changes that they were doing, they needed to make a concrete law. The people back then decided to discuss the possible crimes that person could do and the possible punishment that they could give to the condemned man. And also, a lot deliberation will be done for them to be able to give the utmost consideration to the condemned. They discussed the relentlessness of the punishment that will be given and the situation where it will be given. The variability of the severity of the punishment will also be considered depending on the physical ability of the condemned man. All the possible consideration that they could give to the condemned man will be taken into action. A proper due process was also completed. The condemned man will not be punished without undergoing any investigation. The guilt of the person will be determined with a doubt until proven guilty. The verdict of the condemned man will not be simply based on the guilt of the person but to the proper assessments of the evidences laid. And the condemned man will eventually know the punishment he will get and he would also know the reasons why he will be penalized. It was also put into a consideration that the punishment system will be for the betterment of the society. The punishment system was made as the consequences of the crimes that were identified and not as a form of revenge to the condemned. The punishment system that will be given will ensure that there would no repetition of the crime in the future. That the punishment could have the minimal impression to the condemned man but maximum one to the other members of the society. A continuous study will be done regarding the origin of the punishment system and the changes it undergone to be able to reach its stage today. As these changes occur in the punishment system, the power that was solely to the sovereign was now compartmentalized to the different part of the society. The filing of accusation will be done in a different part of the society. As well the investigation will be done by another sector of the society and the final verdict will be given by a different sector of the society as well. The power of the sovereign in giving punishments will be distributed to these different sectors of the society. This compartmentalization was done so to decrease the bias that could be attained while processing the punishment of a condemned man. And a proper due process will be given to the condemned man. And through this as well, the condemned man will be given a chance to appeal for himself if ever he is not satisfied with the result of this trial. A fair trial is what everybody deserves. Reform was the key to the continuous change in the society. The power defined in the sovereign remains. He still has the absolute power or control over his subordinates. But then the powers that were given to the other sectors of the society were different from that of the sovereign. The knowledge that they had acquired from their studies became the key for them to have the power they had already. Knowledge is power; this was what Michel Foucault emphasized in his story. As they learned new things, they were able to make better ways to improve the punishment system that time. And it turned out that the knowledge that they had acquired did not just help them improve the punishment system but as well the laws and the over all situation of the society. It only means that a person who is knowledgeable knows his subjects and through the power he gained, he could do analysis about his subjects. And this knowledge-power relation made it possible for the people in those times analyzed the things that had happened in the past and relate them to their present. And through this, they were able to find out that the different methods that they were using in the present were better for the people rather than the harsh methods of the past. The positive outlook of the people towards things made their lives better. And as well the people in those times were living respect to the sovereign rather the fear that they had felt in the past. The obedience of the people will not be questioned, for they were showing respect to the authority. The respect that was gained through time will be observed, rather than the blind obedience that the people were being just obedient for they fear the authorities. The fear that may cause problems to the society in the future will always be present in their minds. With this knowledge, one can be confused. Like what happened to K in the book of The Trial by Franz Kafka, he knows that he did not do anything wrong but then he was suddenly arrested. He was arrested at the morning of his thirtieth birthday. He was arrested but accused with nothing. And the worst thing was that the warders that arrested him did not know the exact charge against K. he was brought then to the Inspector who was the one in charge of his arrest but then the Inspector himself did not know as well the reason why K was been arrested. Nobody would tell him the reason why was he on trial and the reason why he was arrested in the first place. Until the end that he was killed on his thirty-first birthday by the two men he did not know as well. In our chaotic society it is the law that binds it and makes significance for its existence. It is the law that becomes its backbone and the reason for its existence. When the people commit a crime, they seek the people who know the law to understand more. They review the written law to comprehend all the stuffs written on it. Like in the story presented above, K did not understand many things. He did not know the reason why he was arrested and why it was being kept from him. He looked for the law for him to comprehend but then there was no one who would explain things to him. These things were also felt by the condemned people in the eighteenth century, they were being penalized unfairly. They also seek for the understanding and the explanation of the things that are happening to them. They also seek for the processes that will be done during their punishment but they get no answer as well for all the things that involves their punishment is being kept secret by the high officials and the sovereign. And all that they do in their life is to wait for the sentence that awaits them, unfair but it was true. In our life there comes a time when we are confused of so many things as well. There comes a time that the things that are happening in our lives seems to have no meaning in us. There are things we do because they are the things that most people do as well, but in the end we do not understand those things. And there are things that we believe because they were the things that most people also believe. And also there are things in our life that we perform but we do not really know. All these things happen in ones life and it all depends on us on how we deal on these things. In the end when we seek for understanding, the only person that we could rely on is our own selves. We are the ones in those situations and we are the only ones who can make the analyses for our own selves. We should not be afraid of the truth for those things will set us free from all the confusions that we can think of. And to attain the comprehension that we require, we need knowledge to equip ourselves. We need to have enough knowledge to be able to analyze things. And through this knowledge we could earn power, the power that we could use in attaining a self composure. Understanding is not an easy thing, it is a process. And through this process we could see the insights and decrements of our own selves and the society. Knowledge is power, so we should not disregard the knowledge-power relation. References Foucault, Michel (1977). Discipline and Punish. Retrieved May 2008 from http://web.ics.purdue.edu/~felluga/punish.html Kafka, Franz (April 2005). The Trial. Retrieved May 2008 from http://www.gutenberg.org/dirs/etext05/ktria11.txt Kafka, Franz (February 2007). In the Penal Colony. Retrieved May 2008 from http://www.mala.bc.ca/~johnstoi/kafka/inthepenalcolony.htm Digeser, Peter (November 1992). The Fourth Face of Power. Retrieved May 2008 from http://www.jstor.org/pss/2132105

Disinterested Versus Uninterested

Disinterested Versus Uninterested The adjective disinterested means impartial and without bias. The adjective uninterested means indifferent or unconcerned. Examples I had a great desire to do a disinterested and pure thingto express my belief in something higher.(Saul Bellow, Henderson the Rain King, 1959)Disinterested intellectual curiosity is the life blood of real civilization. (G. M. Trevelyan)Americans are not isolationist; theyre uninterested. So foreign policy is neglected, presidents find it hard to lead, and the noisy few trump the quiet many. (James M. Lindsay, Foreign Affairs, September/October 2000) Usage Notes You can be disinterested in something but not uninterested, and vice versa. For instance, because Im not a betting man, I dont stand to gain or lose anything in the outcome of most sporting events; I might still enjoy watching a game: Im disinterested but not uninterested. Conversely, I might not care about the intricacies of tax policies, but I certainly have a stake in the outcome: Im uninterested but not disinterested.(Jack Lynch, Disinterested versus Uninterested, The English Language: A Users Guide. Focus Publishing, 2008)A large number of educated speakers and writers, for whatever reason, object to disinterested in the sense uninterested, unconcerneda sense it previously had but lost for awhileand want the word to have only the meaning impartial, unprejudiced. The criticized use has nevertheless gained such ground that it has practically driven out the other one. That change causes no harm to language as communication. We have merely lost a synonym for impartial and gained one for indifferent.(John Algeo, The Origins and Development of the English Language, 6th ed. Wadsworth, 2010) Practice (a) A lively, _____, persistent looking for truth is extraordinarily rare. (Henri Amiel) (b) There are no uninteresting things; there are only _____ people. Answers to Practice Exercises Answers to Practice Exercises:  Disinterested and Uninterested (a) A lively,  disinterested, persistent looking for truth is extraordinarily rare. (Henri Amiel) (b) There are no uninteresting things; there are only  uninterested  people.

Was Abraham Lincoln a racist Term Paper Example | Topics and Well Written Essays - 2000 words

Was Abraham Lincoln a racist - Term Paper Example ave evaluated the matter agree that calling Lincoln a racist is an overtone to his early political life; typically, in the late 1850s, on the debates with. Douglas, Lincoln spoke to what he considered to be basic black and white racial differences "which, in my [Lincolns] judgment, will probably forever forbid their [blacks] living together on the footing of perfect equality" (Gewen, 1). Additionally, Lincoln is known to have agreed that the blacks were not in some aspects equal to the whites, one of them being color but when it came to other aspects like the right to eat the bread without leave of anybody he was equal to Lincoln, Judge Douglas and any other man. From this and most of his statements, Lincoln depicts that his belief that both black and white were entitled to equal rights and protection under the Constitution. Lincoln, as president, struggled to the end of civil war and preserved the nation making him extensively sympathetic when it comes to the matter of slaves; moreover, it also increased the urge for equality among the races in America (Walker 1). Radically, Lincoln dropped his support for plans to colonize freed slaves to Africa after the Civil War after seeing over 200,000 African-Americans volunteer and fighters alongside Union forces; additionally, in 1865 Lincoln delivered an address in which he became the first activist president extending voting rights to African-Americans who fought for the Union. On this notion, Lincoln campaigned that there it was fair that people of the black color are denied some of the rights and franchise yet some of them serve their cause as soldiers and significant members of the society hence they should also experience the same privileges. Abraham Lincoln’s statement on this matter and others was an indication of his belief that any African American should a full political equality; unfortunately, this was the last speech that he made as initially said by John Wilkes Booth from the crowd (Zeeboe 1).

Understanding The Relationship Between Organisational Structure and Assignment

Understanding The Relationship Between Organisational Structure and Culture - Assignment Example Organizational structure can be seen as the method in which interconnected groups and organizations are set up in order to permit them to function effortlessly from a larger standpoint. Two major purposes of a successful structure are to guarantee effective communication among different parts of the company and increase coordination among different departments. In practice, of course, it is impossible to separate structure and culture of an organization. So while we create organizational structure that spells out the positions to be filled by members of an organization. It is mostly culture that defines the roles that go with these positions and the kinds of people who will fill them. In a practical sense, it is difficult to differentiate structure and culture. â€Å"So while we create organizational structure that spells out the positions to be filled by members of an organization, it’s mostly culture that defines the roles that go with those positions and the kinds of peopl e who will fill them† (GTP Organizer Training 2007). 2. Explain how the relationship between an organization’s structure and culture can   impact the performance of the business. The relationship between organizational culture and organizational structure plays an important role in creating an impact on the performance of business. The culture of management and the employees, situations, events, substance, information, processes and such elements are necessary for organizational decisions and movement. In addition, power, task and responsibility of the employees also influence the performance of a business. The management fixes a structure for the business, which involves culture as a... Understanding The Relationship Between Organisational Structure and Culture Presently there is a lot of  information and data available on the culture of organizations. Organizational structure and organizational culture are closely intertwined with one another. It is also the point of view through which people see their organization and its atmosphere. Organizational culture is more of a bigger picture, a more universal term that refers to a big umbrella of smaller issues and topics in an organization. The organizational structure denotes to the infrastructure of the organization and the numerous practices and methods involved in that infrastructure. This organizational structure assists an organizational culture run with reliability and efficiency, which is be the trademark of a healthy organizational structure. It is seen in a sports team, corporation,  or any other group that is large enough to generate its own organizational culture. This makes the organization structure an integral component of the organizational culture of the organization, but al so narrows out a very particular section of the culture as its own duty and responsibility. In terms of work behavior, an individual is expected to be provided with employment when the organization recognizes and understands the values he or she is concerned about. The values of a firm are often portrayed in the mission and vision statements of the company, which an aspect of the planning function.

Industrial application of energy audit Essay Example | Topics and Well Written Essays - 3000 words

Industrial application of energy audit - Essay Example 1.1 Background Energy conservation is important in all aspects of our lives. When firms produce goods to sell or provide services for customers they want to ensure that their services are competitively priced. In order for this to be possible firms have to ensure that they provide these services or produce these goods at the minimum cost possible. Energy cost is one of the main operating expenses for most firms. It is also the one that is most manageable or easiest to adjust in order to gain operating efficiencies. It is therefore important that firms find ways of minimising their energy costs in order to maximise the profitability of their operations. In order to make this possible they seek the help of energy conservation specialists/consultants who perform energy audits of facilities or equipments being used. 1.2 Types of energy audits There are two types of energy audits. ... mal consumption pattern for the items in use the bills were surveyed to determine if the KWh usage was in keeping with the manufacturer’s benchmark of the maximum energy use. The equipments were then assessed to determine if there were any defects that would result in excess energy usage. The facility was checked in terms of floor area and details were gathered on the hours of use of these equipments. The exterior and interior of the building and equipment were checked to determine what adjustments and repairs need to be done to effect energy conservation. The energy manager (proprietor/manager) was questioned to determine critical areas that require monitoring. Sub-meters were then placed in areas of particular concern and both hourly and or daily consumption data was taken for the day. An analysis was done of the results and sources of potential energy and cost savings were identified throughout the building. Some recommendations were then made for energy conservation and ma intenance measures to be put in place. 2.0 Details of the Audit Process It was determined that the preliminary audit was the most appropriate since there were no complexities in the structure of the building. However, it involved testing of equipments which are not generally done in a preliminary audit. 2.1 Pre-Site Work Obtain facility and contact details inclusive of address and telephone number (Appendix 1) Steps were taken to identify the average energy use in the industry, specifically as it relates to electricity consumption. Failing that the internet was checked to determine the energy use of specific equipment Specific energy systems and energy use were also evaluated Specific equipments used in the industry were researched to determine their annual energy (electricity) consumption

The Effect Of Dividend Policy Finance Essay

The Effect Of Dividend Policy Finance Essay The issue of how much a company should pay its stockholders as dividend is been of concern to managers. The optimal dividend policy of a firm depends on investors desire for capital gains as opposed to income, willingness to forgo dividends for future returns, and perception of risk associated with postponement of returns. Management is often in a dilemma; whether to pay dividends or to retain them for future investments with implications on share value. The study sought to determine the effects of dividend policy on the market share value in the banking industry in Kenya, using National Bank Kenya (NBK) as case for the study. The study applied an explanatory research design covering a proportionate sample of 100 shareholders drawn from a target population of 47,000 shareholders of National Bank of Kenya. Data was collected using a structured questionnaire. Both descriptive and inferential statistics were used to analyze data. The hypotheses were tested by use of Pearsons Moment Corr elation. With a response rate of 68%, the study established that NBK had a dividend policy as confirmed by 91% of the respondents. The study established a strong and positive correlation (0.850) between dividend payout and market share value, with a P-value of 0.000. There was a positive correlation (0.299) between dividend growth rate and market value of shares with a p-value is 0.013; hence establishing a significant relationship between variables. There was a positive correlation (0.502) between regularity of dividend declaration and market share value with a P-value was 0.000. Dividend policy had a significant effect on the market share value. The study recommends that management in banks and specifically National Bank Kenya must adjust the dividend policy in tandem with interests and requirements of shareholders to improve the market share value. Key Terms: Dividend policy, dividend payout, dividend declaration, share value Background to the Study Dividend policy has been a puzzle in corporate finance for several decades. Among numerous research subjects about dividend policy, the most popular one is the relationship between the dividend level and the share price of a firm. According to the dividend discount model (Gordon, 1959); it is feasible to derive that dividend payment augmentation should be accompanied by the value increase in a firm. Miller and Modigliani (1961) however, point out that the value of a firm is not influenced by current and future dividend decisions, which is well recognized as the dividend irrelevance theory. According to Kapoor (2009) dividend policy connotes to the payout policy, which managers pursue in deciding the size and pattern of cash distribution to shareholders over time. Therefore, managements primary goal is shareholders wealth maximization, which translates into maximizing the value of the company as measured by the price of its common stock. This goal can be achieved by giving the shareholders a fair payment on their investments. Gordon (1963) found that dividend policy of the company did affect the market prices of its shares. Share value is represented by the market price of the companys common stock, which, in turn, is the function of the companys investment, financing and dividend decisions. Dividend decisions are recognized as centrally important because of increasingly significant role of the finances in the firms overall growth strategy. Bishop et al., (2000) contends that managers must not only consider the question of how much of the companys earnings are needed for investment, but also take into consideration the possible effect of their decisions on share prices. According to Kapoor (2009), share prices of a firm tend to be reduced whenever there is a reduction in dividend payments. An announcement of dividend increase generates abnormal positive security returns and an announcement of dividend decrease generates abnormal negative security returns. A drop in share prices occurs because dividends have a signaling effect. The Research Problem Dividend policy is an integral part of financial management decision of a firm. There is adequate empirical evidence pointing to a strong relationship between dividend policy and stock market prices. However, managers are in a dilemma as to whether to pay large, small or zero percentage of their earnings as dividends or to retain them for future investments. This situation is occasioned by the different shareholder interests which management has to satisfy. For instance, some shareholders prefer to be paid dividends every year for investing in other profitable businesses while other shareholders would like to invest in the future and thus, prefer that the dividends be retained by the company for re-investment. However, most investors prefer companies with high pay outs because they are less risky than potential future capital gains. Since the bank management is dealing with competing interests of various shareholders, the kind of dividend policy they adopt may have either positive or negative effects on the share prices of the company. According to Miller and Modigliani (1961), the effect of a firms dividend policy on the current price of its shares is a matter of considerable importance, not only to management who must set the policy, but also to investors planning portfolios and to economists seeking to understand and appraise the functioning of the capital market. It is this basis that the study sought to establish the effects of dividend policy on market share value in the banking industry in Kenya, using National Bank of Kenya as a case for the study. Purpose of the Study The purpose of the study the study was to determine the effects of dividend policy on the market share value in the banking industry in Kenya, using case study of National Bank of Kenya. The constructs of dividend policy that were correlated with market share value were dividend growth rate, dividend payout, and regularity of dividend declaration. Research Methodology The study adopted an explanatory research design. The design allowed description of the variable characteristics and systematic explanation of the relationships amongst them as supported by Mugenda and Mugenda (2003) and Kothari (2004). The study covered a sample of 100 respondents from a population of 47,000 general public shareholders. The sample was selected through proportionate stratified sampling method; where the population was divided into five strata; shareholders with 1 to 100,000 shares, shareholders with shares between 100,001 and 200,000 shares, shareholders with 20001 to 30000 shares, shareholders with 300,001 to 400,000 shares and shareholders with over 400,000 shares. A structured, self-administered questionnaire was used to collect data from the respondents. Descriptive statistics including frequencies, percentages and mean were used to describe variable characteristics while inferential statistics (correlation and regression) were used to determine and explain varia ble relationships. The research hypotheses were tested using Pearsons Moment Correlation was used to test the research hypotheses. The study also tested the working of the postulated model using ANOVA while regression analysis was applied to test the test model in explaining the variable relationships. Results and Analysis The study achieved a response rate of 68%. Among the respondents, 32% were female while 68% were male; implying that majority of the National Bank of Kenya (NBK) shareholders is male. Dividend Policy The respondents were given a set of statements regarding NBKs dividend policy and asked to indicate extent to which they agreed with each one of them. According to the results (Table 1), 91% of the respondents were aware that National Bank of Kenya had a dividend policy. However, 59% indicated that the Dividend Policy was not well communicated to and understood by the shareholders. Table 1: Status of Dividend Policy Statement/ item Strongly Disagree Disagree Agree Strongly Agree Mean Frq % Frq % Frq % Frq % National Bank of Kenya has a Dividend Policy 5 7.4 1 1.5 29 42.6 33 48.5 3.32 NBK dividends policy is well understood by its shareholders 19 27.9 21 30.9 14 20.6 14 20.6 2.34 Dividend policy has been and continues to be important factor driving NBK share value 1 1.5 12 17.6 19 27.9 36 52.9 3.32 Formal dividend policy gives shareholders the assurance of predictable dividend payments 0 0 22 32.4 32 47.1 14 20.6 2.88 The study revealed that the dividend policy has been and continues to be an important factor driving NBK share value as supported by 80% of the respondents. Respondents were of the view that a formal dividend policy gives shareholders the assurance of predictable dividend payments (68%). The importance of the dividend policy to shareholders was clearly underscored as demonstrated by above average mean scores on all the constructs on which it was measured except the understanding of the policy by shareholders. Dividend Payments on Share Value Objective one sought to assess the effects of dividend payout on the market share value of National Bank of Kenya. An assessment of the effects of dividend payments on share value involved a set of statement which the respondents were required to indicate the extent to which they agreed with them. As shown in Table 2, 90% of the respondents pointed out that they considered payment of dividends a major element in the value of shares, meaning that an increase in a dividend payout causes an increase in share price as supported by 88% of the respondents. However, 79% felt that dividend payment did not remove excess cash flows that could be invested in unprofitable projects. Majority of the respondents (98%) strongly submitted that dividend paying firms are more closely scrutinized by financial analysts to assess managements role in building share value. Further they felt that dividend payments should satisfy shareholders dividend preference rather than depend on the firms investing or financing decisions. The study also revealed that dividend payments are better signals of confidential information than other media forms (98%); thus raising share value. The respondents were also of the view that payment of dividends is a demonstration that that the firm is strong enough and can pass up profitable investments (98%). Moreover, most of the respondents (78%) agreed that they valued their shares at NBK because of the regular dividend payments they received. Out of eight items used to measure the effect of dividend payment on share value, five of them received above average mean scores ranging between 2.97 to 3.76; a demonstration that that indeed dividend pay ment is a major determinant of share value. Table 2: Effects of Dividend Payments on Market Share Value Statement/ item Strongly Disagree Disagree Agree Strongly Agree Mean Fre % Fre % Fre % Fre % I consider payment of dividends a major element in the value of shares I hold at National Bank of Kenya 2 2.9 5 7.4 29 42.6 32 47.1 3.34 An increase in a dividend payout causes an increase in share price 0 0 8 11.8 28 41.2 32 47.1 2.18 Dividend payment removes excess cash flows that could be invested in unprofitable projects 0 0 54 79.4 14 20.6 0 0 2.21 Dividend paying firms are more closely scrutinized by financial analysts to assess managements role in building share value 0 0 1 1.5 41 60.3 26 38.2 2.97 Dividend payments should satisfy shareholders dividend preference rather than depend on the firms investing or financing decisions 0 0 1 1.5 41 60.3 26 38.2 3.37 Dividend payments are better signals of confidential information than other media forms; thus raising share value 0 0 1 1.5 14 20.6 53 77.9 3.76 In my view, payment of dividends is a demonstration that that the firm is strong enough and can pass up profitable investments. 0 0 1 1.5 14 20.6 53 77.9 3.76 I value my shares at NBK because of the regular dividend payments I receive. 5 7.4 10 14.7 20 29.4 33 48.5 2.21 The study tested a hypothesis which stated that Dividend payout does not significantly affect the market value of National Bank of Kenya shares. The hypothesis was tested using Pearsons Moment Correlation Coefficient. The test was conducted to establish the relationship between dividend payout and market value of shares. The study (Table 3) revealed a positive correlation (0.850) between dividend payout and market value of NBK shares with a P-value of 0.000, less than the alpha of 0.01; hence establishing a strong and significant relationship between variables. Table 3: Correlation Analysis on Dividend Payout and Market Share Value Dividend payout Market value of NBK shares Dividend pay out Pearson Correlation 1 0.850(**) Sig. (2-tailed) . .000 N 68 68 Market value of NBK shares Pearson Correlation 0.850(**) 1 Sig. (2-tailed) .000 . N 68 68 ** Correlation is significant at the 0.01 level (2-tailed). Dividend Growth Rate and Share Value Objective two sought to determine the effects of dividend growth rate on market value of National Bank of Kenya shares. This was a measured on a number of statements in which respondents were asked to indicate the extent to which they agreed with them. As shown in Table 4, all the respondents disagreed with the statement that dividend payments at National Bank of Kenya have been experiencing steady growth over the years. However, they (98%) pointed that maintenance of steady and growing dividend payments increases a firms share value. Further, 98% of the respondents were of the view that adjusting dividend payments towards a target payout ratio will increase a firms share value. The study also established that 78% of the respondents valued the shares they held with National Bank of Kenya because of steady growth in dividend payments; contradicting Levinsohn (2003) who observes that paying dividends will influence how a company finances its growth but will not have a lasting effect on its value in the marketplace. Though majority of the respondents disagreed with the contention that the dividend payments have been experiencing steady growth over the years, all the others attributes used to measure the effect of dividend growth rate on market share value all the other attributes were favourably rated with mean scores of over 3.3 out of 5; demonstrating that dividend growth is a major determinant in market share value. Table 4: Effects of Dividend Growth Rate on Market Share Value Statement/ item Strongly Disagree Disagree Agree Strongly Agree Mean Fre % Fre % Fre % Fre % NBK dividend payments have been experiencing steady growth over the years 14 20.6 54 79.4 0 0 0 0 1.79 Maintenance of steady and growing dividend payments increases a firms share value 0 0 1 1.5 14 20.6 53 77.9 3.76 Adjusting dividend payments towards a target payout ratio will increase a firms share value 0 0 1 1.5 40 58.8 27 39.7 3.38 I value the shares I hold with National Bank of Kenya because of steady growth in dividend payments 3 4.4 12 17.6 20 29.4 33 48.5 3.32 The study tested a hypothesis which stated that Dividend growth rate does not significantly affect the market value of National Bank of Kenya shares, using Pearsons Moment Correlation. As shown in Table 5, there is a positive correlation (0.299) between dividend growth rate and market value of NBK shares with a P-value of 0.013 less than the alpha of 0.05; hence establishing a high significant relationship between the study variables. This shows that dividend growth rate has a significant effect on market value of NBK shares. Table 5: Correlation Analysis on Dividend Growth Rate and Market Share Value Dividend growth rate Market value of NBK shares Dividend growth rate Pearson Correlation 1 .299(*) Sig. (2-tailed) . .013 N 68 68 Market value of NBK shares Pearson Correlation .299(*) 1 Sig. (2-tailed) .013 . N 68 68 * Correlation is significant at the 0.05 level (2-tailed). Regularity of Dividend Declaration and Market Share Value Objective three sought to establish the effects of regularity of dividend declaration on the market share value through a set of statements. According to the study findings (Table 6), 77% of the respondents considered regularity of dividend declaration as major element in the value of shares they owned whereas 88% felt that regular dividend declaration caused an increase in share price. Further, 90% of the respondents submitted that regular dividend declaring firms have more shareholders and their share value is high. Table 6: Effects of Regularity of Dividend Declaration on Market Share Value Statement/ item Strongly Disagree Disagree Agree Strongly Agree Mean Fre % Fre % Fre % Fre % I consider regularity of dividend declaration a major element in the value of shares I hold at National Bank of Kenya 1 1.5 14 20.6 29 42.6 24 35.3 3.12 Regularity of dividend declaration causes an increase in share price 2 2.9 6 8.8 28 41.2 32 47.1 3.32 Regular dividend declaring firms have more shareholders and their share value is high. 0 0 7 10.3 7 10.3 54 79.4 3.69 I value my shares at NBK because of the regular dividend payments I receive 26 38.2 28 41.2 0 0 14 20.6 2.03 The results further revealed that majority of the respondents (79%) disagreed with the contention that they valued their shares because of the regularity of dividend declaration with a mean score of 2.03 out of a maximum of 5. In general, three out of the four attributes measuring the effect of regularity of dividend payments on share value received high mean scores of over 3 out of 5; implying that regularity of dividend payments is positively related to share price. It follows thereof that when dividends are not regular, the share value drops and vice versa. The study tested a hypothesis which stated that regularity of dividend declaration does not significantly affect the market value of National Bank of Kenya shares using Pearsons Moment Correlation. As shown in Table 7, the study established a positive correlation of 0.502 with P-value of 0.000, less than the alpha of 0.01; hence demonstrating a high and significant relationship between the two variables. Therefore, regularity of dividend declaration has a significant effect on market value of shares. The results agrees with Pettit (1972) observations that announcements of dividend increases are followed by significant price increases and that announcements of dividend decreases are followed by significant price drops. Table 7: Correlation Analysis on Regularity of Dividend Declaration and Market Share Value Regularity of dividend declaration Market value of NBK shares Regularity of dividend declaration Pearson Correlation 1 0.502(**) Sig. (2-tailed) . 0.000 N 68 68 Market value of NBK shares Pearson Correlation 0.502(**) 1 Sig. (2-tailed) 0.000 . N 68 68 ** Correlation is significant at the 0.01 level (2-tailed). When asked to rate the level of market share value (Figure 1), 3% rated the value as very low, 57% rated it low, with 36% rating the value as high and 4% as very high. This shows that majority (60%) of the shareholders considered the market value of the shares as low. Figure 1: Level of market share value Model Testing The model had hypothesized that regularity of dividend declaration, dividend growth rate and dividend payouts were responsible for variation in the market share value. To test this model multiple regression was run with market share value as the dependent variable and regularity of dividend declaration, dividend growth rate and dividend payouts as the independent variables. According to the study results in Table 8, the three independent variables account for 68% (R Square, 0.679) of the variations in market share value. Table 8: Regression Model Summary Model R R Square Adjusted R Square Std. Error of the Estimate 1 .824(a) .679 .664 .530 Predictors: (Constant), regularity of dividend declaration, dividend growth rate and dividend payouts. The study conducted ANOVA to test determine whether the model works. As shown in Table 9, the F value was 45.110 at significance level of 0.00. Since the significance level (0.00) was far much less than the alpha level 0.05, it implies that the three independent variables (dividend payout, dividend growth rate and regularity of dividend declaration) contributed significantly to variations in the dependent variable (market share value). Table 9: ANOVA Results Model Sum of Squares df Mean Square F Sig. 1 Regression 38.060 3 12.687 45.110 .000(a) Residual 17.999 64 .281 Total 56.059 67 a. Predictors: (Constant): regularity of dividend declaration, dividend growth rate and dividend payouts; b. Dependent Variable: market value of NBK shares Regression analysis was conducted to determine the effects of dividend payout, dividend growth rate and regularity of dividend declaration on market share value. The study established that an increase in regularity of dividend payout, dividend growth rate and regularity of dividend declaration by one unit would increase market value of NBK shares by 0.615, 0.393 and 0.217 respectively. This implies that all the three independent variables significantly affect market share value, though dividend payout is more significant than the other two variables. Table 10: Regression Coefficient Model Un standardized Coefficients Standardized Coefficients t Sig. B Std. Error Beta (Constant) .463 .239 1.939 .057 Dividend payout .615 .075 .758 8.161 .000 Dividend growth rate .393 .130 .218 3.015 .004 Regularity of dividend declaration .217 .057 .223 3.793 .000 a. Dependent Variable: market value of NBK shares Conclusions It is palpable that National Bank of Kenya had a dividend policy, which has been and continues to be important factor driving NBK share value. However, it was not well understood by the most of the shareholders. The NBK shareholders considered payment of dividends is as major element in the value of shares as it demonstrated that that the firm is strong enough and can pass up profitable investments. It is also evident that that an increase in a dividend payout causes an increase in share price. It is also clear from the results that dividend payments have been experiencing declining over the last five years. Although, maintenance of steady and growing dividend payments has been confirmed to increase the firms share value, adjusting dividend payments towards a target payout ratio will also increase a firms share value. Consequently, steady growth in dividend payments makes the shareholders value their shares more. Regularity of dividend declaration was also viewed as a major element w ith regards to the value of shares as shareholders believed that regular dividend declaration caused an increase in share price. Based on the results, dividend payout, dividend growth rate and regularity of dividend declaration significantly influenced the market value of National Bank of Kenya shares. Recommendations Based on the findings, the study made the following recommendation; Dividend policy has proven to be of paramount importance with regards to the market share value and thus NBKs management should avail the policy to its shareholders. This grants them an opportunity to contribute to the improvement of the policy. NBK must adjust its dividend policy to improve the market value of its shares. For an optimal dividend policy to be achieved and maintained, the bank management should maintain regular dividend payment, and also pay a special dividend or initiate a share repurchase programme. Any changes in policy should be shared with the shareholders.