Harrison Bergeron the Power of Conformity free essay sample

The Power of Conformity in the public eye we long to get the impression of an ideal world, a visionary arrangement of political or social flawlessness. An ideal world is a belief system that comprises of an ideal society that runs by flawless guidelines, and along these lines, our general public attempts to put administers on us as people with regards to what is adequate and what isn't so as to accomplish this feeling of harmony. We are then left with choosing for ourselves whether to adjust to such a social respectability. In Harrison Bergeron, we experience a general public that has at last arrived at complete equity according to the creator. In any case, all through the content, we discover that our desires that are forced by society could bring about disorder and that there is a degree of threat that complete equity presents with it. We live in a general public where rivalry is esteemed, a specific measure of rivalry has consistently been acceptable. We will compose a custom paper test on Harrison Bergeron: the Power of Conformity or on the other hand any comparable subject explicitly for you Don't WasteYour Time Recruit WRITER Just 13.90/page From a wellbeing angle, rivalry makes us work more diligently and train to be better competitors, and in this manner more beneficial as a rule. From aâ business outlook, it drives organizations to improve their items, to smooth out their creation techniques and build up the best strategies for appropriating products. Indeed, even in human services, when doctors contend to be the best in their fields, it drives them to grow new clinical revelations. Rivalry as an aggregate presents our reality, which is a positive bit of leeway for us. In Harrison Bergeron, we are confronted with our impression of what is by all accounts an ideal world, to be cultivated. For some odd reason, when Kurt Vonnegut, Jr. composes, â€Å"They were troubled with band loads and sacks of birdshot, and their appearances were veiled, so nobody, seeing a free and elegant signal or a pretty face, would feel like the feline medication in. (Harrison Bergeron, Kurt Vonnegut, Jr. ), he uncovers the extreme estimates that were expected to occur all together for our objective of an idealistic culture to exist. The artists on the TV screen were given such outrageous debilitations that couple of tumbled to the ground, this measure was made with the goal that they would not seem, by all accounts, to be better than any other person, so everybody would be the equivalent. In reality be that as it may, this hypothesis appears to be ridiculous to many, as in spite of the fact that everybody is at long last rewarded the equivalent, they are completely, precisely what it is, the equivalent. In this world, human instinct would be stifled through this absence of choice you are proposing and a significant number of us wish to seek after an energizing life, life loaded with rushes and enthusiasm. This is unimaginable without a surge of blood, which for the most part originates from an inappropriate things, and without these variables which don't exist in an idealistic culture, our reality would gradually disintegrate. Also, when Vonnegut Jr. composes Hazel’s line, â€Å"Reckon it’d fall all separated, society. † (Harrison Bergeron, Kurt Vonnegut, Jr. , Vonnegut is showing the wandering, illogical associations that have gotten standard in this anecdotal society. During this discussion, George can plan a thought that society would break down if individuals somehow managed to dismiss the laws and to represent that thought as a theoretical inquiry, but since he is hindered by the clamor in his impediment, he forgets about his discussion. Despite the fact th at Hazel can following his thinking, he can't recall what he was discussing and she was not brilliant enough to raise the subject once more. The upsetting reality in this is the law of fairness goes unchallenged not on the grounds that residents had faith in them profoundly but since they are too confounded to even consider figuring out what they think about the laws in any case. On the off chance that George had the option to think in harmony for a couple of hours, he may come to accept that the laws he protects are ludicrous. In any case, these laws, against which he would almost certainly dissent on the off chance that he could, are the ones that keep him from speculation for in excess of a couple of moments at a stretch. As a general rule, this again transfers back to our blemished idealistic culture, in the event that we were to completely make this universe of complete balance, there will the individuals who will be not able to think appropriately which nullifies the point of making everybody equivalent. It doesn’t permit individuals an opportunity to totally make the majority of what has been given to them. Ultimately, an enormous favorable position of not complying with each desire given by society, is that individuals will see us, maybe just because, without a veil. We will be consistent with ourselves as well as other people will see who we really are within. They will see our gifts, flaws, and inclinations. They will have the chance to acknowledge us on our own terms. Notwithstanding the hypothesis behind this, this wasn’t the case for where the content, Harrison Bergeron, occurred. When Kurt Vonnegut, Jr. composes, â€Å"Harrison tore the lashes of his impairment saddle like wet tissue paper, tore ties ensured to help 5,000 pounds. † (Harrison Bergeron, Kurt Vonnegut, Jr. ), He is giving us how Harrison speaks to the sparkle of insubordination and singularity that despite everything exists. He has none of the resignation or dreadfulness that the others depicted, yet rather he is a misrepresented alpha male who longs for power. At the point when Harrison rips off his steel restrictions and impediment, the physical quality and excellence he uncovers reminds a few perusers that underneath their own limitations and debilitations, they also are as yet gifted or flawless. In today’s age, we have been educated to live by the standards that have been played before us, with not very many setting out to break them, yet actually, there are places where we can step outside of that container, places which permit us to become people with receptive outlooks, places where we can genuinely act naturally without adjusting to any desires forced by society, since that is, reality behind the intensity of congruity.

A Trip to an Unfamiliar Place

Adwoa An Adu 10/1/12 English 101 Final Draft A Trip to a new spot everything began when I was called to see the head of my school (secondary school), we were really five young ladies included and we were going to England since we had a trade program with a school in Kent, England called the Weald of Kent Grammar School for young ladies. I was so energized in light of the fact that it was my first time traveling outside Africa and it had a decent effect on me. On the whole, we were around thirty understudies picked and these understudies ought to be acceptable scholastically and furthermore have great morals.Before we left for England there were a ton of arrangements we did while we were motel school, we took in some new moves, sonnets in French and different tongues in my nation Ghana, this piece of learning moves was clever in light of the fact that it was so difficult for since I am not a decent artist but rather I endured toward the end. We additionally learnt different societies since we would have a few introductions in the school and we didn’t overlook ailments that are slaughtering Africans like Malaria, AIDS, Tuberculosis, etc, we did investigates on these when we returned home on an excursion. We returned to class from our get-away with our baggage prepared to leave for England.From school to the air terminal was extremely exhausting, it was about an hour and thirty minutes’ drive, we left school around 6pm and showed up at the air terminal 8:30pm our plane was taking off at 12 PM so we stayed nearby the air terminal for a few hours. My father was there with so was different guardians with their girls. I had blended emotions at the time my father was there till he left since I was pitiful and the way that I was leaving him and glad since I was venturing out to a spot I had never been. We checked in at 10pm and the plane took off at 12 midnight.It was exhausting in the plane so I rested from Ghana to Morocco where we made a travel and we t ook another plane from Morocco to London Airport where the Weald of Kent young ladies picked us from they took us to their school and we met the families we would live with I met my own family as well and we went to their home. My first day with them was an inclination I can’t truly express with words yet I will say I was extremely modest in light of the fact that I hadn’t come into contact with British or the Whites before yet after my third day I coexisted well with them and felt upbeat living with my new family, they were exceptionally superb people.Except for quite a long time, each morning I went to class with Laura and Laura was the understudy I had come to live with her family. My first day at Weald of Kent Grammar School was energizing since as a matter of first importance, I was wondered about the site of the school excellent structure it was and the grass are kept short and clean. Classes with them was incredible, we had a Social Studies and Japanese classes and I adored it I took in some new words in Japanese language. We had classes the main week from Monday to Friday and toward the end of the week I went through at home with my family.The one week from now we went with the head of the school to visit the city of London we went to the Buckingham Palace where the Queen of England lived, there were many individuals around in light of the fact that a procession was being held before the royal residence. From that point we proceeded to see the London Eye it’s an immense Ferris arranged on the River Thames in England, we additionally traveled on the River Thames it was fun and a decent encounter. We likewise took a few pictures before the Westminster Abbey this is a university church of St Peter, an exceptionally enormous one arranged in the city of Westminster my loved ones cherished the photos when I demonstrated it to them back in Ghana.There were a ton of incredible thing we saw like the check Tower in Westminster, the Tower of London, excellent shopping centers where we shopped in actuality I truly had a ball with my associates. In the subsequent week, Thursday correctly, we returned to class and I went to a French class which we viewed a film we were to investigate, I adored it so much and the explanation that caused me to make the most of their classes is their method of instructing and learning, it’s radiant, exceptionally simple to follow the educator, extremely straightforward and it’s alright to solicit questions.They have a great deal from offices that makes learning simpler contrasted with my school in Africa where we don’t get such chances yet in the event that we adjusted such procedures will make going to class fun and simple. On Friday night, a goodbye function was held at the school premises since we were leaving the following day on that night we did some African moves, discussed African sonnets, some social introductions and they likewise gave us a few exhibitions since it was a trade program.When I returned home that Friday night, I pressed all my stuff prepared for tomorrow I was dismal however I invested some energy with the family we discussed Ghana contrasted with England and the wished to visit one day. The following morning we as a whole met at the school and a transport took us to the air terminal, in reality this excursion was a truly paramount one which is consistently in my recollections particularly in light of the manner in which the instructors at the school educated and how they instructed us to learn changed my observation about learning and that was an excellent effect it had on me and I wish to go out traveling to England the subsequent time.

Research Topics Example

Research Topics Example Research Topics â€" Essay Example > An Analysis of Competitive Advantage in the UK e Company By submission Introduction OUTSURGE is an e cigarette technology- led global company that was born out of a passion for innovative technology, design and quality products. The company aspires to research and build up an extensive collection of cutting edge goods that confront the standard in industry and assist consumers all over the world achieve more and get satisfaction. The company is currently facing huge competition from large organizations already established in the country. The major competitor being the e SHISHA Company the largely dominates the market share. E OUTSURGE beginning a small starting enterprise it is experiencing a lot of hindrances to penetration into the market by this the frustrations of barriers of entry by large organizations such as the e SHISHA. With the headquarters in the UK and growing links in various countries the main aim is to be accessible to as many people as possible around the world. To achieving this, the company has to grow its business and reflect positivity to customers, shareholders and society through our products. Being a customer-centered company, the company is determined to build outstanding products as compared to other products already exciting in the market. This will be achieved through research and using new technological equipments. By making sure synergy among various departments, the company is continuously determined to generate a stupendous portfolio of products for all customers. The demand for telecommunication services has increased rapidly during the last decade, particularly in the areas of mobile phone; with increased competition in the industry companies must identify a strategy to ensure survival in the market as well as the control of the market share. This global demand is very much triggered by the globalization of business operations across all industries, and the associated with it labor, capital and resource mobility. At national level the increasing demand for information and communication services comes along with changes in life style and living standards of peop le Literature review How can OUTSARGE an e cigarette company enter into an already saturated market? OBJECTIVES This paper aims at exploring the identifiable advantages that are associated with diversifying production. Benefits realized by an organization implementing competitive advantage strategy. This proposal will also seek to analyze the competitive advantage in the UK mobile phone industry. Also the paper will seek to know how an e cigarette company can successfully enter into an already saturated market like the example of the UK market which is fully saturated with such business. The principal oblige for growth and development in the mobile phones and the information technology industry is coupled with the rapidity of new technology execution, which diversifies the market potential by introducing new services, and up bringing new capabilities to major players, as well as reducing their costs. Further factors affecting the antagonism and growth in the industry are de-regulation and privatization, and government efforts to change the monopoly position of the industry. In order to effectively analyze the competitive analysis in the UK mobile industry, we will appreciate the contribution of Michael porter theory of competitive advantage. In 1980 Michael Porter came up with a practical model of rivalry, based on economic principles. Porter's research on industrial groups uncovered five determinants of long-term industry profitability (Porter, 1985). First is the character of rivalry among competing companies in the industry. This is brought about by companies trying to secure the market share for the largely produced product or service for a small market. OUTSARGE will look forward to establish means to secure its market share through provision of high quality goods. Secondly is fear of additional entry. If there are substantial barriers to entry, the companies in the industry will do better than if the barriers are weak. The e cigarette market in the UK is largely dominated by huge investments companies like the e SHISHA and thus the companies crea te a great barrier for small companies entering the market like OUTSURGE. Another factor is the risk of existence of substituting products or services. If customers have numerous alternatives from which to choose, the industry's profitability decreases (Rothaermel, 2001b), to be able to survive the harsh competition in the industry e OUTSURGE looks forward to diversifying its products market. The e SHISHA Company offers delivery services that new and small companies entering the market may not be able to offer. The other factors are the bargaining power of suppliers and buyers. When suppliers are able to alter the price of the firms input by dictating the prices, it becomes difficult for small upcoming companies to penetrate the market, When buyers have the capacity to determine the product prices or even order of extra services, from the producer it becomes difficult for the firm to increase and sustain its profitability expectations. Large establishments like the SHISHA may be in a position to offer these services such as delivery of goods. This is because the company is already stable. In order to gain competitive advantage in its marketing strategies in the mobile phone industry in UK, OUTSURGE must consider undertaking the following steps; Identify the target market and distinguish it by socioeconomic, demographic, and common characteristics or individual needs that make them the potential customers for the product. Identify other businesses that are going after the same target group. Identify what is different with these companies from our company. Use competitors as learning tools by assessing their business models and imitate their strengths while using their weaknesses to advantage the company. Gain custo mers perception about the company’s product knowledge and carry out necessary improvements. In some cases, the company’s ability to manipulate hurdles to enter and compete in its market becomes an effective tool against new competition, further entrenching the business and preserving its profit potential for the foreseeable future (Caves Porter 1977). Once you’ve gained a competitive advantage, your work is far from complete. Constantly maintain your competitive advantage is essential to achieve the set objectives of the firm. You can maintain your competitive advantage by predicting future trends in your industry, constantly researching and monitoring your competitors, and adapting to your customer’s wants and needs (Barney 1991). Conclusion To achieve competitive advantage and maintain the control of the mobile phone industry OUTSURGE has to put in place SMART marketing strategy. Diversify the market with the current trend of rise in levels of technology. This will ensure that the company is able to survive in the highly competitive industry. References Barney, J 1991. Firm resources and sustained competitive advantage, Journal of Management, 17(1), 99â€"120. Caves, R., Porter, M E 1977. From entry barriers to mobility barriers, Quarterly Journal of Economics, 91 (2), 241â€"262, Drucker, R1994. The theory of business. Harvard Business Review, 75 (Septemberâ€"October), 95â€"105. Porter, M 1985. Competitive advantage: Creating and sustaining superior performance, New York: Free Press. Porter, G 1996. What is strategy? Harvard Business Review, 77 (Novemberâ€"December), 61â€"78. Rothaermel, T 2001a. Incumbent’s advantage through exploiting complementary assets via inter-firm cooperation Strategic, Management Journal, 22 (6â€"7), 687â€"699. Rothaermel, T 2001b, Complementary assets, strategic alliances, and the incumbent’s advantage: An empirical study of industry and firm effects in the biopharmaceutical industry. Research Policy, 30 (8),

Corruption of Criminal Justice System - Free Essay Example

Sample details Pages: 2 Words: 501 Downloads: 2 Date added: 2019/02/20 Category Society Essay Level High school Tags: Criminal Justice Essay Did you like this example? Over the years, acts of corruption by the administrations in authority have for a long time shaken the public faith in government. However, the loss of public confidence is particularly acute when those involved are the police. Unfortunately, the police have acquired a dubious reputation. Don’t waste time! Our writers will create an original "Corruption of Criminal Justice System" essay for you Create order They have been accused of committing acts of corruption which might include abuse of authority, money laundering, concealing of criminals and also the violation of human rights (Corinthia, 85). As a result, such inhuman acts have led to mass public outcry hence putting the criminal justice system at a tight spot due to the increasing number of attacks resulting from police brutality. When the security agencies disrespect the law and fail to honor their code of conduct, they inadvertently promote a culture of corruption that breeds deception, greed, and discrimination (Corinthia, 85). Police corruption exists because police culture protects and embraces officers who intentionally, execute innocent people. Additionally, the culture is promoted when close ranks officers to the perpetrators of the crime, cover up knowledge of an officers misconduct with the aim of self-preservation. This culture of corruption arises when there is a failure in the recruitment process, lack of resources and failure of the courts to be accountable. As a result, the public acquires a negative attitude towards the judicial and legal systems that condone police impunity (Corinthia, 87). Most security departments in which corruption is rife tend to have weaknesses in the recruitment process. This is because the police units do not adequately investigate the officers been recruited or trained. As a result, some of these officers tend to have serious criminal records that undermine the confidence in law enforcement. Lack of resources in the police department stems from educational and cultural deficiencies. Research shows that most security departments lack funds to pay the security officers who then end up extorting innocent civilians and receiving bribes to survive (Corinthia, 89). Additionally, some of the security officers act as hit men for organized criminal gangs for them to be paid lucratively. The judicial system has been accused of lacking integrity and accountability when hearing cases that concern officers who have abused their powers in the line of duty. In most cases, prosecutors have been accused of covering up the evidence and using vague law in the prosecution of the facts (Corinthia, 91). Additionally, the courts have been accused of turning a blind eye to police brutality and also failing to mete out befitting punishment for impunity. Thus, lack of judicial accountability reflects implementation of vague laws that put inadequate restrictions on security agencies. It also reveals that the state has failed to criticize police impunity hence, police brutality will always creep in where justice gatekeepers fail to shut the door in its face (Corinthia, 97). In conclusion, to reduce police brutality, laws must be passed with zero tolerance for corruption. Furthermore, the state must provide adequate resources to cater for the officers and finally, proper monitoring policies must be established to ensure that the police serve the citizens per the law.

Effects Of Manipulative Materials On Mathematics...

Effects of manipulative materials in mathematics instruction. Journal for research in mathematics education, 498-505. 1. Main argument or point? The paper argues that effectiveness in usage of manipulative learning depends on prolonged usage of concrete symbolic materials in learning and teaching across the ages in child learning process. However, the paper does not clearly outline particular manipulative learning that should be employed across the grades. 2. Structure of the argument: main sub-points and argumentation analysis? The main sub points in this paper is to determine if there are predetermined situations where manipulative is appropriate for learning and which particular manipulatives to use and when. 3. How does this piece relate to the field? The piece relates to the field in the sense that it outlines the trainings that teachers undergo that helps them become effective in applying use of manipulatives. It also explores how concrete (give examples from the article and talk more about it) 4. The Why is this piece important? The piece is important since it helps in outlining if indeed the use of manipulative materials has significance on teachers performance and children learning across the grades. Various forms of manipulative learning are clearly elucidated such as pictorials and use of instructional conditions (talk more about them explain them why they important) that helps to outline the effectiveness of using manipulatives. 5. What were the mainShow MoreRelatedUsing Manipulatives Help Increase Mathematical Performance For Students With A Learning Disability1539 Words   |  7 Pagesmay help these students when they are trying to understand number sense. A number of studies have been done on trying to determine if using manipulatives help increase mathematical performance for students with a learning disability. Tournaki, Bae, and Kerekes (2008) conducted a study to figure out the effects on mathematical performance when using a manipulative, the rekenrek, to teach addition and subtraction for children with a learning disability. A rekenrek consists of two rows of 10 beads andRead MoreMath strategies for special education students Essay example1164 Words   |  5 Pageslack of self value, and other disruptive behaviors may occur as a result of the difficulties the special education students have in the classroom. In order to help these students to overcome poor problem solving skills, effective strate gy based instruction is needed. Teachers look to research for effective strategies to successfully instruct these students (Maccini Strickland, 2010). Finding meaningful problem-solving strategies that can motivate and extend special education students’ knowledgeRead MoreInstrumentation in Mathematics8575 Words   |  35 PagesINSTRUMENTATION IN MATHEMATICS Prepared BY: MA. KARLA RACHELLE ULIBAS BSED - II Prepared For: JUBERT GANAPAO INSTRUCTOR TABLE OF CONTENTS Title Page i Table of Contents ii-v Theoretical Considerations, Literature and Research Studies on the Use of Learning Aids 1-16 Activity Sheets 17 On Numbers Complete the Skip Counting Series 18-19 On Measurement Metric Length 20 Metric Weight 21 Metric Capacity 22 Compare Metric Measurements 23 Metric System MeasurementRead MoreInstructional Sequence Is Useful For Teachers Of Secondary Mathematics Learners1485 Words   |  6 PagesIntroduction Generalized instructional sequence, also referred to as concrete- representational-abstract (or CRA), is a strategy for teaching that benefits struggling students in many ways. Mathematics is a daunting subject to many secondary learners and it is common for students to struggle in math classes. Moreover, this subject may come especially difficult for students who have a learning disability. For this reason, teachers need to be able to adapt their teaching to reach all students andRead MoreInstrumentation in Mathematics8559 Words   |  35 PagesINSTRUMENTATION IN MATHEMATICS Prepared BY: MA. KARLA RACHELLE ULIBAS BSED - II Prepared For: JUBERT GANAPAO INSTRUCTOR TABLE OF CONTENTS Title Page i Table of Contents ii-v Theoretical Considerations, Literature and Research Studies on the Use of Learning Aids 1-16 Activity Sheets 17 On Numbers Complete the Skip Counting Series 18-19 On Measurement Metric Length 20 Metric Weight 21 Metric Capacity 22 Compare Metric Measurements 23 Read MoreHistorical Context And Basic Principles3834 Words   |  16 Pagesquite uncertain of what is available in mathematics teaching. According to Drijvers et al (2010; cited in Ruthven, 2013) a â€Å"Digital Mathematics Environment (DME)† can help teachers and students with various materials and tools of technology. 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Evidence of the effectiveness of a program or practice should be: Read MoreA Year in the Life of an Elementary School: One Schools Experiences in Meeting New Mathematics Standards10127 Words   |  41 PagesPrint Article Page 1 of 14 A Year in the Life of an Elementary School: One Schools Experiences in Meeting New Mathematics Standards by Karen Dorgan — 2004 This qualitative research project studied the efforts of a small public elementary school over the course of 1 academic year to meet higher standards imposed by the state. The states department of education defined school success in terms of the percentage of students passing a set of multiple-choice, standardized tests in four core areasRead MoreMathematics : A Key Element For A Young Child s Learning Process5238 Words   |  21 Pagesunderstanding of mathematics topics. Language arts, social studies, and science instruction commonly uses literature. At times it can be overlooked when teaching or planning lessons for mathematics. Mathematics instruction tends to have a high emphasis on using manipulatives or workbooks. Literature does not tend to be at the top of the resource list (Golden, 2012). While books can be a very useful tool for teachers successfulness in teaching mathematics topics. You can find mathematics in different

Ownership Structure, Managerial Behavior and Corporate Value Free Essays

Journal of Corporate Finance 11 (2005) 645 – 660 www. elsevier. com/locate/econbase Ownership structure, managerial behavior and corporate value J. We will write a custom essay sample on Ownership Structure, Managerial Behavior and Corporate Value or any similar topic only for you Order Now R. Daviesa, David Hillierb,T, Patrick McColganc a University of Strathclyde, UK b University of Leeds, UK c University of Aberdeen, UK Received 21 November 2002; accepted 6 July 2004 Available online 20 April 2005 Abstract The nonlinear relationship between corporate value and managerial ownership is well documented. This has been attributed to the onset of managerial entrenchment, which results in a decrease of corporate value for increasing levels of managerial holdings. We propose a new structure for this relationship that accounts for the effect of conflicting managerial incentives, and external and internal disciplinary monitoring mechanisms. Using this specification as the basis for our analysis, we provide evidence that the managerial ownership–corporate value relationship is co-deterministic. This finding is at odds with recent work which reports that corporate value determines managerial ownership but not vice-versa. D 2005 Elsevier B. V. All rights reserved. JEL classification: G32 Keywords: Ownership structure; Capital expenditure; Corporate value; Tobin’s Q 1. Introduction In a market without agency problems, corporate managers will choose investments that maximise the wealth of shareholders. In practice, competing objectives which are incompatible with the shareholder wealth-maximising paradigm may also be pursued. T Corresponding author. Leeds University Business School, University of Leeds, Maurice Keyworth Building Leeds, LS2 9JT, UK. Tel. : +44 113 3434359; fax: +44 113 3434459. E-mail address: d. j. hillier@Leeds. c. uk (D. Hillier). 0929-1199/$ – see front matter D 2005 Elsevier B. V. All rights reserved. doi:10. 1016/j. jcorpfin. 2004. 07. 001 646 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Following Jensen and Meckling (1976), a large literature has developed that examines how managerial behavior impacts upon firm performance. A vibrant strand of this literature concerns the relati onship between managerial ownership levels, the direct investment decisions made by management and the inherent value of the firm, as proxied by Tobin’s Q ratio. Morck et al. 1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) provide evidence of a significant nonlinear relationship between corporate value and managerial ownership. Specifically, value increases with managerial holdings for low levels of ownership. At some level, managers become entrenched within the firm resulting in a decrease in firm value. However, whereas Morck et al. (1988) and Hermalin and Weisbach (1991) document further changes in the corporate value–managerial holdings relationship at high levels of equity ownership, McConnell and Servaes (1990) report no such change. Recent work has built upon the findings of Demsetz and Lehn (1985) who argue that levels of managerial ownership will be determined endogenously in equilibrium. Moreover, Cho (1998) and Himmelberg et al. (1999) have shed doubt upon the earlier findings of Morck et al. (1988) and McConnell and Servaes (1990) by controlling for the effects of endogeneity and unobservable (to the econometrician) firm characteristics in their analysis. After controlling for the effects of endogeneity in the corporate value– managerial holdings relationship, they showed that managerial ownership had little or no effect on corporate value and investment. Short and Keasey (1999) and Faccio and Lasfer (1999) utilize a cubic specification to model the corporate value–managerial holdings relationship and both report a significant nonlinear functional form, similar to Morck et al. (1988), for British companies. However, neither study fully examines the misspecifying impact of endogeneity on their results. In this paper, we propose a new structure to the managerial ownership–corporate value relationship which captures a more complex characterisation of the evolving behavior of managers. We argue that at high levels of managerial ownership when external market discipline becomes neffective, there will be a resurgence of entrenchment behavior. With equity holdings around 50%, managers will have implicit control of their company, but still do not have objectives completely aligned to external shareholders. Only at very high levels of managerial holdings are incentives akin to other shareholders. When this model is applied to a l arge sample of firms incorporated in the UK, managerial ownership is seen to have a significant impact on corporate value. This relationship is endogenous, and consistent with Cho (1998) and Himmelberg et al. (1999), corporate value has a corresponding effect on managerial holdings. We also find that although ownership levels are affected by firm level investment, there is no evidence of the reverse occurring. In the next section we outline our model of the managerial ownership–corporate value relationship. We present empirical results in Section 3 and conclude in Section 4. 2. The model In this section, we propose an alternative structure to the managerial holdings–corporate value relationship and argue that the cubic, or simpler representations, used in earlier J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 647 studies1 are unnecessarily restrictive and misspecified. The model that is presented here captures further nonlinearities in this relationship at high levels of managerial holdings and has a quintic specification. Management is faced with both negative and positive incentives to ensure that they follow objectives which maximise shareholder wealth. The effectiveness of these incentives is potentially a function of the level of managerial ownership in the firm. We view the propensity of management to maximise shareholder wealth to be a function of three unobserved factors: external market discipline, even if it is weak, internal controls and convergence of interests. Moreover, the strength of each factor can be viewed as a function of the level of managerial ownership in the firm. 2 2. 1. Low levels of managerial ownership For low levels of managerial ownership, external discipline and internal controls or incentives will dominate behavior (see Fama, 1980; Hart, 1983; Jensen and Ruback, 1983). Empirically, Morck et al. (1988), McConnell and Servaes (1990) and Hermalin and Weisbach (1991) report results consistent with this behavior for the relationship between managerial holdings and corporate value. However, there is also the possibility that lower levels of ownership within this range have endogenously arisen from performance related compensation packages, such as stock options and stock grants rather than increased ownership in itself leading to higher Q ratios. 2. 2. Intermediate levels of managerial ownership At intermediate levels of managerial ownership, management interests begin to converge with those of shareholders. However, with greater ownership comes greater power in the form of voting rights. Managers may, at this level of holdings, maximise their personal wealth through increasing perquisites and guaranteeing their employment at the expense of corporate value. In addition, while low managerial ownership levels may have arisen through the vesting of compensation plans, it is unlikely that such plans will provide management with a moderate ownership stake in the firm. Moreover, even though external market controls are still in place, these and the effect of convergence of interests are not strong enough to align the behavior of management to shareholders. Managerial labour markets operate on the principal that poorly performing 1 See Morck et al. (1988), McConnell and Servaes (1990), Hermalin and Weisbach (1991), Cho (1998) and Himmelberg et al. (1999) for US companies and Short and Keasey (1999) and Faccio and Lasfer (1999) for UK companies. 2 For example, since compensation packages such as stock options are a transfer of wealth from shareholders to management, their value will lessen as managerial ownership increases. External market discipline is also a function of managerial ownership. Large shareholdings by top management act as a deterrent for takeovers because of the greater ability to oppose a hostile bid or drive up premiums to the point where bidders no longer view the target company as a positive net present value investment Stulz (1988). Finally, internal controls in the form of monitoring from large shareholders and corporate boards should reduce the scope for managers to diverge greatly from the interests of shareholders. Again, however, such discipline is likely to be inversely related to managerial control Denis et al. (1997). 648 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 anagers can be removed and appropriately disciplined. Studies by Denis et al. (1997) in the US and Dahya et al. (2002) in the UK both find an inverse relation between topmanagement turnover and managerial ownership. This lack of discipline provides evidence of a deficiency in incentives for managers to maximise shareholder value at this level of owners hip. Franks and Mayer (1996) also report that hostile takeover targets in the UK are not poorly performing firms, which is in contrast to the findings of a disciplinary role for corporate takeovers in the US by Martin and McConnell (1991). In this context, Franks and Mayer (1996) provide significant evidence that takeovers in the UK may not act to remove a self-serving board even when they are performing poorly. This lack of disciplinary control over poorly performing management may strengthen management’s ability to pursue sub-optimal corporate policies at intermediate ownership levels. 2. 3. High levels of managerial ownership (less than 50%) As levels of managerial equity ownership grow, objectives converge further to those of shareholders. At ownership levels, below 50% management do not have total control of the firm and external discipline still exists. While perhaps no longer being subject to any major discipline from external takeover markets, it is likely that even at these levels of ownership, managers are still subject to discipline from external block shareholders. This is particularly true in the UK, where because of strong informal ties between institutions (Short and Keasey, 1999), a lax regulatory environment concerning the ownership of listed companies (Roe, 1990) and low monitoring costs (Faccio and Lasfer, 1999), institutional activism is stronger than in the US. This view is also consistent with Franks et al. (2001) contention of strong minority protection laws in the UK, whereby large shareholders cannot transact with related companies without the consent of the firm’s minority shareholders. The UK regulatory framework stands in contrast to US corporate law which limits minorities to seeking redress after the related party transaction has taken place. Combined with monitoring from UK institutions, this may allo w external shareholders to impose some form of control on management even at elatively large levels of managerial ownership. 2. 4. High levels of managerial ownership (greater than 50%) At levels above 50% ownership, management has complete control of the company. Although atomistic shareholders are unlikely to have been able to in influence managers at far lower levels of ownership than this, there is always a possibility that a cartel of blockholders, allied with minority shareholder’s rights under UK company law, may be able to mount a challenge to management if they fail to make decisions in shareholders’ best interests. For a more in-depth discussion of the institutional differences and similarities between the United Kingdom and United States, see Short and Keasey (1999) and Faccio and Lasfer (1999). 3 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 649 At greater than 50% managerial ownership, this is no longer likely to be a serious issue to management. Furthermore, with majority ownership, the probability of a hostile takeover effectively becomes zero. The failure of external discipline combined with a lack of blockholder incentives above 50% may result in a decrease in corporate value for a small window of managerial holdings above this level. This fall in corporate value is consistent with the theoretical predictions of Stulz (1988). 2. 5. Very high levels of managerial ownership Finally, as managerial shareholdings rise to very high levels, management effectively become sole owners of the company. This would lead to value-maximising behavior as predicted by Jensen and Meckling (1976). Consistent with Morck et al. 1988), Short and Keasey (1999) and Faccio and Lasfer (1999) at above a certain level of ownership, corporate managers are faced with such severe financial penalties for failing to maximise the value of their companies that they are forced to make decisions which will maximise firm value, regardless of how this affects their private benefits of control. 2. 6. Summary Our characterisation of a highly nonlinear relationshi p between managerial equity holdings and corporate value is in contrast to earlier studies (Morck et al. , 1988; McConnell and Servaes, 1990; Hermalin and Weisbach, 1991; Cho, 1998; Himmelberg et al. 1999)4, which posit fewer turning points in their analysis. There is little theoretical basis on which the individual turning points can be determined, and the findings of Kole (1995) suggest that these will be in influenced by the size of the firms in the sample. However, it is expected that the second local maximum will be in the region of 50% managerial ownership reflecting the stage at which management gain total control of the company. In the next section, the main tests of our hypotheses will be carried out. 3. Empirical results 3. 1. Description of the data We use data on managerial and external block ownership for 1995 from the MacMillan London Stock Exchange Yearbook for 1996 and 1997. The Yearbook provides summary accounting data including a consolidated balance sheet, information on company directors, legal information on the company’s lawyers, auditors and stockbrokers, principle activities, company history, capital and dividend payments, and industrial sector for the McConnell and Servaes (1990) modelled the corporate value–managerial ownership relationship as a quadratic function, which by construction has only one turning point. 650 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 vast majority of all quoted companies and securities. 5 We restrict our attention to nonfinancial companies only and require that each firm has complete managerial and external ownership data for 1995, which leaves 802 industrial companies in our sample. 6 Data on capital expenditures, to tal assets employed, after tax profits, depreciation, leverage, equity market values, and research and development costs are collected from Datastream. We estimate Tobin’s Q ratio (our proxy for corporate value) using the formula below: Q? MVEQ ? PREF ? DEBT BV ASSETS ? 1? where: MVEQ=the year-end market value of the firm’s common stock; PREF=the yearend book value of the firmTs preference shares (preferred stock); DEBT=the year-end book value of the firmTs total debt; and BV ASSETS=the total assets employed by the firm, which is measured as total assets minus current liabilities. Our measure is consistent with the modified version of the formula as used by Chung and Pruitt (1994) who find that 96. 6% of the variability in the popular Lindenberg and Ross (1981) algorithm of Tobin’s Q is explained by their approximation. Our method also avoids the data availability problems which arise from using the more rigorous algorithms proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997) in order to estimate the replacement cost of assets. We use book values of preferred stock and long-term debt, rather than the market values proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997). In the UK, there is a far less active market for the trading of corporate debt than that which exists in the US, forcing us to rely on book values for these variables. In a final stratification of our sample, we mitigate the problem of potential outliers and trim 25 firms with the largest and smallest Tobin’s Q measure, leaving a final sample of 752 firms. 7 Table 1 presents descriptive statistics for our sample data. The mean managerial ownership stake of all board members is 13. 02%, which is similar to comparable US studies, but slightly lower than Faccio and Lasfer (1999) who report mean ownership of 16. 7%. Tobin’s Q is slightly higher than that reported for related US work with a mean value of 1. 96. The standard deviation of Tobin’s Q is 1. 21, which is also greater than other studies. However, it is substantially less than the mean of 2. 47 reported by Doukas et al. (2002) and is relatively similar to the mean value of 1. 86 that Short and Keasey (1999) report for their market valuation ratio. 8 The mean blockholder ownership is 37. 34% and is on a par with that reported for US firms by McConnell and Servaes (1990) (32. 4%) and 34. 57% reported by Faccio and Lasfer (1999) for UK firms. The full range of firm sizes is included in the sample with the 5 To establish the reliability of the summary ownership data, we carried out a correlation analysis of a subsample of 422 firms from he original data set of 802 companies (52. 62%) for which we were able to obtain company annual reports. The yearbook data and company accounts data exhibited a correlation of 0. 90, with a pvalue of 0. 00. We also establish the robustness of our data by re-estimating the model using data for 1997. This result is discussed later in this section. 6 Recently listed, merged or acquired firms are not included. 7 This is a larger sample than that used by Morck et al. (1988)—371 firms, Cho (1998)—326 firms and Himmelberg et al. (1999)—maximum 427 firms in any 1 year. Measured as the market value of equity divided by the book value of equity, minus any intangibles. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 1 Descriptive statistics Variable Management ownership Blockholder ownership Largest stakeholder Capital expenditures Total assets employed After tax profits less depreciation/assets employed Debt/assets employed Market value of equity Research and development Tobin’s Q Mean 13. 02% 37. 34% 18. 82% 21,221 255,642 0. 1425 0. 1411 335 2918 1. 9647 S. D. 18. 06% 23. 57% 21. 64% 75,317 1,583,274 0. 4763 0. 252 1399 44,108 1. 2092 Minimum 0. 00% 0. 00% 0. 00% 7 268 A10. 977 0. 0000 0. 68 0 0. 4502 651 Maximum 79. 90% 100. 00% 100. 00% 1,024,200 37,774,000 3. 4207 4. 8358 26,224 1,198,988 7. 0997 Managerial own ership data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Capital expenditures (thousands), total assets employed (thousands), after tax profits, depreciation, leverage, equity market values (millions) and research and development costs (thousands) are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. mallest company having an equity market capitalization of o680,000 and the largest company’s equity valued at approximately o26 billion. The mean market capitalization of firms in the sample is o335 million. Table 2 provides the distribution of sample statistics grouped by managerial ownership. A very large proportion of the sample (62%) have managerial ownership levels less than or equal to 10%. However, a larg e fraction of companies (11%) also in the sample had boards Table 2 Breakdown of sample by managerial ownership Manager level Ownership Number of firms 464 87 75 41 34 26 21 4 Blockholder ownership, % 43. 34. 5 34. 4 24. 0 22. 7 13. 0 12. 7 5. 8 Tobin’s Q 1. 952 2. 033 1. 736 2. 109 2. 113 2. 257 1. 933 1. 808 Total assets employed 393,861 44,093 26,186 34,322 35,864 28,190 14,234 10,127 Capital expenditures/ assets employed 0. 106 0. 161 0. 124 0. 117 0. 114 0. 100 0. 099 0. 114 Liquidity 0. 130 0. 129 0. 157 0. 194 0. 194 0. 177 0. 169 0. 239 0VMOb10% 10VMOb20% 20VMOb30% 30VMOb40% 40VMOb50% 50VMOb60% 60VMOb70% 70VMOb100% Managerial ownership (MO) data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder ownership measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Capital expenditure (thousands), total assets employed (thousands), after tax profits and equity market values (millions) are collected from Datastream. Liquidity is measured as cashflow divided by total assets employed. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. 652 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 3 Regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 85 28. 14 0. 017 MO 0. 12 3. 23 MO2 A0. 013 A3. 08 F MO3 4. 63A10 2. 82 2. 651 A4 MO4 A6. 73A10 A2. 53 A6 MO5 3. 36A10A8 2. 24 The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e where Q is Tobin’s Q and MO is managerial ownership. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. which owned at least 40% of all outstanding equity. As would be expected, outside blockholder ownership decreases with managerial ownership. At managerial ownership levels of 30%, blockholder ownership is slightly less at 24%. It is probable that external discipline, as provided by blockholders, would still be strong at these levels of managerial holdings, particularly where informal coalitions among blockholders are more prominent (Short and Keasey, 1999). At higher levels of managerial holdings, blockholder ownership decreases sharply leading to a collapse in the power of blockholders. Managerial ownership is a decreasing function of company size, which is consistent with Demsetz and Lehn (1985). Although firm sizes in the UK are considerably smaller than US firms, the ratios in Table 2 are similar to summary statistics provided in Morck et al. (1988), McConnell and Servaes (1990), Cho (1998) and Himmelberg et al. (1999). Table 2 also illustrates the nonlinear relationship between Tobin’s Q and managerial holdings. Visual inspection indicates two maximum points in the region of 10% to 20% and 50% to 60%, respectively. The convergence of managerial interests to those of shareholders at very high levels of ownership is not apparent at this stage because of the small number of companies with managerial holdings above 70%. However, the statistics for all other groupings are consistent with our theoretical motivation. 3. 2. Estimation of ownership breakpoints In order to model the Tobin’s Q–managerial ownership (MO) function as having two maximum and two minimum turning points, we specify a quintic function, as follows: Q ? 0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e ? 2? For the nonlinear relationship discussed in Section 2 to be valid, the coefficients in Eq. (2) must have the following signs: a 0N0; a 1N0; a 2b0; a 3N0; a 4b0; a 5N0. The estimated values of the coefficients in Eq. (2) are given in Table 3. 9 The intercept coefficient, which is an estimate of Tobin’s Q i n firms with no managerial holdings, is 1. 85. Each slope coefficient is of the correct sign and statistically significant at the 5% level. Although the It is clear that Tobin’s Q will be in influenced by more than just managerial ownership. However, the objective of this paper is to investigate whether the standard quadratic and cubic specifications used in previous studies are too simplistic. To maintain parsimony, we therefore omit other factors from this specific model. Other relevant factors are incorporated into the analysis in a later table. 9 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 653 Estimated Relationship between Tobin’s Q and Managerial Ownership 2. 40 2. 20 2. 00 1. 80 1. 60 1. 40 1. 20 0 0. 1 0. 2 0. 3 0. 4 0. 5 0. 6 0. 7 0. 8 0. 9 Tobin’s Q Insider Ownership Fig. 1. Estimated relationship between Tobin’s Q and Managerial Ownership. Tobin’s Q was modelled as a quintic function of insider ownership using ordinary least squares regression. The estimated regression line is: Q=1. 85+0. 12IOA0. 013OI2+4. 63A10A4IO3A6. 73A10A6IO4+3. 36A10A8IO5. adjusted R 2 is low, it is similar to that found in comparable US studies. The use of this model as a basis to estimate managerial ownership turning points leads to four critical values: 7. 01%, 26. 0%, 51. 4%, 75. 7% and is illustrated in Fig. 1. To establish the robustness of our regression model, the spline approach as applied by Morck et al. (1988), Cho (1998) and Himmelberg et al. (1999) to estimate breakpoints was carried out using our generated turning points. Table 4 presents the coefficients resulting from the piecewise linear regression. Similar to Table 3, each coefficient has the expected sign and all but one variable is statistically significant at the 5% level. The only variable that is not significant, MOover 76% , has the correct sign. The probable cause for the lack of significance is the small number of firms in this managerial ownership grouping. An examination of these results suggests that Tobin’s Q increases in firms for managerial ownership levels up to 7% and then declines to ownership levels of 26%. This is almost identical to the turning points in Morck et al. (1988) and Himmelberg et al. (1999) (5% and 25%, respectively) and is comparable to Cho (1998), who uses breakpoints of 7% and 38%. However, it differs from the UK studies of Short and Keasey (1999) and Faccio and Lasfer (1999) who each reports two turning points of 12. 99% and 41. 99%, and 19. 68% and 54. 12%, respectively. Earlier studies limited the turning points to two but in our extension, it is clear that there are another two turning points at much higher levels of managerial ownership. It also appears that market discipline has an influence on managerial objectives up to the point where the board takes complete control (51%). Tobin’s Q then decreases until ownership levels reach 76%, after which Q increases. Denis and Sarin (1999) argue that cross-sectional studies may be subject to bias, whereby they fail to account for events with potentially large valuation consequences. 10 10 Examples of such events may include receiving a takeover bid, top management turnover, etc. 654 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 4 Spline regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 854 28. 38 0. 012 MOup 0. 056 2. 93 to 7% MO7% to 26% MO26% 0. 0187 2. 57 2. 769 to 51% MO51% A0. 053 A1. 99 to 76% MOover 0. 624 1. 12 76% A0. 020 A2. 62 F The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MOup to 7% ? a2 MO7% to 26% a3 MO26% to 51% ? a4 MO51%to 76% ? a5 MOover 76% ?e where Q is Tobin’s Q and MOup to 7%=managerial ownership if managerial ownership b7%, =7% if managerial ownershipN7%. MO7% to 26%=0 if managerial ownership b7%, =managerial ownership minus 7% if 7%bmanagerial ownershipb26%, =26% if managerial ownershipN26%. MO26% to 51%=0 if managerial ownershipb26%, =managerial ownership m inus 26% if 26%bmanagerial ownershipb51%, =51% if managerial ownershipN51%. MO51% to 76%=0 if managerial ownership b51%, =managerial ownership minus 51% if 51%bmanagerial ownershipb76%, =76% if managerial ownership N26%. MOover 76%=0 if managerial ownershipb76%, =managerial ownership minus 76% if managerial ownershipN76%. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. As a further test of robustness, we carried out the quintic analysis for managerial ownership and Tobin’s Q for the same sample of available firms in 1997. 11 Again, each coefficient was significant with the correct signs and the turning points from the estimated model were relatively stable at 7. 9%, 26. 5%, 55. 2% and 86. 2%. . 3. Endogeneity of managerial equity ownership, investment and corporate value To analyse the effects of endogeneity in the managerial ownership, investment and corporate value relationship, we follow Cho (1998) and carry out a simultaneous equations analysis using two-stage least squares. Cho (1998) and Himmelberg et al. (1999) showed that once endogeneity was controlled, the perceived impact of managerial ownership on corporate value d isappeared. Moreover, corporate value was found to positively affect levels of managerial ownership. It is possible that if the model specification employed by these studies is wrong, what appears to be a lack of statistical significance in the endogenous variables in the simultaneous equations analysis may actually be due to errors in variables arising from the intermediate regressions. We re-run the two-stage least squares analysis of Cho (1998) using our more complex specification. 12 The control variables in our regression are the same as in Cho (1998). Namely, managerial ownership, investment and corporate value are Some firms fell out of the sample because of mergers, delisting, and being taken over. Cho (1998) also attempts to control for specification error by re-estimating his simultaneous regression analysis using managerial ownership as a linear variable and again finds no relationship between managerial ownership and corporate value. However, if indeed there is a nonlinear relationship between ownership and corporate value, such an approach would fail to capture this. 12 11 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 655 defined to be endogenously determined by each other as well as some additional relevant exogenous variables. That is: Managerial Ownership ? ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? Corporate Value ? g? managerial ownership; investment; leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial ownership; corporate value; volatility of earnings; liquidity; industry? For comparability, we define each of the above vari ables as in Cho (1998). For each company, industry dummy variables are set equal to one for each Financial Times Industry Classification (FTIC) grouping that sample firms lie within, and zero otherwise. In addition to the variables used by Cho (1998), we include blockholder ownership and largest stakeholder in the corporate value regressions to reflect the potential impact of blockholder discipline in the UK and the role of a founding or dominant individual on corporate value. All accounting and market variables are taken at the financial year-end from Datastream. In Table 5, we report results from the simultaneous equations analysis. Taking the managerial ownership regression first, all variables with the exception of investment have coefficients with the expected sign. Managerial ownership is negatively related to the market value of equity, which reflects the fact that wealth constraints and risk-aversion will prevent managers from holding substantial stakes in large firms. Firm level liquidity is shown to be positively related to managerial ownership, which is a stronger result than Cho (1998) who reported no significance for this variable. Importantly, Tobin’s Q is found to be significant and positively related to the level of managerial ownership. This is consistent with Cho (1998) but is opposed to Demsetz and Villalonga (2001), who find the opposite effect. This result suggests that managers tend to hold larger stakes in firms that are successful or have higher corporate value. This may also be indicative of successful managers benefiting from equity-related compensation policies. The investment variable, which has a negative impact on managerial ownership is surprising as theory predicts that firm level investment will be positively related to managerial ownership. Himmelberg et al. (1999) contend that firms with high investment spending will have high managerial ownership to alleviate the monitoring problem caused by discretionary managerial spending. However, Jensen (1986) argued that firms may overinvest as a result of an earnings retention conflict, rather than underinvest as Jensen and Meckling’s (1976) moral hazard theory would predict. When a firm is in this situation, managers may be able to maximise their size-related compensation by overinvesting, but are aware that this may ultimately reduce the value of their shareholdings. Although tentative, this could in part explain the negative relation between investment and ownership. Cho (1998) also finds a negative (but insignificant) coefficient on the investment variable using both capital and research and development expenditures. 56 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 5 Simultaneous equations analysis of managerial ownership, corporate value and investment Variable MVEQ Tobin’s Q Volatility Liquidity Investment Leverage Asset size Largest stakeholder Blockholder ownership MO MO2 MO3 MO4 MO5 Industry dummies Adj. R 2 F Managerial ownership A1. 8A10 (A3. 74) 0. 127 (4. 63) A1. 0A10A6 (A0. 74) 0. 035 (2. 24) A1. 314 (A2. 67) A5 Corporate value Investment 0. 073 (2. 35) 3. 89A10A6 (A2. 86) 0. 013 (1. 01) Yes 0. 045 8. 014 5. 136 (2. 23) 1. 088 (4. 36) 3. 33A10A8 (1. 17) A0. 20 (A0. 06) A0. 837 (A2. 60) 1. 588 (3. 07) A0. 395 (A2. 22) 0. 037 (1. 64) A0. 001 (A1. 14) 1. 9A10A5 (0. 76) Yes 0. 033 3. 497 A0. 035 (A0. 46) 0. 018 (0. 72) A0. 003 (A0. 92) 1. 72A10A4 (1. 03) A3. 12A10A7 (A1. 07) Yes 0. 009 2. 497 Results from a simultaneous equations analysis of managerial ownership, corporate value and investment for 752 firms, using the two-stage least squares method to estimate the following equations: Managerial Ownership ? f ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? CorporateValue ? g? anagerial ownership; investment; financial leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial owner ship; corporate value; volatility of earnings; liquidity; industry? In the above equations, managerial ownership measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Investment is defined as capital expenditure divided by total assets employed, leverage is the ratio of total debt to total assets employed and liquidity is measured as cashflow divided by total assets employed. Capital expenditure, total assets employed, after tax profits, depreciation, leverage, equity market values and profit volatilities are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. t-Statistics are in parenthesis. The estimated coefficients from the corporate value regression are given in the second column of Table 5. Corporate value is shown to be positively related to investment and leverage. While the investment coefficient is as expected, the sign of the leverage variable requires more discussion. Morck et al. 1988) find that leverage has a negative but insignificant impact on corporate value and attribute this to the possibility of managers in highly levered firms holding a higher than average level of ownership. However consistent with our results, McConnell and Servaes (1990) report a positive significant coefficient for leverage. Leverage can have various effects on firm value. The notion that high debt levels lead to greater corporate value has been argued by Modigliani and Miller (196 3) with respect J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 57 to valuable tax shields, Ross (1977) and Myers (1977) with respect to a signalling hypothesis and Jensen’s (1986) free cashflow hypothesis. Ultimately, leverage is one way of imposing external discipline on management and if it is effective, will lead to increased corporate value. Alternatively, Demsetz and Villalonga (2001) interpret a negative association between leverage and firm value as being due to relative inflation between the current time period and the earlier time period where companies had issued much of their debt. We view the most important result from the corporate value regression as being the significance of the managerial ownership variables. Our results indicate that although managerial ownership levels are determined by corporate value, corporate value itself is determined in part by managerial ownership. This finding is at odds with Cho (1998) and Himmelberg et al. (1999) but consistent with the classical view of Jensen and Meckling (1976) and empirical work by Morck et al. (1988) and McConnell and Servaes (1990). An interesting result is that blockholder ownership is shown to negatively impact Tobin’s Q. This result is consistent with Faccio and Lasfer (1999, 2000). McConnell and Servaes (1990) suggest that this could be due to a conflict of interests, which results from blockholders being forced into aligning themselves with managers so as not to jeopardize their other dealings with the firm. Alternatively, the negative coefficient may be explained by the strategic alignment hypothesis, which argues that blockholders and managers find it mutually beneficial to cooperate with each other. Finally, such findings may be consistent with the arguments of Burkart et al. 1997) in that too much block ownership will overly constrain management and reduce their ability to take value-maximising investment decisions. The investment regression coefficients presented in column three of Table 5 show a significant positive effect of corporate value on investment and a negative effect of profit volatility on investment. The finding that corporate value has a positive effect on investment is consisten t with the arguments of Cho (1998) that highly valued firms will have large investment opportunities. Also, firms with variable earnings will be reluctant to invest if future income is uncertain. Managerial ownership is found to have no impact on firm level investment. However, this may reflect optimality in that investment policy may be one way in which managers affect value, but not the only means. Ultimately we view our findings of a causal relation between ownership and firm value as being of greater significance than the lack of a relation between ownership and investment. These results are consistent with Cho (1998) but slightly stronger, in that volatility of earnings is significant in our regressions but insignificant in Cho (1998). . Conclusions Debate as to the relationship between corporate value and managerial ownership in the US is still unresolved. Studies such as Morck et al. (1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) document a nonlinear relation between these two variables. More recent work by Cho (1998), Himmelberg et al. (1999), and Demsetz and Villalonga (2001) shows that when controlling for endogeneity, managerial ownership is determined by corporate value but not vice-versa. 658 J. R. Davies et al. Journal of Corporate Finance 11 (2005) 645–660 We argue that even accepting that corporate value and managerial ownership are endogenously related to each other, misspecification of the managerial holding–corporate value relationship may lead to spurious conclusions concerning the direction of causality. Applying a quintic structure, we present results which suggest that the correct form of this relationship is a double humped curve. This is in contrast to other studies that have assumed a cubic or quadratic specification and by construction only one hump. The second hump or local maximum is attributed to a collapse in external market discipline at or around the point where managers take overall control of their firm. At this point, which is around 50% ownership, the management is not sufficiently akin to owners but have sufficient power to disregard any form of external monitoring or discipline. This has a detrimental affect on corporate value for a short window of managerial holdings. At high levels of managerial ownership, managers are effectively majority owners of their firm leading to a convergence of interests with other outside shareholders. Utilizing the quintic specification for managerial ownership, we show that even when controlling for endogeneity, not only is corporate value a determinant of managerial ownership but managerial ownership is also a determinant of corporate value. This finding is consistent with the classical work of Jensen and Meckling (1976), as well as the early empirical work of Morck et al. (1988) and McConnell and Servaes (1990) who do not control for endogeneity in their analysis of corporate value and managerial ownership. We believe our analysis to have several important contributions to the literature on the relationship between managerial ownership and corporate value. First, our quintic specification extends previous work in this area and successfully captures the complex nonlinear relationship between corporate value and managerial ownership. Second, by analysing a completely different market which is similar in structure to the United States, we strengthen the power and insights gained from earlier comparable US studies. Third, we provide evidence that corporate value, firm level investment and managerial holdings are interdependent with each other. This has implications for the debate on the effectiveness of compensation policies involving stock options for top managers. Moreover, our findings suggest that some levels of managerial ownership may not be beneficial to outside shareholders even when these levels are high. At the very least, this paper has served to add to the debate concerning the importance of managerial ownership on corporate value by providing evidence that even controlling for endogenous effects, managerial ownership and stock compensation schemes do have a significant influence on corporate value. Our research has provided an initial step towards a more accurate characterisation of the corporate value–managerial ownership relationship. While we do not posit that our specification can be applied to every given data set, we argue that previous research may be misspecified where it has failed to fully explore alternative specifications of the managerial ownership–corporate value relationship. Future work in this area may focus on other structural forms, which more effectively reflect the interdependence of managerial ownership and corporate prospects. The nonlinear endogenous impact of blockholders on corporate value and managerial ownership would also provide interesting insights on the external discipline that is faced by firm managers and the impact this has on corporate value. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 659 Acknowledgements The authors would like to thank John Capstaff, Scott Linn, Andrew Marshall, James Wansley and seminar participants at the Financial Management Association International (2001), European Financial Management Association (2002), Dublin Economics Workshop, the University of Strathclyde and an anonymous referee for their valuable comments on earlier versions of the paper. The normal caveat applies. References Burkart, M. , Gromb, D. , Panunzi, F. , 1997. Large shareholders, monitoring, and the value of the firm. Quarterly Journal of Economics 112, 693 – 728. Cho, M. H. , 1998. Ownership structure, investment, and the corporate value: an empirical analysis. 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Liberalism And Conservatism Essays (770 words) -

Liberalism And Conservatism Liberalism and Conservatism Liberalism and conservatism have been political ideas and thoughts from the very birth of our democracy. Their views and points of the governments role in a democratic society have changed over the years, but the basic ideas and principles have remained the same. There are many different degrees of liberalism and conservatism as almost anyone can be labeled. Some individuals are radical and extreme while others stand on more of a neutral territory, but the debates between the understood ideas of each group have continued throughout the history of the United States. We will take liberalisms Gary Doore and conservatisms Irving Kristol as modern day examples and compare and contrast the political ways of thinking of each individual. Conservatism is comprised of religion, nationalism, and economic growth. Among these, Irving Kristol believes religion is most important (18). Why? Obviously, religion doesnt teach people to do wrong. In fact, as most of us know, religion sternly instills good values and morals in a person at an early age. These ideas are what tell people right from wrong, good from bad. Religion motivates people to succeed in life not in materialistic aspects, but in law abiding, respectful aspects. Respect for God, life and other human beings. So how can this be bad for a society? It cant and thats why conservatives think it is most important in the function of a government (18-19) If America could live up to the religious standard, crime would be nonexistent. Of course, this is impossible, but it is the idea that drives conservative thinkers. Kristol points out that recent liberal attempts to slow down and decrease the crime rate have not worked (20). Additionally with each liberal programs failure, more and more American people discredit and distrust the government. Overall, the common conservative consensus is that religious ideals should replace big business-like government and the spending that comes with it. (20-21) Liberty, rights, justice and equality are ideals liberalists such as Gary Doore view as the most important aspects in the democracy of America (24). They also feel America has recently drawn away from these ideals and is therefore not as democratic as it once was or can be in the future. Doore believes there is especially room for democratization in the workplace (28). In fact, he points out that it is the lack of freedom of expression and the restrictive environment of the workplace that has led to this situation. More ideas and innovations would come from corporations if they would allow more freedom to its employees. Not only would workers benefit, but the company they work for would also. (28) Another cause for the break down of democracy in America stems from the administrations of Ronald Reagan and George Bush (Doore 26). Because of the Cold War era and the insecurities it brought to the American people, the administrations thought it was necessary to tighten down and take control. To do this they called for more powers to the executive branch. As a result, Doore and other liberals began to see more of an authoritarian government take shape, and the term imperial presidency was created. The situations went as far as banning newspapers and magazines from Cuba, North Vietnam, and Albania (27). These limits, as well as the restrictive environment of the workplace are what liberals feel are most responsible for the decay of democracy that has taken place over the past few decades. Both Doore and Kristol bring up interesting arguments, but they go too far. Kristol was quick to point out that liberal programs have not slowed down the crime rate at all, but the recent attempts by Clinton and his liberal programs have done just that, so their numbers claim. And how about the deficit? Also, a large turnaround. Who or what is responsible for that though? Clinton definitely takes credit for more than he deserves. Doore states that the administrations of Reagan and Bush created somewhat of an authoritarian government. It did go too far, but some of the actions they took were necessary to control the insecurities the Cold War brought forth. It also helped in ending that period. When Doore wrote this article he mentioned that he