Dividend Payout Decision Making Process

Dividend Payout Decision Making Process CHAPTER ONE INTRODUCTION Background: Dividend policy is an important component of the corporate financial management policy. It is a policy used by the firm to decide as to how much cash it should reinvest in its business through expansion or share repurchases and how much to pay out to its shareholders in dividends. Dividend is a payment or return made by the firm to the shareholders, (owners of the company) out of its earnings in the form of cash. For a long time, the subject of corporate dividend policy has captivated the interests of many academicians and researchers, resulting in the emergence of a number of theoretical explanations for dividend policy. For the investors, dividend serve as an important indicator of the strength and future prosperity of the business, thereby companies try to maintain a stable dividend because if they reduce their dividend payments, investors may suspect that the company is facing a cash flow problem. Investors prefer steady growth of dividends every year and are reluctant to investm ent to companies with fluctuating dividend policy. Over time, there has been a substantial increase in the number of factors identified in the literature as being important to be considered in making dividend decisions. Thus, extensive studies have been done to find out various factors affecting dividend payout ratio of a firm. However, there is no single explanation that can capture the puzzling reality of corporate dividend behavior. Ocean deep judgment is involved by decision makers to resolve this issue of dividend behavior. The decision of companies to retain or pay out the earnings in form of dividends is important for the maximization of the value of the firm (Oyejide, 1976). Therefore, companies should set a constructive target dividend payout ratio, where it pays dividends to its shareholders and at the same time maintains sufficient retained earnings as to avoid having raise funds by borrowing money. A tough challenge was faced by financial practitioners and many academics, when Miller and Modigliani (MM) (1961) came with a proposition that, given perfect capital markets, the dividend decision does not affect the firm value and is, therefore, irrelevant. This proposition was greeted with surprise because at that time it was universally acknowledged by both theorists and corporate managers that the firm can enhance its business value by providing for a more generous dividend policy and that a properly managed dividend policy had an impact on share prices and shareholder wealth. Since the MM study, many researchers have relaxed the assumption of perfect capital markets and stated theories about how managers should formulate dividend policy decisions. Problem Statement: Dividend policy has attracted a substantial amount of research by many researchers and theorists, who have provided theoretical as well as empirical observations, into the dividend puzzle (Black, 1976). Even though researchers and theorists have extended their studies in context to dividend decisions, the issue as to why corporations distribute a portion of their earnings as dividends is not yet resolved. The issue of dividend policy has stimulated much debate among financial analysts since Lintners (1956) seminal work. He measured major changes in earnings as the key determinant of the companies dividend decisions. There are many factors that affect dividend decisions of a firm as it is very difficult to lay down an optimum dividend policy which would maximize the long-run wealth of the shareholders resulting into increase or decrease of the firms value, but the primary indicator of the firms capacity to pay dividends has been Profits. Miller and Modigliani (1961), DeAngelo and DeAngelo (2006) gave their proposition on the dividend irrelevance, but the argument made by them was on assumptions that werent practical and in fact, the dividend payout decision does affect the shareholders value. The study focuses on identifying various determinants of dividend payout and whether these factors influence the dividend payout decision. Research Objective: There are many theories in the corporate finance literature addressing the dividend issue. The purpose of study is to understand the factors influencing the dividend decision of companies. The specific objectives of this study are: To analyze the financials of the company, to draw a framework of factors such as Retained earnings, Age of the company, Debt to Equity, Cash, Net income, Earnings per share etc. responsible for dividend declaration. To understand the criticality of a companys profitability (in terms of Earnings per share) component in declaration of dividends. To measure each factor individually on how it affects the dividend decision. Research Questions: RQ1. What is the relation between dividend payout and firms debt? RQ2. What is the relation between dividend payout and Profitability? RQ3. What is the relation between dividend payout and liquidity? RQ4. What is the relation between dividend payout and Retained Earnings? RQ5. What is the relation between dividend payout and Net Income? Contribution of the Study: Dividend decision is an important financial decision made by firms, managers, and investors. This study aims to contribute to the corporate finance literature, by looking at the Dividend puzzle. An attempt is made to make a valuable contribution in two major ways: Theoretical and Empirical approach is taken to provide a comprehensive view on the subject. The empirical Approach taken in this study will definitely leave some promising future ideas. The empirical findings and conclusions contained in this study can be used by financial managers to inform dividend decisions. Limitations of Study: The areas of concern to investigate in this study are extensive. Due to the Time constraint and accessibility of data, the research will be limited to the following: The period of study is only three years 2006 to 2008. The research has considered only those firms who pay dividends. The study is focused only on firms trading on the New York Stock Exchange. Structure of the Paper: The remaining chapters will be organized as follows: Chapter Two: Literature Review This chapter discusses the different theories laid down in context to dividend policy and explains the relationship between dividend payout and its determinants as concluded by the study of different researchers and theorists. Chapter Three: Research Methodology This chapter explains the research hypothesis and gives a descriptive study of the techniques and the model used for data analysis. The application of the statistical tests used are explained thoroughly. Chapter four: Data Analysis and Findings To address the research questions, results obtained from the regression analysis will be evaluated and discussed in this chapter. Chapter five: Recommendations and Conclusion. This chapter Concludes the entire study and provides recommendations based on the findings and analysis done in the previous chapter and recommendations for future research. CHAPTER TWO LITERATURE REVIEW Dividend remains one of the greatest enigmas of modern finance. Corporate dividend policy is an important decision area in the field of financial management hence there is an extensive literature devoted to the subject. Dividends are defined as the distribution of earnings (present or past) in real assets among the shareholders of the firm in proportion to their ownership. Dividend policy refers to managements long-term decision on how to utilize cash flows from business activities-that is, how much to plow back into the business, and how much to return to shareholders (Khan and Jain, 2005). Lintner (1956) conducted a notable study on dividend distributions, his was the first empirical study of dividend policy through his interview with managers of 28 selected companies, he stated that most companies have clear cut target payout ratios and that managers concern themselves with change in the existing dividend payout rather than the amount of the newly established payout. He also states that, Dividend policy is set first and other policies are then adjusted and the market reacts positively to dividend increase announcements and negatively to announcements of dividend decreases. He measured major changes in earnings as the key determinant of the companies dividend decisions. Lintners study was expanded by Farrelly et al. (1988), who, mailed a questionnaire to 562 firms listed on the New York Stock Exchange and concluded that managers accept dividend policy to be relevant and important. Lintners view was also supported by the study results of Fama and Babiak (1968) and Fama (1974) who suggested that managers prefer a stable dividend policy, and are hesitant to increase dividends to a level that cannot be supported. Fama and Babiaks (1968) study also concludes that Net income appears to explain the dividend change decision better than a cash flow measure. The study by Adaoglu (2000), Amidu and Abor (2006) and Belans et al (2007) stated that net income shows positive and significant association with the dividend payout, therefore indicating that, the firms with the positive earnings pay more dividends. Merton Miller and Franco Modigliani (1961) made a proposition that the value of a firm is not affected by its dividend policy. Dividend policy is a way of dividing up operating cash flows among investors or just a financial decision. Financial theorists Martin, Petty, Keown, and Scott, 1991 supported this theory of irrelevance. Miller and Modiglianis conclusion on the irrelevance of dividend policy presented a tough challenge to the conventional wisdom of time up to that point, it was universally acknowledged by both theorists and corporate managers that the firm can enhance its business value by providing for a more generous dividend policy as investors seem to prefer dividends over capital gains (JM Samuels, FM.Wilkes and R.E Brayshaw). Benartzi et al. (1997) conducted an extensive study and concluded that Lintners model of dividends remains the finest description of the dividend setting process available. Baker et al. (2001) conducted a survey on 630 NASDAQ-listed firms and analyzed the responses from 188 CFOs about the importance of 22 different factors that influence their dividend policy, they found that the dividend decisions made by managers were consistent with Lintners (1956) survey results and model. Their results also suggest that managers pay particular attention to the dividend policy of the firm because the dividend decision can affect firm value and, in turn, the wealth of stockholders, thus dividend policy requires serious attention by the management. E.F Fama and K.R French (2001) investigated the characteristics of companies paying dividends and concluded that the top most characteristics that affect the decision to pay dividends are Firm size, Profitability, and Investment opportunities. They studied dividend payment in the United States and found that the proportion of dividend payers declined sharply from 66% in 1978 to 20.8% in 1999, and that only about a fifth of public companies paid dividends. Growth companies such as Microsoft, Cisco and Sun Microsystems were found to be non-dividend payers. They also explained that the probability that a firm would pay dividends was positively related to profitability and size and negatively related to growth. Their research concluded that larger firms are more profitable and are more likely to pay dividends, than firms with more investment opportunities. The relationship between firm size and dividend policy was studied by Jennifer J. Gaver and Kenneth M. Gaver (1993). They suggested t hat A firms dividend yield is inversely related to the extent of its growth opportunities. The inference here is that as cash flow increases, the coefficient of dividend decreases, indicating that smaller firms that have greater investment opportunities thus they tend not to make dividend payment while larger firms tend to have proactive dividends policy. Ho, H. (2003) undertook a comparative study of dividend policies in Japan and Australia. Their study revealed that dividend policies in Australia and Japan are affected by different financial factors. Dividend policies are affected positively by size in Australia and liquidity in Japan. Naceur et al (2006) examined the dividend policy of 48 firms listed on the Tunisian Stock Exchange during the period 1996-2002. His research indicated that highly profitable firms with more stable earnings could afford larger free cash flows and thus paid larger dividends. Li and Lie (2006) reported that large and profitable firms are more likely to raise their dividends if the past dividend yield, debt ratio, cash ratio are low. A study was conducted by Norhayati Mohamed, Wee Shu Hui, Mormah Hj.Omar, and Rashidah Abdul Rahman on Malaysian companies over a 3 year period from 2003-2005. The sample was taken from the top 200 companies listed on the main board of Bursa Malaysia based on market capitaliza tion as at 31December 2005. Their study concluded that bigger firms pay higher dividends. For the purpose of finding out how companies arrive at their dividend decisions, many researchers and theorists have proposed several dividend theories. Gordon and Walter (1963) presented the Bird in Hand theory which suggested that to minimize risk the investors always prefer cash in hand rather than future promise of capital gain. This theory asserts that investors value dividends and high payout firms. As said by John D. Rockefeller (an American industrialist) The one thing that gives me contentment is to see my dividend coming in. For companies to communicate financial well-being and shareholder value the easiest way is to say the dividend check is in the mail. The bird-in-hand theory (a pre-Miller-Modigliani theory) asserts that dividends are valued differently to capital gains in a world of information asymmetry where due to uncertainty of future cash flow, investors will often tend to prefer dividends to retained earnings. As a result the value of the firm would be increased a s a higher payout ratio will reduce the required rate of return (see, for example Gordon, 1959). This argument has not received any strong empirical support. Dividends, paid by companies to shareholders from earnings, serve as an important indicator of the strength and future prosperity of the business. This explanation is known as signaling hypothesis. Signaling is an example factor for the relevance of dividends to the value of the firm. It is based on the idea of information asymmetry between managers and investors, where managers have private information about the firm that is not available to the outsiders. This theory is supported by models put forward by Miller and Rock (1985), Bhattacharya (1979), John and Williams (1985). They stated that dividends can be used as a signaling device to influence share price. The share price reacts favorably when an announcement of dividend increase is made. Few researchers found limited support for the signaling hypothesis (see Gonedes, 1978 , Watts, 1973) and there are other researchers, who supported the hypothesis, for example, in Michaely, Nissim and Ziv (2001), Pettit (1972) and Bali (2003). The tax-preference theory assumes that the market valuation of a firms stocks is increased when the dividend payout ratios is low which in turn lowers the required rate of return. Because of the relative tax liability of dividends compared to capital gains, investors need a large amount of before-tax risk adjusted return on stocks with higher dividend yields (Brennan, 1970). On one side studies by Lichtenberger and Ramaswamy (1979), Poterba and Summers, (1984), and Barclay (1987) have presented empirical evidence in support of the tax effect argument and on the other side Black and Scholes (1974), Miller and Scholes (1982), and Morgan and Thomas (1998) have either opposed such findings or provided completely different explanations. The study by Masulis and Trueman (1988) model dividend payments in form of cash as products of deferred dividend costs. Their model predicts that investors with differing tax liabilities will not be uniform in their ideal firm dividend policy. As the tax l iability on dividends increases (decreases), the dividend payment decreases (increases) while earnings reinvestment increases (decreases). According to Farrar and Selwyn (1967), in a partial equilibrium framework, individual investors choose the amount of personal and corporate leverage and also whether to receive corporate distributions as dividends or capital gains. Barclay (1987) has presented empirical evidence I support of the tax effect argument. Others, including Black and Scholes (1982), have opposed such findings or provided different explanations. Farrar and Selwyns model (1967) made an assumption that investors tend to increase their after tax income to the maximum. According to this model corporate earnings should be distributed by share repurchase rather than the use of dividends. Brennan (1970) has extended Farrar and Selwyns model into a general equilibrium framework. Under this, the expected usefulness of wealth as a system of barter is maximized. Despite being more robust both the models are similar as regards to their predictions. According to Auerbachs (1979) discrete-time, infinite-horizon model, the wealth of shareholders is maximized by the shareholders themselves and not by firm market value. If there does, infact, exist a difference between capital gains and dividends tax; firm market value maximization is no longer determined by wealth maximization. He states that the continued undervaluation of corporate capital leads to dividend distributions. The clientele effects hypothesis is another related theory. According to this theory the investors may be attracted to the types of stocks that fall in with their consumption/savings preferences. That is, investors (or clienteles) in high tax brackets may prefer non-dividend or low-dividend paying stocks if dividend income is taxed at a higher rate than capital gains. Also, certain clienteles may be created with the presence of transaction costs. There are several empirical studies on the clientele effects hypothesis but the findings are mixed. Studies by Pettit (1977), Scholz (1992), and Dhaliwal, Erickson and Trezevant (1999) presented evidence consistent with the existence of clientele effects hypothesis whereas studies by Lewellen et al. (1978), Richardson, Sefcik and Thomason (1986), Abrutyn and Turner (1990), found weak or contrary evidence. There is an assumption that the managers do not always take steps which would lead to maximizing an investors wealth. This gives rise to another favorable argument for hefty dividend payouts which shifts the reinvestment decision back on the owners. The main hitch would be the agency conflict (conflict between the principal and the agent) arising as a result of separate ownership and control. Therefore, a manager is expected to move the surplus funds from the high retained earnings into projects which are not feasible. This would be mainly due to his ill intention or his in competency. Thus, generous dividend payouts increase a firms value as it reduces the managements access to free cash flows and hence, controlling the problem of over investment. There are many more agency theories explaining how dividends can increase the value of a firm. One of them was by Easterbrook (1984); he proposed that dividend payments reduce agency problems in contrast to the transaction cost theory which is of the view that dividend payments reduce the value as it forces to raise costly finances from outside sources. His idea is that if the dividends are not paid, there is a problem of collective action that tends to lead to hap-hazard management of the firm. So, dividend payouts and raising external finance would attract auditory and regulatory measures by financial intermediaries like investment banks, respective stock exchange regulators and the potential investors as well. All this monitoring would lead to considerable reduction of agency costs and appreciate the market value of t he firm. Moreover, as defined by Jenson and Meckling (1976), Agency costs=monitoring costs+ bonding, costs+ residual loss i.e. sum of agency cost of equity and agency cost of debt. Hence, Easterbrook (1984) noted that dividend payments and raising new debt and its contract negotiations would reduce potential for wealth transfer. The realization for potential agency costs linked with separation of management and shareholders is not new. Adam Smith (1937) proposed that management of earlier companies is wayward. This problem was highly witnessed during at the time of British East Indian Companies and tracking managers was a failure due to inefficiencies and high costs of shareholder monitoring (Kindleberger, 1984). Scott (1912) and Carlos (1922) differ with this view point. They agree that although some fraud existed in the corporations, many of the activities of the managers were in line with those of the shareholders interests. An opportune and intelligent manager should always invest the surplus cash available into those opportunities which are well researched to be in the best interest of the shareholders. Berle and Means (1932) was the first to discover the insufficient utilization of funds which are surplus after other investment opportunities taken by the management. This thought was further promoted by Jensens (1986) free cash flow hypothesis. This hypothesis combined market information asymmetries with the agency theory. The surplus funds left after all the valuable projects are largely responsible for creation of the conflict of interest between the management and the shareholders. Payment of dividends and interest on other debt instruments reduce the cash flow with the management to invest in marginal net present value projects and for other perquisite consumptions. Therefore, the dividend theory is better explained by the combination of both the agency and the signaling theory rather than by any o ne of these alone. On the other hand, the free cash flow hypothesis rationalizes the corporate takeover frenzy of the 1980s Myers (1987 and 1990) rather than providing a clear and comprehensive dividend policy. The study by Baker et al. (2007) reports, that firms paying dividend in Canada are significantly larger and more profitable, having greater cash flows, ownership structure and some growth opportunities. The cash flow hypothesis proposes that insiders to a firm have more information about future cash flow than the outsiders, and they have incentivized motives to leak this to outsiders. Lang and Litzenberger (1989) check the cash flow signaling and free cash flow explanations of the effect of dividend declarations on the stock prices. This difference between permanent and temporary changes is also explored in Brook, Charlton, and Hendershott (1998). However, this study is based on the hypothesis that dividend changes contain cash flow information rather than information about earnings. This is the cash flow signaling hypothesis proposing that dividend changes signal expected cash flows changes. The dividend decisions are affected by a number of factors; many researchers have contributed in determining which determinant of dividend payout is the most significant in contributing to dividend decisions. It is said that the primary indicator of the firms capacity to pay dividends has been Profits. According to Lintner (1956) the dividend payment pattern of a firm is influenced by the current year earnings and previous year dividends. Pruitt and Gitmans (1991) survey of financial managers of 1000 largest U.S companies about the interplay among the investment and dividend decisions in their firms reported that, current and past year profits are essential factors influencing dividend payments. The conclusion derived from Baker and Powells (2000) survey of NYSE-listed firms is that the major determinant is the anticipated level of future earnings and continuity of past dividends. The study of Aivazian, Booth, and Cleary (2003) concludes that profitability and return on equity positi vely correlate with the size of the dividend payout ratio. The study by Lv Chang-jiang and Wang Ke-min (1999) on 316 listed companies in China that paid cash dividends during 1997 and 1998 by using modified Lintner dividend model, suggested that the dividend payout ratio is due to the firms current earning level. Other researchers like Chen Guo-Hui and Zhao Chun-guang (2000), Liu Shu-lian and Hu Yan-hong (2003) also concluded their research on the above stated understanding about dividend policy of listed companies in China. A survey done by Baker, Farrelly, and Edelman (1985) and Farrelly, Baker, and Edelman (1986) on 562 New York Stock Exchange (NYSE) firms with normal kinds of dividend polices in 1983 suggested that the major determinants of dividend payments were the anticipated level of future earnings and the pattern of past dividends. DeAngelo et al. (2004) findings suggest that earnings do have some impact on dividend payment. He stated that the high/increasing dividend concentration may be the result of high/increasing earnings concentration. Goergen et al. (2005) study on 221 German firms shows that net earnings were the key determinants of dividend changes. Baker and Smith (2006) examined 309 sample firms exhibiting behavior consistent with a residual dividend policy and their matched counterparts to understand how they set their dividend policies. Their study showed that for the matched firms, the pattern of past dividends and desire to maintain a long-term dividend payout ratio elicit the highest level of agreement from respondents. The study by Ferris et al. (2006) found mixed results for the relation between a firms earnings and its ability to pay dividends. Kao and Wu (1994) used a time series regression analysis of 454 firms over the period of 1965 to1986, and showed that there was a positive relationshi p between unexpected dividends and earnings. Carroll (1995) used quarterly data of 854 firms over the period of 1975 to 1984, and examined whether quarterly dividend changes predicted future earnings. He found a significant positive relationship. Liquidity is also an important determinant of dividend payouts. A poor liquidity position would generate fewer dividends due to shortage of cash. Alli et.al (1993), reveal that dividend payments depend more on cash flows, which reflect the companys ability to pay dividends, than on current earnings, which are less heavily influenced by accounting practices. They claim current earnings do no really reflect the firms ability to pay dividends. A firm without the cash flow back up cannot choose to have a high dividend payout as it will ultimately have to either reduce its investment plans or turn to investors for additional debt. The study by Brook, Charlton and Hendershott (1998) states that, Firms expecting large permanent cash flow increases tend to increase their dividend. Managers do not increase dividends until they are positive that sufficient cash will flow in to pay them (Brealey-Myers-2002). Myers and Bacons (2001) study shows a negative relationship between the liquid ratio and dividend payout. For companies to enable them to enhance their dividend paying capacity, and thus, to generate higher dividend paying capacity, it is necessary to retain their earnings to finance investment in fixed assets. The study by Belans et al (2007) states that the relationship between the firms liquidity and dividend is positive which explains that firms with more market liquidity pay more dividends. Reddy (2006), Amidu and Abor (2006) find opposite evidence. Lintner (1956) posited that the level of retained earnings is a dividend decision by- product. Adaoglu (2000) study shows that the firms listed on Istanbul Stock Exchange follow unstable cash dividend policy and the main factor for determining the amount of dividend is earning of the firms. The same conclusion was drawn by Omet (2004) in case of firms listed on Amman Securities Market and he further states that the tax imposition on dividend does not have the significant impact on the dividend behavior of the listed firms. The study by Mick and Bacon (2003) concludes that future earnings are the most influential variable and that the past dividend patterns as well as current and expected levels are empirically relevant in explaining the dividend decision. Empirical support for Lintners findings, that dividends were indeed a function of current and past profit levels and were negatively correlated with the change in sales was found by Darling (1957), Fama and Babiak (1968). Benchman a nd Raaballe (2007) discovered that the propensity to pay out dividends is positively correlated to retained earnings. Also, the study by Denis and Osobov (2006) states that retained earnings are a significant dividend characteristic for non- US firms including UK, German, and French firms. One of the motives for dividend policy decision is maintaining a moderate share price as poor stock price performance mostly conveys negative information about firms reputation. An empirical research took by Zhao Chun-guang and Zhang Xue-li et al (2001) on all A shares listed companies listed in Shenzhen and Shanghai Stock Exchange, states that the more cash dividends is paid when the stock prices are high. Chen Guo-Hui and Zhao Chun-guang (2000) undertook a research on all A shares listed before 1996 and paid dividend into share capital in 1997 as their sampling, and employed single-factor analysis, multifactor regression analysis to analyze the data. Their research showed a positive stock price reaction to the cash dividend, stock dividend policy. Myers and Bacon (2001) discussed that the debt to equity ratio was positively correlated to the dividend yield. Therefore firms with relatively more investment opportunities would tend to be more geared and vice versa (Ross, 2000). The study by Hu and Liu, (2005) declares that there is a positive correlation between the cash dividend the companies pay and their current earnings, and a inverse relationship between the debt to total assets and dividends. Green et al. (1993) questioned the irrelevance argument and investigated the relationship between the dividends and investment and financing decisions. Their study showed that dividend payout levels are decided along with investment and financing decisions. The study results however do not support the views of Miller and Modigliani (1961). Partington (1983) declared that firms motives for paying dividends and extent to which dividends are decided are independent of investment policy. The study by Higgins (1981) declares a direct link between growths and financing needs, rapidly growing firms have external financing needs because working capital needs normally exceed the incremental cash flows from new sales. Higgins (1972) suggests that payout ratios are negatively related to firms need top fund finance growth opportunities. Other researchers like Rozeff (1982), Lloyd et al. (1985) and Collins et al. (1996) all show significantly negative relationship between historical sales growth and dividend payout whereas D, Souza (1999) however shows a positive but insignificant relationship in the case of growth and negative but insignificant relationship in case of market to book value. Jenson and Meckling (1976) find a strong relationship between dividends and investment opportunities. They explain, in some circumstances where firms have relative uptight disposable Dividend Payout Decision Making Process Dividend Payout Decision Making Process CHAPTER ONE INTRODUCTION Background: Dividend policy is an important component of the corporate financial management policy. It is a policy used by the firm to decide as to how much cash it should reinvest in its business through expansion or share repurchases and how much to pay out to its shareholders in dividends. Dividend is a payment or return made by the firm to the shareholders, (owners of the company) out of its earnings in the form of cash. For a long time, the subject of corporate dividend policy has captivated the interests of many academicians and researchers, resulting in the emergence of a number of theoretical explanations for dividend policy. For the investors, dividend serve as an important indicator of the strength and future prosperity of the business, thereby companies try to maintain a stable dividend because if they reduce their dividend payments, investors may suspect that the company is facing a cash flow problem. Investors prefer steady growth of dividends every year and are reluctant to investm ent to companies with fluctuating dividend policy. Over time, there has been a substantial increase in the number of factors identified in the literature as being important to be considered in making dividend decisions. Thus, extensive studies have been done to find out various factors affecting dividend payout ratio of a firm. However, there is no single explanation that can capture the puzzling reality of corporate dividend behavior. Ocean deep judgment is involved by decision makers to resolve this issue of dividend behavior. The decision of companies to retain or pay out the earnings in form of dividends is important for the maximization of the value of the firm (Oyejide, 1976). Therefore, companies should set a constructive target dividend payout ratio, where it pays dividends to its shareholders and at the same time maintains sufficient retained earnings as to avoid having raise funds by borrowing money. A tough challenge was faced by financial practitioners and many academics, when Miller and Modigliani (MM) (1961) came with a proposition that, given perfect capital markets, the dividend decision does not affect the firm value and is, therefore, irrelevant. This proposition was greeted with surprise because at that time it was universally acknowledged by both theorists and corporate managers that the firm can enhance its business value by providing for a more generous dividend policy and that a properly managed dividend policy had an impact on share prices and shareholder wealth. Since the MM study, many researchers have relaxed the assumption of perfect capital markets and stated theories about how managers should formulate dividend policy decisions. Problem Statement: Dividend policy has attracted a substantial amount of research by many researchers and theorists, who have provided theoretical as well as empirical observations, into the dividend puzzle (Black, 1976). Even though researchers and theorists have extended their studies in context to dividend decisions, the issue as to why corporations distribute a portion of their earnings as dividends is not yet resolved. The issue of dividend policy has stimulated much debate among financial analysts since Lintners (1956) seminal work. He measured major changes in earnings as the key determinant of the companies dividend decisions. There are many factors that affect dividend decisions of a firm as it is very difficult to lay down an optimum dividend policy which would maximize the long-run wealth of the shareholders resulting into increase or decrease of the firms value, but the primary indicator of the firms capacity to pay dividends has been Profits. Miller and Modigliani (1961), DeAngelo and DeAngelo (2006) gave their proposition on the dividend irrelevance, but the argument made by them was on assumptions that werent practical and in fact, the dividend payout decision does affect the shareholders value. The study focuses on identifying various determinants of dividend payout and whether these factors influence the dividend payout decision. Research Objective: There are many theories in the corporate finance literature addressing the dividend issue. The purpose of study is to understand the factors influencing the dividend decision of companies. The specific objectives of this study are: To analyze the financials of the company, to draw a framework of factors such as Retained earnings, Age of the company, Debt to Equity, Cash, Net income, Earnings per share etc. responsible for dividend declaration. To understand the criticality of a companys profitability (in terms of Earnings per share) component in declaration of dividends. To measure each factor individually on how it affects the dividend decision. Research Questions: RQ1. What is the relation between dividend payout and firms debt? RQ2. What is the relation between dividend payout and Profitability? RQ3. What is the relation between dividend payout and liquidity? RQ4. What is the relation between dividend payout and Retained Earnings? RQ5. What is the relation between dividend payout and Net Income? Contribution of the Study: Dividend decision is an important financial decision made by firms, managers, and investors. This study aims to contribute to the corporate finance literature, by looking at the Dividend puzzle. An attempt is made to make a valuable contribution in two major ways: Theoretical and Empirical approach is taken to provide a comprehensive view on the subject. The empirical Approach taken in this study will definitely leave some promising future ideas. The empirical findings and conclusions contained in this study can be used by financial managers to inform dividend decisions. Limitations of Study: The areas of concern to investigate in this study are extensive. Due to the Time constraint and accessibility of data, the research will be limited to the following: The period of study is only three years 2006 to 2008. The research has considered only those firms who pay dividends. The study is focused only on firms trading on the New York Stock Exchange. Structure of the Paper: The remaining chapters will be organized as follows: Chapter Two: Literature Review This chapter discusses the different theories laid down in context to dividend policy and explains the relationship between dividend payout and its determinants as concluded by the study of different researchers and theorists. Chapter Three: Research Methodology This chapter explains the research hypothesis and gives a descriptive study of the techniques and the model used for data analysis. The application of the statistical tests used are explained thoroughly. Chapter four: Data Analysis and Findings To address the research questions, results obtained from the regression analysis will be evaluated and discussed in this chapter. Chapter five: Recommendations and Conclusion. This chapter Concludes the entire study and provides recommendations based on the findings and analysis done in the previous chapter and recommendations for future research. CHAPTER TWO LITERATURE REVIEW Dividend remains one of the greatest enigmas of modern finance. Corporate dividend policy is an important decision area in the field of financial management hence there is an extensive literature devoted to the subject. Dividends are defined as the distribution of earnings (present or past) in real assets among the shareholders of the firm in proportion to their ownership. Dividend policy refers to managements long-term decision on how to utilize cash flows from business activities-that is, how much to plow back into the business, and how much to return to shareholders (Khan and Jain, 2005). Lintner (1956) conducted a notable study on dividend distributions, his was the first empirical study of dividend policy through his interview with managers of 28 selected companies, he stated that most companies have clear cut target payout ratios and that managers concern themselves with change in the existing dividend payout rather than the amount of the newly established payout. He also states that, Dividend policy is set first and other policies are then adjusted and the market reacts positively to dividend increase announcements and negatively to announcements of dividend decreases. He measured major changes in earnings as the key determinant of the companies dividend decisions. Lintners study was expanded by Farrelly et al. (1988), who, mailed a questionnaire to 562 firms listed on the New York Stock Exchange and concluded that managers accept dividend policy to be relevant and important. Lintners view was also supported by the study results of Fama and Babiak (1968) and Fama (1974) who suggested that managers prefer a stable dividend policy, and are hesitant to increase dividends to a level that cannot be supported. Fama and Babiaks (1968) study also concludes that Net income appears to explain the dividend change decision better than a cash flow measure. The study by Adaoglu (2000), Amidu and Abor (2006) and Belans et al (2007) stated that net income shows positive and significant association with the dividend payout, therefore indicating that, the firms with the positive earnings pay more dividends. Merton Miller and Franco Modigliani (1961) made a proposition that the value of a firm is not affected by its dividend policy. Dividend policy is a way of dividing up operating cash flows among investors or just a financial decision. Financial theorists Martin, Petty, Keown, and Scott, 1991 supported this theory of irrelevance. Miller and Modiglianis conclusion on the irrelevance of dividend policy presented a tough challenge to the conventional wisdom of time up to that point, it was universally acknowledged by both theorists and corporate managers that the firm can enhance its business value by providing for a more generous dividend policy as investors seem to prefer dividends over capital gains (JM Samuels, FM.Wilkes and R.E Brayshaw). Benartzi et al. (1997) conducted an extensive study and concluded that Lintners model of dividends remains the finest description of the dividend setting process available. Baker et al. (2001) conducted a survey on 630 NASDAQ-listed firms and analyzed the responses from 188 CFOs about the importance of 22 different factors that influence their dividend policy, they found that the dividend decisions made by managers were consistent with Lintners (1956) survey results and model. Their results also suggest that managers pay particular attention to the dividend policy of the firm because the dividend decision can affect firm value and, in turn, the wealth of stockholders, thus dividend policy requires serious attention by the management. E.F Fama and K.R French (2001) investigated the characteristics of companies paying dividends and concluded that the top most characteristics that affect the decision to pay dividends are Firm size, Profitability, and Investment opportunities. They studied dividend payment in the United States and found that the proportion of dividend payers declined sharply from 66% in 1978 to 20.8% in 1999, and that only about a fifth of public companies paid dividends. Growth companies such as Microsoft, Cisco and Sun Microsystems were found to be non-dividend payers. They also explained that the probability that a firm would pay dividends was positively related to profitability and size and negatively related to growth. Their research concluded that larger firms are more profitable and are more likely to pay dividends, than firms with more investment opportunities. The relationship between firm size and dividend policy was studied by Jennifer J. Gaver and Kenneth M. Gaver (1993). They suggested t hat A firms dividend yield is inversely related to the extent of its growth opportunities. The inference here is that as cash flow increases, the coefficient of dividend decreases, indicating that smaller firms that have greater investment opportunities thus they tend not to make dividend payment while larger firms tend to have proactive dividends policy. Ho, H. (2003) undertook a comparative study of dividend policies in Japan and Australia. Their study revealed that dividend policies in Australia and Japan are affected by different financial factors. Dividend policies are affected positively by size in Australia and liquidity in Japan. Naceur et al (2006) examined the dividend policy of 48 firms listed on the Tunisian Stock Exchange during the period 1996-2002. His research indicated that highly profitable firms with more stable earnings could afford larger free cash flows and thus paid larger dividends. Li and Lie (2006) reported that large and profitable firms are more likely to raise their dividends if the past dividend yield, debt ratio, cash ratio are low. A study was conducted by Norhayati Mohamed, Wee Shu Hui, Mormah Hj.Omar, and Rashidah Abdul Rahman on Malaysian companies over a 3 year period from 2003-2005. The sample was taken from the top 200 companies listed on the main board of Bursa Malaysia based on market capitaliza tion as at 31December 2005. Their study concluded that bigger firms pay higher dividends. For the purpose of finding out how companies arrive at their dividend decisions, many researchers and theorists have proposed several dividend theories. Gordon and Walter (1963) presented the Bird in Hand theory which suggested that to minimize risk the investors always prefer cash in hand rather than future promise of capital gain. This theory asserts that investors value dividends and high payout firms. As said by John D. Rockefeller (an American industrialist) The one thing that gives me contentment is to see my dividend coming in. For companies to communicate financial well-being and shareholder value the easiest way is to say the dividend check is in the mail. The bird-in-hand theory (a pre-Miller-Modigliani theory) asserts that dividends are valued differently to capital gains in a world of information asymmetry where due to uncertainty of future cash flow, investors will often tend to prefer dividends to retained earnings. As a result the value of the firm would be increased a s a higher payout ratio will reduce the required rate of return (see, for example Gordon, 1959). This argument has not received any strong empirical support. Dividends, paid by companies to shareholders from earnings, serve as an important indicator of the strength and future prosperity of the business. This explanation is known as signaling hypothesis. Signaling is an example factor for the relevance of dividends to the value of the firm. It is based on the idea of information asymmetry between managers and investors, where managers have private information about the firm that is not available to the outsiders. This theory is supported by models put forward by Miller and Rock (1985), Bhattacharya (1979), John and Williams (1985). They stated that dividends can be used as a signaling device to influence share price. The share price reacts favorably when an announcement of dividend increase is made. Few researchers found limited support for the signaling hypothesis (see Gonedes, 1978 , Watts, 1973) and there are other researchers, who supported the hypothesis, for example, in Michaely, Nissim and Ziv (2001), Pettit (1972) and Bali (2003). The tax-preference theory assumes that the market valuation of a firms stocks is increased when the dividend payout ratios is low which in turn lowers the required rate of return. Because of the relative tax liability of dividends compared to capital gains, investors need a large amount of before-tax risk adjusted return on stocks with higher dividend yields (Brennan, 1970). On one side studies by Lichtenberger and Ramaswamy (1979), Poterba and Summers, (1984), and Barclay (1987) have presented empirical evidence in support of the tax effect argument and on the other side Black and Scholes (1974), Miller and Scholes (1982), and Morgan and Thomas (1998) have either opposed such findings or provided completely different explanations. The study by Masulis and Trueman (1988) model dividend payments in form of cash as products of deferred dividend costs. Their model predicts that investors with differing tax liabilities will not be uniform in their ideal firm dividend policy. As the tax l iability on dividends increases (decreases), the dividend payment decreases (increases) while earnings reinvestment increases (decreases). According to Farrar and Selwyn (1967), in a partial equilibrium framework, individual investors choose the amount of personal and corporate leverage and also whether to receive corporate distributions as dividends or capital gains. Barclay (1987) has presented empirical evidence I support of the tax effect argument. Others, including Black and Scholes (1982), have opposed such findings or provided different explanations. Farrar and Selwyns model (1967) made an assumption that investors tend to increase their after tax income to the maximum. According to this model corporate earnings should be distributed by share repurchase rather than the use of dividends. Brennan (1970) has extended Farrar and Selwyns model into a general equilibrium framework. Under this, the expected usefulness of wealth as a system of barter is maximized. Despite being more robust both the models are similar as regards to their predictions. According to Auerbachs (1979) discrete-time, infinite-horizon model, the wealth of shareholders is maximized by the shareholders themselves and not by firm market value. If there does, infact, exist a difference between capital gains and dividends tax; firm market value maximization is no longer determined by wealth maximization. He states that the continued undervaluation of corporate capital leads to dividend distributions. The clientele effects hypothesis is another related theory. According to this theory the investors may be attracted to the types of stocks that fall in with their consumption/savings preferences. That is, investors (or clienteles) in high tax brackets may prefer non-dividend or low-dividend paying stocks if dividend income is taxed at a higher rate than capital gains. Also, certain clienteles may be created with the presence of transaction costs. There are several empirical studies on the clientele effects hypothesis but the findings are mixed. Studies by Pettit (1977), Scholz (1992), and Dhaliwal, Erickson and Trezevant (1999) presented evidence consistent with the existence of clientele effects hypothesis whereas studies by Lewellen et al. (1978), Richardson, Sefcik and Thomason (1986), Abrutyn and Turner (1990), found weak or contrary evidence. There is an assumption that the managers do not always take steps which would lead to maximizing an investors wealth. This gives rise to another favorable argument for hefty dividend payouts which shifts the reinvestment decision back on the owners. The main hitch would be the agency conflict (conflict between the principal and the agent) arising as a result of separate ownership and control. Therefore, a manager is expected to move the surplus funds from the high retained earnings into projects which are not feasible. This would be mainly due to his ill intention or his in competency. Thus, generous dividend payouts increase a firms value as it reduces the managements access to free cash flows and hence, controlling the problem of over investment. There are many more agency theories explaining how dividends can increase the value of a firm. One of them was by Easterbrook (1984); he proposed that dividend payments reduce agency problems in contrast to the transaction cost theory which is of the view that dividend payments reduce the value as it forces to raise costly finances from outside sources. His idea is that if the dividends are not paid, there is a problem of collective action that tends to lead to hap-hazard management of the firm. So, dividend payouts and raising external finance would attract auditory and regulatory measures by financial intermediaries like investment banks, respective stock exchange regulators and the potential investors as well. All this monitoring would lead to considerable reduction of agency costs and appreciate the market value of t he firm. Moreover, as defined by Jenson and Meckling (1976), Agency costs=monitoring costs+ bonding, costs+ residual loss i.e. sum of agency cost of equity and agency cost of debt. Hence, Easterbrook (1984) noted that dividend payments and raising new debt and its contract negotiations would reduce potential for wealth transfer. The realization for potential agency costs linked with separation of management and shareholders is not new. Adam Smith (1937) proposed that management of earlier companies is wayward. This problem was highly witnessed during at the time of British East Indian Companies and tracking managers was a failure due to inefficiencies and high costs of shareholder monitoring (Kindleberger, 1984). Scott (1912) and Carlos (1922) differ with this view point. They agree that although some fraud existed in the corporations, many of the activities of the managers were in line with those of the shareholders interests. An opportune and intelligent manager should always invest the surplus cash available into those opportunities which are well researched to be in the best interest of the shareholders. Berle and Means (1932) was the first to discover the insufficient utilization of funds which are surplus after other investment opportunities taken by the management. This thought was further promoted by Jensens (1986) free cash flow hypothesis. This hypothesis combined market information asymmetries with the agency theory. The surplus funds left after all the valuable projects are largely responsible for creation of the conflict of interest between the management and the shareholders. Payment of dividends and interest on other debt instruments reduce the cash flow with the management to invest in marginal net present value projects and for other perquisite consumptions. Therefore, the dividend theory is better explained by the combination of both the agency and the signaling theory rather than by any o ne of these alone. On the other hand, the free cash flow hypothesis rationalizes the corporate takeover frenzy of the 1980s Myers (1987 and 1990) rather than providing a clear and comprehensive dividend policy. The study by Baker et al. (2007) reports, that firms paying dividend in Canada are significantly larger and more profitable, having greater cash flows, ownership structure and some growth opportunities. The cash flow hypothesis proposes that insiders to a firm have more information about future cash flow than the outsiders, and they have incentivized motives to leak this to outsiders. Lang and Litzenberger (1989) check the cash flow signaling and free cash flow explanations of the effect of dividend declarations on the stock prices. This difference between permanent and temporary changes is also explored in Brook, Charlton, and Hendershott (1998). However, this study is based on the hypothesis that dividend changes contain cash flow information rather than information about earnings. This is the cash flow signaling hypothesis proposing that dividend changes signal expected cash flows changes. The dividend decisions are affected by a number of factors; many researchers have contributed in determining which determinant of dividend payout is the most significant in contributing to dividend decisions. It is said that the primary indicator of the firms capacity to pay dividends has been Profits. According to Lintner (1956) the dividend payment pattern of a firm is influenced by the current year earnings and previous year dividends. Pruitt and Gitmans (1991) survey of financial managers of 1000 largest U.S companies about the interplay among the investment and dividend decisions in their firms reported that, current and past year profits are essential factors influencing dividend payments. The conclusion derived from Baker and Powells (2000) survey of NYSE-listed firms is that the major determinant is the anticipated level of future earnings and continuity of past dividends. The study of Aivazian, Booth, and Cleary (2003) concludes that profitability and return on equity positi vely correlate with the size of the dividend payout ratio. The study by Lv Chang-jiang and Wang Ke-min (1999) on 316 listed companies in China that paid cash dividends during 1997 and 1998 by using modified Lintner dividend model, suggested that the dividend payout ratio is due to the firms current earning level. Other researchers like Chen Guo-Hui and Zhao Chun-guang (2000), Liu Shu-lian and Hu Yan-hong (2003) also concluded their research on the above stated understanding about dividend policy of listed companies in China. A survey done by Baker, Farrelly, and Edelman (1985) and Farrelly, Baker, and Edelman (1986) on 562 New York Stock Exchange (NYSE) firms with normal kinds of dividend polices in 1983 suggested that the major determinants of dividend payments were the anticipated level of future earnings and the pattern of past dividends. DeAngelo et al. (2004) findings suggest that earnings do have some impact on dividend payment. He stated that the high/increasing dividend concentration may be the result of high/increasing earnings concentration. Goergen et al. (2005) study on 221 German firms shows that net earnings were the key determinants of dividend changes. Baker and Smith (2006) examined 309 sample firms exhibiting behavior consistent with a residual dividend policy and their matched counterparts to understand how they set their dividend policies. Their study showed that for the matched firms, the pattern of past dividends and desire to maintain a long-term dividend payout ratio elicit the highest level of agreement from respondents. The study by Ferris et al. (2006) found mixed results for the relation between a firms earnings and its ability to pay dividends. Kao and Wu (1994) used a time series regression analysis of 454 firms over the period of 1965 to1986, and showed that there was a positive relationshi p between unexpected dividends and earnings. Carroll (1995) used quarterly data of 854 firms over the period of 1975 to 1984, and examined whether quarterly dividend changes predicted future earnings. He found a significant positive relationship. Liquidity is also an important determinant of dividend payouts. A poor liquidity position would generate fewer dividends due to shortage of cash. Alli et.al (1993), reveal that dividend payments depend more on cash flows, which reflect the companys ability to pay dividends, than on current earnings, which are less heavily influenced by accounting practices. They claim current earnings do no really reflect the firms ability to pay dividends. A firm without the cash flow back up cannot choose to have a high dividend payout as it will ultimately have to either reduce its investment plans or turn to investors for additional debt. The study by Brook, Charlton and Hendershott (1998) states that, Firms expecting large permanent cash flow increases tend to increase their dividend. Managers do not increase dividends until they are positive that sufficient cash will flow in to pay them (Brealey-Myers-2002). Myers and Bacons (2001) study shows a negative relationship between the liquid ratio and dividend payout. For companies to enable them to enhance their dividend paying capacity, and thus, to generate higher dividend paying capacity, it is necessary to retain their earnings to finance investment in fixed assets. The study by Belans et al (2007) states that the relationship between the firms liquidity and dividend is positive which explains that firms with more market liquidity pay more dividends. Reddy (2006), Amidu and Abor (2006) find opposite evidence. Lintner (1956) posited that the level of retained earnings is a dividend decision by- product. Adaoglu (2000) study shows that the firms listed on Istanbul Stock Exchange follow unstable cash dividend policy and the main factor for determining the amount of dividend is earning of the firms. The same conclusion was drawn by Omet (2004) in case of firms listed on Amman Securities Market and he further states that the tax imposition on dividend does not have the significant impact on the dividend behavior of the listed firms. The study by Mick and Bacon (2003) concludes that future earnings are the most influential variable and that the past dividend patterns as well as current and expected levels are empirically relevant in explaining the dividend decision. Empirical support for Lintners findings, that dividends were indeed a function of current and past profit levels and were negatively correlated with the change in sales was found by Darling (1957), Fama and Babiak (1968). Benchman a nd Raaballe (2007) discovered that the propensity to pay out dividends is positively correlated to retained earnings. Also, the study by Denis and Osobov (2006) states that retained earnings are a significant dividend characteristic for non- US firms including UK, German, and French firms. One of the motives for dividend policy decision is maintaining a moderate share price as poor stock price performance mostly conveys negative information about firms reputation. An empirical research took by Zhao Chun-guang and Zhang Xue-li et al (2001) on all A shares listed companies listed in Shenzhen and Shanghai Stock Exchange, states that the more cash dividends is paid when the stock prices are high. Chen Guo-Hui and Zhao Chun-guang (2000) undertook a research on all A shares listed before 1996 and paid dividend into share capital in 1997 as their sampling, and employed single-factor analysis, multifactor regression analysis to analyze the data. Their research showed a positive stock price reaction to the cash dividend, stock dividend policy. Myers and Bacon (2001) discussed that the debt to equity ratio was positively correlated to the dividend yield. Therefore firms with relatively more investment opportunities would tend to be more geared and vice versa (Ross, 2000). The study by Hu and Liu, (2005) declares that there is a positive correlation between the cash dividend the companies pay and their current earnings, and a inverse relationship between the debt to total assets and dividends. Green et al. (1993) questioned the irrelevance argument and investigated the relationship between the dividends and investment and financing decisions. Their study showed that dividend payout levels are decided along with investment and financing decisions. The study results however do not support the views of Miller and Modigliani (1961). Partington (1983) declared that firms motives for paying dividends and extent to which dividends are decided are independent of investment policy. The study by Higgins (1981) declares a direct link between growths and financing needs, rapidly growing firms have external financing needs because working capital needs normally exceed the incremental cash flows from new sales. Higgins (1972) suggests that payout ratios are negatively related to firms need top fund finance growth opportunities. Other researchers like Rozeff (1982), Lloyd et al. (1985) and Collins et al. (1996) all show significantly negative relationship between historical sales growth and dividend payout whereas D, Souza (1999) however shows a positive but insignificant relationship in the case of growth and negative but insignificant relationship in case of market to book value. Jenson and Meckling (1976) find a strong relationship between dividends and investment opportunities. They explain, in some circumstances where firms have relative uptight disposable

Negative effects of homeschooling Essay

An average day in the life of a 10 year old consists of waking up, eating breakfast, and going to school followed by coming home to their loving families at the end of the day. Would this routine seem complete without going to school involved? In some cases children are not sent to a public school, but taught at home by one of their parents or both. Without being sent to mingle with peers, the child most defiantly misses out on important skills and lessons one can only learn while interacting with other people their age. Crucial life lessons, social skills, and specific aspects of education can be missed out on as a home schooled child. An important aspect to remember if considering home schooling as an option is that the most successful parents who home school are school teachers and not stay at home moms. Even in this situation there is no way that a one person teaching system could even begin to compare to the wisdom, intelligence and experience one can get in a high school setting. Without the variety of influences from teachers there are a few gaps left in a child’s education. With only one influence, they will not have a broad view of the world due to the fact that anything they’ve ever learned of heard an opinion of is from one person. Isn’t education all about learning about all sorts of the view points out there in the real world? In most cases parents may home school their child in order to protect them from the horrible world of peer pressure and bad influences. Although a parent with a child nearing the schooling age would probably think this is a wonderful idea. They most likely do not realize that this is thinking short-term and not considering the long-term negative effects missing out on these experiences may be to a child. In a classroom children learn to follow orders from one who is in charge; sitting quietly and doing what their told is very important in ones life. Out on the playground they learn how to socialize with others their age and begin building sturdy friendships with others who share the same interests. The idea of staying at home learning by themselves is obviously not providing a child with any kind of social situation once so ever. Naturally not all school experiences are fun. It is a giving that in a public school there will be taunting and other unfortunate behavior from other kids. Learning on their own how to deal with  these experiences is extremely important in the grown up world. Without knowing how to cope with emotions and never experiencing the real world it could be extremely difficult learning how to handle other people. Going to college and getting a job would be made more difficult then it has to be. Among all the choices one can make for their kids, why would a parent chose to deprive them of important life skills and a quality education? The idea of â€Å"going to school† is a relevant building block in any person’s life. Not being at school learning with peers is missing out on very important aspects of childhood. Getting familiar with the ideas of how the world works is necessary to having a successful life. Schools are like a little community for children where they grow, learn and adapt to the many challenges life may put ahead of them.

Referring to at Least Two Sources of Data, Critically Discuss How Crime Is Measured in Britain and Explain Why the Statistics Do Not Provide Us with a Full Picture of How Much Crime There Actually Is.

SCS1007 ESSAY Referring to at least two sources of data, critically discuss how crime is measured in Britain and explain why the statistics do not provide us with a full picture of how much crime there actually is. If one were to ask how much crime there is in Britain, the judgement could differ depending on whom you were asking or their judgement on what they actually class as criminal behaviour. Society is ambivalent towards crime, which skews the analysis over the level of criminal activity in Britain.Maguire describes the area of crime numbers or trends as one of ‘shifting sands’ (Maguire 2002, p,322) in terms of the developments and creations in criminological process and thought which happens day to day. He also argues that finding the true level of crime bears very little significance in the study of criminology, but what bears greater significance is the critical approach by which the data is analysed.Nevertheless, there are official police-generated crime statis tics in Britain, made up of reported and recorded crimes, which still, to this day impact on how politicians and journalists view the government’s effectiveness in dealing with crime. The Official Crime Statistics in England are published annually and allow various sectors of society such as the media, politicians and the general public to assess the extent and the trends in criminal activity.These published tables of national crime statistics named ‘Criminal Statistics, England and Wales’ were first compiled in 1857 and were based on annual returns from the courts and the police which were then aggregated by government statisticians (Maguire 2002). Crimes recorded in police statistics are defined by the ‘Notifiable Offence List’ (ONS: Data sources – further information). This follows technological advances in recent times, which have grown the net number of police-recorded crimes, such as ‘common assaults’. Many minor crimes have been upgraded and are now regarded as ‘notifiable offences’ (Maguire 2002).However, there are significant shortcomings with the police-generated crime statistics, such as the fact that certain crimes are not included in this list, referred to by the ONS as ‘non-notifiable’ crimes. These crimes often include anti-social behaviour or minor crimes such as drunkenness, littering or begging. Whilst there is criminal activity occurring in Britain which does not come to police notice, and therefore is not recorded (discussed in detail later in this paper), there are crimes which the police are aware of, but use a great deal of discretion as to whether or not these crimes are recorded (Maguire 2002).The public are responsible for notifying around eighty per cent of recorded crimes to the police (McCabe and Sutcliffe 1978), however, the latter have the responsibility for deciding which crimes to deal with and which to ignore. Often they can regard some crimes as to o trivial or they dispute the legitimacy of others, which can lead to unreliable data. Moore, Aiken and Chapman (2000) see the police as filters, only recording some of the crimes reported to them. Furthermore, there are certain types of crime that are excluded totally from these statistics, seriously altering the extent to which the data can be classed as comprehensive.The term ‘notifiable’ offence essentially refers to one, which can be tried by the Crown Court. This leaves ‘summary offences’ (those which can only be tried in a Magistrate’s Court) excluded from the data (Maguire 2002). In addition to this, crimes which are not regarded as the responsibility of the Home Office, such as those recorded by the British Transport Police, Ministry of Defence Police, and UK Atomic Energy Authority Police (who between them record some 80,000 notifiable offences annually) (Kershaw et al . 2001, p91) are also excluded from ‘official crime figures. †™A further limitation with police recorded crime data is caused by the unpredictable fluctuations with the remaining 20 per cent of crimes which the police themselves discover, either through observation, patrols or through confessions by those arrested. This could be due to increased arrests from planned operations targeted against a certain type of crime. For example, following the London riots in 2011, many people were arrested due to the police focusing their resource and effort on finding the offenders. Similarly, at pop festivals many drug users have been found and arrested.On the other hand, numbers of recorded crimes may fall if police interest in a particular type of crime is withdrawn. This could be for a number of reasons such as in the late 1950’s and early 1960’s when the legalisation of homosexuality was imminent. At this time the police regularly ignored ‘indecency between males’ which resulted in a fall of recorded offences to half the le vel previously regarded as normal (Walker 1971). In criminology, the term ‘the dark figure of crime’ is often used to refer to the crimes that are not reported and therefore not recorded in official statistics.In theory, the ‘dark figure’ consists of offences brought to the justice system but not registered in judicial sources (perhaps because they were settled outside of the court), undiscovered offences or offences where the victim has chosen not to reveal details (Johnson and Monkkonen 1996). This loophole seriously alters the accuracy of the criminal justice disciplinary system. The underlying reasoning for certain crimes not being reported are based on people’s own judgement of the seriousness of the crime, police power, police diplomacy or simply because people see it as an inconvenience.It could be argued that if people don’t believe the reporting of their crime to be serious enough, then the justice system is not as accessible and tran sparent as it should be. This argument widens the issue of the dark figure of crime from a statistical one to an underlying and historical error creating much scope for debate. The police system is in place for the safety of citizens, but if citizens don’t feel the use of the justice system is necessary in certain instances, then what is the point in the justice system being in place for certain crimes?Furthermore, this hinders the reliability of criminologists’ theories where a legalistic stance is taken in the definition of crime. A secondary measure of crime in Britain, regarded by Maguire as a â€Å"directly comparable rival to the police-generated crime statistics† (Maguire 2002) is the British Crime Survey (BCS), now named the Crime Survey for England and Wales (CSEW) to reflect its geographical coverage. This measure attempts to combat the inaccuracy of the ‘dark figure of crime’ referred to above.The CSEW was first conducted in 1892 and is a n annual survey rather than a list of statistics. When the survey was first conducted, there were 11 million crimes reported; however, official statistics recorded by the police only counted less than three million (Hough and Mayhew 1983)– this gap is first hand evidence of the ‘dark figure of crime. ’ Forty six thousand households (ONS: Data sources – further information) were questioned in the year ending June 2012, with the CSEW focusing more on qualitative data rather than the quantitative data used in official statistics.The CSEW picks up on crime that doesn’t surface in official statistics, with households asked about their own personal experiences of crime in the past twelve months as well as taking into account any non-response bias. The measure has a consistent methodology and the results are not skewed by a percentage of the population failing to report their crime. The measure suggests the true level of crime to be twice the official crim e rate due to the proportion of people who admit to being victims or offenders of crime in a face-to-face interview, but do not report this to the police.Although the CSEW does now include a section on domestic violence, an area previously missed off the national figures, (particularly when victims are scared of their offenders) the real rate of crime is still substantially under-estimated. Corporate or workplace crime, homicide, drug possession or crimes against people under the age of 16 are still not included in the CSEW figures. In today’s society, this is a major drawback to the CSEW as corporate crime is growing in our increasingly globalised economy whilst crimes against children appear to be remaining constant with no breakthrough on prevention.In 2011, of the police recorded crime statistics on sexual abuse against children, it was found that 1 in 10 children (9. 4%) aged between eleven and seventeen years old had experienced sexual abuse (NSPCC 31/12/12). Some progr ess appears to have been made in the area of corporate crime following a recommendation contained in the National Statisticians’ Review of Crime Statistics (National Statistician, 2011 18/12/12) – there is now a survey of commercial victimisation which aims to provide statistics on corporate crime in the economy over the next three years and is planned to be incorporated into future quarterly releases in 2013.However, other drawbacks associated with the CSEW include the time lag on information collection – the survey records data from people’s experience 12 months prior. This is in comparison to police recorded crime in which the data is clearly more immediate. Furthermore, the CSEW is vulnerable to sampling errors and variation in results. One person may feel comfortable enough to admit criminal activity to one interviewer, but not to another. Therefore the reliability of the data can be challenged.When comparing both the CSEW and police recorded crime i n official statistics the most recent data from the Office of National Statistics can be analysed. The CSEW, based on interviews in the year ending June 2012, reveals a â€Å"statistically significant decrease of 6 per cent in the overall level of CSEW crime compared with the previous year’s survey (ONS: Overall level of crime 18/12/12). † Similarly, â€Å"the overall level of notifiable crime recorded by the police decreased by 6 per cent in the year ending June 2012, compared with the previous year (ONS: Overall level of crime 18/12/12). Nevertheless, whilst the CSEW estimates just over 9. 1 million incidents of crime for the year ending June 2012, the official figures only record 3. 9 million offences. This is heavily based on the ‘dark figure of crime’ – that proportion of crime in Britain which goes unnoticed by the police. In 2002, the CSEW (then named BCS) calculated that â€Å"40 per cent of crimes known to victims and reported to the poli ce do not end up in official statistics (Kershaw et al 2001, p992). It is evident that, whilst the CSEW does reveal a higher level of criminal activity in Britain, a majority of the crimes can regarded as not serious enough to be included in official statistics, and therefore should not alarm the population. Although the legalistic position attempts to simplify the scale of debate surrounding what crime actually is, stating ‘the most precise and least ambiguous definition of crime is that which defines it as behaviour which is prohibited by the criminal code’ Coleman (2000), this however creates a question on what is actually being regarded as illegal behaviour and ‘prohibited by the criminal code’.Analysing the methods used in Britain to measure crime establishes the fact that criminal statistics are a social construction, based not on a set of legal definitions and laws, which can be transferred between social groups and times, but on a product of social processes. The process of attrition between an act, regarded as criminal, to the same act being punished contains a number of stages that blur the answer to the question ‘How much crime is there in Britain? It appears that the term ‘official crime figures’ is somewhat paradoxical in the fact that if society is basing its justified opinion on these ‘official’ figures, then it must take into account several exclusions in order to get a more comprehensive perspective on what the data is actually showing. Although the figures summarise the most serious crimes in Britain they do not show the total picture.In this day and age more emphasis needs to be placed on the responsibility of the criminal justice system and the link back to the definition of criminals in the first place. In particular, if crime is viewed from a labelling perspective, then the role that the legal system plays in the creation of crime is of great significance when measuring the true le vel of criminal activity in Britain.In addition, consideration needs to be given to future prevention of crime and the measurement of how effective society is at removing or reducing certain categories of crime. In closing, I would argue that when answering the question ‘how much crime is there in Britain? ’ it would be naive to base any argument upon these official crime figures as they are simply ‘indices of organisational processes’ Kitsuse and Cicourel (1963).

Strategic Research Project Essays

Strategic Research Project Essays Strategic Research Project Essay Strategic Research Project Essay Strategic Research Project Name: Course: Institution: Instructor: Date: Strategic Research Project Vodafone Group is a British transnational company that engages in telecommunications. It has its mother company in Newbury, United Kingdom. Vodafone is the world’s largest telecommunication company in terms of revenue and second in terms of the number of users. It operates in over thirty countries having a vast base of associate companies. The company has a slogan â€Å"Everybody’s welcome† displaying how they have made efforts to accommodate all kinds of clients with different backgrounds having the same of interest of using Vodafone products. True to their mission, Vodafone have extended their branches to cover at least all the continents in the world. The company has strengths, weaknesses, opportunities and threats that apply to its operations, in addition to its structures. The major strengths of Vodafone Group are that Vodafone has a wide, geographical portfolio covering much of Africa, the Middle East, plus to a small level, the US. Therefore, they enjoy a strong customer base that provides it with increasing revenue each financial year. This large customer base also becomes the consumers for Vodafone products. Vodafone has also invested substantially in their network infrastructure with signal masts to serve consumers within their vicinity. Vodafone also managed to entrench their presence in most developing states like India and Kenya. Lastly, Vodafone provides reliable data and voice services especially in cities making it a preference for corporate groups. (Vodafone Group Plc, 1900) Some of the weaknesses plaguing Vodafone include non exploitation of other markets. Owing to their heavy investment in Europe, Vodafone misses out on benefiting from the rest of the untapped markets in The Americas and East Asia which still have a large demand for mobile phones along with other Vodafone products. Vodafone has also invested very little in extending their signal range to cover most of rural areas thereby missing out on the huge rural consumers. Vodafone has also not focused their business operations in the US. Therefore, they do not maximize on the thriving demand created by mainstream American firms and entrepreneurs. In terms of opportunities, Vodafone have developed innovations in mobile commerce that seek to fuse banking with mobility that will see an increase in their revenues. Vodafone launched the mobile money transfer service, M-PESA along with Safaricom Kenya, which brought new dimensions to mobile banking. Vodafone has also launched the mHealth Solutions which is the application of mobile communications to healthcare. Apart from these products, Vodafone also launched the cheapest phone aimed for the developing world. The most dominant threat in this market is the constant change in technological approaches. The telecommunications market is characterized by a dynamic competition that constantly seeks to innovate and experiment with new ideas. Consequently, this competitive environment always threatens Vodafone with being edged out of the market. The European Union also poses a threat to the mobile usage across borders in Europe threatening Vodafone as mobile phones are their major product. Lastly, Vodafone still has a lot of ground to catch up with other American telecommunication companies that have cut a niche for themselves as solid competitors. (PLC SWOT analysis, 2011) In terms of market penetration, the Vodafone company has made huge investments in most of Africa as well as the Middle East in a bid to penetrate new markets. It operates in Egypt, in South Africa, in Ghana and in Libya under the partnership with al Madar (Working Nation, 2004). Of interest is the approach of using partnerships as the main method of going into business within Africa. This can be an attempt at mitigating political as well as economic risks that plague most of African states. Within Asia and Latin America, Vodafone has been taking a laid back approach similar to that in Africa by again opting to partner with Verizon Wireless instead of establishing their own offices independently. Within Europe, Vodafone have been more aggressive. It has engaged in past takeovers of telecommunication companies, for example, Elisa, Omnitela plus Cyta alongside other companies. Clearly, Vodafone has invested a larger bulk of their capital in Europe as compared to the rest of the continen ts. Vodafone has three main competitors in the global market namely T-Mobile, Orange as well as O2. Vodafone has taken a strategy of buying out other networks in order to reduce competition within a particular market segment. However, small network operators operating as mobile virtual network operators have lowered this barrier significantly with differentiated products alongside services identifying them as new entrants. Key suppliers of Vodafone have had less muscle to bargain owing to lack of technical advantages as well as the looming Chinese entrants who pursue cost leadership. Vodafone has responded to this by integrating all her key business activities hence leveraging their economies of scale. Vodafone has also countered the threat form substitutes by continuously diversifying its products to meet the consumer’s needs. (Myers, 2010) Vodafone has been actively engaged in domestic politics of their host countries where they possess subsidiaries dragging the firm into many blame games. In order to avoid such complications in the future, Vodafone should revise their policies concerning cooperating with the state in matters of state interest. A good example was the Egypt insurgency where Vodafone, who administers most of the telecommunication infrastructure, shut off all voice and data services to Egypt citizens after orders by the state (William, 2011). Vodafone should also engage in a vigorous campaign to establish themselves in the US where there is a large customer base. Over five years, this should translate into profit margins received by Verizon as well as ATT Mobility. References Global Perspective. (2010). Service Provider VoIP Equipment and Subscribers: Quarterly Worldwide and Regional Market Share, Size, and Forecast. Hoboken, NJ: John Wiley and Sons. Myers, D. Vodafone (Firm). (2004). Working nation: Views from people at work. St. Albans: Vodafone. Vodafone Group Plc (Newbury). (2010). Annual report. Newbury: Vodafone Group Plc. Vodafone Group, PLC SWOT Analysis. (2011) (n.d.). (Business Source Complete) Cleveland: Data monitor Plc. Williams, Christopher (28 January 2011). â€Å"How Egypt shut down the internetâ€Å". The Daily Telegraph (London)

Two Artists And One Great Age essays

Two Artists And One Great Age essays The great age, Renaissance was a time when old beliefs were tested. It was a period of intellectual ferment that prepared the ground for the thinkers and scientists of the 17th century. It was an age that bore two great artists: Leonardo da Vinci and Michelangelo. Leonardo was not a prolific painter like his fellow artists. He was a kind of intellectual painter, a painter who thought a great deal about nature and about how to represent it in art before he picked up the brush. Yet, one might attribute that quality to Michelangelo as well who was clearly a deep thinker. In looking at the works of these artists, their driven personalities and great accomplishments, one sees many similarities. However, they chose different techniques and different mediums. Further, Da Vinci was more of a scientist whereas Michelangelo was more of a loner who was devoted to the love of art and sculpture. Nevertheless, the paintings, statues and unfinished designs created by these two solitary often-abrasive artists are among the most beautiful in the world. Their work is important because it interweaves past revolutionary ideals with modern age of skepticism. If one person could be singled out as the essence of the Renaissance it would be Leonardo da Vinci. He was a painter, scientist, engineer and poet. He became all that his contemporaries wanted to be. His mind was ever open so were his eyes. Leonardo was trained, as all artist of the time were, by being apprenticed in the studio of another artist. These apprentices started out washing brushes and cleaning floors for the their teachers. These studios, however, were the meeting places of the great minds of the day. Leonardo made contact with intelligent men and acquired the skills of scientific inquiry as well as receiving the finest training available in painting and sculpture. Leonardo got his start as an artist around 1469, when his father apprenticed him to the fabled workshop of Verocc...

SAM 451 UNIT 6 Assignment Example | Topics and Well Written Essays - 250 words

SAM 451 UNIT 6 - Assignment Example It is in this context that both these policies hold considerable significance in media interviewing for school-athletic teams. These policies also advocates the significance of conducting an informed interview with the athletic teams, after obtaining due permission from the concerned authoritative bodies. On a chronological note, the policy of obtaining formal consents from authoritative bodies can be argued as more time consuming than the second interview policy. Also, complexities arising during the obtainment of formal consents from the authoritative bodies and the coaches can be regarded as a setback of the policy measure. Accordingly, the policies of the school authority for different group of athletes may differ along with the different forms of reporting medium used in the interview process. For instance, some schools may allow a group of athletes to participate in television shows, while the other group might be only allowed to attend newspaper reporters and that too, in the presence of their coach. Hence, applicability of these policies differ from one another; although, the significance of either of these policies are unignorable (Bowl Championship Series, â€Å"Interview policies†; Helitzer). In comparison to the two interview policies selected, the policy of â€Å"Obtaining required permissions from the coaches of the teams and other authoritative bodies (if applicable)† can be considered as more preferable. It is fundamentally owing to the fact that this particular policy directs the effective completion of the interview process at every stage and also confirms integrity of the procedure, where the other interview policy of conveying the mode of interview and the medium of publication to the authoritative

During the placement identify a specific issue relating to nursing Essay

During the placement identify a specific issue relating to nursing practice. (Progression development in mental health nursing) - Essay Example It requires a perfect understanding of the health problem, its effects and implications for other life and health functions in older people. Therefore, it is imperative for mental health nurses to develop professional awareness of the dementia problem and its risks in older people, in order to understand the ways of addressing this problem, as well as the personal and medical needs of older people. This paper aims at investigating the issue of dementia in older people from the standpoint of a mental health nurse. The paper will discuss and critically evaluate the significance of the problem for older people. Prevalence of dementia in older people and its effects on the critical life functions will be discussed. The paper will analyze the challenges, which mental health nurses face, while trying to deliver high quality nursing care. Other aspects of mental health care will be discussed, including nursing paradigms and therapeutic approaches, the role and the boundaries of a mental hea lth nurse in dementia care, and the role of effective planning and nurse-patient interactions in caring for older patients suffering from dementia. Legal and ethical factors of dementia care will be evaluated. This paper will expose the key problems related to mental health nursing and its role in dementia care. Practical recommendations for mental health nurses will be provided. ... ing those with dementia, constantly grows, and (b) dementia requires that nurses develop complex approaches to care, in order to reduce its negative influence on other life functions. The World Health Organization believes that the growing proportion of older people to the total population is a global phenomenon, and increasing age turns chronic health conditions into the issue of the main health importance (Anonymous 2009a). Among the most common health problems in older people, mental health disorders and cognitive impairments feature prominently (Anonymous 2009). Dementia and depression as the two most widely spread forms of chronic mental conditions later in life (Anonymous 2009a). Needless to say, the higher the proportion of older people to the general population, the more acute the problem of dementia grows. In its 2009 report, WHO estimated that almost 36 million of older people worldwide would be diagnosed of dementia and Alzheimer’s disease in 2010 (Sorrell 2010). Th is number is likely to double every 20 years (Sorrell 2010). These statistical results have far-reaching implications for health care systems’ operation and functioning. These implications are equally relevant to mental health nurses. Nurses need skills and knowledge to anticipate the development of cognitive changes in the older people and guarantee high quality care, which reduces social stigmatization of patients with dementia and improves their life and wellbeing. The problem is dangerous and complicated in the sense that dementia produces multiple negative effects on life and health functioning in older people. According to The World Health Organization, quality of life is â€Å"an individual’s perceptions of their position in life in the context of the culture and value system in which