Rating Agencies Fuelled The Crisis Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1359 Downloads: 4 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? Not only credit rating has a major influence on capital allocation decisions, it is also a key aspect that managers take into consideration when making capital structures decisions. Indeed, in 2002, the Wall Street Journal indicated that Fiat was focusing on decreasing its debt level since it was increasingly worried about a possible downgrade of its credit rating. According to Graham and Harveys findings in 2001, CFOs consider credit ratings as the second most important considerations when they determine the corporations financial structure. Moreover, it is important to remind the fact that the capital structure decision of a firm, which can be characterized as the allocation of long-term debt and equity in the capital structure used to financed fixed assets, is financial decision of significant important for managers. However, although there is has been a heated debate on the various factors that influence the capital structure of a corporation, there has been f ew researches that argue that credit ratings is a key component of the process concerning capital structure decision making. Indeed, if Kisgen explained in 2006 that credit ratings have a direct influence on capital structure decisions, his study was based on a sample of American companies for the period from 1986 and 2001. Due to the very active corporate bonds market in the United-States, American data was abundant. In addition, in 2011, Michelsen and Klein analyzed a international sample of companies for the period from 1990 to 2008 and found the same results based on the fact that credit ratings strongly impact the capital structure of corporations. No researcher has yet focused on assessing the relation between credit ratings and the capital structure decision making in European countries. As a result, the research questions on which this study will be based are the following: -Does the corporate credit rating provided by rating agencies have an impact on the capital structu re decisions made by management in European countries? -How is this rating reflected in the financial structure of corporations? Does this only affect the firms leverage level or also the amount of equity? -Does an upgrade have the same influence on the capital structure decision made by management than a downgrade? The two main theories concerning the factors that affect the capital structure decisions of a firm are the trade-off and the pecking order theory. These modern theories have been derived from the work done by Modigliani Miller in 1958, which is based on the fact that a firms value is not correlated to its leverage. The acknowledgement of the existence of bankruptcy costs and taxes has resulted in the development of the trade-off theory. This theory assumes that a value-maximizing firm will compare the benefits of issuing debt, such as the value of interest tax shields, with the costs of debt such as the direct and indirect costs of bankruptcy in order to determi ne the optimal capital structure of the company. The pecking-order theory is based on the existence of asymmetric information and argues that firms will usually prefer to use internal funds and equity rather than issuing equity due to asymmetric information costs (Myers, 1984). As a result, this theory does not provide an optimal level of debt: companies will issue debt when investment exceeds internal funds and leverage will decrease when investment is below internal funds. However, the determination of the optimal capital structure of a firm is very complex task for management. Both theories mentioned above do not take into account all relevant factors that explain the capital structure decisions made by a firms management. Indeed, Graham and Harvey stated in 2001 that 57,1% of CFOs considered that credit ratings had a significance influence on their decisions concerning the optimal gearing level for their firms. For this study, we will use the empirical research method. Wit hin this research framework, we will use the secondary data method. The sample is based of all companies with a credit rating that belong to the STOXX Europe 600 Index. According to Faulkender and Petersen, companies that have a public debt rating issue approximately 78% of outstanding debt. As a result, the sample chosen reflects a large portion of active firms in capital markets. The STOXX Europe 600 Index, derived from the STOXX Europe Total Market Index (TMI), is composed of 600 companies and reflects large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden and the United Kingdom. We will extract two types of secondary data from the Datastream database: -the companies financial statements extracted from their financial statements for the period from Q1 2000 until Q1 2012. This time period reflects two cycles : the 2000 bullish market in the global capital market thanks to the burst of the dot-com boom as well as two major economic crisis: the 2001 dot com bubble burst and the 2008 financial and economic crisis with the collapse of Lehmans Brothers. -the firms long term corporate obligations ratings by Moodys that characterizes as the opinions of the relative credit risk of fixed-income obligations with an original maturity of one year or more and that reflect both the likehood of default and any financial loss suffered in the event of default. (Moodys 2009). The corporate credit rating used in prior work (for example Kisgen, 2006) is the long-term issuer credit rating of SP. By choosing Moodys long-term corporate obligations ratings, we will be able to assess of there is any discrepancies between the results found using the credit ratings of SP and those using the ratings of another credit rating agency. We will apply a selection criteria for this sample: -we will exclude from the study companies that have been deleted from the STOXX Europe 600 due to delistings, mergers and takeovers -we will also exclude financial firms such as banks, insurances and investments firms since debt and equity issuances for this category of firms has a different goal than for service or industrial firms, which as been argued by Lasfer in 1995 -we will exclude from the sample any companies which is not characterized by Datastream as an issuer on the corporate bond market -finally, we will exclude companies which are not rated by Moodys from Q1 2000 until Q1 2012 or which financial statements are not available. For this study, we will carry out a methodological approach based on Kisgen (2006) empirical design. In order to assess the fact that a company close to a credit rating downgrade or upgrade will issue less debt compared to equity in order to avoid a downgrade or to maximize its chances to benefit from an upgrade (the CR-CS hypothesis), Kisgen (2006) states t hat there are three levels of credit rating changes: credit rating change from investment-grade to non-investment grade, the Broad Ratings change, a Broad Rating being a credit category that includes the plus, middle and minus specification of a certain rating (for example, B+, B and B-), and the Micro Ratings which are specific ratings that include a plus or a minus modification, if given. For our study, we will only focus on the first two potential credit rating changes since they are the most significant. We will therefore conduct two empirical tests: the Plus or Minus test (POM) to test for a credit rating change from one broad category to another and the Investment Grade vs Speculative Grade test (IGSG) to assess the impact of a change from investment grade to non-investment grade. In both these tests, the same dependent variable will be used to define the capital structure of the firm: it will be reflected by measures of the amount of net debt relative to net equity issued by the firm. Due to the fact that we will extract from Datastream Moodys credit rating at the beginning of the year for each firm, we will use measures of a firm capital structure for the subsequent 12 months. In addition, we will opt for book values since credit rating agencies often use these variables instead of market values. Moreover, book values are measures that highlight decisions made by the management of a company. In order to make the distinction between corporations that are close to a potential downgrade or upgrade and firms that are not, Kisgen (2006) also introduced dummy variables. Don’t waste time! Our writers will create an original "Rating Agencies Fuelled The Crisis Finance Essay" essay for you Create order

Expanded Risk Management Plan How to Handle Health...

Introduction The Quick Rx application has the most risk in terms of a legal violation that involves a compromise of patient privacy. In this management risk plan, the author will analyze how to handle Health Insurance Portability Accountability Act (HIPAA) violations in an electronic medical records (EMR) environment. The law provides civil and criminal penalties for the failure to comply with HIPAA. Neglect is punished less severely than willful violations (Hipaa violations and, 2011). Software piracy is extremely common. It refers to unauthorized copying of software. Prevention is very difficult and the degree of enforcing copyright laws varies. The piracy risk is mitigated by the iTunes store platform. Another risk is that our competitors who may have a portion of what we want to offer could update their application before completion. Technical risks are that our application is too complex for our users and therefore result in low purchasing. 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Matrimonial Case for Object and Interpretation- myassignmenthelp

Question: Discuss about theMatrimonial Case for Object and Interpretation. Answer: A married woman named Mrs. Atkinson approaches a lawyer named Mr. Cage. Mrs. Atkinson suspects that her husband named Mr. Atkinson is cheating on her. She suspects this because he has been returning home late every night from work. Mr. Atkinson works as a Project Manager at a firm named Netscribes that primarily deals with E-commerce. When Mrs. Atkinson confronted her husband about his late arrivals every night from work, he was simply stated that he was trying to clear some back-logs at work. As this is the beginning of a legal consultation in respect of a matrimonial case, it is the duty of Mr. Cage to obtain the following documents from Mrs. Atkinson: a clear and distinct description of her husband which includes his regular attire and any characteristics or marks that set him apart from others, a prominent photograph of her husband that is also recent, his work address, a detailed description of his car, knowledge in respect of the places that he visits regularly (e.g. clubs or pubs), and details of the individual with whom her husband is having an affair in her suspicion.[1] Provided that Mrs. Atkinson hands over all the above-mentioned documents to Mr. Cage, the procedure can move forward.[2] These are the documents that must absolutely be obtained and retained by Mr. Cage. It must be mentioned at this instance that a lawyer may ask a diverse range of other questions at the initial consultation of a matrimonial case.[3] These may include: inquiring about the basic background of the husband, if he has had any affair in the past, and whether Mrs. Atkinson has ever suspected her husband of having an affair in the past and if yes, the conclusion such previous suspicion came to.[4] For the purpose of this part of the assignment, I observed an acquaintance for a few hours. The following is my report on their behavior and movements: 28th August, Monday 10 am: Discreetly followed subject to the company he works in names Jeremy and Reynolds Accounting Company, 20, Sunder Street, Brisbane. Discovered the car that he drives, a Grey BMW E-class at the car park of the firm. 20 am: Subject enters his office after a brief phone call right outside office. The conversation was unintelligible from a distance. 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By the time the call connected he was already well-seated in his car and drove back to his office. A thorough research into the kind of camera that is best suited for surveillance purposes and gathering photographic evidence resulted in the following conclusions: A standard SLR (single reflex lens) camera is essential to capture clear photographs from a distance. However, in case Mr. Cage does not know how to operate such a camera he should learn how to use it by looking up tutorials online or getting enrolled for a course in that respect. The camera must allow Mr. Cage to control its focal length, aperture width, shutter speed and so on.[5] Automatic cameras must be avoided at all costs as they do not allow you to control these features. If an automatic camera comes with a manual over-ride feature, then it can be effectively used for investigation work. Telephoto lenses must be used to capture the relevant pictures as these lenses have the ability to magnify the images and thereby make it appear nearer.[6] Zoom lenses may also be used but it must be taken into account that such lenses do not let a large amount of light to get to the film. A fast (highly light-sensitive) film must be used for night-time and interior photography. These films woks competently even without flash. [7] Cage must practice clicking images with an SLR camera, telephoto lens and a fast film. Its best for him if he clicks images at unusual areas and diverse conditions, e.g., outside and inside clubs and pubs, in multi-storey car parks, in shopping centers and at night, and so on. This will allow him to understand how to work the cameras exposure under diverse circumstances. This practice shall help Mr. Cage to gain knowledge in relation to how the camera works best. If Mr. Cage uses a film that is not appropriate for the conditions, he must forward that knowledge to the lab when sending the film for processing. They might be able to improve the clarity of the pictures by processing them differently. Cage may well follow Mr. Atkinson by and take relevant pictures discreetly by taking an acquaintance along. This way, Mr. Cage may well pretend to be taking a holiday picture while actually gathering evidence for the case in full view of the camera. Photographs taken using electronic cameras are easily edited and amended nowadays and may not be by the court as evidence. Bibliography Banks, M. (1998). Visual anthropology: Image, object and interpretation.Image-based research: A sourcebook for qualitative researchers, 9-23. Bennett, A. G., Rudnicka, A. R., Edgar, D. F. (1994). Improvements on Littmann's method of determining the size of retinal features by fundus photography.Graefe's archive for clinical and experimental ophthalmology,232(6), 361-367. Clarke, T. A., Fryer, J. G. (1998). The development of camera calibration methods and models.The Photogrammetric Record,16(91), 51-66. Cunningham, C. D. (1998). Evaluating Effective Lawyer-Client Communication: An International Project Moving from Research to Reform.Fordham L. Rev.,67, 1959. Gonczi, A. (1994). Competency based assessment in the professions in Australia.Assessment in Education: Principles, Policy Practice,1(1), 27-44. Mosten, F. S. (1994). Unbundling of legal services and the family lawyer.Family Law Quarterly, 421-449. Tesler, P. H. (2008). Collaborative Family Law, the New Lawyer, and Deep Resolution of Divorce-Related Conflicts.J. Disp. Resol., 83.

Mary Shelleys description of the monster Essay Example

Mary Shelleys description of the monster Essay At the beginning Shelley contrasts his beauty and his wretchedness. Mary Shelleys description of the monster reduces the good things and increases the bad things which makes our first impression of the monster as being horrific Mary Shelley writes: His teeth of a pearly whiteness which were of a Horrid contrast with his watery eyes Mary Shelley is using Victor Frankensteins first impression of the monster was clearly horrific. You could tell from the first time Victor looked at the monstrous creation properly and he straight away knew the evil he had created. One of the first words of Victor Frankenstein upon seeing the monster was Beautiful, great god Frankenstein was infact being ironic as his creation was indeed not beautiful. He is completely despondent: The beauty of my dreams vanished and breathless horror and disgust filled my heart Mary Shelley uses such words to make us feel that this is such a monster that is so horrid that it will turn the heart black with disgust even to look at it. Mary Shelley gives us an early indication that this monster is not going to be such a first-class monster but a wicked one. We will write a custom essay sample on Mary Shelleys description of the monster specifically for you for only $16.38 $13.9/page Order now We will write a custom essay sample on Mary Shelleys description of the monster specifically for you FOR ONLY $16.38 $13.9/page Hire Writer We will write a custom essay sample on Mary Shelleys description of the monster specifically for you FOR ONLY $16.38 $13.9/page Hire Writer This also agins shows us that she is very intelligent because of the way she uses the language. This quote explains everything about how Dr Frankenstein felt. Frankenstein also makes us think in negative ways towards the monster because he uses very effective and powerful words such as: Demonical corpse, miserable monster and ugly wretch This lets us know that he is regretting the creation and he comparing it with devils and demons. Victor Frankenstein is so scared of the monster that he leaves it and doesnt look back. This also shows Mary Shelleys intelligence because she uses very effective words to describe the monster. Our impression of the monster changes later in the novel when Frankenstein the monster tells us his side of the story. Mary Shelly emphasizes the positive aspects of the monster at this stage. After the monsters creator runs away from him. The monster goes out into the world. His first encounter with humans arnt the best of encounters because at first sight of the monster they straight away judge the monsters by its looks and start beating him and throw missile weapons at him, for example: grievously bruised by stones and many other kinds of missile weapons Mary Shelley is showing here that this monster didnt obviously look like how human beings do, this also show the wretchedness of the monster, it is also giving a simple message which is dont judge a book by its cover. We find out what the monster is really like when he goes and lives in a hovel near some cottagers. Mary Shelley writes about how he helped them at night when the cottagers were asleep. The creature speaks of how he: Often took tools. The use of which I quickly discovered and brought home firing sufficient for the consumptions for several days This showed he had a caring side to him and when he saw that the cottagers were having trouble he went and helped secretly by cutting the wood for them and doing several other things. Mary Shelley also writes about how the monster learns to speak and learns new words by listening to the cottagers, particularly Felix who teaches his girlfriend Safie to speak English. The creature says: I discovered the names that were given to some of the most familiar objects of discourse, I learned and applied the words. We start to feel sorry for the monster when he discovers that he is nothing like other people and that he is completely different to them in looks, height and strength. At this point we feel sorry for him because he talks about how his going to present himself to the cottagers. Frankenstein the monster says: their grace, beauty and delicate complexions, but how was I terrified when I viewed myself in a transparent pool!