Monday, September 30, 2019

Managing Conflict Essay

Managing conflict Medicolegal issues We live in an increasingly demanding and vociferous society and incidents of conflict and aggression are sadly commonplace. Kate Taylor, Clinical Risk Manager at the Medical Protection Society offers advice on how to deal with the problem Working in general practice is busy and demanding, with increased workloads, stretched time and some patients having greater expectations of care. At times, when expectations are not met, we can find ourselves in conflict with patients – and in some situations this can turn to aggression. As nurses, how should we deal with potentially difficult situations? This article aims to increase our understanding of conflict and provide strategies to deal with it effectively. It also includes practical tips to reduce risks associated with managing conflict and aggression. DEFINITIONS Conflict means different things to different people. The Health and Safety Executive defines workplace violence as ‘any incident where staff are abused, threatened or assaulted in circumstances relating to their work, involving an explicit or implicit challenge to their safety, well-being or  health’.1 Non-physical violence can be defined as the ‘use of inappropriate words or behaviour causing distress and/or constituting harassment.'[ 2] The scale of the problem There is limited documentation relating to violence against nurses working in general practice. However, a recent survey carried out by the British Medical Association, to which 20% of doctors responded, found:[ 3] * Violence is a problem in the workplace for half of doctors (same for GPs and hospital doctors). * 1 in 3 respondents had experienced some form of violence in the workplace in the last year (same for hospital doctors and GPs). * 1 in 5 doctors reported an increase in violence in the past year, but the level remained constant for the majority. * Among doctors who reported some experience of violence, most had been the victim of verbal abuse in the past year while more than half had received a threat, and a third had been physically assaulted. Most injuries were minor, but 5% were serious. In April 2011, NHS Protect was set up. It is responsible for leading on work to protect NHS staff and resources from crime in England.[ 4] According to its statistics, physical assault against NHS staff is steadily increasing. However, these statistics do not capture the incidents where staff have been subjected to non-physical violence. In general practice, members of staff are more likely to be subjected to non-physical violence. Imagine working as a practice nurse and an unhappy patient threatens you, telling you ‘I know where you live?’ We cannot underestimate the impact that such non-physical violence can have on individuals. CONTRIBUTORY FACTORS Circumstances * Members of the general practice team are particularly vulnerable as they often consult with patients alone. Doctors and practice nurses often work in small numbers. * Home visits are usually carried out alone. System and Organisational Problems * Delays, restrictions and mistakes such as lost prescriptions or delays in test results * Lack of appointments * Patient disappointment often results from unmet expectations, whether  realistic or unrealistic. Environment * Waiting room (heating, lighting, noise and seating) * Cramped consulting rooms without easy exit for health professionals * Lack of privacy * Availability of potential weapons. Patient Factors * Increased expectations and the difficulties in meeting these demands. Dissatisfaction with the care provided is perceived as the most common cause of aggression and violence * Strong patient emotions e.g. uncertainty, frustration, stress and anxiety. Anger is often secondary to emotions such as anxiety or grief * An underlying medical condition such as hypoglycaemia or psychotic illness * Physical symptoms including pain, headache or over-tiredness * Mental health problems such as * Personal problems e.g. financial, relationship, stress at work * Drugs and alcohol. Staff Factors * Under pressure staff-working in noisy cramped rooms, unable to trace or contact staff * In adequate staff numbers * Escalating the situation by confrontation, over-reacting, poor ccmmunication, inconsistencies in handling patients, patronising behaviour, ignoring a situation or falling to apologise. COMMUNICATION SKILLS Good communication with patients is likely to reduce the risk of conflict and violence. As nurses, how we communicate with our patients can have an impact on how difficult situations develop. We need to think about what we say and how we say it. We should rely on our strong communication skills to determine with our patients what they can expect from the services we provide. A study by American psychologist, Albert Mehrabian, determined that non-verbal communication represents over 50% of an interaction.[ 5] Being aware of your own body language can be the first step to understanding how it is perceived by our patients. Listening and empathising with patients are essential skills for nurses-so how do we ensure our patients know we are listening? * Give the patient your undivided attention * Don’t trivialise the patient’s issue * How is the patient feeling – are they angry, afraid, frustrated? Respond to the emotion as well as the words * Allow the patient to finish what they are saying * Ask questions, paraphrase and reflect to ensure you understand the message. CHALLENGING INTERACTIONS Challenging interactions with patients can be a significant cause of stress for nurses, yet the nature of most clinical jobs makes these encounters unavoidable. It can be difficult to communicate your point of view effectively for fear of generating conflict, which can lead to frustration and dissatisfaction, and may affect your ability to give good care. It is vital to build a trusting relationship with the patient in these circumstances; ensure you listen attentively, empathise and avoid confrontation. Maintain eye contact and try to establish a shared understanding of the patient’s problem. Having acknowledged their perspective, respectfully inform them of your position. Then work on achieving a mutually agreeable solution or way forward rather than focussing on points of disagreement, which can otherwise degenerate into an argument. Then help and support the patient to achieve the agreed solution. After challenging interactions that have required you to state your position, ensure there is effective communication with other members of the practice clinical team, along with a clear record of the discussions held. This will ensure consistency should the patient approach a different clinician seeking to re-negotiate an alternative plan or outcome. PRACTICAL TIPS Practices should consider: * Providing a side room or separate area to deal with upset/aggressive patients or those who need more privacy. * Providing good temperature and ventilation control, adequate seating and clear signage * Providing calming measures to reduce frustration, anxiety or boredom such as distractions in waiting room e.g. toys for children, magazines for adults * Adding an agreed marker to the summary of a patient’s record who has a history of violence (and ensure it is factually accurate) * Having a protocol for involving the police and removing patients from the list * Using CCTV * Ensuring all practice staff have access to panic alarms * Providing locks for all areas where patient access is restricted CONCLUSION We can and will experience conflict in general practice due to the sheer volume of patient contacts that occur every day. The key to managing a conflict situation is to try to de-escalate it as much as possible.confidentiality is central to the trust between nurses and their patients – think how easy it may be to breach confidentiality when you have a situation with an aggressive patient. The Nursing and Midwifery Council Code of conduct clearly states ‘you must respect people’s right to confidentiality’.[ 6] As a last resort you can remove a patient from the practice list. However, this can be seen as an emotive issue, risking criticism from bodies such as the Parliamentary and Health Service Ombudsman, the GMC and the media. You can find useful information on how to go about it in the MPS factsheet, Removing patients from the practice list (September 2013).[ 7] http://www.medicalprotection.org/ uk/england-factsheets/removing-patients-from-the-practice-list. CASE STUDY Nurse E is about to start her clinic when she notices Mrs S on the list of patients for the day. Her heart sinks. Mrs S often presents with one or more complaints, talks nonstop and does not listen to advice provided. She knows from experience that interactions with Mrs S will be challenging. Mrs S is called in 20 minutes later than her planned appointment and she lets Nurse E know that she is not happy. Nurse E admits that her clinic is running late but tells Mrs S that she had an unavoidable emergency. She proceeds to take Mrs S’s blood pressure and other vital signs. Mrs S then asks Nurse E for a prescription for antibiotics as she is going on holiday and wants them ‘just in case her chest flares up’ while away. Nurse E advises her that she will need to make an appointment to see the GP. Mrs S, now increasingly unhappy, begins to raise her voice and bang her fist on the desk, demanding a prescription before she leaves. Nurse E, staying calm, advises Mrs S that she is unable to give her a prescription as she doesn’t have any active symptoms. Mrs S storms out of the consultation room pushing past Nurse E. Understandably upset, Nurse E calls the practice manager to report the incident. How could this situation have been dealt with better? * Apologise when mistakes occur or when clinics are running late. Some practices ask reception staff to inform patients when they are checking in if clinicians are behind schedule * Ensure patients are well informed about how systems at the practice work to try to reduce unrealistic expectations * Acknowledge the patient’s emotions and allow them to express them, which can take time. Ask the patient to tell you about their concerns. Listen actively using comments such as ‘I see’, or ‘go on?’, and nodding your head. Summarise their experiences, feelings and concerns back to them * Work with the patient to resolve the situation. Agree a plan for dealing with their concerns and moving forward. * Try to offer an alternative solution to demonstrate that you are keen to help them. For example, ‘I’m sorry Mrs S, but I am unable to give you a prescription. However, if you wish to make an appointment with one of the GPs you can discuss this with them’ * Consider the layout of the consulting rooms and reception area to ensure you can leave the room if the situation escalates. Aggression in healthcare settings is becoming all too common REFERENCES 1. Health and Safety Executive: work related violence www.hsegov.uk/violence 2. NHS Business Services(2012) Not part of my job http://www.nhsbsa.nhs.uk/Documents/ SecurityManagement/NP0J1 .pdf 3. British Medical Association (2008). Violence in the workplace. The experience of doctors in the UK. http://www.bma.org.uk/ap.nsf/AttachmentsByTitle/ PDFviolence08/$FILE/Violence.pdf 4. NHS Protect 2013 http://www.nhsbsa.nhs.uk/Protect.aspx 5. Mehrabian, A(1971) Silent messages Belmont, CA:Wadsworth 6. NMC(2011)The code: Standards of conduct, performance and ethics for nurses and midwives http://www.nmc-uk.org/Documents/Standards/ nmc TheCodeStandardsofConduct PerformanceAndEthicsForNursesAndMidwives%5FLargePrintVersion.PDF 7. MPS Factsheet removing patients from practices list September 2013 http://www.medicalprotection.org/uk/england-factsheets/removing-patients-from-the-practice-list ~~~~~~~~

Sunday, September 29, 2019

Agency Costs and Corporate Governance Mechanisms

Agency costs and corporate governance mechanisms: Evidence for UK firms Chrisostomos Florackis and Aydin Ozkan* University of York, UK Abstract In this paper, we aim to extend the empirical literature on the determinants of agency costs by using a large sample of UK listed firms. To do so, we employ two alternative proxies for agency costs: the ratio of total sales to total assets (asset turnover) and the ratio of selling, general and administrative expenses (SG&A) to total sales. In our analysis, we control for the influence of several internal governance mechanisms or devices that were ignored by previous studies.Also, we examine the potential interactions between these mechanisms and firm growth opportunities in determining agency costs. Our results reveal that the capital structure characteristics of firms, namely bank debt and debt maturity, constitute two of the most important corporate governance devices for UK companies. Also, managerial ownership, managerial compensation and ownership concentration seem to play an important role in mitigating agency costs. Finally, our results suggest that the impact exerted by internal governance mechanisms on agency costs varies with firms’ growth opportunities.JEL classification: G3; G32 Keywords: Agency costs; Growth opportunities; Internal Corporate Governance Mechanisms. * Corresponding author. Department of Economics and Related Studies, University of York, Heslington, York, YO10 5DD, UK. Tel. : + 44 (1904) 434672. Fax: + 44 (1904) 433759. E-mail: [email  protected] ac. uk. We thank seminar participants at University of York, and the 2004 European Finance Association Meetings for helpful comments and suggestions. 1 1. Introduction Following Jensen and Meckling (1976), agency relations within the firm and costs associated with them have been extensively investigated in the corporate finance literature.There is a great deal of empirical work providing evidence that financial decisions, investment decision s and, hence, firm value are significantly affected by the presence of agency conflicts and the extent of agency costs. The focus of these studies has been the impact of the expected agency costs on the performance of firms. 1 Moreover, the implicit assumption is that, in imperfect capital markets, agency costs arising from conflicts between firms’ claimholders exist and the value of firms decreases if the market expects that these costs are likely to be realised.It is also assumed that there are internal and external corporate governance mechanisms that can help reduce the expected costs and their negative impact on firm value. For example, much of prior work on the ownership and performance relationship relies on the view that managerial ownership can align the interests of managers and shareholders and hence one would observe a positive impact exerted by managerial shareholdings on the performance of firms. The positive impact is argued to be due to the decrease in the exp ected costs of the agency conflict between managers and shareholders.Despite much valuable insights provided by this strand of literature, however, only very few studies directly tackle the measurement issue of the principal variable of interest, namely agency costs. Notable exceptions are Ang et al. (2000) and Sign and Davidson (2003), which investigate the empirical determinants of agency costs and focus on the role of debt and ownership structure in mitigating agency problems for the US firms. In doing so, they use two alternative proxies for agency costs: the ratio of total sales to total assets (asset turnover) and the ratio of selling, general and administrative expenses (SG&A) to total sales.In line with the findings of prior research they provide evidence for the view that managerial ownership aligns the interests of managers and shareholders and, hence, reduces agency costs in general. However, there is no consensus on the role of debt in mitigating such problems and associ ated costs. Ang et al. (2000) point out that debt has an alleviating role whereas Sign and Davidson (2003) an aggravating one. The objective of this paper is to extend the investigation of these studies by analysing empirically the determinants of agency costs in the UK for a large sample of 1See, for example, Morck et al. (1988); McConnell and Servaes (1990); and Agrawal and Knoeber (1996) among others. 2 listed firms. Following the works of Ang et al. (2000) and, Sign and Davidson (2003), we model both proxies of agency costs: asset turnover and the (SG&A) ratio. More specifically, we empirically examine the impact of capital structure, ownership, board composition and managerial compensation on the costs likely to arise from agency conflicts between managers and shareholders. In doing so, we also pay particular attention to the role of growth opportunities in influencing the effectiveness of internal governance mechanisms in reducing agency costs. In carrying out the analysis in this paper, we aim to provide insights at least in three important areas of the empirical research on agency costs. First, in investigating the determinants of agency costs, the analysis of this paper incorporates important firmspecific characteristics (internal corporate governance devices) that possibly affect agency costs but were ignored by previous studies.For example, we explore the role the debt maturity structure of firms can play in controlling agency costs. It is widely acknowledged that short-term debt may be more effective than long-term debt in reducing the expected costs of the underinvestment problem of Myers (1977). 3 Accordingly, in our analysis, we consider the maturity structure of debt as a potential governance device that is effective in reducing the expected costs of the agency conflict between shareholders and debtholders. Similar to Ang et al. 2000) that investigate if bank debt creates a positive externality in the form of lower agency costs, we also check i f the source of debt financing matters in mitigating agency problems. Another potentially effective corporate governance mechanism we consider relates to managerial compensation. Recent studies suggest that compensation contracts can motivate managers to take actions that maximize shareholders’ wealth (see, e. g. , Core et al. , 2001; Murphy, 1999 among others). This is based on the view that financial â€Å"carrots† motivate managers to maximize firm value.That is, a manager will presumably be less likely, ceteris paribus, to exert insufficient effort and risk the loss of his job the greater the level of his compensation. Several empirical studies provide evidence for the effectiveness of managerial compensation as a corporate governance mechanism. For instance, 2 As explained later in the paper, the two proxies for agency costs that are used in our analysis are more likely to capture the agency problems between managers and shareholders. However, we do not rule out t he possibility that they may also capture the agency problems between shareholders and debtholders. It is argued that firm with greater growth opportunities should have more short-term debt because shortening debt maturity would make it more likely that debt will mature before any opportunity to exercise the growth options. Consistent with this prediction, there are several empirical debt maturity studies that find a negative relation between maturity and growth opportunities (see, e. g. , Barclay and Smith, 1995; Guedes and Opler, 1996; and Ozkan, 2000 among others). 3 Hutchinson and Gul (2004) find that managers’ compensation can moderate the negative association between growth opportunities and firm value.In this paper, we examine the effectiveness of managerial compensation as a corporate governance mechanism by including the salary of managers in our empirical model. We also acknowledge that there have been concerns about excessive compensation packages and their negativ e impact on corporate performance. Accordingly, we investigate the possibility of a non-monotonic impact the managerial compensation may exert on agency costs. Second, our empirical model captures potential interactions between corporate governance mechanisms and growth opportunities.Following McConnell and Servaes (1995) and Lasfer (2002), we expect the effectiveness of governance mechanisms in reducing agency problems to be dependent on firm’s growth opportunities. In particular, if agency problems are associated with greater information asymmetry (a common problem in high-growth firms), we expect the effectiveness of corporate governance mechanisms in mitigating asymmetric information problems to increase in high-growth firms (Smith and Watts, 1992 and Gaver and Gaver, 1993).However, if, as argued by Jensen (1986), agency problems are associated with conflicts over the use of free cash flow (a common problem in low-growth firms), we expect governance mechanisms that are li kely to mitigate such problems to play a more important role in low-growth firms (Jensen, 1986). Last but not least, in contrast to previous studies that focus on the US market, we provide evidence for UK firms. Although the UK and the US are usually characterized as having a similar â€Å"common law† regulatory system (see, e. g. , La Porta et al. 1998), the UK market bears significant distinguishing characteristics. 4 It is argued that several of these characteristics may contribute to a more significant degree of managerial discretion and, hence, higher level of managerial agency costs. For example, despite the relatively high proportion of shares held by financial institutions, there is a great deal of evidence that financial investors do not take an active role in corporate governance. Similarly, UK boards are usually characterized as corporate devices that provide weak disciplinary function.More specifically, weak fiduciary obligations on directors have resulted in none xecutives playing more an advisory than a monitoring role. 5 Consequently, the investigation of agency issues and the effectiveness of the alternative governance 4 For a more detailed discussion about the characteristics of the prevailing UK corporate governance system see Short and Keasey (1999); Faccio and Lasfer (2000); Franks et al. (2001); and Ozkan and Ozkan (2004). 5 Empirical studies by Faccio and Lasfer (2000), Goergen and Rennebog (2001), Franks et al. 2001) and Short and Keasey (1999) provide evidence on the weak role of institutions and board of directors in reducing agency problems in the UK. 4 mechanisms in the UK, in a period that witnesses an intensive discussion of corporate governance issues, would be of significant importance. Our results strongly suggest that managerial ownership constitutes a strong corporate governance mechanism for the UK firms. This result is consistent with the findings provided by Ang et al. (2000) and Sign and Davidson (2003) for the US fi rms.Ownership concentration and salary also seem to play a significant role in mitigating agency related problems. The results concerning the role of capital structure variables on agency costs are striking. It seems that both the source and the maturity structure of corporate debt have a significant effect on agency costs. Finally, there is strong evidence that specific governance mechanisms are not homogeneous but vary with growth opportunities. For instance, we find that executive ownership is more effective as a governance mechanism for high-growth firms.This result is complementary to the results obtained by Smith and Watts (1992), Gaver and Gaver (1993) and Lasfer (2002), which support the view that high-growth firms are likely to prefer incentive mechanisms (e. g. managerial ownership) whereas low-growth firms focus more on monitoring mechanisms (e. g. short-term debt). The remainder of the paper is organized as follows. In section 2 we discuss the related theory and formulat e our empirical hypotheses. Section 3 describes the way in which we have constructed our sample and presents several descriptive statistics of that.Section 4 presents the results of our univariate, multivariate and sensitivity analysis. Finally, section 5 concludes. 2. Agency costs and Governance Mechanisms In what follows, we will discuss the potential interactions between agency costs and internal corporate governance mechanisms available to firms. Also, we will analyze how firm growth opportunities affect agency costs and the relationship between governance mechanism and agency costs. 2. 1 Debt Financing Agency problems within a firm are usually related to free cash-flow and asymmetric information problems (see, for example, Jensen, 1986 and Myers and Majluf, 1984).It is widely acknowledged that debt servicing obligations help reduce of agency problems of this sort. This is particularly true for the case of privately held debt. For example, bank 5 debt incorporates significant si gnalling characteristics that can mitigate informational asymmetry conflicts between managers and outside investors (Jensen, 1986; Stulz, 1990; and Ross, 1977). In particular, the announcement of a bank credit agreement conveys positive news to the stock market about creditor’s worthiness.Bank debt also bears important renegotiation characteristics. As Berlin and Mester (1992) argue, because banks are well informed and typically small in number, renegotiation of a loan is easier. A bank’s willingness to renegotiate and renew a loan indicates the existence of a good relationship between the borrower and the creditor and that is a further good signal about the quality of the firm. Moreover, it is argued that bank debt has an advantage in comparison to publicly traded debt in monitoring firm’s activities and in collecting and processing information.For example, Fama (1985) argues that bank lenders have a comparative advantage in minimizing information costs and get ting access to information not otherwise publicly available. Therefore, banks can be viewed as performing a screening role employing private information that allows them to evaluate and monitor borrowers more effectively than other lenders. In addition to debt source, the maturity structure of debt may matter. For example, short-term debt may be more useful than long-term debt in reducing free cash flow problems and in signalling high quality to outsiders.For example, as Myers (1977) suggests, agency conflicts between managers and shareholders such as the underinvestment problem can be curtailed with short-term debt. Flannery (1986) argues that firms with large potential information asymmetries are likely to issue short-term debt because of the larger information costs associated with long-term debt. Also, short-term debt can be advantageous especially for high-quality companies due to its low refinancing risk (Diamond, 1991). Finally, if yield curve is downward sloping, issuing sho rt-term debt increases firm value (Brick and Ravid, 1985).Consequently, bank debt and short-term debt are expected to constitute two important corporate governance devices. We include the ratio of bank debt to total debt and the ratio of short-term debt to total debt to our empirical model so as to approximate the lender’s ability to mitigate agency problems. Also, we include the ratio of total debt to total assets (leverage) to approximate lender’s incentive to monitor. In general, as leverage increases, so does the risk of default by the firm, hence the incentive for the lender to monitor the firm6. 6 Ang et al. 2000) focus on sample of small firms, which have do not have easy access to public debt, and examine the impact of bank debt on agency costs. On the contrary, Sign and Davidson (2003) focus on a sample of large firms, which have easy access to public debt, and examine the impact of public debt on 6 2. 2 Managerial Ownership The conflicts of interest between m anagers and shareholders arise mainly from the separation between ownership and control. Corporate governance deals with finding ways to reduce the magnitude of these conflicts and their adverse effects on firm value.For instance, Jensen and Meckling (1976) suggest that managerial ownership can align the interest between these two different groups of claimholders and, therefore, reduce the total agency costs within the firm. According to their model, the relationship between managerial ownership and agency costs is linear and the optimal point for the firm is achieved when the managers acquires all of the shares of the firm. However, the relationship between managerial ownership and agency costs can be non-monotonic (see, for example, Morck et al. , 1988; McConnel and Servaes, 1990,1995 and, Short and Keasey, 1999).It has been shown that, at low levels of managerial ownership, managerial ownership aligns managers’ and outside shareholders’ interests by reducing manager ial incentives for perk consumption, utilization of insufficient effort and engagement in nonmaximizing projects (alignment effect). After some level of managerial ownership, though, managers exert insufficient effort (e. g focus on external activities), collect private benefits (e. g. build empires or enjoy perks) and entrench themselves (e. g. undertake high risk projects or bend over backwards to resist a takeover) at the expense of other investors (entrenchment effect).Therefore the relationship between the two is non-linear. The ultimate effect of managerial ownership on agency costs depends upon the trade-off between the alignment and entrenchment effects. In the context of our analysis we propose a non-linear relationship between managerial ownership and managerial agency costs. However, theory does not shed much light on the exact nature of the relationship between the two and, hence, we do not know which of the effects will dominate the other and at what levels of manageria l ownership.We, therefore, carry out a preliminary investigation about the pattern of the relationship between managerial ownership and agency costs. Figure 1 presents the way in which the two variables are associated. [Insert Figure 1 here] agency costs. Our study is more similar to that of Ang et al (2000) given that UK firms use significant amounts of bank debt financing (see Corbett and Jenkinson, 1997). 7 Clearly, at low levels of managerial ownership, asset turnover and managerial ownership are positively related. However, after managerial ownership exceeds the 10 per cent level, the relationship turns from positive to negative.A third turning point is that of 30 percent after which the relationship seems to turn to positive again. Consequently, there is evidence both for the alignment and the entrenchment effects in the case of our sample. In order to capture both of them in our empirical specification, we include the level, the square and the square of managerial ownership i n our model as predictors of agency costs. 2. 3 Ownership Concentration A third alternative for alleviating agency problems is through concentrated ownership.Theoretically, shareholders could take themselves an active role in monitoring management. However, given that the monitoring benefits for shareholders are proportionate to their equity stakes (see, for example, Grossman and Hart, 1988), a small or average shareholder has little or no incentives to exert monitoring behaviour. In contrast, shareholders with substantial stakes have more incentives to supervise management and can do so more effectively (see Shleifer and Vishny, 1986; Shleifer and Vishny, 1997 and Friend and Lang, 1988).In general, the higher the amount of shares that investors hold, the stronger their incentives to monitor and, hence, protect their investment. Although large shareholders may help in the reduction of agency problems associated with managers, they may also harm the firm by causing conflicts between large and minority shareholders. The problem usually arises when large shareholders gain nearly full control of a corporation and engage themselves in self-dealing expropriation procedures at the expense of minority shareholders (Shleifer and Vishny, 1997).Also, as Gomez (2000) points out, these expropriation incentives are stronger when corporate governance of public companies insulates large shareholders from takeover threats or monitoring and the legal system does not protect minority shareholders because either of poor laws or poor enforcement of laws. Furthermore, the existence of concentrated holdings may decrease diversification, market liquidation and stock’s ability to grow and, therefore, increase the incentives of large shareholders to expropriate firm’s resources.Several empirical studies provide evidence consistent with that view (see, for example, Beiner et al, 2003). In order to test the impact of ownership concentration on agency costs, we include a var iable that refers to the sum of stakes of shareholders with equity stake greater than 3 8 per cent in our regression equation. The results remain robust when the threshold value changes from 3 per cent to 5 per cent or 10 per cent. 2. 4 Board of Directors Corporate governance research recognizes the essential role performed by the board of directors in monitoring management (Fama and Jensen, 1983; Weisbach, 1988 and Jensen, 1993).The effectiveness of a board as a corporate governance mechanism depends on its size and composition. Large boards are usually more powerful than small boards and, hence, considered necessary for organizational effectiveness. For instance, as Pearce and Zahra (1991) point out, large powerful boards help in strengthening the link between corporations and their environments, provide counsel and advice regarding strategic options for the firm and play crucial role in creating corporate identity. Other studies, though, suggest that large boards are less effecti ve than large boards.The underlying notion is that large boards make coordination, communication and decision-making more cumbersome than it is in smaller groups. Recent studies by Yermack, 1996; Eisenberg et al. , 1998 and Beiner et al, 2004 support such a view empirically. The composition of a board is also important. There are two components that characterize the independence of a board, the proportion of non-executive directors and the separated or not roles of chief executive officer (CEO) and chairman of the board (COB).Boards with a significant proportion of non-executive directors can limit the exercise of managerial discretion by exploiting their monitoring ability and protecting their reputations as effective and independent decision makers. Consistent with that view, Byrd and Hickman (1992) and Rosenstein and Wyatt (1990) propose a positive relationship between the percentage of non-executive directors on the board and corporate performance. Lin et al. (2003) also propose a positive share price reaction to the appointment of outside directors, especially when board ownership is low and the appointee possesses strong ex ante monitoring incentives.Along a slightly different dimension, Dahya et al. (2002) find that top-manager turnover increases as the fraction of outside directors increases. Other studies find exactly the opposite results. They argue that non-executive directors are usually characterized by lack of information about the firm, do not bring the requisite skills to the job and, hence, prefer to play a less confrontational role rather than a more critical monitoring one (see, for example, Agrawal and Knoeker, 1996; Hermalin 9 nd Weisbach, 1991, and Franks et al. , 2001)7. As far as the separation between the role of CEO and COB is concerned, it is believed that separated roles can lead to better board performance and, hence, less agency conflicts. The Cadbury (1992) report on corporate governance stretches that issue and recommends that C EO and COB should be two distinct jobs. Firms should comply with the recommendation of the report for their own benefit. A decision not to combine these roles should be publicly explained.Empirical studies by Vafeas and Theodorou (1998), and Weir et al. (2002), though, which study that issue for the case of the UK market, provide results that do not support Cadbury’s stance that the CEO – COB duality is undesirable. In the context of the UK market, UK boards are believed to be less effective than the US ones. For instance,. To test the effectiveness of the board of directors in mitigating agency problems we include three variables in our empirical model: a) the ratio of the number of non-executive directors to he number of total directors, b) the total number of directors (board size) and c) a dummy variable which takes the value of 1 when the roles of CEO and COB are not separated and 0 otherwise. 2. 5 Managerial Compensation Another important component of corporate g overnance is the compensation package that is provided to firm management. Recent studies by Core et al. (2001) and Murphy (1999) suggest, among others, that compensation contracts, whose use has been increased dramatically during the 90’s, can motivate managers to take actions that maximize shareholders’ wealth.In particular, as Core et al. (2001) point out, if shareholders could directly observe the firm’s growth opportunities and executives’ actions no incentives would be necessary. However, due to asymmetric information between managers and shareholders, both equity and compensation related incentives are required. For example, an increase in managerial compensation may reduce managerial agency costs in the sense that satisfied managers will be less likely, ceteris paribus, to utilize insufficient effort, perform expropriation behaviour and, hence, risk the loss of their job.Despite the central importance of the issue, only a few empirical studies exa mine the impact of managerial compensation components on corporate performance. For example, Jensen and Murthy 7 Such a result may be consistent with the governance system prevailing in the UK market given the fact that UK legislation encourages non-executive directors to be inactive since it does not impose fiduciary obligations on them. Also, UK boards are dominated by executive directors, which have less monitoring power.Franks et al. (2001) confirm this view by providing evidence on a non-disciplinary role of nonexecutive directors in the UK. 10 (1990) find a statistically significant relationship between the level of pay and performance. Murphy (1995), finds that the form, rather than the level, of compensation is what motivates managers to increase firm value. In particulars, he argues that firm performance is positively related to the percentage of executive compensation that is equity based.More recently, Hutchinson and Gul (2004) analyze whether or not managers’ comp ensation can moderate the negative association between growth opportunities and firm value8. The results of this study indicate that corporate governance mechanisms such as managerial remuneration, managerial ownership and non-executive directors possibly affect the linkages between organizational environmental factors (e. g. growth opportunities) and firm performance.Finally, Chen (2003) analyzes the relationship between equity value and employees’ bonus. He finds that the annual stock bonus is strongly associated with the firm’s contemporaneous but not future performance. Managerial compensation, though, is considered to be a debated component of corporate governance. Despite its potentially positive impact on firm value, compensation may also work as an â€Å"infectious greed† which creates an environment ripe for abuse, especially at significantly high levels.For instance, remuneration packages usually include extreme benefits for managers such as the use of private jet, golf club membership, entertainment and other expenses, apartment purchase etc. Benefits of this sort usually cause severe agency conflicts between managers and shareholders. 9 Therefore, it is possible that the relationship between compensation and agency costs is non-monotonic. Similar to the case of managerial ownership, we carry out a preliminary investigation about the pattern of the relationship between salary and agency costs.As shown in figure 2, the relationship between salary and agency costs is likely to be non-linear10. In our empirical model, we include the ratio of the total salary paid to executive directors to total assets as a determinant of agency costs. Also, in order to capture potential 8 Rather, the majority of the studies in that strand of literature reverse the causation and examine the impact of performance changes on executive or CEO compensation (see, for example, Rayton, 2003 among others). Concerns about excessive compensation packages and their negative impact on corporate performance have lead to the establishment of basic recommendations in the form of â€Å"best practises† in which firms should comply so as the problem with excessive compensation to be diminished. In the case of the UK market, for example, one of the basic recommendations of the Cadbury (1992) report was the establishment of an independent compensation committee. Also, in a posterior report, the Greenbury (1995) report, specific propositions about remuneration issues were made.For example, an issue that was stretched was the rate of increase in managerial compensation. In the case of the US market, the set of â€Å"best practises† includes, among others, the establishment of a compensation committee so as transparency and disclosure to be guaranteed (same practise an in the UK) and the substitution of stock options as compensation components with other tools that promote the long-term value of the company 10 A similar preliminary ana lysis is carried out so as to check potential non-linearities concerning the relationship between the rest of internal governance mechanisms and agency costs.Our results (not reported) indicate that none of them is related to agency costs in a non-linear way. 11 non-linearities, we include higher ordered salary terms in the regression equation. Finally, we include a dummy variable, which takes the value of 1 when a firm pays options or bonuses to managers and 0 otherwise. Including that dummy variable in our analysis enables us to test whether or not options and bonuses themselves provide incentives to managers.As Zhou (2001) points out, ignoring options is likely to incur serious problems unless managerial options are either negligible compared to ownership or almost perfectly correlated with ownership. [Insert Figure 2 here] 2. 6 Growth Opportunities The magnitude of agency costs related to underinvestment, asset substitution and free cash flow differ significantly across high-gro wth and low-growth firms. In the underinvestment problem, managers may decide to pass up positive net present value projects since the benefits would mainly accrue to debt-holders.This is more severe for firms with more growth-options (Myers, 1977). Asset substitution problems, which occur when managers opportunistically substitute higher variance assets for low variance assets, are also more prevalent in high-growth firms due to information asymmetry between investors and borrowers (Jensen and Meckling, 1976). High-growth firms, though, face lower free cashlow problems, which occur when firms have substantial cash reserves and a tendency to undertake risky and usually negative NPV investment projects (Jensen, 1986).Given the different magnitude and types of agency costs between high-growth and low-growth firms, we expect the effectiveness of corporate governance mechanisms to vary with growth opportunities. In particular, if agency problems are associated with greater underinvestme nt or information asymmetry (a common problem in high-growth firms), we expect corporate governance mechanisms that mitigate these kinds of problems to be more effective in high-growth firms (Smith and Watts, 1992 and Gaver and Gaver, 1993).However, if, as argued by Jensen (1986), agency problems are associated with conflicts over the use of free cash flow (a common problem in low-growth firms), we expect governance mechanisms that mitigate such problems to play a more important role in low-growth firms (Jensen, 1986). Several empirical studies that model company performance confirm the existence of potential interactions between internal governance mechanism and growth opportunities. For example, McConnell and Servaes (1995) find that the relationship between firm value and leverage is negative for high-growth firms and positive for low12 growth firms.Their results also indicate that equity ownership matters, and the way in which it matters depends upon investment opportunities. Sp ecifically, they provide weak evidence that on the view that the allocation of equity ownership between corporate insiders and other types of investors is more important in low-growth firms. Also, Lasfer (2002) points out that high-growth firm (low-growth firms) rely more on managerial ownership (board structure) to mitigate agency problems. Finally, Chen (2003) finds that the positive relationship between annual stock bonus and equity value is stronger for firms with greater growth opportunities.In order to capture potential interaction effects, we include interaction terms between proxies for growth opportunities and governance mechanisms in our empirical model and, also, employ sample-splitting methods (see, for example, McConnell and Servaes, 1995 and Lasfer, 2002). Based on previous empirical evidence the prediction we make is that mechanisms that are used to mitigate asymmetric information problems (free cash flow problems) are stronger in high-growth firms (low-growth firms). 3. Data and Methodology 3. 1 Data For our empirical analysis of agency costs we use a large sample of ublicly traded UK firms over the period 1999-2003. We use two data sources for the compilation of our sample. Accounting data and data on the market value of equity are collected from Datastream database. Specifically, we use Datastream to collect information for firm size, market value of equity, annual sales, selling general and administrative expenses, level of bank debt, short-term debt and total debt. Information on firm’s ownership, board and managerial compensation structure is derived from the Hemscott Guru Academic Database.This database provides financial data for the UK’s top 300,000 companies, detailed data on all directors of UK listed companies, live regulatory and AFX News feeds and share price charts and trades. Specifically, we get detailed information on the level of managerial ownership, ownership concentration, size and composition of the board, ma nagerial salary, bonus, options and other benefits. Despite the fact that data on directors are provided in a spreadsheet format, information for each item is given in a separate file. This makes data collection for the required variables fairly complicated.For example, in order to get information about the amount of shares held by executive directors we have to combine two different files: a) the 13 file that contains data on the amount of shares held by each director and b) the file that provides information about the type of each directorship (e. g. executive director vs. nonexecutive director). Also, we have to take into account the fact that several directors in the UK hold positions in more than one company. Complications also arise when we attempt to collect information about the composition of the board and the remuneration package that is provided to executive directors.The way in which our final sample is compiled is the following: we start with a total of 1672 UK listed f irms derived from Datastream. This number reduces to 1450 firms after excluding financial firms from the sample. After matching Datastream data with the data provided by Hemscott, the number of firms further decreases to 1150. Missing firmyear observations for any variable in the model during the sample period are also dropped. Finally, we exclude outliers so as to avoid the problem with extreme values. We end up with 897 firms for our empirical analysis. 3. Dependent Variable In our analysis we use two alternative proxies to measure agency costs. Firstly, we use the ratio of annual sales to total assets (Asset Turnover) as an inverse proxy for agency costs. This ratio can be interpreted as an asset utilization ratio that shows how effectively management deploys the firm’s assets. For instance, a low asset turnover ratio may indicate poor investment decisions, insufficient effort, consumption of perquisites and purchase of unproductive products (e. g. office space). Firms wit h low asset turnover ratios are expected to experience high agency costs between managers and shareholders11.A similar proxy for agency costs is also used in the studies of Ang et al. (2000) and Sign and Davidson (2003). However, Ang et al. (2000), instead of using the ratio directly, they use the difference in the ratios of the firm with a certain ownership and management structure and the no-agency-cost base case firm. Secondly, following Sign and Davidson (2003), we use the ratio of selling, general and administrative (SG&A) expenses to sales (expense ratio). In contrast to asset turnover, expense ratio is a direct proxy of agency costs.SG&A expenses include salaries, commissions charged by agents to facilitate transactions, travel expenses for executives, advertising and marketing costs, rents and other utilities. Therefore, expense ratio should 11 The asset turnover ratio may also capture (to some extent) agency costs of debt. For instance, the sales ratio provides a good signa l for the lender about how effectively the borrower (firm) employs its assets and, therefore, affects the cost of capital 14 reflect to a significant extent managerial discretion in spending company resources.For example, as Sign and Davidson (2003) point out, â€Å"management may use advertising and selling expenses to camouflage expenditures on perquisites† p. 7. Firms with high expense ratios are expected to experience high agency costs between managers and shareholders12. 3. 3 Independent Variables Our empirical model includes a set of corporate governance variables related to firm’s ownership, board, compensation and capital structure. Several control variables are also incorporated. For example, we use the logarithm of total assets in 1999 prices as a proxy for firm size (SIZE).Also, we include the market-to-book value (MKTBOOK) as a proxy for growth opportunities. Finally, we divide firms into 15 sectors and include 14 dummy variables accordingly so as to contro l for sector specific effects. Analytical definitions for all these variables are given in Table 1. [Insert Table 1 here] 3. 4 Methodology We examine the determinants of agency costs by employing a cross sectional regression approach. Following Rajan and Zingales (1995) and Ozkan and Ozkan (2004), the dependent variable is measured at some time t, while for the independent variables we use average-past values.Using averages in the way we construct our explanatory variables helps in mitigating potential problems that may arise due to short-term fluctuations and extreme values in our data. Also, using past values reduces the likelihood of observed relations reflecting the effects of asset turnover on firm specific factors. Specifically, the dependent variable is measured in year 2003. For accounting variables and the market-tobook ratio we use average values for the period 1999-2002. Ownership, board and compensation structure variables are measured in year 2002.Given that equity owne rship characteristics in a country are relatively stable over a certain period of time, we do not expect that measuring them in a single year would yield a significant bias in our results (see also La Porta et al. , 2002, among others). 12 An alternative proxy for agency costs between managers and shareholders, which is not used in our paper though, is the interaction of company’s growth opportunities with its free cash flow (see Doukas et al. , 2002). 15 Our approach captures potential interaction effects that may be present.For example, as explained analytically in section 2. 6, the nature of the relationship between the alternative governance mechanisms or devices and agency costs may vary with firm’s growth opportunities. To explore that possibility, we firstly interact our proxy for growth opportunities (MKTBOOK) with the alternative corporate governance mechanisms. In this way, we test for the existence of both main effects (the impact governance variables on age ncy costs) and conditional effects (the impact of growth opportunities on the relationship between governance variables and agency costs).Additionally, we split the sample into high-growth and low-growth firms and estimate our empirical models for each sample separately. Then we check whether the coefficients of governance variables retain their sign and their significance across the two sub-samples. 3. 5 Sample Characteristics Table 2 presents descriptive statistics for the main variables used in our analysis. It reveals that the average values of asset turnover ratio and SG&A ratio are 1. 24 and 0. 45 respectively. The mean value for managerial ownership is 14. 4 per cent of which the average proportion of stakes held by executive (non-executive) directors is 10. 68 per cent (4. 06 per cent). The ownership concentration reaches the level of 37. 19 per cent, on average, in the UK firms. Also, the average proportion of non-executive directors is 49. 5 per cent and the average board size consists of 6. 97 directors. Finally, we were able to identify only 73 firms out of the final 897 (8. 1 per cent) in which the same person held the positions of CEO and COB. As far as the capital structure variables are concerned, the average proportion of bank debt on firm’s capital structure is 55. 5 per cent and that of short-term debt is 49. 53 per cent. Finally, the average market-to-book value is 2. 09. In general, these values are in line with those reported in other studies for UK firms (see, for example, Ozkan and Ozkan, 2004 and Short and Keasey, 1999). [Insert Table 2 here] The results of the Pearson’s Correlation of our variables are reported in Table 3. Our inverse proxy for agency costs, asset turnover, is clearly positively correlated to managerial ownership, executive ownership, salary, bank debt and short-term debt.Ownership concentration is also positively related to asset turnover but the correlation coefficient is not statistically significant. On the contrary, board size and non-executive 16 directors are found to be negatively correlated with asset turnover. Finally, as expected, asset turnover is found to be negatively correlated with both growth opportunities and firm size. The results for our second proxy for agency costs, SG&A, are qualitatively similar with a few exceptions (e. g. short-term debt) but with opposite signs given that SG&A is a direct and not an inverse proxy for agency costs. Insert Table 3 here] 4. Empirical Results 4. 1 Univariate analysis In Table 4 we report univariate mean-comparison test results of the sample firm subgroups categorized on the basis of above and below median values for managerial ownership, ownership concentration, board size, proportion of non-executives, bank debt, short-term debt, total debt, salary, firm size and growth opportunities. Firms with above median managerial ownership (ownership concentration) have asset turnover of 1. 34 (1. 31) whereas those with below median ma nagerial ownership (ownership concentration) have asset turnover of 1. 5 (1. 17). These differences are statistically significant at the 1 per cent (5 per cent) level. The results for executive ownership, salary, bank debt and short-term debt are also found to be statistically significant and are in the hypothesized direction. Specifically, we find that firms with above median values for all the above mentioned variables have relatively higher asset utilization ratios. On the contrary, there is evidence that firms with larger board sizes indicate significantly lower asset utilization ratios. Insert Table 4 here] In panel B of the same table we report the results using SG&A expense ratio as a proxy for agency costs. Results are in general not in line with the hypothesized signs with notable exceptions those of ownership concentration and growth opportunities. For example, firms with above median ownership concentration (MKTBOOK) have an SG&A expense ratio of 0. 41 (0. 55) whereas fir ms with below median ownership concentration (MKTBOOK) have an SG&A expense ratio of 0. 49 (0. 36).However, the results for managerial ownership, salary and short-term debt suggest that these governance mechanisms or devices are not effective in protecting firms from excessive SG&A 17 expenses. Sign and Davidson (2003) obtains a set of similar results, for the case when agency costs are approximated with the SG&A ratio. Overall, the univariate analysis indicates several corporate governance mechanisms or devices, such as managerial ownership, ownership concentration, salary, bank debt and short-term debt, which can help mitigate agency problems between managers and shareholders.Also, consistent with previous studies, we find that the relation between governance variables and agency costs is stronger for the asset turnover ratio than the SG&A expense ratio. The analysis that follows allows us to test the validity of these results in a multivariate framework. 4. 2 Multivariate analysi s In this section we present our results that are based on a cross sectional regression approach. We start with a linear specification model, where we include only total debt from our set of capital structure variables (model 1).In general, the estimated coefficients are in line with the hypothesized signs. Specifically, consistent with the results of Ang et al. (2000) and Sign and Davidson (2003), we find both managerial ownership and ownership concentration to be positively related to asset-turnover. The coefficients are statistically significant at the 5 per cent and 1 per cent significance level respectively. On the contrary, the coefficient for board size is negative, which probably indicates that firms with larger board size are less efficient in their asset utilization.Also, the results for our proxy for growth opportunities (MKTBOOK) support the view that high-growth firms suffer from higher agency costs than low-growth firms. Finally, there is strong evidence that manageria l salary can work as an effective incentive mechanism that helps aligning the interests of managers with those of shareholders. Specifically, the coefficient for salary is positive and statistically significant to the 1 per cent level. Therefore, compared to previous studies, our empirical model provides evidence on the existence of an additional potential corporate governance mechanism available to firms. Insert Table 5 here] In model 2 we incorporate two additional capital structure variables, the ratio of bank debt to total debt and the ratio of short-term debt to total debt, in order to test whether debtsource and debt-maturity impacts agency costs. Also, we split managerial ownership into executive ownership (the amount of shares held by executive directors) and non-executive 18 ownership (the amount of shares held by non-executive directors). We do this because we expect that equity ownership works as a better incentive mechanism in the hands of executive directors rather in t he hands of non-executive directors.According to our results, bank debt is positively related to asset turnover. Also, in addition to debt source, the maturity structure of debt seems to have a significant effect on agency costs. The coefficient of short-term debt is positive and statistically significant at the 1 per cent significance level. Furthermore, there is evidence that from total managerial ownership, only the amount of shares held by executive directors can enhance asset utilization and, hence, align the interest of managers with those of shareholders.In model 3 we estimate a non-linear model by adding the square of salary. As explained earlier in the paper, a priori expectations, which are supported by preliminary graphical investigation, suggest that the relationship between asset turnover and salary can be non-monotonic. Our results provide strong evidence that the relationship between salary and asset turnover is non-linear. In particular, at low levels of salary, the relationship between salary and asset turnover is positive. However, at higher levels of salary, the relationship becomes negative.This result is consistent with studies that suggest that extremely high levels of salary usually work as an â€Å"infectious greed† and create agency conflicts between managers and shareholders. The coefficients of the remaining variables are similar to those reported in models 1 and 2. Finally, in model 4 we allow for a non-linear relationship between executive ownership and agency costs. However, our results do not support such a relationship and, therefore, the square term in our following models13.To sum up, the results of Table 5 indicate that managerial ownership (executive ownership), ownership concentration, salary (when it is at low levels), bank debt and short-term debt can help in mitigating agency problems by enhancing asset utilization. Also, the coefficients for the control variables market to book and firm size, negative and positiv e respectively, suggest that smaller and non- growth firms are associated with reduced asset utilization ratio and, hence, more severe agency problems between managers and shareholders.As discussed earlier in the paper, there is a possibility that the nature of the relationship between the alternative governance mechanisms or devices and agency costs varies with firm’s growth opportunities. In Panel A of Table 6, we explore such a In trial regressions, which are not reported, the cubic term of executive ownership is also included in our model. Once more, the results do not support the existence of a non-monotonic relationship. 13 19 possibility by interacting those governance mechanisms found significant in models 1-4 with growth opportunities, proxied by market-to-book ratio.Our empirical results support the existence of two interaction effects. We find that executive ownership is an effective governance mechanism especially for high-growth firms (the coefficient EXECOWNER* MKTBOOK is positive and statistically significant). This result is consistent with the study of Lasfer (2002), which suggests that the positive relationship between managerial ownership and firm value is stronger in high-growth firms. On the contrary, the coefficient SHORT_DEBT*MKTBOOK is found to be negative and statistically significant.This means that the efficiency of short-term debt in mitigating agency problems is lower for high-growth firms. A possible explanation may be that short-term debt basically mitigates agency problems related to free cash flow. Given that high-growth firms do not suffer from severe free cash-flow problems (but mainly from asymmetric information problems), the efficiency of short-term debt as governance device decreases for these firms. One could argue, though, that short-term debt should be more important for the case of highgrowth firms since it helps reduce underinvestment problems.However, it seems that this effect is not very strong for the case in our sample. A similar result is obtained in McConnell and Servaes (1995) who find that the relationship between corporate value and leverage is positive (negative) for low-growth (high-growth) firms14. [Insert Table 6 here] Secondly, we use the variable MKTBOOK so as two split the sample into two subsamples. We label the upper 45 per cent in terms of MKTBOOK as â€Å"high-growth firms† and the lower 45 per cent as â€Å"low-growth firms†. Then, we re-estimate our basic model for the two sub-samples separately (Table 6, panel B).The results of this exercise confirm the existence of an interaction effect between executive ownership and asset turnover. In particular, the coefficient of EXECOWNER is positive and statistically significant only in the case of the sample that includes only high-growth firms. As far as short-term debt is concerned, it is found to be positive and statistically significant in both samples. 14 The idea in McConnell and Servaes (1995) is that d ebt has both a positive and a negative impact on the value of the firm because of its influence on corporate investment decisions.What possibly happens is that the negative effect of debt dominates the positive effect in firms with more positive net present value projects (i. e. , high-growth firms) and that the positive effect will dominate the negative effect for firms with fewer positive net present value projects (i. e. , low-growth firms). 20 To summarize, the results of our multivariate analysis suggest, among others, that executive ownership and ownership concentration can work as effective governance mechanisms for the case of the UK market.These results are in line with the ones reported by the studies Ang et al. (2000) and sign and Davidson (2003). Also, we find that, in addition to the source of debt, the maturity structure of debt can help to reduce agency conflicts between managers and shareholders. The fact that previous studies have ignored the maturity structure of d ebt may partly explain their contradicting results concerning the relationship between capital structure and agency costs. Furthermore, we find that salary can work as an additional mechanism that provides incentives to managers to take valuemaximizing actions.However, its impact on asset turnover is not always positive i. e. the relationship between asset turnover and salary is non-monotonic. Finally, there is strong evidence that the relationship between several governance mechanisms and agency costs varies with growth opportunities. Specifically, our results support the view that the positive relationship between executive ownership (short-term debt) is stronger for the case of high growth (low growth) firms. 4. Robustness checks Given the significant impact of growth opportunities on agency costs (main impact) and on the impact of other corporate governance mechanisms (conditional impact), we further investigate the relationship between growth opportunities, governance mechanism s and agency costs. At first, we substitute the variable MKTBOOK with an alternative proxy for growth opportunities. The new proxy is derived after employing common factor analysis, a statistical technique that uses the correlations between observed variables to estimate common factors and the structural relationships linking factors to observed variables.The variables which are used in order to isolate latent factors that account for the patterns of colinearity are following variables: MKTBOOK = Book value of total assets minus the book value of equity plus the market value of equity to book value of assets; MTBE = Market value of equity to book value of equity; METBA = Market value of equity to the book value of assets; METD = Market value of equity plus the book value of debt to the book value of assets. 21 These variables have been extensively used in the literature as alternative proxies for growth opportunities and Tobin’s Q.As shown in Table 7 (panel A) all these varia bles are highly correlated to each other. In order to make sure that principal component analysis can provide valid results for the case of our sample, we perform two tests in our sample, the Barlett’s test and the Kaiser-Meyer-Olkin test. The first test examines whether or not the intercorrelation matrix comes from a population in which the variables are noncollinear (i. e. an identity matrix). The second test is a test for sampling adequacy.The results from these tests, which are reported in panel B, are encouraging and suggest that common factor analysis can be employed in our sample since all the four proxies are likely to measure the same â€Å"thing† i. e. growth opportunities. Panel C presents the eigenvalues of the reduced correlation matrix of our four proxies for growth opportunities. Each factor whose eigenvalue is greater than 1 explains more variance than a single variable. Given that only one eigenvalue is greater than 1, our common factor analysis provid es us with one factor that can explain firm growth opportunities.Clearly, as shown in panel D, the factor is highly correlated with all MKTBOOK, MTBE, METBA and METD. We name the new variable GROWTH and use it as an alternative proxy for growth opportunities. Descriptive statistics for the variable GROWTH are presented in panel D. [Insert Table 7 here] Table 8 presents the results of cross-section analysis after using the variable GROWTH as proxy for agency costs. In general, the results of such a task are similar to the ones reported previously.For instance, there is strong evidence that executive ownership, ownership concentration, salary, short-term debt and, to some extent, bank debt are positively related to asset turnover. Also, there is some evidence supporting a non-linear relationship between salary and asset turnover. Finally, our results clearly indicate that agency costs differ significantly across high-growth and low-growth firms and, most importantly, there is a signif icant interaction effect between growth opportunities and executive ownership.However, we can not provide any evidence on the existence of an interaction between asset turnover and short-term debt. [Insert Table 8 here] 22 In panel B of table 8, we split our sample into high-growth and low-growth firms on the basis of high and low values for the variable GROWTH. Specifically, we label the upper 45 per cent in terms of GROWTH as â€Å"high-growth firms† and the lower 45 per cent as â€Å"low-growth firms†. Then we estimate our basic model for each sub-sample separately. The results are very similar to the ones reported in Table 6 (panel B), where we apply a similar methodology.As an additional robustness check, we use a third proxy for growth opportunities, a dummy variable that takes the value of 1 if the firm is a high-growth firm and 0 otherwise, and re-estimate the models 6 and 7 of Table 8. The definition used in order to distinguish between high-growth and low-gro wth firms is the following: Firms above the 55th percentile in terms of the variable GROWTH are called high-growth firms. Firms below the 45th percentile in terms of the variable GROWTH are called low-growth firms.Finally, firms between the 45th and 55th percentile are excluded from the sample. The results (not reported) are qualitatively similar to the ones reported in Table 8. For example, there is evidence for the existence of an interaction effect between executive ownership and growth opportunities but not for the one between short-term debt and growth opportunities. Also, we re-estimate the models reported in Table 8 after substituting the total salary paid to executive directors for the total remuneration package paid to executive directors.We are doing so given that the total remuneration package that is paid to managers includes several other components. For instance, the components of compensation structure have been increased in number during the last decade and may inclu de annual performance bonus, fringe benefits, stock (e. g. preference shares), stock options, stock appreciation rights, phantom shares and other deferred compensation mechanisms like qualified retirement plans (see Lynch and Perry, 2003 for an analytical discussion). Once more, the results do not change substantially.Finally, in Table 9 we substitute the annual sales to total assets with the ratio of SG&A expenses to total sales. As already mentioned earlier in the paper, this ratio can be used as a direct proxy for agency costs. Our results, as presented in Table 9, indicate that executive ownership, ownership concentration and total debt help reduce discretionary spending and, therefore, the agency conflicts between managers and shareholders. Sign and Davidson (2003) do not find any evidence to support these results. Also, we find that agency costs and growth opportunities are positively related i. . the coefficient of the variable GROWTH is positive and statistically significant to the 5 per cent statistical level. 23 Finally, our results support the existence of an interaction effect between growth opportunities and executive ownership. However, once more, our analysis does not indicate the existence of an interaction effect between short-term debt and growth opportunities. [Insert Table 9 here] 5. Conclusion In this paper we have examined the effectiveness of the alternative corporate governance mechanisms and devices in mitigating managerial agency problems in the UK market.In particular, we have investigated the impact of capital structure, corporate ownership structure, board structure and managerial compensation structure on the costs arising from agency conflicts mainly between managers and shareholders. The interactions among them and growth opportunities in determining the magnitude of these conflicts have also been tested. Our results strongly suggest managerial ownership, ownership concentration, executive compensation, short-term debt and, to s ome extent, bank debt are important governance mechanisms for the UK companies.Moreover, â€Å"growth opportunities† is a significant determinant of the magnitude of agency costs. Our results suggest that highgrowth firms face more serious agency problems than low-growth firms, possibly because of information asymmetries between managers, shareholders and debtholders. Finally, there is strong evidence that some governance mechanisms are not homogeneous but vary with growth oppo

Saturday, September 28, 2019

Summary junk food

Why Do Americans Eat a Lot of Fast Food? Alaa A1-Marhoon American Language and Culture Program University of Idaho Mark Bittman, in his 2011 article, â€Å"Is Junk Food Really Cheaper? † says that American people think fast food is cheaper than real food and they use this point to explain why so many of them are overweight. However, he believes that's not true because junk food is actually more expensive than real food. The average cost of a fast food meal is around $12 per person. On the other hand, home cooked meals might cost round $10 per four people.Some people say the fast food could be cheaper if it is weighted by the calorie, but that also isn't a way to price the food according to Bittman because the home cooked meal could have more calories by adding natural sources (paras. 1-3). Money isn't a guide for what people eat, either. As Bittman states even poor people could have real food with a small amount of money. The author mentions, the time isn't either because the people who drive to fast food restaurants ould drive to any supermarket to buy their stuff to cook, but the fact is some people are lazy and they don't want to cook.Also, some people don't accept others' advice to cook at home (paras. 5-7). The author believes that eating fast food isn't Just related to money and time, but it gets people addicted to eating it, which make it harder to stop because the fast food industry mix chemicals with it. Bittman explains those chemicals make the taste of fast food and people addicted to having them. A study in 009 showed that eating a lot of fast food affects the brain.Also, the fast food industry leads people to eat fast food more and more because that makes people feel pleasure when they eat it (paras. 8-10). Bittman confirms there are five fast food restaurants tor each supermarket in the United S t s All those supermarkets increase the fresh food price by 40% and decrease soda and manufactured food by 30% to increase their restaurant benefit s. On the other hand, those supermarkets have done that to force people to eat fast food projects (Para. ).To have better lives, Bittman advises people to change their eating habits. Making this change will require to work both culture and political. People have already done this before to change the tobacco settlement limited in 1998. Certainly, this change will not be something hard to make. People will alone have to work together.

Friday, September 27, 2019

American history after 1865 Coursework Example | Topics and Well Written Essays - 6500 words

American history after 1865 - Coursework Example From this research it is clear that slavery was one of the traditions destroyed during the conflict. The tradition where whites especially in the southern society were keeping slaves without respecting their human rights came into destruction because of the conflict. The conflict also managed to destroy the deep-rooted belief of the Southern Whites that slaves would only work under compulsion. Several institutions including factories that were owned by Whites in large cities like Atlanta, Columbia and Richmond were set on fire. After the civil war, freed slaves managed to remain reluctant to settle down and form relationship with their former masters. However, some of them committed themselves to wage labor while others changed masters. Some of the freed slaves were waiting to get land of their own as promised by the government. In order to survive, many of the ex-slaves managed to secure employment through contract labor system. The freed slaves also managed to create institutions t hat they were denied during the slavery era. Some of the institutions they managed to create include schools, churches and several fraternal. The Northerners managed to release many slaves. Some of them went to the South to offer materialistic and humanitarian services. The Northern military was willing to set a military base for the freed men and women in the South. However, the Southerners were not ready to accept any help from the Northerners and the disagreement resulted into chaos. Therefore, the North was not successful in changing the Southern society. The North also did not manage to stop the issue of racial oppression in the Southern society (Divine et al. 477). The hailing prosperous of the Southern society remained unsuccessful and poor because of exploitation from the northern business interests (Divine et al. 471) 4.  Why was Northern interest in Southern reconstruction waning? The Northern interest in reconstruction waned because the South managed to create a strong opposition especially in the early 1870s. Heavy black turn in the elections of 1872 helped the Republicans to hold more powers and create a strong ruling foundation in most of the Southern states (Divine et al. 469). The Republican leaders were interested in industrial and western expansion as opposed to the Northerners. A series of laws were passed that favored the Southerners especially giving more power to its army. This contributed in waning of the Northern interest in Southern reconstruction. 5.  Why were the Redeemers able to take back the South? The redeemers managed to neglect the interest of white farmers who were in the South and this made many of the Whites to lose their farms. The Redeemers were interested in economic growth and development, which made them have significant support in the South. A third of the Redeemers were professional politicians and they had great experience in leadership that helped them to take back the south. The Redeemers also managed to rule o n two basic principles that helped in uniting the Southern planters through blocking the government from directly interfering in the economy (Divine et al. 471). Moreover, disputed elections of 1876 that led to a compromise in 1877 contributed in making the Redeemers take control of the South (Divine et al. 470). Part 2 1. Could a fair policy towards Native Americans been devised? It was possible to devise a fair policy towards Native Americans if only they agreed to comply with the policy. However, most of the Native American did not manage to comply with the set policies. For example, the concentration policy failed to last for long because the Indians broke boundaries while hunting buffalos (Divine et al. 485). 2. What impact did the frontier

Thursday, September 26, 2019

Marketing Management in a Global Economy Essay Example | Topics and Well Written Essays - 1250 words

Marketing Management in a Global Economy - Essay Example When dealing with place, the company needs to ask where the buyer will search for the product, how the client will access the correct distribution channels, if they need to use a sales force, and what the competitors do that an individual can learn. For the pricing section of the marketing mix, the company requires to determine what the product’s value is to the client. Whether there is an established price point for services or products in the area, whether the client price is sensitive enough to give one an extra market share with a small price decrease, and how the company’s price compares with the competitors (Doole & Robin, 2008). When it comes to promotion, the company discerns when and where they can get their marketing measures across to their target market, how they can reach their audience via radio, press, or billboards, what time is best to carry their promotion, and whether any environmental issue dictates the marketing launch’s timing. The company a lso needs to determine how its competitors carry out its promotion. 2. Define Value Chain, and give an example of a company that utilizes a Value Chain Delivery Network, further cite the success rate of their value chain network. The concept of the â€Å"value chain†, owes its existence to Michael Porter, a management guru. Value chain refers to the sequential group of support and primary activities, which an enterprise carries out to turn various inputs into outputs that benefit its external customers (Doole & Robin, 2008). Various companies worldwide utilize value chain analysis, although the information shared about it is minimal because knowledge of one’s Value Chain Analysis means loss of competitive advantage. The profit wars have now moved to the supply chain arena with the VCA model now used for modeling across top clients like Target Stores, which utilize various kinds of services in the various quantities. Through the aid of some analytics, the companyâ€℠¢s logistics department can utilize the data for engagement with the customer and search for an optimal supply chain scenario. Toyota Motors is an example of a company that utilizes an integrated value-chain delivery network. Toyota manufactures its automotives via the TPS system, which puts emphasis on a lean system of manufacturing. This system was created to improve the cars’ quality, with the clients also being able to order the cars efficiently and quickly. Toyota Motors possesses an integrated system, known as TPS, in its production process. This system portends various advantages for the company’s production system. This ranges from Human Resource management to its products. This is further evidenced, in the fourteen principles, to which Toyota holds dear, including the quality of service, the efficiency of the production process, in addition with the quality of, the final product. This has allowed Toyota to become the biggest automotive company in the world bec ause of lean management that can be derived from a value chain delivery network. The system allows the company to deliver cars as fast and efficient as possible. 3. What is MIS (from a marketing point of view) and how does it affect the marketing research process? MIS is a system of communications, documents, procedures, and equipment that collects,

Sigmund Freud.His Conception Of Mental Illness Essay

Sigmund Freud.His Conception Of Mental Illness - Essay Example For a long time, mental handicaps were seen as completely insurmountable, just something that nobody could engage with or do anything about. In the 20th century, though, that began to change. The notion that mental illness was treatable began to become widespread, and mental hospitals because places of treatment rather than mere confinement. A good example of the changing attitudes is the 1975 film One Flew Over the Cuckoo’s Nest, based on Ken Kesey’s 1962 novel of the same title. In it, Randle McMurphy, played by Jack Nicholson, is transferred from prison to a mental institution, where he challenges the way the institution is run. Prior to his arrival, the institution is essentially a holding pen, a place where people are kept because society doesn’t want to deal with them. There is no real expectation that anyone ever will, or ever can, leave the institution or be cured of their problems. Indeed, McMurphy initially goes there because he thinks it will be an easier place than prison to serve out the remainder of his sentence, only to discover that one he’s in the institutional system, he can be kept there indefinitely against his will. However, by engaging with the other patients as human beings, McMurphy challenges the authority of the institutional system.... The 1960s were a fertile time for changing attitudes, and the liberation of McMurphy’s compatriots should be seen in that context. In 1968, the Special Olympics were founded, as parents of mentally disabled children were encouraged for the first time to take pride in their offspring despite their disability. Prior to this era, such parents were frequently told to have their children permanently institutionalized, and tell people they were dead. As another example, three years prior to the release of One Flew Over the Cuckoo’s Nest, there had been a famous television expose of the Willowbrook State School, a grossly abusive and inadequate institution for mentally disabled children and youths. It led to a public outcry and a series of reforms in how such institutions were run. One Flew Over the Cuckoo’s Nest, in that sense, is chronicling an unfolding cultural narrative about the treatment of mental handicaps; it’s a story about changing attitudes that came out in a time of changing attitudes. There is often an easy narrative applied to the Civil War, one in which evil, racist Confederates are opposed by virtuous, non-racist Union troops. Few would phrase it in exactly that way, but that is the basic structure of the model many people absorb from pop culture and conventional wisdom. Like most such good-vs.-evil narratives, it is a gross oversimplification that misses much of its own point. Reality is, as ever, more complex. At another end of the spectrum, one finds those who insist that the war had nothing to do with slavery, that that was a mere incidental issue. Considering that every state that seceded wrote an elaborate proclamation of their reasons, and that every one of those documents cites slavery as their central ideological issue, the

Wednesday, September 25, 2019

Role of Organizations in the Profession of Nursing Research Paper

Role of Organizations in the Profession of Nursing - Research Paper Example American Association of Critical Care Nurses is the world’s largest specialty nursing organization, which represents the interests of more than 500,000 nurses who vehemently work toward the objective of providing care for acutely ill patients. The essence of the AACN mission statement is that â€Å"AACN drives excellence because nothing less is acceptable†. At the same time, its vision statement reflects that â€Å"AACN is dedicated to creating a healthcare system driven by the needs of patients and families where acute and critical care nurses make their optimal contribution† (Ebright , 2010). I choose the AACN for this assignment because the organization exemplarily operates its critical care and it has won many awards for its excellence including The DAISY Award for Extraordinary Nurses. Membership requirementsThe AACN offers six various membership options including active membership, affiliate membership, student membership, emeritus membership, international digital membership, and retired or disabled membership. The membership requirements are different for different options. The annual subscription rate also varies in accordance with the type of membership option chosen. History and demographicsThe AACN was established in 1969 and the first intensive care units (ICUs) were introduced in 1950s with intent to provide improved care to critically ill patients. The improved technological applications have assisted the AACN to place itself on the world’s top position.’s top position. Presently the organization has the power of over 80,000 members. The AACN members include 89% male and 11%female. Similarly, Caucasians constitute 78% of the AACN members. The current trend shows that the member strength of the organization increases day by day. Priority agenda items The AACN website says that â€Å"our patients, our nurses, our units† are the main priorities of organization. The scope of the AACN is to provide quality hea lthcare to its members by establishing a sustainable and healthy worksite environment. The AACN encourages effective leadership so as to promote worksite environments, which are â€Å"respectful, healing, and humane† (American Association of Critical- Care Nurses, 2011). The AACN works with other organizations to vie with common nursing care issues and establish a professional nursing practice. The modern trends indicate that the organization gives great emphasis on ambulatory care centers by employing more nurses in this sector. The increased vacancy rate of AACN indicates that the organization will suffer troublesome nurse shortage issues in the coming years unless it recruits adequate nursing staff immediately. Hence, the AACN has recently implemented a variety of programs for meeting its nurse staffing requirements. The main focus of the organizations is to meet the needs of its members whose family includes individuals who are acutely and critically ill. In addition, the AACN specifically emphasizes and advances nursing education through technology as the organization greatly promotes patient safety and improved care. Likewise, the organisation offers extensive payment concessions to its existing members, who completed a specific membership period,

Tuesday, September 24, 2019

Social policy Essay Example | Topics and Well Written Essays - 1500 words - 5

Social policy - Essay Example Studies into the relationship between gender, health and human life cycle have taken a systematic approach in this unit. During my studies in this module, I found out that there is a positive correlation between gender, health and stages in the human life cycle (Hayward, 2003). From the point of determination of the sex of children, a difference in health trajectory begins to show between the two sexes. These differences vary in kind(Romans & Seaman, 2006). With ageing comes health complications. Ursula Lehr posits that old age is characterised by negative traits such as a decline in the capacities of individuals coupled with dysfunction or complete loss of the vital functions of the human body. In the social construction of old age, sociologists have shared that the current society is based on a ‘cult of youth’, where youthfulness, beauty, vigour and strength have immense value (Romans & Seaman, 2006). The society has a way of constructing a way of viewing issues that do not regard the law. I learned this alongside my colleagues last year in the unit ‘Introduction to Sociology’ where we were first introduced to the concept of social construction. Initially, during my First Year, I thought social constructs only existed in childhood. However, after further studies on the issue, I came to find out that the issue of social constructs can be applied in other issues such as gender, race, mental health and physical disability among others. I now understand that anything that results from shaping and forming by the society is of concern to sociologists and researchers. The number of aged people in Britain could rise to 12 million in the year 2021. This figure could grow further to 15.5 million aged people by the year 2030, according to figures provided by the Office of National Statistics. The number of people expected to be above the age of 80 by the year 2021 is 3 million, with further projected increase to 5.5 million people by the year

Monday, September 23, 2019

Genetically Modified Foods Research Paper Example | Topics and Well Written Essays - 1000 words

Genetically Modified Foods - Research Paper Example Despite this, the development of these foods has met sharp critics from various stakeholders in the field of agriculture and medicine, and this has resulted to legal debates in parliaments of various countries, United States of America included. In the production of genetically modified foods, scientists usually select desirable genes from crops, combine them and come out with crops that are more superior in regard to disease and pest attack, as well as production. This is contrary to traditional food reproduction technology, in which unrelated crops were used. The cliche in the technology, as argued by opponents is based on the idea that recombining inter-species genes do not have ways of evaluating the potential threats and long-term effects on the consumption of genetically modified foods by living organisms. Since food affects each and every one of us, the discussion on food safety is of great importance to all humankind, and thus proper evaluation of both thee merits and demerit s associated with the technology is necessary. This essay seeks to outline the merits and demerits of genetically modified foods, and argue that the merits outweigh the demerits, and thus production of foods using this technology should be encouraged. Advantages of genetically modified foods To adapt to the technology of GMO’s, consumers need to be well informed on all aspects of the food starting from its production to preparation and consumption. In this regard, the consumers also need to be informed on the nutrition levels of different foods in order to ensure they purchase and consume foods that meet their health requirements. Opponents argue that GMO’s harm other organisms, human included; the recombination of genes may at times be ineffective and lead to the production of poisonous foods, which when consumed can be fatal. This is contrary to the current standards as all genetically food are tested against health standards before being released to the market. In t he production of genetically modified foods, the recombination of genes is strived to ensure that the crops are less exposed to pest and disease attacks. This is beneficial to the farmers as it reduces their cost of production and consequently increase yields and return. Therefore, the farmers can use the saved money in meeting other economic demands, which is also necessary for the economic development of a country (Skinner and Liang 12-78). On this point, opponent base their argument on the taste of foods and argue that genetically modified food have bad taste in comparison to natural foods. Although the taste of foods affects the appetitive of an individual, the nutritional value of the food is more important and thus their argument does not hold sound ground for an argument. Our ecology is very important in ensuring that all life of living organisms is sustained, and chemical components usually affect our ecology by tampering with the water systems as well as the exposure to che micals, which have adverse effects on humans, as well as animals (Shepard 34). Through the production of genetically modified foods, fewer chemicals are used, and this ensures that humans are less exposed to chemical hazards, as well as our environment remains unpolluted. Opponents argue that since genetically modified food are not good for human consumption, their production may lead to cross-pollination thus making it hard to identify genetically modified foods. Drought and other natural disasters have become a common occurrence in the recent past, and this has led to various organizations across the world striving to innovate new means of producing high yields in crop production

Sunday, September 22, 2019

Fitzgerald and Gatsby Essay Example for Free

Fitzgerald and Gatsby Essay Francis Scott key Fitzgerald was a popular american storyteller. Born September 24th, 1896 and died in December 21st, 1940, Fitzgerald lived the prime of his life in the Roaring-Twenties. The values and morals were declining in favor of materialistic and careless attitudes following the world war. Social prestige no longer came to how hardworking and knowledgeable you were but how much property and goods you had. People began to think that instead of earning a place in society you could purchase it. This corrupted the characters in the novel The Great Gatsby and twisted the American dream. In the novel by Fitzgerald The Great Gatsby he connects many of the characters to real people that he has delt with in his life. Fitzgerald’s character Gatsby is a mirror of himself. In many ways Fitzgerald betters himself through Gatsby and his characteristics but still follows a close backbone to Fitzgerald himself and events in his life. James Gats was born into a poor, disadvantaged farm family and came from nothing. Fitzgerald was born into a deprived family and had to create himself on his own. Neither came from old money or was born into the elite class but rather had to work for all of their money. Fitzgerald loved to party and drink but with that came many things he did wrong when he was drunk. Gatsby threw many parties but never drank so he wouldnt miss a beat. It says how Gatsby learned from Dan Cody, that when he was drunk women took advantage of him and he made ignorant mistakes. Fitzgerald was taken advantage by his wife and spent money very foolishly when he was drunk. Gatsby was created without Fitzgeralds alcoholism. Fitzgerald was also enrolled in the army and became a military officer but never went to war. Gatsby returned home as a war hero with medals of honor. Gatsby never had money problems it seemed as he never really worked but the money just kept coming in. Fitzgerald was always fighting to keep making money and worked for hours on end to make ends meet so he could support his lavish, careless, and drunken lifestyle. Fitzgerald was a major party addict. He loved the fast life. He was an excessive partier but his home life suffered and was extremely unhappy. Gatsby Through many big parties almost every weekend but he was lacking the only thing money couldnt buy him, love. Both Fitzgerald and Gatsby fell in ove at a young age with a woman out of their league. Fitzgerald with Ginevra and Gatsby with Daisy. Both Daisy and Ginevra came from a background of old money. They lived luxurious lifestyles. These women were beautiful,rich and characterized everything these men believed were perfect. They were blinded by materialistic things rather than inner beauty. At the time these men were still unsuccessful and couldnt support these high maintenance women. Their love lives are very similar. Both Daisy and Ginevra did love them but could not marry them because â€Å"Rich girls do not marry poor boys†. The women moved on but the men still loved them and were even more determined to become successful and win their lovers back. In the end both men were successful and earned a lot of money to move into the elite class. They so called conquered the American Dream But they were still unhappy. They didnt have the loving family unit or white picket fence house instead they had excessive amours of money, designer clothing, expensive cars, big unfriendly mansions and a cold separated family. But both Daisy and Ginevra got married already to rich men who could support their lifestyles. They were both unhappy with their marriage. Fitzgerald meets up with Ginevra again and has a second and last chance to impress her and win over her love now that he was successful. They meet at a bar and he drinks and is out of control. He is rude and is not the way Ginevra remember the Fitzgerald she fell in love with and loses his chance. Gatsby gets a second chance with Daisy too. When he firsts meets her she seems different to him, Older and less bubbly but he still loves her. But he goes out to lunch with her and her husband and takes things too far trying to win her back and loses his final chance. Through time things have changed about each character but in their minds they were static. They were both imagining different visuals and personalities from their youths. Everyone in life gets older and matures. It did not work out in the end for both men. The American dream was twisted and all of the riches they earned were wasted because money cannot buy true love. It just was not ment to be. Even though money is up there with oxygen it isnt everything. These men where searching for love and happiness and money was not going to buy it. The novel parallels to Fitzgeralds life immensely. Its captures and llustrates many of the issues Fitzgerald suffered. He had constant implications with women in his life therefore he portrays them as shallow, ignorant, and disloyal in the novel. Fitzgerald used many of his emotions to influence his novel and that is why it mirrors his life so closely, as well as many of the other pieces of writing he has created. He is a gifted writer and lived a rollacoster lifestyle up until he died of a heart attack. If only he realized sooner how to prioritize his life he could lived much happier. It is unfortunate what he had to go through. But there is no reward for living life as a drunken partier.