Agency Theory In Banking Sector

The theory point of view is the market sale of all kinds of information about the products is more comprehensive than the purchaser to know more about the goods all kinds of information to understand better than the other benefit is bigger, the relevant commodity information had less knowledge of the purchaser will pay the price get more information from sellers, market information of the transfer function can reduce the loss caused by asymmetric information, information asymmetry is the inevitable defects in market economy, the government should have the regulatory effect in the market system, in order to reduce the information asymmetry of economic losses.However, owners and users in the acquisition, transmission, processing information related to the investment decision will produce deviation, so the solution of the problem of asymmetric information to improve the efficiency of investment has important practical

Throughout the case, it can be seen how Cendant Corporation was performing activities that dealt with the interactions of income smoothing. The main cause of performing with Income Smoothing was to make their shareholders and investors believe that they had a professional and ethical operation running. Income smoothing can best be represented as how either gains or losses from a certain period are taken into a good or bad period with losses or no profits. Income smoothing throughout this case was used as an unethical practice performed by Cendant Corporation to achieve financial stability and falsify numbers to make the investors believe they had premium stocks when in reality it wasn’t what was really occurring which would then lead to the

What changes were required to implement the Supernova process—for FAs? For Merrill Lynch itself? What were the risks and potential benefits for both? Major change in philosophy and approach on managing accounts of clients, where financial advisor will merely be focusing on long term relationship and profitability rather than acquisition and immediate return. For Merrill lynch change is nature of work, where customer retention and loyalty will be given importance and also resulting in less market errors due to decrease in number of clients and focusing on profitable clients.

Tax law starts from the assumption that the application of the arm’s length standard will reduce the interference of tax effects with bona fide business decisions taken by the corporate management. The “arm’s‐length” standard provides the right starting point for the analysis. The theory underlying the arm’s length price suggests that transactions governed by arm’s length prices do not only indicate the “right” profit for the particular group company but also the “right” split of revenue for the involved countries. 2.1. COURT PRACTICES OF VARIOUS STATES IN APPLYING ARM LENGTH’S

(2002) identified that corporations always tended to achieve the target of leverage levels in the static trade-off theory when increase or retire a larger amount of new capital. The study also found that the higher the market-to-book ratio of corporations, the lower the target of debt ratios. Frank and Goyal (2004) stated that the deviation from the leverage ratio were useful in predicting the adjustment of debt, but not in the adjustment of equity. The study show that when the different between the present value of tax shields and the present value of financial distress cost reached the maximization, the optimal leverage was gained. This study also pointed out that the important of firm size for determining the validity of the trade-off theory.

Hill Country practices the conservative capital structure, which has excessive liquidity and lower interest rates that will bring negative impacts on the company’s financial performance measures. So, it is a good opportunity for Hill Country to implement a more aggressive capital structure. For example, the Chief Executive Officer (CEO) of this company can increase the leverage ratio by either increase the debt or reduce the equity or both. At first, debt financing usually used when a firm raises money for capital expenditures by issuing debt instruments to individual or institutional investors. In return for lending the money, the firm need to pay the principal plus interest payment at some agreed time in the future.

There are basically two arguments why fair value accounting can donate to pro-cyclicality. The first argument is that fair value accounting and asset write-ups allow banks to raise their leverage during economic expansions, which in turn makes the financial system more vulnerable and financial crises more severe. The second argument is that fair value accounting can cause corruption in financial markets. The idea is that ―banks may or have to sell assets at a price lower than the major value and that the price from these forced sales becomes applicable to other institutions that are required by fair value to mark their assets to market. Fundamental value differs from fair value in the following

Understanding Six Flags’ enterprise value of $1.311 billion (Exhibit 2), H Partners is able to make a more informed decision as to the overall health of the company. It is also important to note that the enterprise value is influenced by the amount of cash that Six Flags will hold after the reorganization. The enterprise value can be inflated by lowering the amount of cash that Six Flags is going to hold, however, the less cash they have available to them, the higher the chance of falling back into liquidity problems, therefore, we feel that taking an average is a reasonable way to determine the amount of

But when we look commercial banking industrial income, from 1998 to 2001, we can see a slight improvement among the mentioned factors. So this thing is clearly depicting that in near future their growth will be much higher than the current one because of the promising deliver retail experience and also because of the slide modification which they are going through. In short, I would say their future is much brighter than some other players in the banking industry. Market Capital Idea dreamer How to pictch the idea your name will not be written in you don't do things which you love.. Courage to take risk.. right minded people, people who know what the meaning of

First, if the interest rate in its own country is low then investing outside is a better option for the company in the long run since it is expected that the MNC will gain a higher interest rate on its funds. A local currency with low market value will make it challenging for the multinational company (MNC) to compete with bigger and more stable companies in the international market. Lastly, it will be beneficial for the MNC to invest funds in a financial market with a competitive currency at the global market that will appreciate over time. 5. Explain why some financial institutions prefer to provide credit in financial markets outside their own country.