...the theory of financial intermediation by Benston and Smith in 1976. Regarding the theory, there is one fundamental question among others, what is the main reason why financial intermediaries exist? In 1976 there was no clear consensus about the specific role of financial intermediaries and many different approaches existed on the issue how to analyze them in an appropriate way. The primary goal of the authors is to develop a proper framework for the analysis by setting the main focus on transaction costs. Therefore, they take a look at four different aspects: the demand for financial commodities, the production, their pricing altogether with the pricing of additional services and the influence of governmental regulation on financial intermediaries. They start their survey from a contrary point as the other authors did in recent history by defining financial intermediaries as firms which create specialized financial commodities. On the supposition that the individuals’ earnings over time do not enable the achievement of the desired inter-temporal consumption pattern, demand for financial commodities arises. In this case assets held by the consumers serve as a possibility to rearrange their intra- and intertemporal consumption pattern for maximizing their utility. This leads to two key facts. First, utility is based on consumption at different points in time and second, transaction costs occur by acquiring financial commodities. Accordingly, financial intermediaries...
Words: 785 - Pages: 4
...Guillermo Furniture Store Lori A. Poole FIN-571 Marcel A. Santiz December 12, 2011 Guillermo Navallez resides in Sonora, Mexico and has made a living for a number of years creating his own style of furniture. The area of Sonora, Mexico is not only known as a beautiful vacation spot, but it is also large furniture manufacturing location in North America. A good supply of timber is an available in this area that allows Guillermo to have access to a variety of wood to create tables and chairs for his company. For years, Guillermo has had the advantage of inexpensive labor cost and charged a premium for the quality of his handcrafted pieces of furniture (Guillermo’s Furniture Store, 2011). Guillermo eventually faced a challenge during the 1990s when two obstacles caused a dent in his business. The first obstacle was the entrance of a competitor located overseas into the furniture market. The second obstacle was the opening of a large retailer causing...
Words: 1426 - Pages: 6
...Bank’s latest annual global report which evaluates the ease of starting a business, dealing with construction permits, registering property, and paying taxes. On average, it takes 13 procedures and 119 days of work to start a business in Brazil, and construction permits demand an average 17 procedures and 469 days to finally get authorised. Corruption Brazil has become somewhat notorious for the levels of corruption among its politicians and senior business people. However, a recent report by The Economist suggests that the country is finally ready to clean up its act, estimating that in 2013 more corruption will result in appropriate custodial sentencing, thus prompting a petering out effect. Financial Brazil’s economic boom has pushed prices up in the country, and from a financial perspective, doing business isn’t as cheap as you might think. The currency has moved closer to parity with many of its leading peers...
Words: 1323 - Pages: 6
...climate change to crossborder health risks to natural-resource scarcities. Many of these so-called global commons problems carry grave risks to economic growth in the developing world and to the livelihoods and welfare of their people. Climate change is the classic example. Despite the risks involved, donor governments have funded programs addressing global challenges such as climate change at far lower levels than traditional programs of country-based development assistance. The prospects for dealing with such global challenges will depend at least in part on new collective financing mechanisms. In this paper, we examine four categories of existing resource-mobilization options, including (1) transportation levies; (2) currency and financial transaction taxes; (3) capitalization of IMF Special Drawing Rights (SDRs); and (4) the sale, mobilization, or capitalization of IMF gold. In the end, we recommend that willing governments utilize a modest portion of their existing SDR allocations to capitalize a third-party financing entity. This entity would offer bonds on international capital markets backed by its SDR reserves. The proceeds would back private investment in climate-mitigation projects in developing countries that might otherwise lack adequate financing. This approach could mobilize up to $75 billion at little or no budgetary cost for contributing governments. Any limited budgetary costs could be offset by using excess proceeds from recent IMF gold sales. In our view, capitalizing...
Words: 9912 - Pages: 40
... taking advantage of its no or lower taxation. Thus, there may be extremely low or no capital gains or transfer tax, gift, death or estate duties. The difference in the level of taxation between jurisdictions is determinant to decide whether a tax haven should be used and, if so, which one. The no or nominal tax criterion is not sufficient, by itself, to result in characterization as a tax haven. The OECD recognized that very jurisdiction has a right to determinate whether to impose direct taxes and, if so, to determinate the appropriate tax rate b) Bank and commercial secrecy. Tax havens generally allow secrecy or confidentiality to operations in or through them. Many jurisdictions offer protection to banking affairs and other financial transactions from divulgence to foreign tax authorities, and some of them have also enacted secrecy or confidentiality provisions. Generally, classical tax havens do not require the production of companies’ annual accounts. Transparency ensures that there is an open and consistent application of tax laws among similarly situated taxpayers and that information needed by tax authorities to determine taxpayer’s correct tax liability is available. c) Lack of exchange controls. Many tax havens developed a dual currency control system, under which residents are subjected to both local and foreign currency controls and non-residents, only to the local currency controls. Companies set up in a tax haven are treated as non-residents for exchange control...
Words: 580 - Pages: 3
...approximately 94% of the funds are allocated to domestic security market, although the equity market in US only added up to less than 48% of global equity market as a whole. Therefore, extensive amount of studies have been conducted in order to identify the driving force behind the home bias. Based on the findings of the empirical studies, it reveals that the determinant of home bias can be conclude as high transaction cost and information asymmetric. One of the factor the cause the arisen of home bias is due to the high transaction cost. Transaction costs have been appeared in a few research papers but most of them have been ended with different conclusion. The research conducted by Domowitz, Glen, and Madhavan (1998) have classified the transaction cost into three components that is commission, fee and “market impact” cost. Market impact cost is defined as the expense incurred to the trader when trading a security. The cost often leads to a fluctuation in the market that will affect the market liquidity when the security is invested. However, some research argues that transaction costs are unlikely to explain the puzzle of home bias. In the research investigate by Tesar and...
Words: 1132 - Pages: 5
...Techniques •Application controls –Input controls –Processing controls –Output controls •Testing computer application controls –Black box approach –White box approach •Computer aided audit tools and techniques for testing controls Application Controls •Programmed procedures designed to deal with potential exposures that threaten specific applications, such as payroll, purchases, and cash disbursements systems. •Three categories: –Input controls –Processing controls –Output controls Input Controls •Designed to ensure that transactions are valid, accurate, and complete. •Broad classes: –Source document controls –Data coding controls –Batch controls –Validation controls –Input error correction –Generalized data input systems Source document controls •Techniques to prevent source document fraud (for example, an individual with access to purchase orders and receiving reports could fabricate a purchase transaction to a non-existent supplier) –Use pre-numbered source documents –Use source documents in sequence –Periodically audit source documents Data Coding Controls •Checks on integrity of data codes used in processing. •A customer’s account number, an inventory item number, and a chart of accounts number are all examples of data codes. Data Coding Controls •Three types of errors that can corrupt data codes and cause processing errors: –Transcription errors –Single transposition errors –Multiple transposition errors Transcription Errors ...
Words: 970 - Pages: 4
...Outsourcing 1/60 ABSTRACT: The main focus of this project is investigating and exploring the impact of outsourcing on one of the most iconic Danish companies (LEGO), which attracted our attention during the preparation of this project. We decided to focus on a single case study, because we felt that dividing our efforts by investigating more than one company, would not allow us to focus in sufficient detail on the domino effects that outsourcing can have on a singular institution. The main question of this project is “How could LEGO improve the Make-or-buy- decision and the relationship management when it comes to outsourcing”? In order to answer the main question, we must consider two sub-questions stemming from the main issue, namely: “How could LEGO improve the decision-making-process to outsource by taking more influencing factors into consideration?” and “What could LEGO have done differently in its relationship to the outsourcing vendor Flextronics”. We used the Case Study Research method to work on these questions. Doing that, we reviewed theories, which explained the phenomenon of outsourcing on a theoretical basis. After creating a theoretical framework and the database, we analyzed the case (LEGO) for parallels between the theories and their practical experience. Finally, we were able to drawn some conclusions to both the central and subsidiary questions initially posed. In summary, it can be said that LEGO did not take all aspects into...
Words: 18615 - Pages: 75
...In 1996, Arauco acquired Alto Paraná in Argentina to expand its land holdings and production capacity of pulp. Alto Paraná produces approximately 350,000 tons of pulp in its own pulp mill, which is supplied by its own plantations (50%) and third parties (50%). Alto Paraná frequently enters into negotiations with third parties, but must contend with substantial transaction costs due to the remoteness of the Alto Paraná facility. These transaction costs, in the form of transportation expenses, drastically decrease profit margins. In our analysis of Alto Paraná’s operations, we calculated the quasi-rents to be $61.7/ton. Given these costs, we believe that Arauco made the right business decision to vertically integrate Alto Paraná’s operations to own both forests and pulp production facilities. In order to calculate quasi-rents, the components of transaction costs to both the pulp mill and the forest, and each party’s next-best selling and buying alternatives (if they were to stop conducting business with each other) must be evaluated. If the pulp mill does not procure softwood from the surrounding forest plantations it would have to acquire it from Corrientes, which is 300 km away. As such, Alto Paraná would incur additional transportation costs (assuming cost of wood is the same at both places) over the new supply route. This value (Tcpulp) comes out to $14.4 / ton (see Appendix). If the local forested wood cannot be sold to the pulp mill in Alto Paraná, it will have to be...
Words: 795 - Pages: 4
...Student name: Don Keerthiratna WijendraStudent Number: 8748935Assessment Reference : 8748935/ME/July/12/1 | Transaction Cost Economics is defined as “The cost associated with exchange of goods or services and incurred in overcoming market imperfections. Transaction costs cover a wide range: communication charges, legal fees, informational cost of finding the price, quality, and durability, etc., and may also include transportation costs. Transaction costs are a critical factor in deciding whether to make a product or buy it.” (www.TheBusinessDictionary.com). Coase showed that traditional basic microeconomic theory was incomplete because it only included production and transport costs, whereas it neglected the costs of entering into and executing contracts and managing organizations. Such costs are commonly known as transaction costs and they account for a considerable share of the total use of resources in the economy. When transaction costs are taken into account, it turns out that the existence of firms, different corporate forms, variations in contract arrangements, the structure of the financial system and even fundamental features of the legal system can be given relatively simple explanations. If transaction costs were zero, no firms would arise. All allocation would take place through simple contracts between individuals. By incorporating different types of transaction costs, Coase paved the way for a systematic analysis of institutions in the economic system and their significance...
Words: 1499 - Pages: 6
...Critically comment on the transaction cost based theory of Construction procurement and evaluate its potential as a practical tool in the Selection of procurement systems Abstract This term paper will provide comprehensive reviews on the entire literature involving transaction cost economics (TCE) in construction procurement. It will also critically describe the transaction cost based theory of construction procurement and also give an evaluation of its potential as a critical tool in the selection of procurement systems. The paper will also explore how TCE has emerged from most economic roots to examine empirical phenomena in construction procurement. TCE has been increasingly applied not only to business-related fields such as finance, accounting, organizational theory and marketing but also to the construction industry. Most construction industries have recently moved to practice innovative working techniques that will involve great collaboration and interrelationships that has been in the past. While these benefits such as collaborative and improved ways of working are discussed, but so little is evident about their cost. Hence there proves to be a diverse evidence showing the cost of procurement and more competitive and traditional practices. The purpose of this term paper is to try and examine the transaction based theory of procurement that is used in construction industry. Introduction Ever since it emerged in the early 1970s (Williamson 1971) the new...
Words: 3143 - Pages: 13
...culture, and guanxi network is used to elaborate the information obtained from the company. Findings – This paper highlights that the belief of sincerity and trustworthiness has refined to the organization culture that supports the sustainability of Taiwanese guanxi network. Besides, the transaction cost theory, resource-based view, and specific relationship investment has become a hinder strategy for Taiwanese organization to maintain the business relationship. This paper introduces an interesting collaborative strategy between three parties, the original equipment manufacturer (OEM) supplier, the machinery manufacturer, and the end-user (the branding). Although there is no direct business flows between the end-user and the machinery manufacturer, the specific relationship investment between these two parties are tight and cannot be separated. This has ensured the proper business flows between the OEM supplier and the end-user as well as the OEM supplier and the machinery manufacturer. Originality/value – This paper illustrates that a guanxi network is not sufficient to ensure a long-term business relationship to be established. Indeed, the organization culture as well as the consideration on the transaction cost and resources from each party does have a great impact on the collaboration relationship to be...
Words: 6442 - Pages: 26
...Norges Handelshøyskole Bergen, Spring 2011 Master Thesis within the main profile of International Business Thesis Advisor: Professor Svein Ulset Title: International Modes of Entry Subtitle: The Case of Disney By, Carlos Gonzalez Hernandez This thesis was written as a part of the master program at NHH. Neither the institution, the supervisor, nor the censors are -through the approval of this thesis- responsible for neither the theories and methods used, nor results and conclusions drawn in this work. International Modes of Entry: The Case of Disney 1 Abstract The case of Disney’s theme parks represents an opportunity to test major internationalisation theories in a setting of large investments with little chance for reversal of commitments. The purpose of the research is to study the benefit of different entry modes dependent on Disney’s Theme Parks value-generating resources and capabilities while conditioned to certain local industrial and institutional conditions in foreign markets. Five major theories and frameworks were used to analyze all four Disney’s ventures abroad. This resulted in 20 individual hypotheses analyzed. Results indicate that Disney followed a predictable internationalisation process in the cases of Tokyo, Hong Kong and Shanghai, but that it went off-path in the Paris one. In successful cases Disney followed a cautious approach, involving local partners to transfer and adapt the “Disney Experience”. In the case of Paris the company decided to enter...
Words: 19107 - Pages: 77
...Chapter 1—The Information System: An Accountant’s Perspective TRUE/FALSE 1. Information is a business resource. ANS: T 2. An information system is an example of a natural system. ANS: F 3. Transaction processing systems convert non-financial transactions into financial transactions. ANS: F 4. Information lacking reliability may still have value. ANS: F 5. A balance sheet prepared in conformity with GAAP is an example of discretionary reporting. ANS: F 6. The Management Reporting System provides the internal financial information needed to manage a business. ANS: T 7. Most of the inputs to the General Ledger System come from the Financial Reporting System. ANS: F 8. When preparing discretionary reports, organizations can choose what information to report and how to present it. ANS: T 9. Retrieval is the task of permanently removing obsolete or redundant records from the database. ANS: F 10. Systems development represents 80 to 90 percent of the total cost of a computer system. ANS: F 11. The database administrator is responsible for the security and integrity of the database. ANS: T 12. A backbone system is completely finished, tested, and ready for implementation. ANS: F 13. The internal auditor represents the interests of third-party outsiders. ANS: F 14. Information Technology (IT) audits can be performed by both internal and external auditors. ANS: T 15. The single largest...
Words: 3541 - Pages: 15
...exchanges with financial institutions, as an external stakeholder, is a. stock transaction information c. inventory receipts information b. sales & billing information d. sale of goods & services information 3. A subsystem is called a system when it is a. viewed in relation to the larger system of which it is a part b. the focus of attention c. able to achieve its goals d. able to interact with the other system 4. A system is said to have the ability to achieve its goal when a. there is a convenient way of representing, viewing, and understanding the relationships among subsystems b. all parts serve a common purpose c. it can serve at least one purpose but it may serve several d. there is an effective functioning and harmonious interaction of its subsystems 5. This is processed by its information system as a unit of work. a. financial transaction b. transaction c. nonfinancial transaction d. resources 6. AIS subsystems a. process financial & nonfinancial transactions that directly affect the processing of financial transactions b. measure economic events in monetary terms c. process nonfinancial transactions d. directly process financial transactions 7. Which of the following is NOT a reason why transaction processing system is central to the overall function of the information system? a. Records financial transactions in the accounting records. b. Converts economic events into financial transactions ...
Words: 1575 - Pages: 7
