...characterized by information asymmetries. Explain how these asymmetries may be reduced through the book-building process. Answer: Information asymmetries exist in an IPO market as the insiders have more information about the issuing shares than the investors. Moreover, the investors as well as firms don’t have enough information about the market. There exists a greater asymmetry in IPO market as compared to secondary market because there is no former data available for it. These asymmetries are somewhat limited by using book-building process to float initial public offerings instead of public auctions. The book-building process, which was first examined in the academic literature by Benveniste and Spindt (1989) and Benveniste and Wilhelm (1990), involves shares issuing company, investors and the intermediaries which are generally the investment banks. The investment bank first decides the price range or band for the bidding and then invites investors to evaluate and perhaps buy the issue. Next, investors evaluate the issue and provide the investment bank with preliminary indications of their demand for the issue. Finally, the investment bank prices the issue and allocates shares to investors, generally allocating more shares to investors who indicate higher levels of demand. Journal of Financial Economics 65 (2002) 3–29 Building the IPOorder book: underpricing and participation limits with costly information$ Ann E. Shermana,*, Sheridan Titmanb The investment bank...
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...CHAPTER ONE 1. BACKGROUND OF THE STUDY Before an investor commits his funds to any investment in stocks, he must ensure that such stock is the type that is capable of satisfying his investment objectives. These objectives which vary from one investor to another include:- i) security (safety of capital invested) ii) adequate return on investment by way of dividends iii) growth prospects/capital appreciation iv) spread of risks, etc. The exercise of security analysis is based on the general assumption that the intrinsic value of a company can be discovered by an assembly and analysis of financial information relating to its operations. This then forms the basis on which the investor could evaluate each stock in the market and determine the extent to which it satisfies his specific objectives before deciding whether or not to invest. 2. STATEMENT OF THE PROBLEM A decision to invest in stocks, like any other investment decision, has a direct impact on the investor’s networth. The main issue which this study focuses on is to examine how prudently an investor can select securities based on conventional objective criteria so as to improve his networth. Consequently, some relevant research questions that direct the study include:- - determining the profitability of the companies whose studies are being offered to the investor and likelihood of maintaining or improving upon such performance...
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...equity financing for rapidly-growing private companies. Finance may be required for the start-up, development/expansion or purchase of a company. Venture Capital firms invest funds on a professional basis, often focusing on a limited sector of specialization (eg. IT, infrastructure, health/life sciences, clean technology, etc.). The goal of venture capital is to build companies so that the shares become liquid (through IPO or acquisition) and provide a rate of return to the investors (in the form of cash or shares) that is consistent with the level of risk taken. With venture capital financing, the venture capitalist acquires an agreed proportion of the equity of the company in return for the funding. Equity finance offers the significant advantage of having no interest charges. It is "patient" capital that seeks a return through long-term capital gain rather than immediate and regular interest payments, as in the case of debt financing. Given the nature of equity financing, venture capital investors are therefore exposed to the risk of the company failing. As a result the venture capitalist must look to invest in companies which have the ability to grow very successfully and provide...
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...The BIGGER Picture (Ch. 1) Why do we need financial reporting? What is its purpose? Who are some of the key players in financial reporting? PROVIDER EXTERNAL USERS REGULATORS Your textbook (as most out there) evaluates accounting issues from a FASB perspective. We will discuss issues from the FASB’s conceptual framework, but also will try to think about others’ perspectives as well. Before we talk about the conceptual framework, we will discuss the structure of the ultimate product of the financial reporting process – the company’s annual report/10-K. What does it look like? What information is typically included? 1. Description of the company’s business and risk factors 2. Management’s Discussion and Analysis (MD&A) 3. Comparative Financial Statements (including notes to financial statements) 4. Independent Auditor’s Report on Financial Statements 5. Management’s Report on Financial Statements and Internal Controls 6. Auditor’s report on internal controls 7. Who develops financial reporting standards in the U.S.? That is, who influences Generally Accepted Accounting Principles (GAAP)? (1) Securities and Exchange Commission (2) AICPA (1938-1973) (3) FASB What constitutes GAAP? Generally accepted accounting principles have authoritative support. * Either a rule-making body has established a principle or, over time, a practice has been adopted as appropriate because of universal application. What are the sources of GAAP...
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...(Prerequisite: FIN 100) Quarter: Spring 2013 Meeting Days/Time: Tuesday’s, 5:45, Prince George’s Campus Instructor: Jason Powers Instructor Phone: 443-599-9525 Academic Office: 301-505-3332 / 301-505-3311 Instructor E-mail: Jason.Powers@strayer.edu Instructor Office Hours/Location: Tuesday’s from 3:30pm – 5:30pm. Online Academic Office Phone Number: 877-540-1733 http://icampus.strayer.edu Technical Support Contact Information: 877-642-2999 Backboard Helpdesk: 866-350-9427 Inclement Weather Policy In the event of inclement weather, consult the Strayer University student website at www.strayer.edu for information on University closings and delays. Be sure to monitor the website for updates as they occur. Additionally, the student is required to contact me at Jason.Powers@strayer.edu. |4/8/2013 |Term Start Date | | | | | | |Week 1 | |Week 7 | | | |4/9/2013 | |5/21/2013 | |Week 2 | |Week 8 | | | |4/16/2013 | |5/28/2013 | |Week 3 | |Week 9 | | | |4/23/2013 | |6/4/2013 | ...
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...Financial statements are produced internally by a company’s accounting department and certified to be accurate by the CEO and CFO. The information contained in the financial statements is used by investors, management, creditors, and the government to make decisions. An audit from and independent firm gives these users of the financial statements a level of assurance that the information is presented fairly, in accordance with GAAP, and free from material error as well as an opinion on the internal control of the company. This assurance allows the users of the information to make decisions with confidence, and a reduced level of information risk. Information risk comes from four main sources: information that is far away, biases and motives of the company, large amounts of data, and complex transactions. Even with the current system of standards for audits, guarantee from management, and government oversight there are cases where fraudulent reporting and business practices slip through the cracks. In 2009, a case being called “India’s Enron” came to light. The company Satyam was audited by PricewaterhouseCoopers, who blamed misinformation from management for not catching the scandal. This fraud clearly should have been found by the auditor, and if it would have been reported correctly in prior years all the users of the financial statements probably would have made different decisions. If audits were not required for public companies the financial system as a whole...
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...Question1 What is corporate governance? Corporate governance refers to the framework of rules, set of systems, relationships, principles and processes by which a company is governed. (Corporate Governance Principles and Recommendations, 2014) Corporate governance is based on principles such as conducting the business with all integrity and fairness, being transparent with regard to all transactions, making all the necessary disclosures and decisions, complying with all the laws of the land, accountability and responsibility towards the stakeholders and commitment to conducting business in an ethical manner. Good corporate governance provide the confidence to investor, which is crucial to the ability of entities listed on the ASX to compete for capital. (Corporate Governance Principles and Recommendations, 2014) How important is it to investors in evaluating which corporations to invest in? There is a level of confidence that is associated with a company that is known to have good corporate governance, which is crucial to the ability of entities listed on the ASX to compete for capital. (Corporate Governance Principles and Recommendations, 2014) Corporate governance is known to be one of the criteria that foreign institutional investors are increasingly depending on when deciding on which companies to invest in. They provide the guidelines as to how the company can be directed or controlled such that it can fulfil its goals and objectives in a manner that adds to the value...
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...What does Heather have to do tocapitalize on opportunity? Produce designs consumers want Line up retailers and advertising support Get items produced and delivered on time What are advantages of opportunity? Little capital needed Good market niche: Unserved,fragmented, and growing What are key factors forsuccess? Design sense Ability to sell retailer design General management Ability to manage cash, production,delivery, and quality What is the upside? Lots of expansion potential in“niche” Costs of operations mostly fixed Don’t need to control --Production--Cutting, Sewing, Shipping,infrastructure built up in industry toallow people to do just what she isdoing. Low working capital need Possible risks include: •Will her designs sell?•Successful designs will be “knocked-off.”•Heather’s ability to design for 5seasons, 20-30 designs per season What could Heather do toreduce the design risk? Hire a proven designer. Do some market research. Capitalizes on momentum --Gets key points out inexecutive summary: Incorporated Have a line Hired and paid people Have factor Have building Have production capability Leaves no doubt ininvestor’s mind that this isgoing to happen. Only issueis will it be with my money? Lays out uniquequalifications of Heather andconcept: Financial statements poorlypresented: Only 2 years Not well organized This reads like a preliminarydocument -- much more work isneeded. Arden & Company Don’t put any...
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...Executive Summary Size Up Analysis Harley Davidson is a leader in the motorcycle manufacturing industry that mainly competes in the heavyweight class motorcycles. They compete mainly against Japanese manufacturers in the market. During the 1980s, the company came close to bankruptcy due to quality issues that accompanied its rapid production expansion. However, that incident compelled Harley Davidson to renew its focus on quality. Since then, Harley Davidson’s successful differentiation strategy focusing on quality, luxury and branding has been reflected on Harley Davidson’s financial highlights. Net income has more than doubled in a span of 5 years; net income increased to $213 million in 1998 from $104 million in 1994. Net working capital has also increased to $376 million in 1998 from $179 million in 1994. Harley Davidson’s share price has more than tripled during the same period as well, suggesting improved investor confidence. However, we should note that Harley Davidson has increased its financial leverage as displayed by the change in their debt to assets ratio. It was noted that Harley Davidson’s customers are willing to wait 2 years for its motorcycles. There seems to be unmet demand and that may have caused a focus on production to be ingrained into their culture. This is evident in their vision to dramatically increase production capacity demonstrated in their plan 2003. Harley Davidson’s products also have very long life cycles. The evolution of the...
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...ANALYSIS…………………………………………………………………………………………….5 5. PROBLEM STATEMENT………..…………………………………………………………………………………….6 6. STATEMENT OF OPTIONS……..…………………………………………………………………………………...6 7. CRITERIA FOR EVALUATION.....…………………………………………………………………………………..6 8. EVALUATION OF OPTIONS………………………………………………...……………………………….………7 9. RECOMMENDATIONS…………………………………………………………………………………………………9 10. PLAN OF ACTION………..……………………………………………………………………………………………...9 11. EXHIBIT-1............................................................................................................................................................10 12. EXHIBIT-2............................................................................................................................................................12 13. REFERENCES......................................................................................................................................................13 To: Mr. David Larson From: Mr. Dadhich Bhatt Date: January 6, 2004 Subject: Detail analysis report on future course of action for business operation of Larson Inc. in Nigeria. As detail analysis required regarding Nigerian business environment to take decision about Nigerian subsidiary, this analysis contains feasibility study and evaluation of possible options against defined criteria. Abbreviation NIPC – Nigerian Investment...
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...GOVERNANCE 2012 CONTENTS Foreword Corporate Governance in Malaysia Corporate Governance Principles and Recommendations Principle 1: Establish clear roles and responsibilities Principle 2: Strengthen composition Principle 3: Reinforce independence Principle 4: Foster commitment Principle 5: Uphold integrity in financial reporting Principle 6: Recognise and manage risks Principle 7: Ensure timely and high quality disclosure Principle 8: Strengthen relationship between company and shareholders Table 1: Comparison between the MCCG 2012 and the 2007 Code 1 FOREWORD By TAN SRI ZARINAH ANWAR Chairman, Securities Commission Malaysia The Securities Commission Malaysia (SC) had in July 2011 released the Corporate Governance Blueprint 2011 (Blueprint) which sets out the desired corporate governance landscape going forward. The essence of the Blueprint is to achieve excellence in corporate governance through strengthening self and market discipline and promoting good compliance and corporate governance culture. Boards and shareholders must embrace the understanding that good business is not just about achieving the desired financial bottom line by being competitive, but by also being ethical and sustainable. The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia. The Code was later revised in 2007 (2007 Code) to strengthen the roles and responsibilities of the board of directors, audit...
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... For the purposes of this research paper, I will attempt to convey my understanding of a stakeholder through the lens of Gary Heerkens’ book, “Project Management”. Though the definitions vary, there are several ‘tenants’ that comprise the meaning of a stakeholder. Any of the following may make an individual a stakeholder: • Stands to gain or lose through the success or failure of the project • Provides funding for the project • Has invested resources in the project • Participates in (works on) the project • Is affected by the outputs of the project • Is affected by the outcome of the project • Is in the “chain of accountability” ( Heerkens, 2014) As Heerkens noted, stakeholders can be almost anyone in any level of a company. Investors, customers, employees, and even suppliers are considered stakeholders (in part) because they all stand...
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...CORPORATE GOVERNANCE 2012 CONTENTS Foreword Corporate Governance in Malaysia Corporate Governance Principles and Recommendations Principle 1: Establish clear roles and responsibilities Principle 2: Strengthen composition Principle 3: Reinforce independence Principle 4: Foster commitment Principle 5: Uphold integrity in financial reporting Principle 6: Recognise and manage risks Principle 7: Ensure timely and high quality disclosure Principle 8: Strengthen relationship between company and shareholders Table 1: Comparison between the MCCG 2012 and the 2007 Code 1 FOREWORD By TAN SRI ZARINAH ANWAR Chairman, Securities Commission Malaysia The Securities Commission Malaysia (SC) had in July 2011 released the Corporate Governance Blueprint 2011 (Blueprint) which sets out the desired corporate governance landscape going forward. The essence of the Blueprint is to achieve excellence in corporate governance through strengthening self and market discipline and promoting good compliance and corporate governance culture. Boards and shareholders must embrace the understanding that good business is not just about achieving the desired financial bottom line by being competitive, but by also being ethical and sustainable. The Malaysian Code on Corporate Governance (Code), first issued in March 2000, marked a significant milestone in corporate governance reform in Malaysia. The Code was later revised in 2007 (2007 Code) to strengthen the roles and responsibilities of the board of directors, audit...
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...(graphical, electronic, mechanical, photocopying, recording, taping or otherwise), without the prior written permission of the Securities Commission Malaysia. Perpustakaan Negara Malaysia Corporate governance blueprint 2011 : towards excellence in corporate governance Bibliography : p. 77 ISBN 978–983–9386–67–7 1. Corporate governance--Malaysia. 2. Industrial management. 1. Suruhanjaya Sekuriti Malaysia. 658.4009595 Cataloguing-in-Publication Data This book is printed using eco-friendly recyclable and bio-degradable paper CONTENTS FOREWORD BY MINISTER OF FINANCE II, MALAYSIA MESSAGE FROM CHAIRMAN OF THE SECURITIES COMMISSION MALAYSIA INTRODUCTION CHAPTER 1 v vii 1 5 SHAREHOLDER RIGHTS CHAPTER 2 13 ROLE OF INSTITUTIONAL INVESTORS CHAPTER 3 21 THE BOARD’S ROLE IN GOVERNANCE – – – – ROLES AND RESPONSIBILITIES INDEPENDENCE OF THE BOARD COMPOSITION OF THE BOARD COMMITMENT OF BOARD MEMBERS 43 CHAPTER 4 DISCLOSURE AND TRANSPARENCY CHAPTER 5 53 ROLE OF GATEKEEPERS AND INFLUENCERS CHAPTER 6 61 PUBLIC AND PRIVATE ENFORCEMENT IMPLEMENTATION ACRONYMS AND ABBREVIATIONS REFERENCES ACKNOWLEDGEMENTS 69 75 77 79 FOREWORD by YB DATO’ SERI AHMAD HUSNI HANADZLAH Minister of Finance II, Malaysia Malaysia is transforming itself into a high-income nation by 2020. The New Economic Model (NEM) and the Economic Transformation Programme (ETP) provide the economic framework to significantly increase...
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...1.0 Introduction The report topic ‘Role of a Credit Rating Agency in the capital market development of Bangladesh’ is a significant one in the present capital market context of Bangladesh. The report focuses on increasing the understanding on the workings of the present capital market, the concept of credit rating and the effect it can have on the capital market. 1.1 Origin This report has been authorized to the students as an integral component of the Business Communication (C- 501) course requirement. The Course Instructor Ms. Mahjabeen Ahmad has authorized this report on March 27, 2002 with the date of submission being June 30, 2002. 1.2 Objective The main objective of the report is: ▪ To portray the role that a Credit Rating Agency (CRA) can play in the capital market development of Bangladesh The sub-objectives of the report are: ▪ To review the current situation of the capital market of Bangladesh ▪ To discuss the activities /operations of a Credit Rating Agency 1.3 Scope The scope of the report is limited to the presentation of a broad overview of the capital market of Bangladesh, definition and description of general activities of a Credit Rating Agency and the impact it can have on Bangladeshi capital market. The depiction does not include any discussion on the Stock Exchanges of Bangladesh or the International capital market. Since the rating business in Bangladesh is still at its infancy, no practical example...
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