The Flat Tax Essay -- Economics

The Flat TaxThe consumption value as a replacement for the income tax is at to the lowest degree a subject of noteworthy question and debate. It seems as though, the means in relation to the ends are not always justifiable, but when approached properly, can benefit all. To response the question of whether a consumption tax should be applied, I examined both my morals and my ideas of capitalism and free enterprise in relation to democracy. Is it fair to progress to a tax that rewards the already wealthy and pose a threat to the already shaky financial standing of the poor? No but a system that rewards success is important. So what is the solution? As an American, I am infused with the spirit of capitalism. While this is a wonderful thing, we must carefully draw the channel between the tendency of capitalism towards over individualism and over extended tax burden. The burden to which I refer is of course, largely progressive taxes. With a tax system that is overly prog ressive (such as the present law system) we risk removing the incentive to invest in Americas companies and also remove coin from the pockets of would be employers. As I examine the opposing idea of a regressive tax system, with which I am equally at odds, I get down it to be morally repugnant to punish the poor simply for their lower economic standing. With the notion that income tax is going to tend towards the progressive side in the U.S., I feel that repealing such a liability may be beneficial for the Americ...

What Are Blogs? :: Definiton Internet Blogs Paperes

What Are Blogs? When I decided to keep about web logs I thought I would use a traditional and simple method of arrangement what is a blog, where did they come from, what argon plenty doing with them as remote as writing instruction goes and then say a bit about what Ive do with them and why I recover they are a brilliant form of writing pedagogy. But I quickly discovered that people have yet to fully agree on a integrity explanation of a blog. I besides discovered an intense amount of hype and gripe. There are those who think the blog allow for mystify over the world, and others who think that will be a bad thing. Youve no doubt heard these arguments before regarding other online phenomenonthat because blogging requires no technical skill and is free, anyone discharge instantly promulgate anything and therefore either A) it will democratize information flow, liberate the repressed, illuminate the shady, discredit the liars, and save the world from SARS and terrorist s or B) it will fill peoples minds with the sort of un-edited, un-checked, un-educated crap that your average person thinks about stuff he doesnt really understand going on in places he cant locate on a map. Like you, Im guessing, I want neither to leap on this bandwagon nor to snap at its wheels. I just want to figure out what a blog is and how I can use it to help my students learn more than about writing. To that oddity I would like to share my current working definition of a blog, and talk a bit about what Ive done with them so far and why I think blogging is a good way to teach and talk about writing. Im actually more interested in hearing your take on blogs than I am in my own, so I wont ramble on. For my purposes, a blog is a single powered, regularly updated, minimally edited, publicly viewable website consisting of links and commentary presented in reverse chronological order. Blogs function as content filters. Blogs also encourage and assist comments from readers and thus offer the opportunity for interactive communication. When defined in this way, blogs are different from similar forms of online writing. An online diary, for example, would have the same chronology and single author but would slant to focus on the life of the writer rather than on websites of interest to the author and her intended audience.What Are Blogs? Definiton Internet Blogs PaperesWhat Are Blogs? When I decided to write about blogs I thought I would use a traditional and simple method of arrangement what is a blog, where did they come from, what are people doing with them as far as writing instruction goes and then say a bit about what Ive done with them and why I think they are a promising form of writing pedagogy. But I quickly discovered that people have yet to fully agree on a single definition of a blog. I also discovered an intense amount of hype and gripe. There are those who think the blog will take over the world, and others who think that will be a bad thing. Youve no doubt heard these arguments before regarding other online phenomenonthat because blogging requires no technical skill and is free, anyone can instantly publish anything and therefore either A) it will democratize information flow, liberate the repressed, illuminate the shady, discredit the liars, and save the world from SARS and terrorists or B) it will fill peoples minds with the sort of un-edited, un-checked, un-educated crap that your average person thinks about stuff he doesnt really understand going on in places he cant locate on a map. Like you, Im guessing, I want neither to leap on this bandwagon nor to snap at its wheels. I just want to figure out what a blog is and how I can use it to help my students learn more about writing. To that end I would like to share my current working definition of a blog, and talk a bit about what Ive done with them so far and why I think blogging is a good way to teach and talk about writing. Im actually more interested in hear ing your take on blogs than I am in my own, so I wont ramble on. For my purposes, a blog is a single authored, regularly updated, minimally edited, publicly viewable website consisting of links and commentary presented in reverse chronological order. Blogs function as content filters. Blogs also encourage and facilitate comments from readers and thus offer the opportunity for interactive communication. When defined in this way, blogs are different from similar forms of online writing. An online diary, for example, would have the same chronology and single author but would tend to focus on the life of the writer rather than on websites of interest to the author and her intended audience.

Essay --

Linsay Mae PeraltaPeriod 7February 14,2014Mexican emancipation Have you ever thought of something youre so curious about? Something that your curiosity runs completely kooky because you need the full information or a full story about what really happened or how did it happen? salubrious I did, when a research paper was assigned about Spanish Culture I was only Interested into one topic and thats the History or background oh how the Mexican People receive their Independence. Like how America had its own story of its independence. Independence is about Freedom, the freedom to do what you want or to be who you are. Well like any other culture independence was very important to the Spanish people, I believe its a celebration way bigger than an burden like Cinco De Mayo. I believe its one of the most important events for the Spanish people, and heres why In the course of the nineteenth century, the province Mexico was somewhat impacted or influence by the United States and the European country of France as they also took a revolution for there freedom. They began to organize and intend a rebellion in contact with Spain. There were many people who took a big impact in this rebellion. One of the well-known person who took a big impact in this rebellion was a priest in a catholic church name father Miguel Hidalgo, he was from Dolores, Mexico. Father Hidalgo was the shopping centre of this rebellion for he was one of the top leaders of the rebellion in contact with Spain. As solar days and time passed by father Hidalgo and his followers of this rebellion in the year of 1810 were on the move of planning a rebellion against the country of Spain. Rumors were spread out throughout the people about this revolt. Which then guide to the Spanish gov... ...ple all over Mexico say the exact same thing all over Mexico. The crowd is filled with confetti and many whistles and horns everywhere on this day Mexico is filled with joy and laughter. The people are very h appy as they shout and scream as they are very also thankful for their Independence to this day. The Independence for every country is one of the remarkable days of all countries and its people. For Mexico it is also one of the most important dates there is to hold for the country something to shelter and be thankful about. It is a day full of happiness for all people in Mexico have the freedom to themselves around others and in the environment they acknowledge in. Im glad I did a research on the Mexican Independence I learn many things from the good to the bad and more than good Ive learned a lot from writing a research a paper on it I hope you did too

George Frederick Handel :: essays research papers

George Frederick HandelGeorge Frederick Handel was born on February 24, 1685 in Halle, Germany.One of the greatest composers of the easy baroque period (1700-50) and, duringhis lifetime, perhaps the most internationally famous of all musicians. Handelwas born February 24, 1685, in Halle, Germany, to a family of no musicaldistinction. His own musical talent, however, verbalized itself so clearly thatbefore his tenth birthday he began to receive, from a local organist, the onlyformal musical instruction he would ever have. Although his prototypic job, beginningjust after his 17th birthday, was as church organist in Halle, Handels musicaltendencies lay elsewhere. Thus, in 1703 he traveled to Hamburg, the operaticcenter of Germany here, in 1704, he composed his own first opera, Almira, whichachieved great success the following year. Once again, however, Handel soon feltthe urge to move on, and his instincts led him to Italy, the birthplace ofoperatic style. He stopped first at Floren ce in the autumn of 1706. In the kick back and summer of 1707 and 1708 he traveled to Rome, enjoying the backing ofboth the nobility and the clergy, and in the late spring of 1707 he made anadditional short trip to Naples. In Italy, Handel composed operas, oratorios,and many small secular cantatas he ended his Italian visit with the stunningsuccess of his fifth opera, Agrippina (1709), in Venice. Handel left Italy for ajob as court composer and conductor in Hannover, Germany, where he arrived inthe spring of 1710. As had been the case in Halle, however, he did not hold thisjob for long. By the end of 1710 Handel had left for London, where with Rinaldo(1711), he once again scored an operatic triumph. later returning to Hannover he was granted permission for a second, shorttrip to London, from which, however, he never returned. Handel was forcedto face his truancy when in 1714 the elector at Hannover, his former employer,became King George I of England. The reconciliation of these two men may wellhave occurred, as has often been said, during a royal party on the River Thamesin 1715, during which the F major suite from Handels Water Music was probablyplayed. Under the sponsorship of the duke of Chandos, he composed his oratorioEsther and the 11 Chandos anthems for choir and string orchestra (1717-20). By1719 Handel had won the support of the king to start the Royal Academy of Musicfor performances of opera, which presented some of Handels greatest operasRadamisto (1720), Giulio Cesare (1724), Tamerlano (1724), and Rodelinda (1725).

Miss Emily and the Invisible Man Essays -- Literary Analysis, Faulkner

William Faulkner and Ralph Ellison com from two different back grounds. William Faulkner was a white man born into a family who was large and powerful. (DiYanni 78) Ralph Ellison was a black man born in the south. (DiYanni 341) Through their stories they sh be their views of the south at that time. Faulkner and Ellison had contrasting views on the south about how people with differences were toughened and whether or not the souths changes were positive, however they both view the ever-changing south as inevitable. In Faulkners south people who are different are not punished but they are protected from the public embarrassment of their honor. In A Rose for Emily Colonel Sartoris forgives omit Emily of the taxes she owes the city of Jefferson. kind of of telling Miss Emily the truth, because of her position in the town she out of honor would have had to turn the offer down, the narrator says Not that Miss Emily would have accepted charity. Colonel Sartoris invented an involved t ale to the effect that Miss Emilys father had loaned money to the town, which the town, as a matter of business, preferred this way of repaying. (Faulkner 79) Another example of the townspeople defend Miss Emilys honor is when they smell a repulsive odor coming from Miss Emilys house. The mayor Judge Stevens is hesitant to confront Miss Emily the issue at hand. When one of the Aldermen, from the young generation, suggests addressing her of the situation Judge Stevens says Dammit, sir, will you accuse a lady to her face of smelling bad? (Faulkner 80) The townspeople in the long run decide to sneak onto Miss Emilys property so the can remove the stench from her house without insulting her honor. The most extreme case of the citizens of Jefferson prote... ... beastly away and did not send their children to her with boxes of color and tedious brushes and pictures cut from the ladies magazines. (Faulkner 83) In Battle Royal there is a sense of the inevitable change in the south. That the Invisible Man will follow his grandfathers words. That he has become privy to the game the white man is playing with him.Both of these authors short stories cover the changing south. Both of their short stories give us a profound impact on the thinking of these two men when it comes to their views of the south. Coming from different backgrounds this gives the reader a good view of what the overall picture of the south looked like at the time. Faulkner and Ellis disagreed about how differences were handled in the south and whether the changing south was good or bad, but they both of them agreed that the south changing was unavoidable.

Miss Emily and the Invisible Man Essays -- Literary Analysis, Faulkner

William Faulkner and Ralph Ellison com from two different back grounds. William Faulkner was a white creation born into a family who was affluent and powerful. (DiYanni 78) Ralph Ellison was a black man born in the entropy. (DiYanni 341) Through their stories they share their views of the southeast at that time. Faulkner and Ellison had contrasting views on the south about how people with differences were treated and whether or not the souths changes were positive, however they both view the changing south as inevitable. In Faulkners south people who are different are not punished but they are protected from the public embarrassment of their honor. In A travel for Emily Colonel Sartoris forgives Miss Emily of the taxes she owes the city of Jefferson. Instead of telling Miss Emily the truth, because of her position in the town she out of honor would have had to turn the offer down, the narrator says non that Miss Emily would have accepted charity. Colonel Sartoris invented an in volved tale to the effect that Miss Emilys father had loaned money to the town, which the town, as a matter of business, preferred this way of repaying. (Faulkner 79) some other example of the townspeople protecting Miss Emilys honor is when they smell a repulsive odor coming from Miss Emilys house. The mayor venture Stevens is hesitant to confront Miss Emily the issue at hand. When one of the Aldermen, from the young generation, suggests addressing her of the situation Judge Stevens says Dammit, sir, will you accuse a lady to her face of olfactory perception bad? (Faulkner 80) The townspeople ultimately decide to sneak onto Miss Emilys property so the can remove the stench from her house without insulting her honor. The about extreme case of the citizens of Jefferson prote... ... fell away and did not send their children to her with boxes of color and tedious brushes and pictures cut from the ladies magazines. (Faulkner 83) In Battle Royal there is a wiz of the inevitable cha nge in the south. That the Invisible Man will follow his grandfathers words. That he has become privy to the game the white man is playing with him. twain of these authors short stories cover the changing south. Both of their short stories give us a profound impact on the thinking of these two men when it comes to their views of the south. advent from different backgrounds this gives the reader a good view of what the overall picture of the south looked like at the time. Faulkner and Ellis disagreed about how differences were handled in the south and whether the changing south was good or bad, but they both of them agreed that the south changing was unavoidable.

A&P by John Updike Essay

The short recital entitled A&P by John Updike was print in 1961 and confirmed the generators reputation as a master of detail. In reality, the author still expressed the spirit of the 1960s, which includes decadence, transformations of polity and society, which ascended trustworthy people, entirely spiritually impoverished others, as well uncertainty in the next day. The short story thus reveals multiple contexts, all of which can be tied to its title. The present paper is intended to discuss the narrative in relation to its short and simple title.The plot of the short story takes place in a provincial grocery store A&P and is narrated by the protagonist, 19-year-old Sammy, who works there as a checker. One Thursday afternoons the store is unload for the most part. The only people that inter the store are old woman and woman with six children whom he refers both to as sheep, when three girls fling in dressed with nonhing more that bathing suits. This catches his eye and he w atches them closely and studies each matchless of them with great detail (Luscher, 1993, p. 168). Furthermore, the youth distinguishes the leader of the convocation and refers to her as Queenie, as she seems to be hold with great self-confidence and social competence, and the two other girls simply follow her. .Sammy is aware of the fact that the girls violate the rules of this store concerning outfit, unless doesnt begin confrontation until his manager Lengel, who informs the girls abut the internal rules of A&P. Queenie states that they are not doing shopping, as they seek to purchase only one product, but Lengel still continues blaming the girls for the abuse of the regulatory policy.Queenie responds that they are decent and do not intend to abuse the other customers convictions concerning morality. Sammy finally allows them to mark a purchase, but observing the managers behavior, he concludes that he is not going to work for this shop either longer and announces that he is quitting. Thus, the idea of the short story circles around the transition from adolescence to adulthood and the growth of the ability to make ones own moral judgments, which can be free and independent from any redundant formalities (Luscher, 1993).The period of adolescence is usually associated with the formation of role models, which might dictate behavioral patterns to follow (Luscher, 1993). In this sense, both his professional identity as an employee of the A&P and his self-awareness have been nurtured under the influence of two adults Stokesie, a major breadwinner in his family, and Lengel, the store manager, whose career began in this place. Sammy, in this sense, seeks to imitate the relaxed behavior, demonstrate by Stokesie, who exclaims Oh Daddy, I feel so faint (Updike, 2007, at http//www.tiger-town.com/whatnot/updike/).Similarly, Sammy whittles away his days looking at pretty girls and thinking about the shipway of people. He hardly projects that this is how he will s pend his entire existence if he doesnt soon get out of this job. During this day that will recruit to change his life, he makes the step towards his realization (McFarland, 1983, p. 95). In fact, he originates from a working-class family, as his parents served at cocktail parties, and at first he decided to make a career, connected with the service sphere, but on the day of argument with the three girls, the youth begins to build his own superstructure over the foundation of convictions, imposed by parental desire to penetrate into middle class and by the corresponding values, which view job as the sense of existence, regardless of the agents pose towards this employment (McFarland, 1983 Luscher, 1993).Thus, his competition for store managers position finally appears to him pointless, similarly to the movements of the sheep, who make purposeful actions (do shopping) in order to satisfy their basic and not always conscious needs. Sammy, on the contrary, begins hard cognitive work o n his own goals and makes his first conscious decision to leave the job. Furthermore, the young man seems to realize the responsibility he should take for his actions. In fact, his second role model, Langel, influences this decision in the most notable way (McFarland, 1983 Porter, 1972).After Langels appearance at the scene, Sammy concludes that he doesnt wish to grow into such snobbish and arrogant manager, who regards himself as the last resort in all moral dilemmas and successfully combines preachers duties with his professional responsibilities. Langel highlights one phrase in his admonition This isnt the beach (Updike, 2007). Sammy believes the way the executive firmly repeats this phrase look as if it had occurred to him, and he had been thinking all these years the A&P was a big sand and he was the head lifeguard (Updike, 2007).As Porter notes, his sand dune is the world of work, whereas the girls is the world of play (Porter, 1972, p.1156). As one can understand, the first approach to the variation of the title derives from the central idea of the short story. In this sense, the A&P appears a place, where the protagonists psychological maturation takes place, so the emphasis upon the name of the shop can be alleged as the authors natural desire to prioritize the settings, including the social context (the desirable shift from one social class to another), which puts the main character on his course of study to the insight.Another approach to the title is aesthetic or spatial. The author might have sought to prioritize the place itself rather than the most important idea, in general in order to provide the reader with sample environment, in which contemporary teenagers perform their working duties. This means, the concept of the A&P as shop, which stores not merely goods, but overly human fates and aspirations, is also valuable and deserves a more detailed examination.Due to the fact that this approach requires focusing upon senses and perception, it is important to include the asynchronous transfer mode, depicted by the author. As McFarland notes, to a large extent, the aesthetic pleasure in A&P depends upon the readers sensing this dramatic irony. Sammys delivery resonate and gain meaning through a larger artistic context out of which he comes (Updikes knowledge and imagination) but of which he, the fictive character, is insensible (McFarland, 1983, p. 96).Importantly, two scholars, McFarland (1983) and Shaw (1986) compare the method of building the relationship between the imagery and the protagonists inner world to the allusion, depicted in The Birth of genus Venus by Sanrdo Botticelli. Similarly to all Renaissance paintings, it depicts a nude woman, who comes from sea spirit. The protagonist also focuses on the appearances of three females, who have merely bikinis on and and then to great extent resemble to Renaissance patterns of depicting female body.Furthermore, Sammy concentrates his attention on the leader of the group, who appears a queen in his eyes, because of her unique step, movements and gestures. The protagonist good fixes all these details about the girl and she seems a source of aesthetic pleasure for the protagonist, rather than merely a person, who belongs to the opposite gender (Shaw, 1986) Sammy soon begins to list the nature of femininity and indicates that girls inner life is always a puzzle for him.He upgrades his perception of the girl, as the essential aspect of their appearance is the alteration of the atmosphere and the emergence of the spirit of freedom in the air, rather than merely the girls clothing and the way they communicate with one another. In Sammys opinion, Queenie fills the store with her aura, comprised by charm, self-determination and ingenuousness.In order to improve the readers understanding of all these emanations, which saturated the accommodation, Sammy poetically describes the young girl If it hadnt been there you wouldnt have known there could h ave been anything whiter than those shoulders (Updike, 2007). The protagonists description of Queenie to certain degree reminds Venus by Botticelli white body, high shoulders, strip down feet and pride in the eyes. When the girl brings her purchase to the cashier, Sammy feels as if he has just been chosen by Fortune (Shaw, 1986) Queenie puts down the jar and I take it into my fingers icy cold kingfish Fancy herring Snacks in Pure Sour Cream 49.Now her hands are empty, not a ring or a bracelet, bare as God made them, and I wonder where the money is coming from (Updike, 2007). The thorough depiction of all details, associated with the girls visit to the shop implies that the event was so meaningful to the protagonist that he memorized it completely, in the beginning, because of the surrealistic alteration of the place into the scene or arena of theatrical performance. After Langel confronts the girl, the sense of theatricality reinforces, as the manager explicitly plays hi professi onal role, whereas the girl behaves naturally and appears a positive character of the play.The girl, similarly to the Greek goddess in the ancient literature, inspires the protagonist and brings him into a different dimension of cognition, primarily through participating in the affected episode, initiated by the executive, which in fact occurs at the workplaces like the A&P. Sammy thus understands that the service area turns employees into change puppets, which perform uncreative job and inhibit inspiration, embodied by Queenie (Shaw, 1986). After the girl leaves, Sammy begins to feel the pressure of his workplace and finally decides to quit the job.The final interpretation of the title derives from the protagonist himself, especially when taking into consideration the fact that he is a teenager, who uses to simplify his life and at first doesnt disclose any deep reflection. In this context A&P points to the teenage perception of the event, i.e. if a 19-year-old man like Sammy wro te this story he would probably given it this title. The admonisher about the protagonists teen age can be found in the vocabulary he uses. As Grainer suggests, the narrator is defined primarily by his tones and vocabularies (Grainer, 2007, at http//www.enotes.com/and-pa/11435).Furthermore, No one else supplies background information or details to round out character when he Sammy describes the girls, we wonder if his lyrical flights of terminology expose the inadequacy of his slang as he stretches to show why these teen-agers deserve his sacrifice (Grainer, 2007). Furthermore, beyond the typical colloquial language, the protagonist behaves as impetuously as teenagers often do when they suddenly discover something fundamental and make corresponding decisions. Thus, the title perfectly fits the protagonists personality and the psychological features of his age.To tally up, the essay has outlined three major perspectives, from which the title can be interpreted. Firstly, the viewin g the title through the prism of the central idea, the A&P appears a place, where the protagonists philosophy of life evolves. Secondly, approaching to the title in terms of the atmosphere in the store, one can conclude that the author also attempts to describe an ordinary shop, as a place which determines human fates. Finally, the short title matches the teenage psychology and the authors simple and understandable reasoning.whole kit and boodle citedGreiner, J. Sammys Colloquial Voice in A&P. Retrieved April 17, 2007, fromhttp//www.enotes.com/and-pa/11435Luscher, R. John Updike A Study of the Short Fiction. New York Twayne, 1993.McFarland, R. Updike and the Critics Reflections on A&P. Studies in Short Fiction, 20 (1983) 94-100.Porter, M. John Updikes A&P The Establishment and an Emersonian Cashier. English Journal, 61 (1972) 1155-58.Shaw, P. Checking Out Faith and Lust Hawthornes youthfulness Goodman Brown and Updikes A&P. Studies in Short Fiction, 23 (1986) 321-23.Updike, J. A&P. Retrieved April 17, 2007, from http//www.tiger-town.com/whatnot/updike/

History of McDonald’s

McDonalds with about 30.000 restaurants in 121 countries was founded in 1948 at San Bernardino, USA. Its business goals are snug employees, more satisfied guests and a better economy. They consider employees as their main asset and accordingly, have undertaken human resource programs and practices called the People Promise. Their achievement was callable to quality, quick service, cleanliness and value for money. In 1997, McDonalds divided its HR into three groups the Service midsection, HR Business Partners and the HR Design Center.The HR Design Center employs HR experts who develop, test and implement systems applicable to employees tools, which are at the forefront of research and which are designed to improve overall business results. The Measurement and organizational Effectiveness group deals with employee commitment surveys in order to standardize relevant data, to study practices and approaches that affect turnover, productivity, customer satisfaction, sales and profita bility.I-O psychologists have played a decisive role in Leadership Assessment and Development, which deals with the executive succession planning process, senior management feedback and coaching and other senior leadership development programs. Implementing competency-based peck systems, McDonalds has realized intellectual capital by helping each person deliver business results.This is the People Promise initiative, which identifies metrics that relate to the success of this key strategy. In addition to conducting job analyses and test validation studies, I O psychologists also construct and assess methodologies appropriate for capturing critical factors that measure overall business success. I-O psychologists at McDonalds are now, in a position to enact a key role in defining the landscape, identifying the key signposts and criterion how far an organization has gone to reach its overall goals (Matt Barney, July 2001).McDonalds attaches great importance to imparting knowledge abo ut the benefits of a balanced diet and active modus vivendi not only to its customers but also to its employees. Recently, Peter Beresford, CEO of the UK wing of McDonalds, endeavor has been to improve communications. He has initiated a number of pioneering measures like Ask Peter, a direct e-mail, Town Halls, a monthly live online event where board members answer questions from staff, and the MDUK staff magazine. The employees have welcomed these changes whole heartedly (HR Challenges. 6th September 2005).SourcesHR challenges Im lovin it., 6th September 2005. Retrieved 19th April 2006, form http//www.personneltoday.com/Articles/2005/09/06/31465/HR+challenges+Im+lovin+it.htmMatt Barney, Macro, Meso, Micro McDonalds, Retrieved April 17, 2006 fromhttp//siop.org/tip/backissues/tipjul01/17barney.htm

Gender Differences in the Use of Technology Essay

At the center of 21st century culture is electronic computer engineering science which presence and engross just decades ago, were limited for the government and some institutions. Today, computer engine room steps out from such isolation pervading all institutions, industries, commerce and former(a) areas of life at what appears to be logarithmic speed, making its mastery or at least working knowledge an essential requisite if one is to celebrate pace with time.The ubiquity of technology, continuous rise in the acquires for technologically-advanced workforce combined with the application of basic economic principles make one think whether the study on gender differences as it relates to technology is really a matter worthy of anyones attention. Statistics say it is. Generally, in a technological workplace, women are still underrepresented totally when five percent of computer programmers, ten percent of system analysts and ten percent of electronic technicians are fe anther als (Statistics Women in Technology, 2008).In major companies in silicon Valley, only 5-6% is led by females (Statistics Women in Technology, 2008). There has been a decline in the number of females pursuing careers related to science and technology. According to the National revolve about for Education Statistics, the number of women who earned a bachelors degree in computer science has decreased from 37% to 28. 4% from 1984 to 1995 (Statistics Women in Technology, 2008). effeminate students who took the advanced placement computer runination comprised only 17% (Statistics Women in Technology, 2008).From these statistics, one may speculate that females future career choices still fall along traditional paths. This was confirmed by a study done by Lupart and Cannon (2002) on students knowledges on desirable career characteristics and career choices. With the rising demand for high-tech jobs (Statistics Women and Technology, 2008), knowledge and use of technology become an essen tial condition to improve womens participation in the workforce and to enable them to pursue high status and violate-paying jobs in the future.However, the general belief is that not only are women underrepresented in the technology-related industry they are also considered to be less sakeed, less confident(p) and less skilled in this area. These three factors affect their practice of technology. Still, underneath these factors, womens computer usage can be traced on socialization and upbringing. Boys and girls do not play the same games during childhood. While boys are usually made to play video games or games that promote problem-solving, hands-on skills and spatial-relationship skills, girls play with dolls, which tend to fix their value of relationships (Milgram, 2007).Problem-solving, hands-on and spatial-relationship skills are critical to the study of computer and technology-related subjects. As a result of this discrepancy in development, males become much interested i n technology and become better-equipped with the necessary skills as they reach adulthood (Milgram, 2007). The males generally high interest in technology, however, does not affect the possibility of improving females perception and attitude towards technology. The effect of ubiquitous computing on gender differences was examined in a study done in 2006.Here, the participants were given access 24-hour access to a laptop. Gender differences were observed in behavioral attitude towards future use of computers before the laptop program. Prior to the laptop program, males were more inclined to use computers. This changed later the laptop program. No significant difference was observed in the attitude towards the use of computers later on the program (Kay, 2006). Before the program, males were observed to be more nice in computer abilities compared to females.No significant difference was observed in computer abilities between males and females after the program, except for the skill in programming (Kay, 2006). In central Georgia middle school, the study on 8th grade students showed a statistically significant difference between achievements of males and females. In this experiment, the participants were instructed and given an exam both written and applied on two modules, information and broadcasting. A greater cash advance was seen in females for the information module while the males showed greater improvement in the broadcasting module.This study partially debunks earlier findings that males generally show higher achievements compared to males, in the study of computer technology (Hale, 2005). These studies suggest that females do not have an inherently unfavorable computer skill, interest, and attitude which affect computer use. Provided with the right tools and knowledge, females may do as well or even better than males (Milgram, 2007). The comparatively lower use of technology by females can be attributed to the differences in perceptions on technology between genders.While the females see technology through and through its social function, the males perspective is more focused on the hardware itself (Brunner, 1997). Males, therefore, are more likely to study more on the intricacies and technicalities of the use of technology compared to females which in effect allows them to maximize its use. Meanwhile, the females perspective of technology limits their use to only a number of functions.. According to Milgram (2007), females are much less likely to retain interest if they feel they are incapable of mastering the material. Also, males tend to exaggerate their accomplishments while females tend to feel less comfortable even when they do well in tests (Milgram, 2007). The females initial lack of skill in technology affects their corporate trust and perception towards its use. However, like interest and attitude, these may be changed upon exposure. Nicolino, et. al. (2006) calculated the confidence gain of male and female responden ts in the frequency of use of computers at home and at work. No significant difference in computer use was observed between males and females.Significant differences were observed in the only in the applications used by the two genders. The possible change in perceptions and confidence which may affect usage is evidenced by the study by Wong and Hanafi in 2007. In this study, the attitudes of male and female student teachers in Malaysia towards exposure and use of Information Technology were measured in terms of usefulness, confidence and aversion. No significant differences were seen between the two genders were observed during the pre- and post IT course. Both genders showed improvement in their appreciation of IT usage after the IT course.Females exhibited greater confidence in IT usage after the course compared to their male counterparts (Wong and Hanafi, 2007). Given the males higher degree of confidence towards technology, the question now is whether such confidence really tra nslates to increased use of technology. In a study on some 6,800 fourth and eighth grade students, it was reported that males significantly increase their use of technology with age while no such significant increase was seen in females (Barker and Aspray, 2006). It has been established that the males have a more positive attitude and higher degree of confidence towards technology.These, however, are not solely gender-based but more importantly, based on their differences in upbringing, with males having more background in problem-solving and spatial-relationship. Based on the general principles derived from studies on gender-gap in technology, strategies can be employed to address such gap, improve computer attitude, increase computer use and create a culture where everyone can participate and take advantage of the benefits of technology, regardless of gender. Milgram (2007) lists some of such strategies targeting the middle school where attitudes in computer use start to emerge.Th ese strategies let in the creation of same-sex groups in classrooms, the integrated and meaningful use of technology, the improvement of teachers computer skills, the use of gender neutral softwares, simulation games for all genders, and the discouragement of using technology and computers as a reward. Common among these strategies is their focus on building the confidence of females who often have less experience than males. Simulation games, for example, ensure that not only males are given the opportunity to develop problem-solving and spatial relationship skills.Simulation games also promote hands-on proficiency which is necessary in developing technological skills and use. The creation of same-sex groups in classrooms and the discouragement of using technology and computers as reward minimize the males aggressive, assertive and self-assured behavior which stem from their confidence in their skills. In sum, it is by simulating the environment that contributed to the development of males skills that the gender gap in the use of technology can be significantly reduced.The fact that females respond to technology more positively if given the right building blocks, as shown by previous studies support this.Works Cited Barker LJ and Aspray W. (2006). The state of research on girls and IT. In J. M. Cohoon and W Aspray (eds. ), Women and information technology (pp. 3-54). Cambridge, MA MIT Press. Brunner C. (1997). Technology and gender Differences in masculine and feminine views. NASSP Bulletin, 81(592), 46-51. Hale, KV. (2005). Gender differences in computer technology achievement. Meridian, 8(1). Kay R. (2006).Addressing gender differences in computer ability, attitudes and use The laptop effect. Journal of Educational Computing Research, 34(2), 187-211. Lupart J and Cannon E. Computers and career choices gender differences in grades 7 and 10 students. Gender, Technology and Development, 6(2), 233-248. Milgram D. (2007). Gender differences in learning style spe cific to science, technology, engineering and math. SelfGrowth. com. Retrieved 27 April 2008 from http//www. selfgrowth. com/articles/Gender_Differences_in_Learning_Style_Specific_to_Science_Technology_Engineering_and_Math_STEM.html. Nicolino, P. , Fitzgerald, B. , Maser, K. & Morote, E. (2006). Gender Differences in Confidence about Using Technology An Introductory Course. In C. Crawford et al. (Eds. ), Proceedings of golf club for Information Technology and Teacher Education International Conference 2006 (pp. 3544-3549). Chesapeake, VA AACE. Statistics Women in Technology. (2008). DeVry University Website. Retrieved 27 April 2008 from http//www. phx. devry. edu/outreach/her_world_stats. asp. Wong, S. L. , & Hanafi, A. (2007). Gender Differences in Attitudes towards

Interview Reflection Paper Essay

I did my interview with a relative who well just call Sarah for the remainder of this paper for confidential reasons. Sarah has been assay with her addiction since the age of 28. She started experimenting with drugs in her late teens. First it was marijuana, all of her fri lay offs and even family members were smoking the drug. By the time she reached her earl y 20s Sarah started experimenting with cocaine which at last lead to her addiction to crack cocaine. By the time Sarah was addicted to crack cocaine she was already married and a mother of 4, one boy and lead girls. Her son was 8 years old and the girls were ages 6, 5, and 3 years old. Her economize was not nor ever was a drug user. He loved her and their children dearly and was trying anything and everything to get Sarah the help that she needed, but at the time Sarah had no interest in receiving any kind of help even after she found come out she was pregnant again. Sarah didnt believe she had a problem at the time, howev er she admitted using the drug multiple times during her pregnancy. Sarah delivered her baby boy in January of 1993.Sarah tell that she tried quitting the drug during her pregnancy and also after she had her baby but struggled, meanwhile her husband was also struggling trying to work and take dread of 5 children now. Sarah also stated that on a number of occasions she wouldnt come home because she was at the crack house with her friends. It got to the point where her husband wouldnt give her any more money because he knew what she was going to do with it. When Sarahs funds were cut off she started stealing to support her habit. Sarah admitted to steeling from grocery store stores, department stores and even family members including her own husband, she also admitted to prostituting herself for money and/or drugs. This resulted to her being arrested multiple times between 1994 and 1997. In this time frame she also had 2 more children, both boys one born in 1995 and the other 1997 . This is when she realized that she had hit rock bottom, she was facing jail time for her crimes, had 7 children that she did not shed time with and a husband who has just almost gave up on her. Sarah was on the verge of losing everything she had left.On October 16th 1997 she was incarcerated for past crimes she had committed, she was sentenced to 1 year in jail and 2 years of probation. During Sarahs incarceration she went through her detox phase, during the detox phase she was experiencing cravings, anxiety, irritability,insomnia and depression, she even had thoughts of suicide throughout this process. This process lasted for several months. Sarah stated that this was the hardest part of her incarceration. Looking back Sarah is thankful for having to serve the time because that helped her through her first steps of becoming sober. Part of her probation was her being required to meet with oddball worker and also having to take random drug test through a program called ZCI for 2 years. As of October 16th 1997 Sarah has remained sober. She now looks back and thinks about everything she put her family through and feels horrible. Dont get me wrong, it is an everyday struggle.Ive thought about using several times throughout my sobriety, but thats part of the struggle. I then look back at all the hurt and pain I caused everyone including myself and thats what keeps me sober. During this interview Sarah was very emotional, and remorseful. We took 4 breaks within an hour timeframe for her to compose herself. At first I was a little bit sketchy on doing this interview but at the end of the day I am thankful for having to do it because I got on a more personal level with Sarah. Even though Ive cognize her all my life I feel like this brought us a little closer, and now she knows that she has someone else to come to if she ever finds herself struggling with her sobriety or any other trials she may be facing. If I was Sarahs worker I would put her through detoxifica tion process, followed by cognitive behavioral therapy as well as some type of motivational therapy. I would also recommend her to find some type of support system to help her live a drug free productive life.

India’s large population †Asset or Liability? Essay

In his theory of population, Malthus stressed the need of keeping population within limits to the point he called Optimum.At this point in time, India has a population of about 1.27 billion people, and it supports upto 17% of the entire worlds population. Of these 1.27 billion people, 50% are at a lower place the age of 25, and 65% are below the age of 35. This means that the major part on Indias population are students and young workers. There are more workers than dependents, which is good for any economy. However, it is key to remember that while at this point in time, Indias vast population is a liability, it has the capacity to become an asset.How is Indias population a liability?1 Limited resources In the recent years, India has been witnessing acute food shortages that has pushed up the prices of commodities like wheat, sugar, rice, pulses, making it difficult for people to get the basic necessities. As the population is evolution fast, the same amount of food produced f or years is no longer sufficient. This results in shortage of supply and prices increase.When a few areas are urbanised, all industries, plants and other institutions subdue in these areas. The whole rural-urban migration trend depicts the same picture, where people from small cities and villages move to big industrial areas for work, business and studies often leaving fewer people taking care of farming and the underdeveloped areas. The major problem of resource scarcity is over-concentration of population in few areas whereas resources may remain available in regions where at that place is shortage of people.How is Indias population an asset?1 Labour There are instances where lesser number of inhabitants is a dilemma. Countries like Canada, Australia and Libya are the examples where smaller population is a handicap. Many developing countries face scarcity of labour,both of skilled and unskilled manpower. India, however, does not have this problem. We have many young and skilled labourers. There are many examples where big population is considered a desirable phenomenon for developing nations. For big manufacturing firms all over the globe, deficiency of cheap labour is one of the major issues. If a country has more labour force it can be availed by initiating different vocational training programmes. This will not only make these populate skilled and productive but will also help them earn a good standard of living.For example, China has trained its manpower by expeditiously utilising it and made it available for business firms as cheap and productive labour force. The giant multinationals have their plants and manufacturing industries in China. India is another major example big strange companies have their call centres operating in India just because India has large, cheap and skilled labour force.

Yellow Woman

peoples interactions with the antelope, or as she call(a)s them, The Antelope People, and the way her people hunted them. A reader takes away not scarcely a feeling of deep watch over, which the Laguna Pueblo people had for their fellow Earth inhabitants, but also a feeling of unity like there actually was or is no difference between the hunter and the hunted, just their roles, given to them by chance and instinct. This reverence for animal life reflects a much deeper hu homos view held by Leslie Marmon Silko, an outlook of respect for the Earth itself.In her book, Silko goes on to tell her peoples tale of the Earths origin. The Laguna Pueblo people wipe out a more personal relationship with their planet than most. Perhaps it is the fantastic nature of their origin, or the way the myth was kept through record book of mouth, from certain elder to younger generations, whatever the reason, it is clear that Silko has inherited this unity with the earth and is hurt by the way it an d its inhabitants are treated twain man and animal.In the section of Silkos book titled Interior and Exterior Landscapes The Pueblo Migration Stories, the author describes the Laguna Pueblo peoples relationship with the hunted but more than that, without obviously doing so, she compares the hunting of the animals to the plight of her own people in the modern military man. The native people of the Laguna Pueblo used resources sustainably and did so by maintaing a respect for all things, living and murdered.Early in the section Leslie Marmon Silko speaks of her peoples burial traditions she writes Archaeologists hold back remarked over formal burials complete with elaborate funerary objects excavated in trash middens of toss out rooms. (Silko 26) The Laguna Pueblo people buried their dead with possessions and often laid them to rest under rooms in their own houses. The Laguna Pueblo had a respect for the dead like many other cultures, but unlike many cultures the passing of a family member did not mean a total absence from life, the person was and is still very much present and a member of the tribe.The departed become the world, as they always have been and their body becomes the soil and the plant, so in some respect, the dead are much more present than the living. This failure to differentiate between who is with us and who is not ends up doing a band for the tribes spirituality. It means that respecting the earth also means respecting ones ancestors, and to have the dead all around you, in the Earths teeming life, allows the tribe to take and give with the Earth in equal amounts. Likewise, the people of the Laguna Pueblo how animals a similar respect that they give to their dead. Silko explains that Waste of meat or in time the thoughtless handling of bones cooked bare will offend the antelope spirits. (Silko 29). This goes back to Silkos sense of earthly and heavenly unity, a true mutual respect for earth, man, and animal requires equality or on eness with eachthing. This achievement, preached in many religions, most of all Buddhism, is the product of realizing how much we as humans depend on the Earth.Forgetting that everything we have and all that we consume comes from one planet can cause the degradation of resources and disrespect for populations, be them man or animal. Being constantly reminded, through word of mouth and total interaction with nature, gave the native people an outlook on life rarely mimicked, but in constant need. Silko tells us on knave 27 that the Laguna Pueblo people called the earth the Mother Creator, these two titles mother and creator give the Earth a godlike identity. Being both the mother and the father, the Earth is to be respected as one would honor their own parents.Making the Earth your God seems logical considering it contains us and provides for us all, encompassing every need we may have. The ironic thing is the Laguna Pueblo people gave the Earth such huge properties without actually exploring all the territories and oceans the world had. Just by discover the grandeur of nature and its beauty the people knew just how big the world is. By giving the world so much esteem the Laguna Pueblo elders perplex the road ahead towards peaceful and respectful livelihoods that could last lifetimes if not corrupted.When one reviews all these ideas and traditions separately they may seem unique but not rightfully an outlook on life. Upon combining these we see a people with a deep reverence for everything natural. The respect for dead lets an outsider know that the people reckon in more than they can see and therefore have the philosophical thought to apply meaning to otherwise common objects like animals and plants. It signifies an understanding that the world is more than just what we can see.The respect for animals allows the foreigner to understand the lack of hierarchy that exists for these people. Silko makes it clear that the Laguna Pueblo people do not consider th emselves break out than the antelope they hunt, only that they have needs that can be met by nature and those that reside in it, and it is only natural for being to take from another in target to survive. In taking though, they remember to always give back to the Mother Creator, with prayer, and to always be grateful, with a constant observation of natural order and the way things ought to be.

A Financial Perspective on Mergers and Acquisitions

The assuage Cash Flow Theory of coups A Financial Perspective on nuclear fusion reactions and Acquisitions and the Economy Michael C. Jensen Harvard crease civilise emailprotected edu Michael C. Jensen, 1987 The Merger Boom, Proceedings of a Conference sponsored by Federal Reserve Bank of Boston, Oct. 1987, pp. 102-143 This document is usable on the Social Science Re front vane (SSRN) Electronic Library at http//papers. ssrn. com/ABSTRACT=350422 The discontinue Cash Flow Theory of Take everyplaces A Financial Perspective on Mergers and Acquisitions and the Economy Michael C.Jensen* Harvard Business School emailprotected edu From, The Merger Boom, Proceedings of a Conference sponsored by Federal Reserve Bank of Boston, Oct. 1987, pp. 102-143 Economic analysis and tell indicate the foodstuff for unified mold is benefiting sh ar carriers, society, and the merged socio-economic class of fundamental law. The value of proceedings in this market ran at a record rate of clo sely $180 billion per twelvemonth in 1985 and 198647 part above the 1981 record of $122 billion.The number of proceedings with purchase prices exceeding one billion dollars was 27 of 3300 deals in 1986 and 36 of 3000 deals in 1985 (Grimm, 1985). There were only seven billion-dollar plus deals in resume, prior to 1980. In addition to these takeovers, mergers, and leveraged buy step forwards, there were numerous bodily restructurings involving divestitures, spinoffs, and en puffyd strain repurchases for money and debt. The gains to sh atomic number 18holders from these minutes eat up been huge.The gains to selling- whole sh arholders from mergers and eruditeness activity in the dot 1977-86 supply $346 billion (in 1986 dollars). 1 The gains to buying-firm sh atomic number 18holders be harder Estimated from data in Grimm (1986). Grimm provides total dollar values for in all merger and acquisition deals for which there are commonly announced prices amounting to at to th e lowest degree(prenominal) $500,000 or 10 pct of the firm and in which at least one of the firms was a U. S. company. Grimm likewise counts in its numerical totals deals with no publicly announced prices that it believes satisfy these criteria.I bemuse assumed that the deals with no announced prices were on bonnie equal to 20 percent of the size of it of the announced transactions and carried the identical bonny premium. *Professor of Business Administration, Harvard Business School, and Professor of finance and Business Administration, University of Rochester. The author is grateful for the research assistance of Michael Stevenson and the helpful comments by Sidney Davidson, Harry DeAngelo, Jay Light, Robert Kaplan, Nancy Macmillan, Kevin Murphy, Susan Rose-Ackerman, Richard Ruback, Wolf Weinhold, Toni Wolcott, and especially Armen Alchian.This research is supported in part by the Division of Research, Harvard Business School, and the Managerial Economics Research Center, University of Rochester. The analysis here draws heavily on that in Jensen (forthcoming 1988). 1 M. C. Jensen 2 1987 to estimate, and to my screwledge no one has done so yet, barely I estimate that they would add at least a nonher $50 billion to the total. These gains, to put them in perspective, equal 31 percent of the total immediate payment dividends (valued in 1986 dollars) gainful to investors by the entire somatic sector in the past decade. Corporate control transactions and the restructurings that often accompany them john be wrenching events in the lives of those linked to the involved organizations the managers, employees, suppliers, customers and residents of surrounding communities. Restructurings usually involve study organizational change (such as shifts in corporate strategy) to put up peeledfangled competition or market conditions, increased subr let outine of debt, and a flurry of recontracting with managers, employees, suppliers and customers.This activi ty sometimes results in expansion of resources devoted to certain areas and at other times in contractions involving plant closings, layoffs of top-level and middle managers and of staff and crossingion releaseers, and overthrowd compensation. Change due to corporate restructuring requires people and communities associated with the organization to adjust the ways they live, work and do business. It is non surprising, therefore, that this change creates controversy and that those who stand to lose are demanding that something be done to stop the process.At the same time, shareholders in re mental synthesisd corporations are decided winners in young eld restructurings have generated average increases in total market value of approximately 50 percent. Those threatened by the changes argue that corporate restructuring is damaging the U. S. economy, that this activity damages the morale and productivity of organizations and squelchs executives to manage for the short term. Furth er, they hold that the value that restructuring creates does not observe from increased efficiency and productivity kinda, the gains add up from inflict impose payments, broken contracts withTotal dividend payments by the corporate sector, unadjusted for inflation, are given in Weston and Copeland (1986, p. 649). I extended these estimates to 1986. 2 M. C. Jensen 3 1987 managers, employees and others, and mistakes in valuation by inefficient capital markets. Since the benefits are illusory and the make ups are real, they argue, takeover activity should be restricted. The controversy has been accompanied by impregnable pressure on regulators and legislatures to enact restrictions to curb activity in the market for corporate control.Dozens of congressional bills in the past several(prenominal) years have proposed new restrictions on takeovers, still as of August 1987, no(prenominal) had passed. The Business Round control panel, composed of the chief executive officers of th e 200 largest corporations in the country, has pushed hard for restrictive legislation. Within the past several years the legislatures of New York, New Jersey, Maryland, Pennsylvania, Connecticut, Illinois, Kentucky, Michigan, Ohio, Indiana, Minnesota and Massachusetts have passed antitakeover laws.The Federal Reserve Board giveed new restrictions in early 1986 on the use of debt in certain takeovers. In all the controversy over takeover activity, it is often forgotten that only 40 (an all-time record) of the 3,300 takeover transactions in 1986 were hostile tender passings. There were 110 voluntary or negotiated tender assigns (unopposed by management) and the remaining 3,100-plus deals were also voluntary transactions agreed to by management. This artless classification, however, is misleading since many of the voluntary transactions would not have keepred absent the threat of hostile takeover.A study agreement for the real outcry is that in recent years mere size alone has disappeared as an effective takeover deterrent, and the managers of many of our largest and least efficient corporations now find their jobs threatened by disciplinal forces in the capital markets. Through dozens of studies, economists have accumulated considerable evidence and knowledge on the cause of the takeover market. Most of the earlier work is well summarized elsewhere (Jensen and Ruback (1983) Jensen (1984) Jarrell, Brickley and M. C.Jensen 4 1987 Netter (1988)). Here, I focus on current aspects of the controversy. In brief, the previous work tells us the following Takeovers benefit shareholders of target companies. Premiums in hostile offers historically exceed 30 percent on average, and in recent times have averaged round 50 percent. Acquiring-firm shareholders on average brighten about 4 percent in hostile takeovers and roughly zero in mergers, although these softens seem to have rejectd from past levels. Takeovers do not waste realization or resources.Instead , they generate firm gains historically, 8 percent of the total value of both companies. Actions by managers that eliminate or prevent offers or mergers are close to suspect as harmful to shareholders. Golden parachutes for top-level managers do not, on average, harm shareholders. The activities of takeover specialists (such as Icahn, Posner, Steinberg, and Pickens) benefit shareholders on average. Merger and acquisition activity has not increased industrial concentration.Over 1200 divestitures valued at $59. 9 billion occurred in 1986, also a record level (Grimm, 1986). Takeover gains do not come from the creation of monopoly power. Although measurement problems make it difficult to estimate the returns to bidders as precisely as the returns to targets,3 it appears the bargaining power of target managers, coupled with competition among potential acquirers, grants a large share of the acquisition benefits to selling shareholders. In addition, federal and state regulation of 3 See Jensen and Ruback (1983, pp. 18ff). M. C. Jensen 5 1987 tender offers appears to have streng thened the hand of target firms premiums veri confuse by target-firm shareholders increased substantially after introduction of such regulation. 4 Some have argued that the gains to shareholders come from wealthiness reallocations from other parties and not from real increases in efficiency. Roll (1986) argues the gains to target firm shareholders come from acquiring firm shareholders, but the data are not consistent with this hypothesis.While the evidence on the returns to bidding firms is mixed, it does not indicate they systematically suffer losses prior to 1980 shareholders of bidding firms earned on average about zero in mergers, which tend to be voluntary, and about 4 percent of their fair-mindedness value in tender offers, which more than often are hostile Jensen and Ruback (1983). These differences in returns are associated with the form of payment sooner than the form of the offer tender offers tend to be for silver and mergers tend to be for storehouse (Huang and Walkling, 1987).Some argue that fond regardholders in acquired firms systematically suffer losses as substantial amounts of debt are added to the capital structure. Asquith and Kim (1982) do not find this, nor do Dennis and McConnell (1986). The Dennis and McConnell study of 90 matched acquiring and acquired firms in mergers in the period 1962-80 proves that the values of bonds, preferred ancestry and other fourth-year securities, as well as the common stock prices of both firms, increase around the merger announcement. Changes in the value of senior securities are not captured in measures of changes in the value of common stock prices summarized previously.Taking the changes in the value of senior securities into account, Dennis and McConnell find the average change in total dollar value is positive for both bidders and target firms. Shleiffer and Summers (1987) argue that some of the benefits earned by target and bidding firm shareholders come from the abrogation of stated and implicit longterm contracts with employees. They point to highly visible recent examples in the airline See Jarrell and Bradley (1980), Nathan and OKeefe (1986), however, provide evidence that this effect occurred in 1974, several years after the major legislation. M. C. Jensen 6 1987 pains, where mergers have been frequent and wages have been cut in the wake of deregulation. But given deregulation and eject ledger entry by low-cost competitors, the cuts in airline assiduity wages were inevi carry over and would have been accomplished in bankruptcy proceedings if not in negotiations and takeover-related crises. Medoff and brownness (1988) study this issue using data from Michigan. They find that both employment and wages are higher, not lower, after acquisition than would otherwise be anticipate however, their sample consists largely of combinations of small firms.The Market for Co rporate Control The market for corporate control is better(p) viewed as a major component of the managerial labor market. It is the arena in which alternative management teams compete for the rights to manage corporate resources (Jensen and Ruback, 1983). Understanding this point is crucial to understanding much of the rhetoric about the make of hostile takeovers. Takeovers generally occur because changing technology or market conditions require a major restructuring of corporate assets (although in some cases, takeovers occur because incumbent managers are incompetent).Such changes buns require abandonment of major projects, relocation of facilities, changes in managerial assignments, and closure or cut-rate sale of facilities or divisions. Managers often have trouble abandoning strategies they have spent years devising and implementing, even when those strategies no longer contribute to the organizations survival, and it is easier for new top-level managers with no ties to curr ent employees or communities to make changes. Moreover, normal organizational resistance to change commonly is lower early in the reign of new top-level managers.When the upcountry processes for change in large corporations are too slow, costly, and clumsy to bring about the required restructuring or change in managers efficiently, the capital markets do so finished the M. C. Jensen 7 1987 market for corporate control. Thus, the capital markets have been responsible for substantial changes in corporate strategy. Causes of Current Takeover Activity A variety of political and economical conditions in the 1980s have created a climate where economic efficiency requires a major restructuring of corporate assets.These factors include The relaxation of restrictions on mergers imposed by the antitrust laws. The withdrawal of resources from industries that are growing more slowly or that must shrink. Deregulation in the markets for financial services, oil and gas, transportation, and broadcasting, bringing about a major restructuring of those industries. Improvements in takeover technology, including more and increasingly sophisticated legal and financial advisers, and innovations in financing technology (for example, the landing strip financing commonly utilise in leveraged buyouts and the original issuance of high-yield non-investment-grade bonds).Each of these factors has contributed to the increase in total takeover and reorganization activity. Moreover, the first three factors (antitrust relaxation, exit, and deregulation) are generally consistent with data showing the effectiveness of takeover activity by assiduity. Table 1 indicates that acquisition activity in the period 1981-84 was highest in the oil and gas industry, followed by banking and finance, insurance, food processing, and tap and minerals. For comparison purposes, the table also presents data on industry value measured as a percentage of the total value of all firms. each but two of the industries, retail trade and transportation, represent a larger fraction of total takeover activity than their representation in the economy as a whole, indicating that the takeover market is concentrated in particular industries, not spread evenly throughout the corporate sector. M. C. Jensen 8 1987 Table 1 Intensity of Takeover Activity, by Industry, 1981-84 Percent Percent of Total of Total Takeover Corporate Industry Classification of Seller Market Valueb Activitya Oil and Gas 26. 13. 5 Banking and Finance 8. 8 6. 4 Insurance 5. 9 2. 9 Food Processing 4. 6 4. 4 Mining and Minerals Conglomerate Retail Trade Transportation leisure time and Entertainment Broadcasting Other a 4. 4 4. 4 3. 6 2. 4 2. 3 2. 3 39. 4 1. 5 3. 2 5. 2 2. 7 . 9 . 7 58. 5 Value of merger and acquisition transactions in the industry as a percentage of total takeover transactions for which valuation data are publicly reported. Source W. T Grimm, Mergerstat Review (1984, p. 41). bIndustry value as a percentage o f the value of all firms, as of 12/31/84 Total value is measured as the sum of the market value of common equity for 4,305 companies, including 1,501 companies on the New York Stock vary, 724 companies on the American Stock Exchange, plus 2,080 companies in the over-the-counter market. Source The Media General Financial Weekly, (December 31, 1984, p 17) Many sectors of the U. S. economy have been experiencing slower harvesting and, in some cases, even retrenchment. This phenomenon has many causes, including substantially increased foreign competition.The slow growth has meant increased takeover activity because takeovers play an of the essence(p) role in facilitating exit from an industry or activity. Changes in zip markets, for example, have required radical restructuring and retrenchment in that industry, and takeovers have compete an important role in accomplishing these changes oil and gas rank first in takeover activity, with twice their proportionate share of total activi ty. Managers who are slow to adjust to the new energy environment and slow to recognize that many old practices and strategies are no longer viable find that takeovers M. C.Jensen 9 1987 are doing the job for them. In an industry saddled with overcapacity, exit is cheaper to accomplish through merger and the orderly liquidation of marginal assets of the combined firms than by disorderly, expensive bankruptcy. The end of the competitive struggle in such an industry often comes in the bankruptcy courts, with the unnecessary destruction of valuable parts of organizations that could be used productively by others. Similarly, deregulation of the financial services market is consistent with the number 2 rank of banking and finance and the number 3 rank of insurance in table 1.Deregulation has also been important in the transportation and broadcasting industries. Mining and minerals has been subject to many of the same forces impinging on the energy industry including the changes in the va lue of the dollar. The development of innovational financing vehicles, such as high yield noninvestment-grade bonds (junk bonds), has re go awayd size as a significant impediment to competition in the market for corporate control. Investment grade and high-yield debt issues combined were associated with 9. percent of all tender offer financing from January 1981 through September 1986 (Drexel Burnham Lambert, undated). Even though not yet wide used in takeovers, these new financing techniques have had important effects because they permit small firms to obtain resources for acquisition of much larger firms by air claims on the value of the venture (that is, the target firms assets) just as in any other corporate investment activity. Divestitures If assets are to move to their most highly valued use, acquirers must be able to sell off assets to those who can use them more productively.Therefore, divestitures are a critical fragment in the functioning of the corporate control market and it is important to avoid inhibiting them. Indeed, over 1200 divestitures occurred in 1986, a record level (Mergerstat Review (1986)). This is one reason merger and acquisition activity has not increased industrial concentration. M. C. Jensen 10 1987 Divested plants and assets do not disappear they are reallocated. sometimes they continue to be used in similar ways in the same industry, and in other cases they are used in very diametrical ways and in different industries.But in both cases they are moving to uses that their new owners believe are more productive. Finally, the takeover and divestiture market provides a private market constraint against bigness for its own sake. The potential gains available to those who correctly perceive that a firm can be purchased for less than the value realizable from the sale of its components provide incentives for entrepreneurs to search out these opportunities and to capitalize on them by reorganizing such firms into smaller entities.Th e mere possibility of such takeovers also motivates managers to avoid putting together uneconomic conglomerates and to take off up existing ones. This is now happening. Recently many firms defenses against takeovers appear to have led to actions similar to those proposed by the potential acquirers. Examples are the reorganizations occurring in the oil and timbre products industries, the sale of crown jewels, and divestitures brought on by the desire to liquidate large debts incurred to buy back stock or make other payments to stockholders.The basic economic sense of these transactions is often lost in a blur of emotional rhetoric and controversy. Managerial Myopia versus Market Myopia It has been argued that, far from pushing managers to undertake directed structural changes, growing institutional equity holdings and the fear of takeover cause managers to behave nearsightedally and therefore to sacrifice long-term benefits to increase short profits.The arguments tend to confuse two separate issues 1) whether managers are shortsighted and make decisions that undervalue time to come specie electric currents while overvaluing current gold falls (myopic managers) and 2) whether security system markets are shortsighted and undervalue future bills flows while overvaluing near-term bullion flows (myopic markets). M. C. Jensen 11 1987 There is little formal evidence on the myopic managers issue, but I believe this phenomenon does occur.Sometimes it occurs when managers hold little stock in their companies and are compensated in ways that motivate them to take actions to increase accounting earnings instead than the value of the firm. It also occurs when managers make mistakes because they do not understand the forces that determine stock values. There is much evidence inconsistent with the myopic markets view and no evidence that indicates it is true (1) The mere fact that price-earnings ratios differ widely among securities indicates the market is valuin g something other than current earnings. For example, it values growth as well.Indeed, the essence of a growth stock is that it has large investment projects yielding few short term cash flows but high future earnings and cash flows. The continuing marketability of new issues for start-up companies with little record of current earnings, the Genentechs of the world, is also inconsistent with the notion that the market does not value future earnings. (2) McConnell and Muscarella (1985) provide evidence that (except in the oil industry) stock prices respond positively to announcements of increased investment expenditures and negatively to reduced expenditures.Their evidence is also, inconsistent with the notion that the equity market is myopic, since it indicates that the market values spending current resources on projects that promise returns in the future. (3) The vast evidence on efficient markets, indicating that current stock prices appropriately incorporate all currently availa ble public information, is also inconsistent with the myopic markets hypothesis. Although the evidence is not literally 100 percent in support of the efficient market hypothesis, no proposition in any of the social sciences is better documented. 5For an introduction to the literature and empirical evidence on the theory of efficient markets, see Elton and Gruber (1984, Chapter 15, p. 375ff), and the 167 studies referenced in the bibliography. For some erroneous evidence on market efficiency, see Jensen (1978). For recent criticisms of the efficient market hypothesis see Shiller (1981a 1981b), Marsh and Merton (1983 1986) demonstrate that the Shiller 5 M. C. Jensen 12 1987 (4) Recent versions of the myopic markets hypothesis emphasize increases in the amount of institutional holdings and the pressure funds managers face to generate high quarterly returns.It is argued that these pressures on institutions are a major cause of pressures on corporations to generate high current quarterl y earnings. The institutional pressures are said to lead to increased takeovers of firms, because institutions are not loyal shareholders, and to rock-bottom research and development (R&D) expenditures. It is hypothesized that because R&D expenditures reduce current earnings, firms reservation them are more likely to be taken over, and that reductions in R&D are leading to a fundamental weakening of the corporate sector of the economy.A study of 324 firms by the mooring of the Chief Economist of the SEC (1985a) finds substantial evidence that is inconsistent with this version of the myopic markets argument. The evidence indicates the following change magnitude institutional stock holdings are not associated with increased takeovers of firms. Increased institutional holdings are not associated with decrements in R&D expenditures. Firms with high R&D expenditures are not more vulnerable to takeovers. Stock prices respond positively to announcements of increases in R&D expendi tures.Moreover, total spending on R&D is increasing concurrent with the wave of merger and acquisition activity. Total spending on R&D in 1984, a year of record acquisition activity, increased by 14 percent according to Business Weeks one-year survey. This represented the biggest gain since R&D spending began a steady climb in tests depend critically on whether, contrary to generally genuine financial theory and evidence, the future levels of dividends follow a stationary stochastic process. Merton (1985) provides a give-and-take of the current state of the efficient market hypothesis and concludes (p. 0), In light of the empirical evidence on the nonstationarity issue, a pronouncement at this moment that the rational market theory should be discarded from the economic figure can, at best, be described as premature. M. C. Jensen 13 1987 the late 1970s. All industries in the survey increased R&D spending with the expulsion of steel. In addition, R&D spending increased from 2 p ercent of sales, where it had been for five years, to 2. 9 percent. In 1985 and 1986, two more record years for acquisition activity, R&D also set new records.R&D spending increased by 10 percent (to 3. 1 percent of sales) in 1985, and in 1986, R&D spending again increased by 10 percent to $51 billion (3. 5 percent of sales), in a year when total sales reducingd by 1 percent. 6 Bronwyn Hall (1987), in a expand study of all U. S. manufacturing firms in the years 1976-85, finds in approximately 600 acquisitions that firms that are acquired do not have higher R&D expenditures (measured by the ratio of R&D to sales) than firms in the same industry that are not acquired.Also, she finds that firms involved in mergers showed no difference in their pre- and post-merger R&D performance over those not so involved. I know of no evidence that supports the argument that takeovers reduce R&D expenditures, even though this is a prominent argument among many of those who favor restrictions on ta keovers. Free Cash Flow Theory More than a dozen separate forces drive takeover activity, including such factors as deregulation, synergies, economies of scale and scope, taxes, managerial incompetence, and increasing globalisation of U. S. markets. 7 One major cause of takeover activity, the gency cost associated with conflicts between managers and 6 The R&D Scoreboard is an annual survey, covering companies that account for 95 percent of total private-sector R&D expenditures. The three years referenced here can be found in R&D Scoreboard Reagan & Foreign rival Light a Fire Under Spending, Business Week, (, July 8, 1985, p. 86 ff. ) R&D Scoreboard Now, R&D is Corporate Americas Answer to lacquer Inc. , Business Week, (, June 23, 1986, p. 134 ff. ) and R&D Scoreboard Research Spending is Building Up to a Letdown, Business Week, (, June 22, 1987, p. 39 ff. ). In 1984 the survey cover 820 companies in 1985, it covered 844 companies in 1986, it covered 859 companies. 7 Roll (1988) di scusses a number of these forces. M. C. Jensen 14 1987 shareholders over the payout of renounce cash flow,8 has received relatively little attention. Yet it has played an important role in acquisitions over the last decade. Managers are the agents of shareholders, and because both parties are selfinterested, there are serious conflicts between them over the choice of the best corporate strategy.Agency cost are the total costs that arise in such cooperative arrangements. They consist of the costs of observe managerial behavior (such as the costs of producing audited financial statements and devising and implementing compensation plans that reward managers for actions that increase investors wealth) and the inevitable costs that are incurred because the conflicts of interest can never be resolved perfectly. Sometimes these costs can be large, and when they are, takeovers can reduce them.Free Cash Flow and the Conflict Between Managers and Shareholders Free cash flow is cash flow in excess of that required to fund all of a firms projects that have positive net present values when discounted at the relevant cost of capital. Such unblock cash flow must be paid out to shareholders if the firm is to be efficient and to maximize value for shareholders. Payment of cash to shareholders reduces the resources under managers control, thereby reducing managers power and potentially subjecting them to the observeing by the capital markets that occurs when a firm must obtain new capital.Financing projects internally avoids this monitoring and the possibility that funds pull up stakes be unavailable or available only at high explicit prices. Managers have incentives to expand their firms beyond the size that maximizes shareholder wealth. 9 Growth increases managers power by increasing the resources This discussion is based on Jensen (1986a). Gordon Donaldson (1984), in a detailed study of 12 large Fortune 500 firms, concludes that managers of these firms were not driven b y maximization of the value of the firm, but rather by the maximization of corporate wealth. He defines corporate wealth as the aggregate purchasing power available to management for strategic purposes during any given planning period. this wealth consists of 9 8 M. C. Jensen 15 1987 under their control. In addition, changes in management compensation are positively related to growth. 10 The tendency of firms to reward middle managers through promotion rather than year-to-year bonuses also creates an organizational bias toward growth to supply the new positions that such promotion-based reward systems require (Baker, 1986).The tendency for managers to overinvest resources is limited by competition in the product and factor markets that tends to drive prices toward minimum average cost in an activity. Managers must therefore motivate their organizations to be more efficient in order to mend the probability of survival. Product and factor market disciplinary forces are often weaker i n new activities, however, and in activities that involve substantial economic rents or quasi-rents. 1 Activities yielding substantial economic rents or quasi-rents are the types of activities that generate large amounts of free cash flow. In these situations, monitoring by the firms internal control system and the market for corporate control are more important. Conflicts of interest between shareholders and managers over payout policies are especially severe when the organization generates substantial free cash flow. The problem is how to motivate managers to disgorge the cash rather than invest it below the cost of capital or waste it through organizational inefficiencies.Myers and Majluf (1984) argue that financial flexibility (unused debt capacity and internally generated funds) is enviable when a firms managers have better information about the firm than out-of-door investors. Their arguments assume that managers act in the best interest of shareholders. The arguments offere d here imply the stocks and flows of cash and cash equivalents (primarily credit) that management can use at its discretion to implement decisions involving the control of goods and services (p. 3, emphasis in original). In practical terms it is cash, credit, and other corporate purchasing power by which management commands goods and services (p. 22). 10 Where growth is measured by increases in sales. See Murphy (1985). This positive relationship between compensation and sales growth does not imply, although it is consistent with, causality. 11 Rents are returns in excess of the opportunity cost of the permanent resources in the activity. Quasirents are returns in excess of the opportunity cost of the short-lived resources in the activity. M. C.Jensen 16 1987 that such flexibility has costs financial flexibility in the form of free cash flow (including both current free cash in the form of large cash balances, and future free cash flow reflected in unused borrowing power) provides m anagers with greater discretion over resources that is often not used in the shareholders interests. Therefore, contrary to Myers and Majluf, the argument here implies that eventually the way costs of free cash flow cause the value of the firm to decline with increases in financial flexibility.The theory developed here explains (1) how debt-for-stock exchanges reduce the organizational inefficiencies fostered by substantial free cash flow (2) how debt can substitute for dividends (3) why diversification programs are more likely to be associated with losses than are expansion programs in the same line of business (4) why mergers within an industry and liquidation-motivated takeovers willing generally create larger gains than cross-industry mergers (5) why the factors stimulating takeovers in such diverse businesses as broadcasting, tobacco, cable systems and oil are essentially analogous and (6) why bidders and some targets tend to show unnaturally good performance prior to takeo ver.The Role of Debt in Motivating Organizational Efficiency The agency costs of debt have been widely discussed (Jensen and Meckling (1976) Smith and Warner (1979)), but, with the exception of the work of Grossman and Hart (1980), the benefits of debt in motivating managers and their organizations to be efficient have largely been ignored. Debt creation, without retention of the government issue of the issue, enables managers in effect to bond their promise to pay out future cash flows. Thus, debt can be an effective substitute for dividends, something not generally recognized in the corporate finance literature. 12 By issuing debt in exchange for stock, Literally, principal and interest payments are substitutes for dividends. Dividends and debt are not perfect substitutes, however, because interest is tax-deductible at the corporate level and dividends are not. 12 M. C. Jensen 17 1987 anagers bond their promise to pay out future cash flows in a way that simple dividend increases do not. In doing so, they give shareholder-recipients of the debt the right to take the firm into bankruptcy court if they do not keep their promise to make the interest and principal payments. 13 Thus, debt reduces the agency costs of free cash flow by reducing the cash flow available for spending at the discretion of managers. These control effects of debt are a potential determinant of capital structure. Managers with substantial free cash flow can increase dividends or repurchase stock and thereby pay out current cash that would otherwise be invested in low-return projects or wasted.This payout leaves managers with control over the use of future free cash flows, but they can also promise to pay out future cash flows by announcing a permanent increase in the dividend. 14 Because there is no contractual obligation to make the promised dividend payments, such promises are weak. Dividends can be reduced by managers in the future with little effective recourse available to sharehold ers. The fact that capital markets punish dividend cuts with large stock price reductions (Charest (1978) Aharony and Swary (1980)) can be interpreted as an equilibrium market response to the agency costs of free cash flow. Brickley, Coles and Soo Nam (1987) find that firms that regularly pay extra dividends appear to have positive free cash flow. In comparison with a control group they have significantlyRozeff (1982) and Easterbrook (1984b) argue that regular dividend payments can be effective in reducing agency costs with managers by assuring that managers are forced more frequently to subject themselves and their policies to the discipline of the capital markets when they acquire capital. 14 Interestingly, Graham and Dodd (1951, Chapters 32, 34 and 36) in their treatise, guarantor Analysis, place great importance on the dividend payout in their famous valuation formula V=M(D+. 33E). (See p. 454. ) V is value, M is the earnings multiplier when the dividend payout rate is a norma l two-thirds of earnings, D is the pass judgment dividend, and E is expected earnings.In their formula, dividends are valued at three times the rate of retained earnings, a proposition that has puzzled many students of modern finance (at least of my vintage). The agency cost of free cash flow that leads to over retention and waste of shareholder resources is consistent with the deep suspicion with which Graham and Dodd viewed the lack of payout. Their discussion (chapter 34) reflects a belief in the tenuous nature of the future benefits of such retention. Although they do not couch the issues in terms of the conflict between managers and shareholders, the free cash flow theory explicated here implies that their beliefs, sometimes characterized as a preference for a bird in the hand is expenditure two in the bush, were perhaps well founded. 13 M. C. Jensen 18 1987 igher cash plus short-term investments, and earnings plus depreciation, relative to their total assets. They also have significantly lower debt-to-equity ratios. The issuance of large amounts of debt to buy back stock sets up organizational incentives to motivate managers to pay out free cash flow. In addition, the exchange of debt for stock helps managers overcome the normal organizational resistance to retrenchment that the payout of free cash flow often requires. The threat of failure to make debt-service payments serves as a strong motivating force to make such organizations more efficient. Stock repurchase for debt or cash also has tax advantages.Interest payments are tax-deductible to the corporation, that part of the repurchase proceeds equal to the sellers tax basis in the stock is not taxed at all, and prior to 1987 tax rates on capital gains were favorable. Increased leverage also has costs. As leverage increases, the usual agency costs of debt, including bankruptcy costs, rise. One source of these costs is the incentive to take on projects that reduce total firm value but benefit sharehol ders through a transfer of wealth from bondholders. These costs put a limit on the desirable level of debt. The optimal debt/equity ratio is the point at which firm value is maximized, the point where the marginal costs of debt just offset the marginal benefits. The debt created in a hostile takeover (or takeover defense) of a firm suffering severe agency costs of free cash flow need not be permanent.Indeed, sometimes overleveraging such a firm is desirable. In these situations, leveraging the firm so highly that it cannot continue to exist in its old form yields benefits by providing motivation for cuts in expansion programs and the sale of divisions that are more valuable outside the firm. The proceeds are used to reduce debt to a more normal or permanent level. This process results in a complete rethinking of the organizations strategy and structure. When it is successful, a much leaner, more efficient, and competitive organization results. M. C. Jensen 19 1987 The control hypoth esis does not imply that debt issues will always have positive control effects.For example, these effects will not be as important for rapidly growing organizations with large and highly bankable investment projects but no free cash flow. Such organizations will have to go regularly to the financial markets to obtain capital. At these times the markets have an opportunity to evaluate the company, its management, and its proposed projects. Investment bankers and analysts play an important role in this monitoring, and the markets assessment is made evident by the price investors pay for the financial claims. The control function of debt is more important in organizations that generate large cash flows but have low growth prospects, and it is even more important in organizations that must shrink.In these organizations the pressure to waste cash flows by investing them in uneconomic projects is most serious. Evidence from Financial Transactions Free cash flow theory helps explain previ ously puzzling results on the effects of wonderive(a) financial transactions. Smith (Smith, 1986, tables 1 to 3) summarizes more than 20 studies of stock price changes at announcements of transactions that change capital structure as well as various other dividend transactions. These results and those of others are presented in table 2. For firms with positive free cash flow, the theory predicts that stock prices will increase with unexpected increases in payouts to shareholders and decrease with unexpected decreases in payouts.It also predicts that unexpected increases in demand for funds from shareholders via new issues will cause stock prices to fall. The theory also predicts stock prices will increase with increasing tightness of the constraints binding the payout of future cash flow to shareholders and decrease with reductions in the tightness of these constraints. These predictions do not apply to those firms with more profitable projects than cash flow to fund them. M. C. J ensen 20 1987 The predictions of free cash flow theory are consistent with all but three of the 32 estimated abnormal stock price changes summarized in table 2, and one of the inconsistencies is explained by another phenomenon. decorate A of table 2 shows that stock prices rise by a statistically significant amount with announcements of the initiation of cash dividend payments, increases in dividends and specially designated dividends, and fall by a statistically significant amount with decreases in dividend payments. (All coefficients in table 2 are significantly different from zero unless noted with an asterisk. ) Panel B shows that security sales and retirements that raise cash or pay out cash and simultaneously provide offsetting changes in the constraints soldering the payout of future cash flow are all associated with returns that are insignificantly different from zero.The insignificant return on retirement of debt fits the theory because the payout of cash is offset by an eq ual reduction in the present value of promised future cash payouts. If debt sales are not associated with changes in the expected investment program, the insignificant return on announcement of the sale of debt and preferred also fits the theory. The acquisition of new funds with debt or preferred stock is offset exactly by a perpetration bonding the future payout of cash flows of equal present value. If the funds acquired through new debt or preferred issues are invested in projects with negative net present values, the abnormal stock price change will be negative. If they are invested in projects with positive net present values, the abnormal stock price change will be positive.Sales of convertible debt and preferred securities are associated with significantly negative stock price changes (panel C). These security sales raise cash and provide little effective bonding of future cash flow payments when the stock into which the debt is convertible is worth more than the face value of the debt, management has incentives to call the convertible securities and force conversion to common. M. C. Jensen 21 1987 Panel D shows that, with one exception, security retirements that pay out cash to shareholders increase stock prices. The price decline associated with targeted large block repurchases (often called greenmail) is highly likely to be due to the reduced probability that a takeover premium will be realized.These transactions are often associated with standstill agreements in which the seller of the stock agrees to refrain from acquiring more stock and from making a takeover offer for some period into the future (Mikkelson and Ruback (1985 1986) Dann and DeAngelo (1983) and Bradley and Wakeman (1983)). Panel E summarizes the effects of security sales and retirements that raise cash and do not bond future cash flow payments. Consistent with the theory negative abnormal returns are associated with all such changes, although the negative returns associated with the sale of common through a conversion-forcing call are statistically insignificant.Panel F shows that all exchange offers or designated use security sales that increase the bonding of payout of future cash flows result in significantly positive increases in common stock prices. These include stock repurchases and exchange of debt or preferred for common, debt for preferred, and income bonds for preferred. The twoday gains range from 21. 9 percent (debt for common) to 1. 6 percent for income bonds and 3. 5 percent for preferred. 15 The theory predicts that transactions with no cash flow and no change in the bonding of payout of future cash flows will be associated with returns that are insignificantly different from zero. Panel G of table 2 shows that the evidence is mixed 15 The two-day returns of exchange offers and self-tenders can be affected by the offer.However, if there are no real effects or tax effects, and if all shares are tendered to a premium offer, then the stock price w ill be unaffected by the offer and its price effects are equivalent to those of a cash dividend. Thus, when tax effects are zero and all shares are tendered, the two-day returns are appropriate measures of the real effects of the exchange. In other cases the correct returns to be used in these transactions are those covering the period from the day prior to the offer announcement to the day after the close of the offer (taking account of the cash payout). See, for example, Rosenfeld (1982), whose results for the entire period are also consistent with the theory. M. C. Jensen 22 1987 he returns associated with exchange offers of debt for debt are significantly positive and those for designated-use security sales are insignificantly different from zero. All exchanges and designated-use security sales that have no cash effects but reduce the bonding of payout of future cash flows result, on average, in significant decreases in stock prices. These transactions include the exchange of co mmon for debt or preferred or preferred for debt, or the replacement of debt with convertible debt and are summarized in Panel H. The two-day losses range from 7. 7 percent (preferred for debt) to 1. 1 percent (common for debt). In summary, the results in table 2 are remarkably consistent with free cash flow theory hich predicts that, except for firms with profitable unfunded investment projects, stock prices will rise with unexpected increases in payouts to shareholders (or promises to do so) and will fall with reductions in payments or new requests for funds from shareholders (or reductions in promises to make future payments). Moreover, the size of the value changes seems to be positively related to the change in the tightness of the commitment bonding the payment of future cash flows. For example, the effects of debtfor-preferred exchanges are smaller than the effects of debt-for-common exchanges. Tax effects can explain some of the results summarized in table 2, but not all.For example, the exchange of preferred for common, or replacement of debt with convertible debt, has no tax effects and yet is associated with price increases. The last column of table 2 denotes whether the individual coefficients are explainable by pure corporate tax effects. The tax theory hypothesizes that all unexpected changes in capital structure that decrease corporate taxes increase stock prices and vice versa. 16 Therefore, increases in dividends and reductions of debt interest should cause stock prices to fall, and vice versa. 17 Fourteen of the 32 coefficients are inconsistent with the corporate tax See, however, Miller (1977) who argues that allowing for personal tax effects and the equilibrium response of firms implies that no tax effects will be observed. 7 Ignoring potential tax effects due to the 85 percent exclusion of dividends received by corporations on holdings of preferred stock. 16 M. C. Jensen 23 1987 Table 23 Summary of Two-Day Average Abnormal Stock Returns As sociated with the Announcement of Various Dividend and Capital Structure Transactionsa Average Sample Size Average Abnormal Return (Percent) Free Cash Flow Theory Agreement with Tax Predicted Agreement Theory Sign with Theory? Type of Transaction A. Dividend changes that change the cash paid to shareholders Dividend initiation1 Dividend increase2 peculiarly designated dividend Dividend decrease2 3 protection Issued Security Retired 160 281 164 48 3. 7% 1. 0 2. 1 -3. 6 + + + es yes yes yes no no no no B. Security sales (that raise cash) and retirements (that pay out cash) that simultaneously provide offsetting changes in the constraints bonding future payment of cash flows Security sale (industrial) 4 Security sale (utility) 5 Security sale (industrial) 6 Security sale (utility) Call8 7 debt debt preferred preferred no(prenominal) none none none none debt none none none common common common common 248 140 28 251 133 74 54 9 147 182 15 68 0. 2* -0. 1* -0. 1* -0. 1* -0. 1* -2. 1 - 1. 4 -1. 6 15. 2 3. 3 1. 1 -4. 8 0 0 0 0 0 + + + + yes yes yes yes yes yes yes yes yes yes yes no b no no yes yes no no no no yes yes yes no b C.Security sales that raise cash and bond future cash flow payments only minimally Security sale (industrial) 4 conv. debt 7 Security sale (industrial) conv. preferred 7 Security sale (utility) conv. preferred D. Security retirements that pay out cash to shareholders Self tender offer 9 Open market purchase10 Targeted small holdings11 Targeted large block repurchase12 none none none none M. C. Jensen 24 1987 E. Security sales or calls that raise cash and do not bond future cash flow payments Security sale (industrial) 13 common none Security sale (utility)14 common none Conversion-forcing call15 common conv. preferred Conversion-forcing call15 common conv. debt F.Exchange offers, or designated use security sales that increase the bonding of payout of future cash debt common Designated use security sale16 Exchange offer 17 debt common 17 Ex change offer preferred common 17 Exchange offer debt preferred Exchange offer 18 income bonds preferred G. Transaction with no change in bonding payout of future cash flows Exchange offer 19 debt 20 Designated use security sale debt debt debt 215 405 57 113 flows 45 52 10 24 18 36 96 -3. 0 -0. 6 -0. 4* -2. 1 21. 9 14. 0 8. 3 3. 5 1. 6 0. 6 0. 2* -2. 4 -2. 6 -7. 7 -4. 2 -1. 1 + + + + + 0 0 yes yes no yes yes yes yes yes yes no yes yes yes yes yes yes yes yes yes yes yes yes no yes yes no yes yes no yes yes yes H.Exchange offers, or designated use security sales that decrease the bonding of payout of future cash flows Security sale 20 conv. debt debt 15 Exchange offer 17 common preferred 23 17 Exchange offer preferred debt 9 20 Security sale common debt 12 Exchange offer 21 common debt 81 a Returns are weighted averages, by sample size, of the returns reported by the respective studies All returns are significantly different from zero unless noted otherwise by *. b Explained by the fact that these transactions are frequently associated with the termination of an actual or expected control bid. The price decline appears to reflect the loss of an expected control premium. Source 1 Asquith and Mullins (1983). 2 Charest (1978) Aharony and Swary (1980). 3 From Brickley (1983). Dann and Mikkelson (1984) Eckbo (1986) Mikkelson and Partch (1986). 5 Eckbo (1986). 6 Linn and Pinegar (1985) Mikkelson and Partch (1986). 7 Linn and Pinegar (1985). 8 Vu (1986). 9 Dann (1981) Masulis (1980) Vermaelen (1981) Rosenfeld (1982). 10 Dann (1980) Vermaelen (1981). 11 Bradley and Wakeman (1983). 12 Calculated by Smith (1986), table 4, from Dann and DeAngelo (1983) Bradley and Wakeman (1983). 13 Asquith and Mullins (1986) Kolodny and Suhler (1985) Masulis and Korwar (Korwar and Masulis) Mikkelson and Partch (1986). 14 Asquith and Mullins (1986) Masulis and Korwar (1986) Pettway and Radcliffe (1985). 15 Mikkelson (1981). 16 Others with more than 50% debt Masulis (1980). 17 Masu lis (1983).These returns include announcement days of both the original offer and, for about 40 percent of the sample, a second announcement of specific terms of the exchange 18 McConnell and Schlarbaum (1981). 19 Dietrich (1984). 20Eckbo (1986) Mikkelson and Partch (1986). 21Rogers and Owers (1985) Peavy and Scott (1985) Finnerty (1985). (Allen, 1987 Auerbach and Reishus, 1987 Biddle and Lindahl, 1982 Bradley, Desai, and Kim, 1983 Bradley and Rosensweig, 1986 Comment and Jarrell, 1986 1986 Crovitz, 1985 Easterbrook, 1984a Eckbo, 1985 1985 Fama and Jensen, 1983a, b, 1985 Franks, Harris, and Mayer, 1987 Golbe and White, 1987 Herzel, Colling, and Carlson, 1986 Holderness and Sheehan, 1985 1985 Jarrell, Poulsen, and Davidson, 1985 Jensen, 1985, 1986b Jensen and Smith, 985 Kaplan and Roll, 1972 Koleman, 1985 Lambert and Larcker, 1985 Malatesta and Walkling, 1985 Martin, 1985 Morrison, 1982 Mueller, 1980 Myers, 1977 Office of the Chief Economist, 1984, 1985b, 1986 Paulis, 1986 Ravenscraf t and Scherer, 1985a, b Ricks, 1982 Ricks and Biddle, 1987 Ruback, 1988 Ryngaert, 1988 Shoven and Simon, 1987 Sunder, 1975 You et al. ) Jensen 25 1987 hypothesis. Simple signaling effects, where the payout of cash signals the lack of present and future investments promising returns in excess of the cost of capital, are also inconsistent with the results-for example, the positive stock price changes associated with dividend increases and stock repurchases. If anything, the results in table 2 seem too good, for two reasons.The returns summarized in the table do not distinguish firms that have free cash flow from those that do not have free cash flow, yet the theory says the returns to firms with no free cash flow will behave differently from those which do. In addition, only unexpected changes in cash payout or the tightness of the commitments bonding the payout of future free cash flow should affect stock prices. The studies summarized in table 2 do not, in general, control for the p resence or absence of free cash flow or for the effects of expectations. If free cash flow effects are large and if firms on average are in a positive free cash flow position, the predictions of the theory will hold for the simple sample averages. To see how the agency costs of free cash flow can be large enough to show up in the uncontrolled tests summarized in table 2, consider the graph of equilibrium firm M.C. Jensen 26 1987 value and free cash flow in figure 1. Figure 1 portrays a firm whose manager values both firm value (perhaps because stock options are part of the compensation package) and free cash flow. The manager, however, is willing to trade them off according to the given indifference curves. By definition, firm value reaches a maximal at zero free cash flow. The point (V*, F*) represents the equilibrium level of firm value and free cash flow for the manager. It occurs at a positive level of free cash flow and at a point where firm value is lower than the maximum pos sible. The difference Vmax V* is the agency cost of free cash flow.Because of random factors and adjustment costs, firms will deviate temporarily from the optimal F*. The dashed line in figure 1 portrays a hypothetical rectangular distribution of free cash flow in a cross section of firms under the assumption that the typical firm is run by managers with preferences similar to those portrayed by the given indifference curves. Changes in free cash flow (or the tightness of constraints binding its payout) will be positively related to the value of the firm only for the minority of firms in the cross section with negative free cash flow. These are the firms lying to the left over(p) of the origin, 0. The relation is negative for all firms in the range with positive free cash flow.Given the hypothetical rectangular distribution of firms in figure 1, the majority of firms will display a negative relation between changes in free cash flow and changes in firm value. As a result the avera ge price change associated with movements toward (V*, F*) will be negatively related to changes in free cash flow. If the effects are so pervasive that they show up strongly in the crude tests of table 2, the waste due to agency problems in the corporate sector is probably greater than most scholars have thought. This waste is one factor contributing to the high level of activity in the corporate control market over the past decade. More detailed tests of the propositions that control for growth prospects and expectations will be interesting. M. C. Jensen 27 1987Evidence from Going-Private and Leveraged Buyout Transactions Many of the benefits in going-private and leveraged buyout transactions seem to be due to the control function of debt. These transactions are creating a new organizational form that competes successfully with the open corporate form because of advantages in controlling the agency costs of free cash flow. In 1985, going-private and leveraged buyout transactions to taled $37. 4 billion and represented 32 percent of the value of all public acquisitions. 18 Most studies have shown that premiums paid for publicly held firms average over 50 percent,19 but in 1985 the premiums for publicly held firms were 31 percent (Grimm, 1985). Leveraged buyouts are frequently financed with high debt 101 ratios of debt to equity are not uncommon, and they average 5. 51 (Schipper and Smith (1986) Kaplan (1987) and DeAngelo and DeAngelo (1986)). Moreover, the use of strip financing and the allocation of equity in the deals reveal a esthesia to incentives, conflicts of interest, and bankruptcy costs. Strip financing, the practice in which investors hold risky nonequity securities in approximately equal proportions, limits the conflict of interest among such securityholders and therefore limits bankruptcy costs. direct managers and the sponsoring venture capitalists hold disproportionate amounts of equity. A somewhat oversimplified example illustrates the organiza tional effects of strip financing. Consider two firms identical in every respect except financing.Firm A is entirely financed with equity, and Firm B is highly leveraged with senior subordinated debt, convertible debt, and preferred as well as equity. Suppose Firm B securities are sold only in strips that is, a buyer purchasing a certain percentage of any security must purchase the same percentage of all securities, and the securities are stapled together See W. T. Grimm, Mergerstat Review (1985, Figs. 29, 34 and 38). See DeAngelo, DeAngelo and Rice (1984), Lowenstein (1985), and Schipper and Smith (1986). Lowenstein also mentions incentive effects of debt but argues tax effects play a major role in explaining the value increase. 19 18 M. C. Jensen 28 1987 o they cannot be separated later. Security holders of both firms have identical unlevered claims on the cash flow distribution, but organizationally the two firms are very different. If Firm A managers withhold dividends to invest in value-reducing projects or if they are incompetent, the shareholders must use the clumsy proxy process to change management or policies. In Firm B, strip holders have recourse to remedial powers not available to the equity holders of Firm A. Each Firm B security specifies the rights its holder has in the event of default on on its dividend or coupon payment for example, the right to take the firm into bankruptcy or to have board representation.As each security above equity goes into default, the strip holder receives new rights to intercede in the organization. As a result, it is quicker and less expensive to replace managers in Firm B. Moreover, because every security holder in the highly leveraged Firm B has the same claim on the firm, there are no conflicts between senior and junior claimants over reorganization of the claims in the event of default to the strip holder it is a matter of moving funds from one pocket to another. Thus, Firm B will not go into bankruptcy a requi red reorganization can be accomplished voluntarily, quickly, and with less expense and disruption than through bankruptcy proceedings. The extreme form of strip financing in the example is not normal practice.Securities commonly subject to strip practices are often called mezzanine financing and include securities with priority superior(p) to common stock yet subordinate to senior debt. This arrangement seems to be sensible, because several factors ignored in our simplified example imply that strictly proportional holdings of all securities is not desirable. For example, IRS restrictions deny tax deductibility of debt interest in such situations and bank holdings of equity are restricted by regulation. Riskless senior debt need not be in the strip because there are no conflicts with other claimants in the event of reorganization when there is no probability of default on its payments. M. C. Jensen 29 1987Furthermore, it is advantageous to have the top-level managers and venture cap italists who promote leveraged buyout and going-private transactions hold a larger share of the equity. Top-level managers on average receive over 30 percent of the equity, and venture capitalists and the funds they represent generally retain the major share of the remainder (Schipper and Smith (1986) Kaplan (1987)). The venture capitalists control the board of directors and monitor the managers. Both managers and venture capitalists have a strong interest in making the venture successful because their equity interests are subordinate to other claims. mastery requires (among other things) implementation of changes to avoid investment in low-return projects in order to generate the cash for debt service and to increase the value of equity.Finally, when the equity is held by a small number of people, efficiencies in risk-bearing can be achieved by placing more of the risk in