The Legal And Market Systems Finance Essay - Free Essay Example

Introduction The argument for this article is focus on maximizing firms value to society through firms ethical business decisions which require incorporate with the three forms of justice; economic justice, legal justice and distribute justice, in its business decision in order to protect stakeholders alienable and inalienable rights (indebtedness) and wealth maximization with minimum social waste. Pareto optimal efficient market exists when there is no feasible allocation of resources which can make some individual better off without making someone else worse off, Stiglitz (1981). The three forms of justice not incorporated when Pareto optimal business decisions has not make. Thus, it indirectly reflects that the stakeholders rights will be violated because of the unfair redistribution of both residual and non-residual claims. To achieve Pareto optimal business decision, three forms of justice should require to be integrated. Besides indebtedness, moral debt is an additional firms obligation which occurs when the firm takes some sort of benefits from other stakeholders through not fulfilling just business decisions. To increase the firms value to society, the incorporation of all associated moral debt claims should be include in its business decisions. However, a strong economic argument had incurred that a better protection on stakeholders rights should be enforced by laws and regulations while engage with society. 2. The role of the legal and market systems: a change in perspectives The main objective of the firm in the traditional financial economic perspective is to maximize shareholders wealth. The results from having these perspectives are agency costs, conflicts of interest, and asymmetry of information between shareholders and stakeholders. Agency costs results from the managers not having same interests as shareholders and also the conflict of interest between employees and managers. Asymmetrical consequences are resulted from conflicts of interests. Thus, the shareholders or managers will gain upside benefits from non-Pareto optimal business decisions whilst the stakeholders and society will bear the down side costs. Laws and regulations are required to solve the non-Pareto optimal business decisions in order to help goal congruency by ensuring that the firm and director share in the downside costs. There should be more direct link between business decisions and consequences in order to allow more symmetrical distribution of the upside benefits and downside costs. This will encourage the agents of the organizations to integrate the moral debt claims in their business decisions by more symmetrical acknowledgement of the rights of stakeholders. The market system does not require more regulations since the courts should enforce all contracts. Those contracts are the important underpinning of the market system. However, it is assumed that the sophisticated (informed) issuers and sophisticated borrowers have been negotiated. Some researchers reject the argument in the traditional perspective that the competitive market system and legally binding social contracts are sufficient to keep markets efficient in the Pareto optimal sense and sufficient to protect all shareholders and stakeholders rights. La Porta et al. (2001) find that legal systems throughout the world vary in the way they formulate legal rules and enforce such rules to protect shareholders rights. Shleifer (2005) found out that countries with market systems associ ated with contracting theory are not always effective due to market limitations and frequent subversions of the courts. Generally, good protection and enforcement for stakeholders rights will limit the conflict of interest, agency costs and moral debt claims between inside and outside stakeholders. La Porta et al. (2001) suggest that all outside investors of the firm need their rights protected and that if rights enforcement is absent then insiders would not have much reason to distribute profits. 3. Going beyond the legal and market systems for Pareto optimal business decisions Donaldson and Dunfee (2002) argue that there is a moral need to go beyond the market and legal systems to enforce contracts due to the fundamental in maximizing societys wealth. Andolfatto (2002) and Feldman (1971) demonstrate that the well functioning market system will potentially work against fair distribution of claims (social policy) that requires the legal system through government intervention to protect inalienable rights. Initially, based on Chandler, 1998; Pieper, 1966; Schumacher, 1993; Steiner, 1999, we have to understand that individuals have the right to goods to satisfy their basic survival needs and that society as a whole is obligated to satisfy moral debt. The firm needs to protect the alienable and inherent inalienable rights and claims of all stakeholders in order to maximize the value of the firm to society. Shleifer (2005), La Porta et al. (1997, 1998, 2001, 2004), Shleifer and Wolfenzon (2002), Glaeser et al. (2001) and Beck et al. (2000) observe that coun tries that have strong regulations and enforcement for the protection of stakeholders rights find improvements in development and public participation in their respective capital markets. Ultimately, moral debt cannot be totally monitored by legislation alone. It requires the power from the individual, the firm and the government to be just in their decisions and actions. Morrison (2004) observes that the series of frauds and the governments response to those frauds have serious and wide-ranging consequences to the stability of our financial system. Thus, it is necessary to ensure distributive justice in order to help in satisfying stakeholders moral debt claims through their alienable and inalienable rights. 4. The moral debt distribution model and value-resetting There are 6 assumption of the moral distribution model. Firstly, when there is a claim by the moral debt holder towards the liable firm, it will involve money of shareholders with everything remaining the same. Secondly, huge moral debt responsibility firm may have value to shareholders but may not to society because claims are redistributing. Thirdly, maturity date of the debt can be immediately and continuing due to the present of transferable right. Fourthly, whenever a firm exists, the total face value of the debt will not be zero. Fifthly, the debt claim might not be lawfully applicable. Lastly, through ethical behavior, value to society is maximized by firm when it distributes its wealth equally and residual claims are attained. Figure 1: The moral debt distribution payoff graph Based on Figure 1, typically, the value to society by firm is lesser than to shareholders when the moral debt is not evenly spreading out. The decision is within the market and lawfully acceptab le but immoral. So, it will not incur any external costs. It is non-Pareto efficient. Thus, consideration must be given before the firm realizes its obligation to the society. The market value of the firm (MV) is equal to equity plus debt. The value of the moral debt, DMD is equal to total debt, DT minus financial debt, DF. If the DMD is more than 0, the value to shareholder, VSH is more than to society, VSOC. Thus, firm can decrease the DMD to 0 when DT -DF and so VSH =VSOC. The VSH is maximized when the maximum cost to shareholder is 0 because of the limited liability status of the firm and moral debt that unfulfilled the lawful application. The VSOC is maximized when the maximum cost to society it is at -DT because of the total redistribution of claims. Figure 2: The moral debt distribution payoff graph (decrease the moral debt claims without any changes in share price). Based on Figure 2, it is more effective to decrease the moral debt when the firm evenly spreading out al l the claims. The decision is within the market, lawfully acceptable and moral. So, it will not incur any external costs. It is Pareto efficient. To decrease the moral debt claims, the VSOC will increase when the societys payoff move to the left to the societys new payoff, with everything remaining the same, because the firm meets its obligations. It will lead to a more optimal Pareto. The market value of the firm (MV) is equal to equity plus debt. The value of the moral debt before evenly spreading, DMD is equal to total debt, DT minus financial debt, DF. The value of the moral debt after evenly spreading, DMD is equal to total debt, DT2 minus financial debt, DF. The value to shareholders before evenly spreading is VSH and after is VSH2. The value to society before evenly spreading is VSOC and after is VSOC2. Figure 3: The moral debt distribution payoff graph (decrease the moral debt claims and resulted in the decrease in share price). Truthfully, when the firm meets its obli gation, it affects the residual claims available to shareholders. It will produce a value-resetting in the share price and so to the firms market value. Based on figure 3, the decision is within the market, lawfully acceptable and moral. So, it will not incur any external costs. It is Pareto efficient. The share price is affected when there is efficient competitive market at discounted future cash flows. With everything remaining the same, when the moral debt claim decreases from DT ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢DF to DT3 ÃÆ' ¢Ãƒâ€¹Ã¢â‚¬  Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢DF , the market value decreased from MV to MV3 because the firms equity revalue the firm at MV3 using the value-setting. There will be more even spreading of claims which resulted the movement of the societys payoff line to the left so that the value to society of the firm increases from VSOC to VSOC3 while the value of the firm to shareholders decreases from VSH to VSH3. The decrease in the value of the firm to shareho lders is not a loss but a value-resetting. In the figure, the firm is over-valued in value-resetting is due to the non-Pareto business decision. This decision benefited the large investors and not the society or stakeholders. Due to the fact that large investors rather maximize their own benefit than distributing maximum residual claims. If there is not any protection over the stakeholders, the social costs will be bear by the stakeholders as the benefit is the shareholders. Therefore, the risk can be covered by law and regulation by implying constraints on management decisions. This is when there are not any transferable or nontransferable rights, as the wealth is redistributed, at any near future time. The extent of the law and regulation will determine the capital market effectiveness. The risk can also be covered with the agency costs when the firms is nearly bankrupt to a stronger firm with higher risk investment. It forces the redistribution wealth to be transfers from stak eholders to shareholders. However, there will be no welfare loss if there isnt any wealth to redistribute. There are 2 situations where over-valued can incurred. First is when the moral debt obligation is not exercise. Thus, the firm will find a more controllable market value and equity value which lead to higher value to the society. The second event is when the firm has limited liability like the partnership. This is because unlimited liability firms have a better contract compliance and monitoring. Costs incurred for the law and regulation implied was fixed while the costs incurred during the market system cannot be fixed. The usage of this market system is to provide clear prices and express and accumulate information. Value-resetting is one of market system correction. It enables the firm inference the stakeholders moral debt claims to make ethical business decisions. 5.0 Business decisions, externalities and share price over valuation Externalities described an allocation of transferrable ownerships to other in a designed economy. It constitute of two components, a normal good and public good, the advantage or threat to others. Business decisions that take into consideration of moral requirement are distributive justice and others two justices in defending rights and deduce externalities. Governance interferes only happen when externalities risk cannot be offset in capital market. Externalities occur when private cost of firm cannot fully cover social costs of particular business decision. For the market efficiency, traders shall make rational judgment and utilize their property rights. Stakeholder must realize future benefit and costs to transfer any ownership and special oversight are needed to defending stakeholders right and to reduce redistribution of stakeholders claims. Firm value maximization cannot achieve with the presence of externalities in the firm value to society. When externalities incre ase, firm can obtain advantage from redistribute claims and further make an overvaluation to the firm share price. Shareholder will better off but on the other hand the society is worse off. In conclusion, firm can raise its share price from two approaches, by being Pareto or non-Pareto optimal. Pareto used ethical business decisions to allocate claims and apply value resetting of the firms equity. This can increase stakeholders value to maximize firm value to society. Non-Pareto optimal business decision by reallocation of stakeholders claims that increase the conflicts of interest and assist an over valuation of the firms equity. This may not provide benefit to shareholders but it may benefit selected group like management or majority shareholders, but this will eventually decrease the value of the firm to society. 6.0 Conclusion To maximize firm value to society, firms shall incorporate stakeholders moral requirement into business decisions, which do not have legal and financial control on transferable ownership in the firms. When shareholders, directors and governments realize the obligation of moral debt and go further beyond existing corporate governance, this will eventually increase the value of the firm to society.

Examining The Functional Connectivity Of A Whole Brain Atlas

Background: The brain is often considered the most complex organ in the human body. It is also the most difficult to understand, given the vast array of different functions spread throughout its mass and the interconnected functionality of its regions that makes subdividing it based on form or function a difficult task. Craddock, et al. (2012), in the article examined, attempt to produce a method for further examining the functional connectivity (FC) of the regions of the brain and subdivide them based on spatial positioning and function. Understanding FC in the brain can significantly improve understanding of many brain functions and the effect of outside stimulus of various parts of the brain. This examination will only be able to take place by creating an accurate whole brain atlas. This creation of a whole brain atlas, or a map of the brain separating it into regions of interest (ROI) based positioning and/or function, has typically been done via fMRI analysis of the brain co mbined with an anatomically based mapping procedure. This study seeks to use fMRI technology combined with an algorithm to create voxel clusters or ROI’s that optimize both spatial coherence and homogeneity in regards to the FC of the individual ROIs that can closely match of the results of a voxel-wise analysis, while improving on computation power required and interpretability. Clinical Significance: The usefulness of this technology and methodology can be found in both neurology researchShow MoreRelatedNokias Human Resources System144007 Words   |  577 Pagescollaboration partners and customers; our ability to manage efficiently our manufacturing and logistics, as well as to ensure the quality, safety, security and timely delivery of our products and services; our ability to source sufficient amounts of fully functional quality components, sub ­assemblies and software on a timely basis without interruption and on favorable terms; our ability to manage our inventory and timely adapt our supply to meet changing demands for our products; our ability to successfullyRead MoreOne Significant Change That Has Occurred in the World Between 1900 and 2005. Explain the Impact This Change Has Made on Our Lives and Why It Is an Important Change.163893 Words   |  656 Pagesquite an original take on the most extensively covered conflicts in human history and the decades of unprecedented global violence they framed. Morrow’s contribution here, as in his recent research and scholarship as a 6 †¢ INTRODUCTION whole, treats the two wars and their prehistory and aftermaths as genuinely global phenomena, not as conflicts among the great powers of Europe, the United States, and Japan, which has been the obsessive focus of most of the vast literature on this subject

Religious And Gender Prejudice Were Major Factors That...

A: To what extent can we say that religious and gender prejudice were major factors that caused the Salem Witch Trials? The Salem Witch Trials was the time period in which the community tried and burned women that were accused of practicing witchcraft. The trials could easily be blamed on the fear of the new type of ‘religion’. The witch trials consisted of mostly only women being tried and accused, it also started with a native american woman. The trials have been perceived as a infamous time in American history because they slaughtered 20 young women, while 200 of them were still accused (Christine Leigh Heyrman). However to an extent we could say that religious and gender prejudice was a major factor of the Salem Witch Trials. I have chosen to investigate the topic of the Salem Witch Trials because i believe it was not a popular choice for many, so i thought doing an investigation on it would shed some light on the topic, while keeping my essay interesting. Not only the fact that not a lot of people even wanted to choose it, not a lot of people understand the time period and the actions and beliefs that occurred during it. I wished to investigate the minds and lifestyle of the people back then to see and figure out why they would even believe in witches, and believe in them enough to convict and kill multiple women in such a short time period. The sources i have been using during my investigation were both off of the internet. One discussed the religious

Research Proposal of Challenges in Cyber Security in Business

Question: Discuss about the Challenges in Cyber Security in Business. Answer: Project Objective The main objective of the project is- To assess the challenges faced by the business organizations regarding cyber security. There are number of challenges faced by the business organizations which not only disrupts the business activities but also cause harm to overall business( Gabel, et al., 2015) Project Scope This project has wider scope for the business organizations. As the outcomes of the research will provide benefits to the business organizations. In the research the issues found ion the cyber security will be explored and the impact of the challenges on the business activities will also be identified. These exploration would be used by the business organizations to develop a plan for the privacy or security against cybercrimes or threats(Akhgar Brewster, 2016). As maintenance of security against the cyber threats is requisite for the business organization as these issues or challenges can have negative impact on the operations of business organization such as- disclosure of important data or information. Therefore this research project will be helpful for the business organizations. Literature Review The term cyber security can be defined as an act to protect the systems and content of information and communication technology. Challenges in the cyber security in the business organizations are the cyber-attacks. Cyber-attacks arises risks for the business organizations. Main aspects of the cyber - security risks are- threats, impacts and vulnerabilities. According to( Jahankhani, et al., 2015),risk management in context to information systems is determined as essential aspect for effective cyber-security. According to ( Li Clark, 2015), cyber risk raises fears of security failures and hack attacks which can endanger the global economy. In year 2015, a report in context to global risk was published by the WEF i.e. World Economic Forum, that stated, 90% of companies globally recognize they are not sufficiently prepared to defend themselves against the cyber - attacks. Due to cyber-attack companies are losing their customer data as well as information related to credit cards. Accord ing to ( Gabel, et al., 2015), in many business organizations, cyber criminals has stolen money from accounts and also hacked the system of company and to unlock the system again they had demanded ransom money. Importance of cyber security for business organization is broad, as the cyber - attacks can cause threat for the business. Because of the cyber - attack, business organizations can lost their information which is valuable for the company. As information plays an important role in the businesses, because to carry out business operations, information is required( Gabel, et al., 2015). In context to businesses, information about the financial transactions or statements, employees information, stakeholders information is required by the businesses to perform various activities. If this information is lost due to cyber-attack or the sensitive information is used by some other unauthentic user then image of the company can be lost. Business organizations requisites to set an information riskmanagement system to deal with the cyber risks which arise due to cyber-attacks. Themanagement system shall assess the security risk and then develop a policy or plan to deal with those identified risks. Information and communication technology should be protected by the business organizations via adopting measures for standard security and managing configurations and use of system( Gabel, et al., 2015). Unrequired functions should be disabled by the business organizations and updating of the security patches shall also be done within regular period of time. Business organizations can follow these measures to handle the cyber risk: Business organization shall consider malware protection, as the policies should be formulated which cover web browsing, email and personal devices usage. Besides this, antivirus software shall also be installed and scanning for malware shall be regularly done. The business organizations shall follow accepted principles for network design and also ensure the configuration of devices as per the security standards. User activities should be tracked or monitored by themanagement of businesses as well as authorization to access the private data shall not be given to low level employees. Types of cyber-attacks which can cause harm to the business are discussed below: S. No. Type of cyber attack Cause harm to business organization 1. Hacking Hacking can be defined as illegal intrusion into a network or computer system( Baylon, 2014). Hackers, by hacking the computers of business organization, can access to the sensitive information and use this information for their own purpose. 2. Dissemination of Malware (Malicious software such as- virus. Trojan`s. spyware, hoax etc.) Some software are designed in such way that can harm the business organizations, as the virus attacks can corrupt or delete the files and data in the computer system. 3. Phishing Phishers can cause harm to the business organization, as they can send mail to the employees which looks authentic but in real, but when the employee access to the link given in the mail can cause harm to the business as phishers can collect the private information like account number and passwords( Jahankhani, et al., 2015). 4. Network interference One of the challenge which can be faced by the business organizations in context to cyber security is disruption of network. This can cause harm for the business organization as transmission of data can be delayed. Research Questions The main questions associated with the research is: What are the challenges faced by the business organizations in cyber security? Some other questions which are linked with the primary question of the research are: What shall be protected by the business organizations? Why are intrusions so often effective Research Design and Methodology This research is both qualitative and quantitative in nature. As the data in qualitative and quantitative form will be collected for the research. Qualitative research Data collection- Qualitative data will be collected through the interviews. The interview will be done in such way so that information in descriptive form can be gathered. As the qualitative research lays more emphasis on decsrpitive data(Flick, 2014). Sampling technique- random sampling technique will be done to select the samples from whom the data will be gathered. Management of the IT company will be chosen for research`s purpose. Sample Size: Sample size for the research will be 30 employees of IT Company. Analysis of data- The descriptive data will be analyzed through an IT expert. Quantitative research Data collection- Quantitative data will be collected through the questionnaire. A questionnaire will be formulated in such way so that quantitative information or data can be gathered for the research. Questionnaire will provide data in form of numbers and figures( Vogt, 2011). Sampling technique- In order to select the samples, random sampling technique will be done from whom the data will be gathered. Samples for the research will be employee of the IT Company. Sample Size: Sample size for the research will be 50 employees of IT Company. Analysis of data: Quantitative data will be analyzed through the statistical techniques. Research Limitations This research will only be limited to the assessment of issues or challenges faced by the business organizations regarding cyber security. Emphasis will be laid on the security management of computers which are used in the business organizations. The project will only assess the challenges of cyber security faced by the business organization, mechanism to handle the challenges will not be offered through the project(Dwyer Bernauer, 2013). This research will particularly deal with components for intrusion detection of cyber security. In addition to this, the project will only notify the security challenges due to cyber-attacks or threats to the business organizations, further security plan could be developed by the management off the business organizations. Time Schedule (Research plan) The research activities are scheduled in following order: S. No. Activity Start Date End Date Total duration 1 Project Objective 2 May, 2017 4 May, 2017 3 Days 2 Project Scope 5 May, 2017 8 May, 2017 4 Days 3 Literature Review 9 May, 2017 18 May, 2017 10 Days 4 Research Question 19 May, 2017 20 May, 2017 2 Days 5 Research Design 21 May, 2017 26 May, 2017 6 Days 6 Research Limitation 27 May, 2017 30 May, 2017 4 Days 7 Total days for completion of activities - - 29 Days Conclusion Consideration of the challenges or the threats in the cyber security is crucial for the business organization in order to run their business or to carry out their activities of business sin smooth way. Challenges in the cyber security can harm the business and therefore it is requisite to develop plan for the managing the issues and challenges. It is being concluded that research is necessary to be performed in order to evaluate or assess those issue or challenges related with cyber security, so that management of business organization could take step against the problem caused due to cyber-attacks. References Baylon, C., 2014. Challenges at the Intersection of Cyber Security and Space Security. s.l.:Springer. Gabel, D., Liard, B. Orzechowski, D., 2015. Cyber risk: Why cyber security is important. [Online] Available at: https://www.whitecase.com/publications/insight/cyber-risk-why-cyber-security-important Jahankhani, H., Carlile, A. Akhgar, ,. ., 2015. Global Security, Safety and Sustainability. s.l.:Springer. Li, Q. Clark, G., 2015. Security Intelligence. s.l.: John Wiley Sons. . Vogt, W. P., 2011. SAGE Quantitative Research Methods. s.l.:SAGE. Akhgar, B. Brewster, ., 2016. Combatting Cybercrime and Cyberterrorism. s.l.:Springer. Dwyer, L. M. O. Bernauer, J. A., 2013. Quantitative Research for the Qualitative Researcher. s.l.: SAGE Publications. . Flick, U., 2014. An Introduction to Qualitative Research. s.l.:SAGE.