Literature Review Essay

They warned the investors not to buy unlisted shares, as Stock Exchanges do not permit trading in unlisted shares. Another rule that they specify is not to buy inactive shares, ie, shares in which transactions take place rarely. Themain reason why shares are inactive is because there are no buyers forthem. They are mostly shares of companies, which are not doing well. A third rule according to them is not to buy shares in closely-held companies because these shares tend to be less active than those of widely held ones since they have a fewer number of shareholders. They caution not to hold the shares for a long period, expecting a high price, but to sell whenever one earns a reasonable reward. Jack Clark Francis (1986) revealed the importance of the rate of return in investments and reviewed the possibility of default and bankruptcy risk. He opined that in an uncertain world, investors cannot predict exactly what rate of return an investment will yield. However he suggested that the investors can formulate a probability distribution of the possible rates of return. He also opined that an investor who purchases corporate securities must face the possibility of default and bankruptcy by the issuer. Financial analysts can foresee bankruptcy. He disclosed some easily observable warnings of a firm’s failure, which could be noticed by the investors to avoid such a risk. Preethi Singh3(1986) disclosed the basic rules for selecting the company to invest in. She opined that understanding and measuring return m d risk is fundamental to the investment process. According to her, most investors are ‘risk averse’. To have a higher return theinvestor has to face greater risks. She concludes that risk is fundamental to the process of investment. Every investor should have an understanding of the various pitfalls of investments. The investor should carefully analyse the financial statements with special reference to solvency, profitability, EPS, and efficiency of the company. David. L. Scott and William Edward4 (1990) reviewed the important risks of owning common stocks and the ways to minimise these risks. They commented that the severity of financial risk depends on how heavily a business relies on debt. Financial risk is relatively easy to minimise if an investor sticks to the common stocks of companies that employ small amounts of debt. They suggested that a relatively easy way to ensure some degree of liquidity is to restrict investment in stocks having a history of adequate trading volume. Investors concerned about business risk can reduce it by selecting common stocks of firms that are diversified in several unrelated industries. Lewis Mandells (1992) reviewed the nature of market risk, which according to him is very much ‘global’. He revealed that certain risks that are so global that they affect the entire investment market. Even the stocks and bonds of the well-managed companies face market risk. He concluded that market risk is influenced by factors that cannot be predicted accurately like economic conditions, political events, mass psychological factors, etc. Market risk is the systemic risk that affects all securities simultaneously and it cannot be reduced through diversification Nabhi Kumar Jain (1992) specified certain tips for buyingshares for holding and also for selling shares. He advised the investors to buy shares of a growing company of a growing industry. Buy shares by diversifying in a number of growth companies operating in a different but equally fast growing sector of the economy. He suggested selling the shares the moment company has or almost reached the peak of its growth. Also, sell the shares the moment you realise you have made a mistake in the initial selection of the shares. The only option to decide when to buy and sell high priced shares is to identify the individual merit or demerit of each of the shares in the portfolio and arrive at a decision. Carter Randal (1992) offered to investors the underlying principles of winning on the stock market. He emphasised on long-term vision and a plan to reach the goals. He advised the investors that to be successful, they should never be pessimists. He revealed thatthough there has been a major economic crisis almost every year, it remains true that patient investors have consistently made money in the equities market. He concluded that investing in the stock market should be an un-emotional endeavour and suggested that investors should own a stock if they believe it would perform well. S. Rajagopal. (1996) commented on risk management in relation to banks. He opined that good risk management is good banking. A professional approach to Risk Management will safeguard the interests of the banking institution in the long run. He described risk identification as an art of combining intuition with formal information. And risk measurement is the estimation of the size, probability and timing of a potential loss under various scenarios. Charles. P. Jonesl8 (1996) reviewed how to estimate security return and risk. To estimate returns, the investors must estimate cash flows the securities are likely to provide. Also, investors must be able to quantify and measure risk using variance or standard deviation. Variance or standard deviation is the accepted measure of variability for both realised returns and expected returns. He suggested that the investors should use it as the situation dictates. He revealed that over the past 12 years, returns in stocks,bonds, etc. have been normal. Blue chip stocks have returned an average of more than 16% per year. He warned that the investors who believe that these rates will continue in the future also, will be in trouble. He also warned the investors not to allow themselves to become victimised by â€Å"investment gurus†. Rukmani Viswanath (2001) reported that the Primary Dealers in Govt. securities are working on a new internal risk management model suited for the Indian market conditions. Theattempt is to lay down general parameters for risk perception. The Primary Dealers Association of India (PDAI) is formulating a set of prudential norms for ‘risk management practices’. While internationally the principles of risk management may be the same everywhere, the Association is of the view that they have to identify the relevant issues and apply those principles in the Indian context. It strongly argues that it must work on a model that can help to manage liquidity and interest rate risk. While the existing RBI guidelines on risk management cover mainly statutory risk, the PDAI hopes that its new risk management model will be able to perceive ‘real risk’. These new norms are expected to help gauge several issues like, whether a fall in the prices of securities or yields is a temporary or permanent situation etc. The areas the new norms are likely to address are the assessment of the liquidity situation and envisaging investor appetite for a specific instrument and their appetite for risk. According to thegovt. securities dealers, these norms are expected to help them hedge. FOOTNOTES 1. Grewal and Navjot Grewal, Profitable lnvestment in shares, Vision Books Pvt. Ltd. 36 Connaught Place, New Delhi 1984. 2. Jack Clark Francis, Investment – Analysis and Management, MC Graw Hill, International Editions, 1986. 3. Preethi Singh, Investment management, Himalaya PublishingHouse, Bombay Nagpur and Delhi,1986. . Lewis Mandell, Investments, Macmillan Publishing Company, New York, 1992. 5. Nabhi Kumar Jain, How to earn more from shares, Nabhi Publications, Delhi, 1992. 6. Carter Randall Non-stop ~winning from the stock market Vision Books, New Delhi, Bombay (1992). . 7. S. Rajagopal,. â€Å"Bank Risk Management – A risk pricing model†, State Bank of india, Monthly Review, VoI. XXXV, No. 11, November 1996, p. 555. 8. Rukmani Viswanth, â€Å"PDs working on Risk Management Model†, TIE Hindu, Business Lime, Daily, Voi. 8, No. 17, January 18,2001, p. 11

Cold War in the period 1945-53 Essay

â€Å"More a result of mutual misunderstanding than of expansionist policies by either the U.S.A or the U.S.S.R.† Discuss this view of the out break of the Cold War in the period 1945-53. This view of the outbreak of the Cold War in 1945-53 refutes the extremism of the orthodox and revisionist views, attesting a middle ground of â€Å"mutual understanding† that avoids appropriating blame to the policies of either superpower. However, the issue is less dichotomous than the hypothesis allows for. To call the Soviet Union’s foreign policy â€Å"expansionist† indicates that it has been interpreted as such, and is therefore subject to a possible misunderstanding of their motives for doing so. For example, Melvyn Leffler stresses the â€Å"reasonable criterion† when judging American and Soviet security demands, emphasizing that especially in the case of the Soviet Union, security was very much a reasonable imperative given their historical experience with invasions from contiguous states. In this case, Soviet policy may be defended as security-motivated, but was perceived by the U.S. as expansionist, based on the misunderstanding that the Soviet Union was entirely motivated by ideology. Conversely, Marc Thachtenberg defends the American point of view, arguing that Leffler’s interpretation understates the reality of Soviet threat, therefore justifying an increased American political and economic presence in global geopolitics (e.g. the Marshall Plan, 1947). Therefore, the Sovietization of Eastern Europe and the Americanization of the Western Bloc (both perceived as expansionist policies by the other) could be said to have arisen from mutual misunderstanding of each other’s motives. The period 1945-53 was replete with examples of both Soviet and American expansionism. Even as early as February 1945, Stalin had already made it clear at Yalta that territorial expansionism was to be one of his imperatives. By 1948, fully communist government presided over the states of Eastern Europe and the Berlin blockade of Soviet design on West Germany. A similar inclination was demonstrated in Turkey, Northern Iran and Korea. While the Soviet incursions into Iran have been defended as a desire only to control its oil fields (an objective also shared by the West) and pressure on Turkey may have been viewed as a matter of security. Robert Jevis points out that if either of these probes had succeeded, further Soviet gains would have been likely, a consideration that Stalin would hardly have missed. This suggests that Stalin’s approach to expansionism was opportunist rather than inexorably purposeful. In other words, he was driven by realpolitik rather than ideology. However, Nigel Gould-Davies insist that Stalin was â€Å"immersed in ideology†, citing the congruence of Stalin’s theoretical work, Economic Problems of Socialism, with the premises that Marx’s Critique of the Gotha Program. Further, in the case of Korea, while Western leaders and many later scholars, such as Alexander George; construe the attack on South Korea as evidence of Soviet expansionism. Recent evidence presented by Kathryn Weathersby contends that Stalin authorized the invasion solely because he was mistakenly convinced that the U.S.A would resist. The diversity of opinion demonstrates how easily a superpower’s policies could be misconstrued depending on how motives were perceived. In the U.S, thanks to the ominous views of Soviet leadership espoused by George Kennan, leaders were increasingly convinced of Stalin’s desire for world revolution, and inaccurately equated Soviet expansionism with this goal without considering, for example, Soviet security needs. Equally, apprehension in the U.S Administration was mirrored on the Soviet side. Stalin understandably perceived the Marshall Plan as a â€Å"blatant American device† for gaining control of Western and (if not worse) Eastern Europe. Concerning Korea, Anotaly Dobrynin asserts that by the 1950s, Stalin â€Å"saw U.S. plans and actions as preparations for an all out war of unprovoked aggression against the Soviet Union.† The rollback policy did little to assuage this fear, and even thought its pursuit by General MacArthur proved to be an unfortunate divergence from the Truman Administration policy, the Soviets had already been convinced of American expansionism. It can be seen again, therefore, that mutual misunderstanding on both sides led to perceptions of the other’s policies as being expansionist, which in turn, sowed the distrust and reason from retaliatory action that set the Cold War in motion. In conclusion, barring other factors, the outbreak of the Cold War in 1945-53 was more a result of mutual misunderstanding than of expansionist policies by either superpower.

Tesco CSR Essay Example | Topics and Well Written Essays - 500 words

Tesco CSR - Essay Example F during charity â€Å"Change for Good.† The phrase was used for children charity and hence it was private but Tesco used it anyway for its own commercial purposes. This led to a lot of controversy and it ultimately damaged the income stream for the children which did not sit well with a section of the public and damaged a bit the reputation of the company. The issue is meat supply from its suppliers. After research unveiled that some of the beef burgers from Tesco contained 29% horsemeat and others pig meat, the reputation of the company dropped instantly. This was not the fault of Tesco but rather of its suppliers who supplied the meat to the numerous Tesco stores countrywide. Sales of frozen burgers and frozen ready- made food has dropped significantly. The confidence of the customers on the meat and food being sold in the stores has dwindled and the effects being experienced in the sales (Wall, 2013). Tesco has to restore the confidence of its customers once again. This should be preceded by having to seek new suppliers of the meat as well as having to monitor these suppliers to ensure that the meat being provided and the products in general are up to human consumption standards (Butler, 2013). The legal team also has to work extra hard to prevent law suits from customers on the products. Briefly analyse what happened applying theories on organisational ethics theory, corporate governance CSR concepts, stakeholder applications & reputation management concepts/metrics. Not all of them are required, but the more you apply and reference inside the PR crisis/issue the better it is. Demonstrate application of relevant theories. This is an ethical matter and all stakeholders in conjunction with the management must come up with the best strategies to handle the matter and prevent a repeat in future (Philips, 2003, pg. 87). The reputation of the company must be taken care of if CSR is to work in favour of the company and people are to accept it. To ensure quality

Question and Answer Essay Example | Topics and Well Written Essays - 500 words

Question and Answer - Essay Example For example, large fonts get associated with adult characters or the volume of voices that are ‘heard’ by the children. Children are able to articulate the non textual content of the books through their observation and interpretation which they express by enacting the roles of the characters. Thus, postmodern picture books help to create three dimensional interactive narration from two dimension picture books where the gap between the fantasy and reality considerably reduces. It suggests that postmodern picture books greatly influence children’s power of critical thinking, imagination, theatrical ability to enact the role of characters of the story and significantly impact the development of cohesive process of constructing meaning to pictures. The conventional picture books were confined to traditional fonts and pictures where children’s ability to interact was considerably restrained, both in terms of interaction and construction of new meaning to the narration. The postmodern picture books are highly creative in their content and pictorial narration which often provokes the reader to respond in constructive imagery. Its pictorial narration is often interspersed with characters from different stories which forces children to construct new meaning to the text. Most importantly, it also hugely facilitates in the integration of children coming from diverse socio-cultural background. Thus, it is not only highly interactive but also defies con ventional narration of pictorial text by its innovative modeling of characters that draws out responses from children in myriad ways. Azripe, E. & Styles, M. with Cowan K., Mallouri, L. & Wolpert, M. (2008) ‘The voices behind the pictures: Children responding to postmodern picturebooks’, in S Pentaleo & L. Sipes (eds.), Postmodern Picturebooks: Play, Parody and Self Referentiality, Routledge, London, pp.

Shinto Reflection Essay Example | Topics and Well Written Essays - 750 words

Shinto Reflection - Essay Example Shinto Shrine is one of the most common sacred spaces among religious groups. It is a sacred space designed for worship purpose of the Shinto groups of Japan. Shinto is an indigenous religious group professed by the people of Japan and it involves action-based religious beliefs and practices (Breen and Teeuwen 2000). Ritual practices are practiced by this religious group diligently to connect between modern Japan and the ancient Japan. It is a traditional religion of Japan as opposed to modern Christianity, Islam and Buddhism. Shinto involves the worship of Kami, which refers to divinity, spirits or sacred essence. These sacred essences and divinities include animals, rivers, trees, rocks and places. Shinto people believe that people and Kami are inseparable (Hardacre 1986). Therefore, Shinto use the Shinto shrines to meet and worship the Kami as a way of demonstrating their sacred life and beliefs. The design of Shinto Shrines also shows the architectural style of Japanese history, which reveals values, beliefs and practices of the Shinto. At the front there is a Japanese gate consisting of two upright bars and two crossbars that show the separation between common space and sacred space (Hardacre 1986). These gates are known as torii, and they exist in twenty styles that match the buildings and the enshrined Kami and lineage. Therefore, the Shinto shrine reflects the sacred worship of Kami by the Shinto from the gate. The Shinto shrine also reflects the beliefs of the Shinto people who worship there through various symbolic and real barriers between the normal world and the shrine space.

Motivation in organization, in the eyes of B.F. Skinner Essay

Motivation in organization, in the eyes of B.F. Skinner - Essay Example In operant conditioning, Skinner shows that punishment dealt in any form severely affects an organism in a very negative manner and therefore must not be practiced. Applying this concept to education, Skinner believes that punishing a student, especially very young ones can bring about adverse effects in their behaviour in the future. If applied to Organisational behaviour, a leader or organizer within the group must keep in mind that the administration of punishment may or may not have negative repercussions to the members of the group if it is not done properly. Although punishment is allotted in school and in the workplace, Skinner believes that this does not promote the mental well-being of students and workers. He also believes that there is no such thing as "motivation", stating that this is just a by-product of punishment and that individuals learn and function more efficiently if they are let to discover things by themselves assuming that they are provided with all the materi als they need. This work relates Skinners psychological concepts to organisational behaviour, how his concepts affect the group as a whole and the members within the group. Burrhus Frederic Skinner was born on March 20 1904 in Susquehanna, Pennsylvania. He went to Hamilton College taking up a Bachelor of Arts degree in English Literature circa 1926. He tried to pursue a career in writing fiction after he graduated from college. He chose to settle in Greenwich Village, but was later frustrated with his works, thinking that he can never make it right because he feels that he lacks the experience and passion to write. He the chance upon the philosophical works of Bertland Russel which also discusses the behaviourist theories of psychologist John B. Watson who would later on inspire B.F. Skinner to study psychology. Skinner was so inspired with Watson and his work that he began to express much interest in the behaviour of people around him. His interest in psychology was also reflected in his fictional work, but he eventually decided to stop writing and study Psychology at Harvard. He received his doctorate degree in psychology at Harvard, working afterwar ds as a university researcher until 1936. He then went on to teach psychology at the University of Minnesota at Minneapolis and in the University of Indiana, but found himself back at Harvard in 1948 as a professor of psychology. He was a rather decorated educator having received awards like the Medal of Science in 1968, presented to him by no less than President Lyndon B. Johnson. Himself. Three years past and he was awarded with the Gold Medal of the American Psychological Foundation and was given the Humanist of the Year Award of the American Humanist Association in 1972. Eight days before his death in 1990, he became the first recipient of the Citation for Outstanding Lifetime Contribution to Psychology by the American Psychological Association (Wikipedi, 2006a; Wikipedia, 2006b). Being the author that he is, B.F. Skinner has published numerous books about psychology and fiction. Among these are: Walden Two in 1948, Science and Human Behaviour in 1953, Verbal Behaviour in 1957 a nd both Freedom and Dignity and About Behaviourism in 1971 (Tsicali, 2003). B, F. Skinner's

Do Children Benefit When Their Teacher Speaks Their Second Language Research Proposal

Do Children Benefit When Their Teacher Speaks Their Second Language - Research Proposal Example This report talks that biculturalism refers to a process wherein individuals learn to function in two distinct socio-cultural environments: their primary culture, and that of the dominant mainstream culture of the society in which they live. Setting these two worlds apart is their language. Language barriers not only hinder or slow down the learning process, it also inhibits the child’s socializing capabilities. There is a sense of alienation that sets in, inside the classroom that manifests in myriad ways, like aggression, extreme shyness and the eventual drop out situation. This essay makes a conclusion that teachers who understand and appreciate culturally different strengths and funds of knowledge are more likely to provide enriching and responsive learning environments that celebrate and capitalize on children’s cultural differences. As students themselves, most teachers were socialized in mainstream schools for at least 12 years and often attended teacher preparation programs grounded in the mainstream culture. Beginning the journey toward increased cultural competence requires teachers to rethink their assumptions and consider life’s issues through the lenses of people who come from cultural backgrounds different from their own. Teachers cannot hope to begin to understand who sits before them unless they can connect with the families and communities from which their children come. To do that it is vital that teachers and teacher educators explore their own beliefs and attitudes about non-white and non-middle-class people.

CONCEPTUAL ANALYSIS Essay Example | Topics and Well Written Essays - 2250 words

CONCEPTUAL ANALYSIS - Essay Example Conceptual Graphs (CG) were central versions of conceptual structures that were meant to be psychologically sensible, semantically triggered, logically solid, and computationally efficient (Sowa, 1984). Thus, conceptual graphs provided a visual representation of logic derived from linguistic networks of AI and other graphs. Sowa’s book provided a structure for future researchers to build upon in the scope cognitive science and the significance of reasoning laying down the foundations of AI. The CG provided a mathematical notation of knowledge helping to logically represent cognitive linguistics. Reasoning plays a significant role in weighing out different operators so as to manipulate it. The various principles of CG representation require the presence of psychologically sensible operations for perception, reasoning, and linguistic comprehension. Sowa (1984) has explained how reasoning works in computational systems as memory structures are organized in a way so as to employ the reasoning processes. CG again, visualize the graphic logical structure, in this case allowing for deductions to be made in a realistic manner. In trying to break down any cognitive issue, conceptual analysis lends itself to the inference of logical conclusions. Conceptual analysis and especially, cognitive graphs have helped process natural languages, where the mapping and visualization is done and in a systematic logical way thereby building the cognitive capacities of computational systems. Using the foundational structures of conceptual analysis along with other philosophical concepts, Sowa (1984) analyzes languages in terms of semantics, syntax, linguistics, and human language abilities. By delving deep into the development of linguistic capacities, he attempted to analyze the language perspective. Sowa (1984) also gives brief references to Augmented Transition Networks (ATNs) a graphical structure used in defining languages. However, no deep discussion is

SAAB's Cash Flow Problems Coursework Example | Topics and Well Written Essays - 1500 words

SAAB's Cash Flow Problems - Coursework Example This is where the concept of fair market value and forced sale value becomes important (Curtis, 2011, 1). Discussion Business failure can occur for various reasons ranging from legal, political and economic factors that are beyond an individual firm’s control, to internal factors like cash flow problems, manufacturing and selling difficulties and lack of firm orders on which to base production capacity. If a business finds it difficult to even break even and pay its own operating, selling and distribution costs, it can either look for a partnership, being rescued through a Government or private bailout, being acquired by a more stable entity or file for bankruptcy. Sadly this is what happened with SAAB, after its struggling Automobile Division was taken over by General Motors in 1990. But in the aftermath of the 2008 recession and subsequent bailout of General Motors itself by the American Government, SAAB Automobile Division was sold off to Spyker Cars N.V. with the aid of a Russian sponsor in 2010. Spyker had subsequently been renamed Swedish Automobiles. However, the purchase and operation of SAAB Automobiles proved too heavy for Spyker to manage because Spyker was a small firm and taking over SAAB had drained their cash position as well as tested their managerial capabilities to the maximum. After a purchase offer by a Chinese firm was thwarted by former owner General Motors (they were against the technology being available to Chinese manufacturers) the company filed a bankruptcy petition and started looking for a buyer. Various offers and counter offers were made from China Youngman, Tata Motors, Mahindra & Mahindra, Koenisegg etc. The company could only produce between 20,000 and 40,000 vehicles at its manufacturing plants in Mexico and Sweden. The financial meltdown did not allow it to take advantage of the Chinese demand because it cancelled its plans to expand into new markets due to low cash position, paucity of credit and economic uncertaintie s. Various episodes of being unable to pay worker salaries and even to pay suppliers for materials repeated themselves in 2011. For example, July salaries were paid at the last minute on July 26; August salaries were paid through equity insurance as Gemini Fund purchased 5 million shares in SAAB. September salary payments also seemed to be in jeopardy. The Swedish Enforcement Administration has been monitoring SAAB in case of failure to meet creditor’s claims. The company Union has also threatened to go on strike because of salary payment difficulties that occurred three times in 2011. So we see that even financing from potential buyers had to be resorted to so that the company could be kept afloat (www.swedecar.com). It must be admitted that the lack of cash flow emerged from an apparent lack of attention to the production and marketing mix as well. Everyone knows that when you are trying to put a company or a brand name back on its feet, a sizeable amount of money must be s pent on advertising and press relations, creating hype and curiosity so that buyers are attracted to the upcoming offerings (Kotler & Keller,

Politics in Nigeria Essay Example for Free

Politics in Nigeria Essay Is there any lesson to be learnt in the war on terror where the proponents vowed never to dialogue or negotiate with terrorists, only to now realize, after the demise of thousands and loss of billions of dollars, that dialogue is the only option left for a lasting peace in Iraq and Afghanistan? Do we see such favour and sensationalism by the press on these botched attempts as we witness when the culprits happen to be Muslims? What would have happened if those Christians had succeeded in carrying out the blast? In a nation where the press in mainly in the hands of people of a particular faith, it is hard to be neutral in their reportage of these kinds of events; especially if it reinforces a stereotype and serves a hot selling item of news. John Akpava was caught with weapons at a Ministerial Press Briefing held at Radio House, Abuja. What would the press have done with this story if John Akpava were a Muslim? A ‘suicide’ bomber was allowed into the premises of the Church of Christ in Nigeria (COCIN), Jos, by a fellow member of the church, who detonated explosives that led to the death of 8 persons; 38 others were seriously injured. The Sun Newspaper of Tuesday, March 6th, 2012 reported that the said Boko Haram suicide bomber was identified by The Defence Headquarters (DHQ), as Mr. Adams Joseph Ashaba, ‘who allegedly masterminded the bombing of the Church of Christ in Nigeria (COCIN) in Jos, the Plateau State capital on February 26, disclosing, that he was actually a member of the Church.’ In another report on Daily Trust of Monday, February 27th, 2012, 8 members of the same (COCIN) were arrested this time in Bauchi with explosive devices desiring to set ablaze the church. Their arrest was almost thwarted by some Christians, but for the timely intervention of the Police. The above examples and that of the arrest of Augustine Effiong of Akwa Ibon origin who was reported by Thisday of May 21st, 2012, to have confessed his involvement in the BUK bombings, should make Muslim and Christian leaders realise that we are all in this together, and that we should work in harmony to bring about workable solution to the problem of insecurity in Nigeria. We have to do this. The problems of this country could only be solved by Nigerians. Yes, we can listen to good advice from abroad, and learn from other people’s experiences on similar matters. The ambivalence of the sacred is not to be seen as a bad thing. A polarised world is the one which should be strange. What we hold dear are not the same; our understanding of who God is and what His Laws are is also varied and diverse. The only thing we can firmly attest to as people is that we are brothers in humanity. The multiplicity of religions is a manifestation of our diverse backgrounds and reasoning. While some are content to worship the air and trees; others worship a fellow being as god. Look at Christianity and Islam for example: In either faith, we have hundreds of sects and variants. Each sect or variant in turn has its own idiosyncrasies and modes of worship and body of beliefs. The realisation that every time you are looking at the number 6 on a table, another sees the number 9 across that table helps to devise means to study and tolerate conflicting ideologies. While Muslims have been stereotypically dubbed as violent, Christians have had their share of stereotypes too. A typical uninformed Muslim thinks all Christians are Crusaders, trying to snuff out the light of Islam. He detests the Christians in his surroundings and distrusts them. When he meets the right Christian, he is confused and disorientated. He asks more and learns; he deepens his understanding and the shallowness of undue hate goes away. We also have stories of Christians referring to Muslims as idolaters and heathens who slaughter a ram every year to their god. One of such ignoramuses even wrote a book he titled â€Å"Who is This Allah?† He used that rare opportunity to show just how ignorant he is. The average uninformed Christian distrusts and despises the Muslims. The irresponsible journalism tactics employed by some media houses have also helped fuel the problem. The annual holidays connected to the Christian faith given by the Federal Government and most state governments are the Christian New Year, Good Friday, Easter Monday, Christmas and Boxing Day. We also have the weekly holidays of Saturday and Sunday to enable them go and worship. On the Muslim side we have the yearly holidays of Eidul Adha, Eidul Fitr and Mawlidun Nabiyy. The Osun state governor decided to give the Muslims their right by making 15th November, which corresponds to 1st Muharram a public holiday. Objectively, no one should have any issues with that; after all, are citizens are equal and what is sauce for the goose is sauce for the gander; but alas! That was not to be! The Christain owned Punch newspaper wrote an editorial condemning it and saying Nigeria is secular. How convenient! Muslims say he was sent by God as a messenger, bearer of glad tidings and warner against the impending doom of the end of time. They revere him and truly believe in him. They do not elevate him to a rank above prophethood. Any attack on his personality is an affront on their faith. The Muslims believe that Jesus (or ‘Eesa) the son of the Virgin Mary is alive, never died or resurrected, ascended to the heavens until his return, is a great prophet who was born in one of the four ways God perpetuates life. Any insult on him is an affront on the Muslim faith and any who disbelieves in him is not a Muslim. The Christians have two main beliefs about him. One says he is in fact God, Lord and Saviour; a part of a triune while the other contends that he was sent by God but lesser than God. These are clearly opposing views about the same people! Do we go out and persecute those who do not share the same sets of beliefs with us? Only a fool will answer in the affirmative! This madness must stop, and to stop it, we must know ourselves and what we hold dear better; that is no fool’s calling. We know and believe that if more of us know what you and I know today and if more are willing to practise our faiths to the letter, there will be little or no bloodshed. Over centuries Muslims and Christians and Jews have been murdered for the simple reason that they belong to a different faith; we can and must stop it.

Theories of Merger and Takeover Waves

Theories of Merger and Takeover Waves Merger Wave The American economy experienced two great takeover waves in the postwar period, first in the 1960s and the second in the 1980s. Both waves had a deep affect on the structure of corporate America. The main trend in the 60s was diversification and conglomeration. In contrast the 1980s takeover reversed the previous process and brought US corporations back to specialization. In this respects, the last thirty years were a roundtrip for corporate America. This paper is an overview of the salient features of the two takeover waves. 1.1 The 1960s Conglomerate Merger Wave The merger wave of the 1960s was the major since the turn of the century (Stigler, 1968). A typical characteristic of the 1960s transaction was a friendly acquisition, frequently for stock, of a smaller private or public firm which was outside the acquiring firms main line of business. During this period unrelated diversification was widespread among the large companies. Rumelt (1974) has reported that the fraction of single business companies in the Fortune 500 decreased from 22.8% in 1959 to 14.8% in 1969. Further, the portion of conglomerates with no dominant businesses increased to 18.7% from 7.3%. There was also a considerable move to diversification among companies that retained their core business. The driving force behind the 1960s wave was high valuations of company stocks and large corporate cash flows. However the management was unwilling to pay out the high cash flows as dividends, and on the other hand able to issue equity at attractive terms therefore, turned their atte ntion to acquisitions (Donaldsoni. 1984).Dividends were considered as a complete waste, and acquisitions as a very attractive way to conserve corporate wealth. There are two sets of arguments used to explain why companies diversify. The first set argues that firms diversify to increase shareholder wealth. A number of authors have discussed different aspects of diversification that can potentially raise shareholder wealth. Williamson (1970), suggest that firms diversify to beat imperfections in external capital markets. Through diversification, managers create internal capital markets, which are less prone to asymmetric information problems. Lewellen (1971), argues that conglomerates can carry on higher levels of debt since corporate diversification reduces earnings variability. if conglomerate firms are more valuable than companies operating in a single industry If the tax shields of debt increase. Shleifer and Vishny (1992), state that conglomerates may have a higher debt capacity since they can sell assets in those industries that suffer the least from liquidity problems in bad states of the world. Finally, Teece (1980) argues that divers ification leads to economics of scale. The second set of arguments states diversification as a product of the agency problems between shareholder and managers. Amihud and Lev (1981) argue that managers follow a diversification strategy to protect the value of their human capital. However, Jensen (1986) suggests that companies diversify to increase the private benefits of managers. Similarly, Shleifer and Vishny (1989) suggest that managers diversify because they are better at managing assets in other industries. Thus, diversifying will make skills more indispensable to the firm. 1.2 The 1980s Merger Wave Form a longer historical perspective, Golbe and White (1988) presented time series evidence of U.S. takeover activity from the late 1800s to the mid-1980s. Their findings have suggested that takeover activity above 2 to 3 percent of GDP is unusual. However, the greatest level of merger activity occurred around 1980s, at roughly 10 percent of GNP. By this measure, takeover activity in the 1980s is historically high. The size of the average target in the 1980s had increased extremely from the modest level of the 60s. By 1989 28%, of Fortune 500 companies were acquired and many transactions, particularly the large ones, were hostile. Further the medium of exchange in takeovers was cash rather than stock, they were characterized by heavy use of leverage. Firms were purchased by other firms by leveraged takeovers by borrowing rather than by issuing new stock or using solely cash on hand. Other firms restructured themselves, borrowing to repurchase their own shares. The 80s was also characterized by latest forms of control changes, which included bustup takeovers. Bustup takeovers involved the sell off of a substantial fraction of the targets assets to other firms. (Bhagat, Shleifer, and Vishny, 1990; Kaplan, 1997). 2 Merger Motives The following sections will explain the motive behind the two merger waves. 2.1 Managerial Motives Agency theory predicts that unless managers are strictly monitored by large block of shareholders they will certainly act out of self-interest. Amihud and Lev (1981) have provided proof that unless closely monitored by large block shareholders managers will attempt to reduce their employment risk through diversification. Lane et al.(1998) in this study have reexamined Amihud and Lev findings about agency theory Using a sample of 309 US firms that diversified between 1962 1970, from the Federal Trade Commission (FTC) Statistical Report on Mergers and Acquisitions (1976). This study falls in the third broad category[1] of agency studies. However this analysis only examines the strategic behaviors of managers when they are not under siege and are also not in a situation, in which their interests are clearly in conflict with those of shareholders. Specifically, firms without large block shareholders are expected to engage in more unrelated acquisitions and show higher levels of diversif ication than firms with large block shareholders (Jensen and Meckling (1976)) Using Multiple Regression, the study found no evidence for the standard agency theory predictions that management controlled firms are linked with strategically lower levels of diversification and lower levels of returns than are firms with large block shareholders. It was found that Ownership structure and diversification are largely independent constructs. Thus, managers may be are worthy of more trust and autonomy than what the agency theorists have prearranged for them. Rather than seeking to restrict managerial discretion through extreme oversight, a more balanced approach by principals is needed. Some safeguards are essential as conflicts of interests between managers and shareholders do arise in certain situations, therefore, the assumption that such conflicts dominate the day-to-day management is not realistic. Matsusaka,(1993) takes a deep look at the astonishingly high pre-merger profit rates of target companies during the conglomerate merger wave. The main goal of the study is to assess how important was managerial discipline as a takeover motive. The analysis uses an extensive data set of 806 manufacturing sector acquisitions that took place in 1968, 1971 and 1974. The sample was collected from New York Stock Exchange listing statements. Sample of 609 observations was taken from 1968, 117 from 1971, and 129 from 1974. The results did not differ in any vital way by year, so observations from the three periods were pooled. Because antitrust enforcement was strict in the late 1960s and early 1970s, it was safely assumed that the sample mergers were not motivated to increase market power Ravenscraft and Scherer (1987). This allowed the investigation to focus on a narrow set of merger motives. Profitability[2] throughout the study was measured as a rate of return on assets. The theory identified two basic characteristics of mergers motivated to discipline target management. First it wsa observed that the target was underperforming its industry and the only reason to discipline the managers was that they were not maximizing profit. It could be because of incompetence that they were pursuing their own objectives. The second, the target company had publicly traded stock and the only posibility to discipline management was by electing an appropriate board of directors. In this situation a takeover was necessary to effect a change as the diffused stock ownership resulted in free-rider problems. Owners can remove bad managers of privately owned firms, as they are closely held. The problem occurs in large publicly traded firms with diffuse ownership. The statistical results revealed that both public and private targets had extremely high profit rates prior to acquisition compared to their size classes and industries. Therefore, takeovers were not motivated to discipline target managers during the conglomerate merger wave. The second finding of the study is that public targets were not as particularly profitable as private targets. It was also found that the largest public targets had the lowest profit rates. A credible interpretation of the evidence is that managerial discipline may have been significant for just a small set of acquisitions that involved large publicly-traded targets. Matsusaka (1993) leaves the bigger question unexplained. Why buyers time and again sought high profit targets during the merger wave. There is a simple clarification, that high quality assets are generally favored to low quality assets, as high quality assets are more expensive. In addition to explaining why firms seek high-profit targets, an asset complementarity theory implies that firms tend to divest their low-profit divisions Palmer and Barber (2001) have determined the factors that led large firms to participate in the1960s wave. The theoretical approach, of the study conceptualizes corporate elites (managers and directors) as actors. However it is assumed that these actors have interests which have arisen from positions held in organizational and institutional environments, and from multidimensional social class structure. Often Acquisitions are deviant and innovative ways by which corporate these elites can increase their status and wealth. Corporate elite diversify to the extent that their place in the class structure provides them with the capacity and interest to augment their wealth and status in this way. The authors have examined how the firms top directors and managers class position influenced its tendency to employ diversification in the 1 960s. More specifically the following arguments on social status[3] have been tested empirically. Firstly, Firms run by top managers who attended an exclusi ve secondary school or whose family was listed in a metropolitan social register were less likely than other firms to complete diversifying acquisitions in the 1960s. Secondly, Firms run by top managers who were Jewish were more likely than other firms to complete diversifying acquisitions in the 1 960s. Thirdly, Firms run by top managers situated in the South or west were more likely than other firms to complete diversifying acquisitions in the 1960s. The study selected a sample of the largest 461 publicly traded U.S. industrial corporations from the Federal Trade Commissions Statistical Report on Mergers and Acquisitions (1976), between January 1, 1963, and December 31, 1968. This particular time period was chosen because as the merger wave took off at the end of 1962 and crested in 1968. The results of the study were found through count and binary regression models. The findings of the study are consistent with that of Zeitlin (1974). According to him top managers capacities and interests are shaped by their social class position. Corporate elite members differ in their social class position. It is this variation that influences the behavior of the firms they command. The results indicate that social club memberships and upper-class background influenced a firms propensity to complete diversifying acquisitions in the 1960s. Network embeddedness and status influenced acquisition likelihood in opposite directions. Corporations that were run by chief executives who were central in social networks but marginal with respect to status were more likely than other firms to complete diversifying acquisitions in the 1960s. Therefore, individuals with high status had small interest in adopting innovation. Corporate elites can inhibit the spread of an innovation when it threatens their interests. As observed by Hayes and Taussig (1967), One must never under estimate the moral suasion that the business and financial communities can bring to bear on those who engage in practices of which they disapprove. In this respect, the analysis provides additional evidence that intraclass conflict shaped corporate behavior during the 1960s merger wave. It seemed that in the 1960s, it was not concentrated ownership but, ownership in the hands of capitalist families that reduced a firms tendency to complete diversifying acquisitions. Further, as predicted by agency theory , concentrated ownership would lower acquisition rates most when in the hands of the CEO or other top managers, as opposed to outsiders, However it was found the reverse to be the case. Overall, there was very little support for any of the agency theory in the 1960s merger wave. Further, the results provided no support for several of the class-theory hypotheses. Firms headquartered in the South or West run or by Jewish CEOs did not have a greater propensity to complete diversifying acquisitions during the 1960s. The process of diversification of American firms reached its height during the merger wave of the late 1960s. Matsusaka(1993)evaluated the 1960s merger wave. In an attempt to do so the author has proposed a number of explanations that drove managers to diversify during the conglomerate merger wave. There are reasons to suspect that managers may have pursued a diversification strategy even when it impaired the shareholder. They may have entered new lines of business to protect their organization-specific human capital or establish themselves. On the other hand, they may have been pursuing size as an end and because of strict antitrust opposition to horizontal and vertical mergers they had to expand by buying into unrelated industries. The study has evaluated whether manager were diversifying for their own advantage or in the interest of shareholders returns .To do so the author inspected the effect of diversification on the value of his firms equity. Thus, if the value of a firm declined upon announcement of an acquisition, then its management was not acting to maximize shareholder wealth. One explanation for conglomeration stated in the study, stems from Managerial-Discipline theory. Firstly, Firms were taken over to discipline or replace their bad managers ie â€Å"Managerial-Discipline. Secondly, Managerial Synergy theory states that the bidder management wanted to work with target management, not replace it. In this case the acquirer management believed that the target management would complement to their skills. Therefore firm that had Managerial-discipline problem were likely to have had low profits, and on the other hand managerial-synergy targets were likely to have had high profits. Another explanation is that buyers were motivated by earnings-per- share (EPS) manipulation. This explanation states that conglomerates have a high price-earnings ratio (P/E). [4] Therefore the bidder management was bootstrapping, by buying firms with low P/Es. Construction of the dataset began with a list of mergers from the sample of 1968, 1971 and 1974 .The sample was identified from the takeovers from New York Stock Exchange listing statements and the results were presented through regression. The announcement-period return to the bidders shareholders was measured through dollar return, [5] .Regression of the dollar-return measure found that the return to a diversification acquisition was significantly positive. On average their shareholders enjoyed an $11.0 million value increase in value when bidders made a diversification acquisition,. This rejects the hypothesis that diversification hurt shareholders and is thus inconsistent with the idea that diversification was driven by managerial objectives. On the other hand, bidders who made related acquisitions cost their shareholders $6.4 million on average. Thus, the hypothesis that the markets reaction was the same to related acquisitions and diversification is rejected, suggesting that there was a market premium to diversification. Using descriptive statistical summaries it was found that both diversifying and horizontal buyers preferred to buy firms that were profitable. For both type of acquisitions the average operating profit was more than 5% in excess of the targets industry average. Therefore fame of high-profit targets argues against the importance of a managerial-discipline motive for both types of acquisition and in favor of a managerial-synergy motive. This is because Managerial-discipline takeovers should have been directed at low-profit firms, whose profitability needed improved. The motive was Managerial-synergy as the targets were takeovers were high- profit firms, this is because synergy-motivated managers were looking for good partners Matsusaka(1993). Another factor linked to the managerial theories is whether or not the targets management was retained.Top management is said to have been retained if it meet the following criteria. Firstly It was reported in the Wall Street Journal that the acquired firms management would continue to operate under the new management. Secondly, it was indicated in the buyers listing statement that the targets management would be retained. Lastly, when the merger took place at least one of the top three executives of the target firm was still managing the firm three years later from when the merger took place. According to the above mentioned definitions, 61.8% of the managers in the sample were retained and only 3.5% of the acquisitions fell in the Replaced category. The main finding is that buyers earned significantly positive announcement-period returns during the conglomerate merger wave when they made diversifying acquisitions. The hypothesis that conglomerates were driven by empire building or some other managerial objective can be rejected because such explanations imply value decreases to unrelated acquisitions. Another explanation of the conglomerate merger wave is that mergers were driven by an accounting trick rather than expected efficiencies. Therefore, investors watched EPS; when the EPS went up they bid up the price of the stock. According to this argument, Conglomerates, tended to buy companies with lower P/E ratios than their own in order to increase their EPS and boost their stock prices. There was no evidence that firms earned positive returns which inflated EPS in this way. The study indicated that early conglomerators earned significantly positive returns simply because they were first. They may have gained some rents to organizational innovation. Possibly the men who built the first conglomerates had a unique talent for diversification, which the market rewarded. Hubbard, Palia (1999), have examined the likelihood that internal capital markets were formed to alleviate the information costs associated with the less well-developed external capital markets of the time; that is, whether they were expected to create value by the external capital markets in the 1960s.In this paper, the authors have inspected a form of cross-subsidization that occurs when a financially unconstrained bidding firm takes over a financially constrained target firm and as a result forms an internal capital market.The study examined whether the external capital markets expected that the formation of internal capital markets in the 1960s were value-maximizing for the bidding firm. However, existing research has argued that internal capital markets can be value-enhancing. As argued by Geneen(1997), the financing and budgeting expertise that a firm possesses is not necessarily related to its degree of diversification. Accordingly, the internal capital market hypothesis for all acquisitions is tested. The study also tests the bootstrapping explanation for conglomeration in the 1960s, which takes place when firms with a high price-earnings ratio (P/E) took over low P/E target firms and fooled the stock market with an increased combined earnings-per-share. In the 1960s, external capital markets were less developed in terms of company-specific information production than in later years. The authors have classified company-specific information into two general categories. Firstly, production information; and secondly, financing and budgeting expertise. However, in this study information-intensive activities were introduced. This was because; it assists the manager to internally allocate capital across divisions of a diversified firm. It was suggested that diversified firms were perceived by the external capital markets to have an informational advantage, because external capital markets were less well developed at that time. Comparing it to the current decade, there was less access by the public to computers, data- bases, analyst reports, and other sources of company-specific information. Not only this there was less large institutional money managers and the market for risky debt was illiquid. The authors selected a sample of 392 acquisitions that occurred during the period from 1961 through 1970. Diversifying acquisitions were defined as those in which the bidder and target do not share any two- digit SIC code Matsusaka(1993), and related acquisitions as those in which they do share a two-digit SIC code. Further the Wall Street Journal was used for announcement date as the event date. Four measures of abnormal returns to the conglomerate bidding firm were calculated. These measures are as follows. Firstly, the usual percentage returns or the cumulative abnormal returns from five days before to five days after the event date. Secondly the percentage returns until date of last revision or the cumulative abnormal returns from five days before to five days after the date of the last revision (Lang et al. (1991)). Thirdly, the dollar returns or the percentage return times the market value of the bidder six days before the announcement (Malatesta(1983); Matsusaka(1993)). Lastly , the investment return defined as the change in the value of the bidder divided by the purchase price (Morck et al. (1990)). Tobins r ratio[6] is used as a proxy for a firms capital market opportunities. The evidence from these measures is mixed. Positive abnormal returns for all four measures were shown for related acquisitions. On the other hand, two of the four measures had shown statically significant positive abnormal returns for diversifying acquisitions in. Not only that diversifying acquisitions do not significantly earn less than related acquisitions in two of the four measures. Thus, evidence suggests, the capital markets believed acquisitions to be generally good for bidder shareholders during the 1960s. More significantly, it was found that when financially unconstrained buyers acquired constrained target firms, highest bidder returns were earned. Further, bidders generally retain target management, signifying that management may have provided company- specific operational information and the bidder on his part also provided capital budgeting expertise. Therefore, external capital markets expected information benefits from the formation of the internal capital markets. The study found no evidence in support of the bootstrapping hypothesis, as the coefficient on the dummy variable[7] was not statistically different from zero. This result is consistent with Matsusaka, (1993), who also finds no evidence for bootstrapping.Therefore, firms merged to form their own internal capital markets as there was a deficiency of well-developed external capital markets in the 1960s. Some firms apparently had an information advantage over the external capital markets and were expected to produce value in an internal capital market. In the 1960s diversified acquisitions were rewarded by financial markets, the informational advantage that acquiring firms appeared to possess was likely to be in the capital budgeting, allocation process and operational aspects of each division. Bidder firms generally retained the target management as it would facilitate them running the operational part of each target firm. The Motives discussed in the above mentioned articles are appealing; however evidence from the stock market suggests that shareholders preferred their firms to diversify. Using a data set from the 60s and early 70s, Matsusaka (1993) reported that, when the company announced an unrelated acquisition, the stock price of the bidder increased on average of $8 million. However, on the announcement of a related acquisition, the bidding firms stock price fell by $4 million. The difference between the two returns is quite significant. Thus it appears that investors fully believed that unrelated acquisitions benefited their firms relative to the alternatives. Thus the managers just did what the stock market told them to do that is to diversify. Evidence from 1980s stock market suggested that shareholders, again, liked what was happening. Shleifer, and Vishny (1992) found that in the 1980s, stock prices of the bidding firms rose when they bought other firms in the same industry, and fell with unrelated diversification. It is clear that the market disapproved unrelated diversification. Therefore it does not astonish that, in light of such market reception, managers stopped diversifying and did what the stock market directed them to do. 2.2 Legal Motives Matsusaka (1996) investigated whether the antitrust enforcement of the 1960s led firms to take on the diversification goal, by preventing them from expanding within their own core industries. If correct, diversification should have occurred more less frequently when small firms merged than when large firms merged since small mergers were less likely to have attracted antitrust attention. Further the author examined the diversification patterns in the United Kingdom, Canada, Germany, and France in the late 1960s and early 1970s, where none of these countries had legal restrictions on horizontal growth similar to those in the Unites States. The US Clayton Antitrust Act was the antitrust legislation in the postwar period (1950 Celler-Kefauver amendment to Section 7). The act, prohibited mergers that would substantially lessen competition, or tend to create a monopoly. This new law was used by the antitrust authorities and the courts to limit the number of mergers between vertically related and firms in the same lines of business. The strictness of the antitrust environment in 1968 is illustrated by the observation that in the earlier 12 years, all antitrust cases that reached the Supreme Court had been resolved in support of the government. The study indicates the following two implications. Firstly, large horizontal mergers were more liable to have been challenged on antitrust grounds than small horizontal mergers. Secondly mergers between unrelated firms were unlikely to have been blocked, regardless of size. Firms diversified in 1960s, since antitrust authorities prevented them from expanding in their home industries. Later when antitrust policy became less rigid in the 1980s, firms expanded horizontally, leading them to refocus on their core business. Stigler (1966) was perhaps the first to present evidence on the antitrust hypothesis, concluding that, the 1950 Merger Act has had a strongly adverse effect on horizontal mergers by large companies. The author selected a sample of 549 mergers (that took place in 1968) from the New York Stock Exchange. Results of the study were reported through Logit regressions .It was found that bidders were as likely to have entered new industries when they made small acquisitions as when they made large acquisitions, and small buyers were as likely to have diversified as large buyers. Further the total number of diversification acquisitions concerning small companies was high.Though, according to the antitrust hypothesis; diversification should have been widespread primarily in large mergers where same industry acquisitions were prohibited by tough antitrust enforcement. Secondly assembled international evidence indicated that diversification took place in many industrialized nations in the 1960s and 1970s, although restrictions against horizontal combinations were unique to the United States. Yet, most other industrialized Western nations[8] experienced diversification merger waves and general movements toward diversification in their largest companies (Chandler (1991)).Thus most of the evidence, is not consistent with the antitrust hypothesis, signifying that other explanations for corporate diversification should be emphasized not the anti trust hypothesis. Scholes and Wolfson (1990) state, that the changes in U.S. tax laws[9] in the 1980s had obvious affect on the desirability of mergers and acquisitions. However such transactions were not only motivated by tax factors but also non tax factors[10]. Tax laws can have number of affects on mergers and acquisitions , which can include the following capital losses, presence of tax-attribute carry forwards such as net operating losses , investment tax credits, and foreign tax credits, among others, that might be cashed in more quickly and more fully by way of a merger; the desire to step up the tax basis of assets for depreciation purposes to their fair market value; the desire to sell assets to permit a change in the depreciation schedule to one that is more highly accelerated. The authors in this study have examined the effect of changes in tax laws passed in 1980s on merger and acquisition activity in the United States. The authors selected the annual values of mergers and acquisitions from 1968 through 1987 in nominal dollars. The data source for nominal values was W. T. Grimm and Company for 1968-85 and Mergers Acquisitions (1987-88, rev. quarterly) for 1986 and 1987. Using time series analysis it was found that the dollar volume of merger activity between 1980-1981 increased from $44.35 billion to $82.62 billion (86%) in nominal terms. The percentage increase was approximately twice as large as the next largest percentage increase in annual merger and acquisition activity over the 1970-86 periods. There was spectacular increase in merger activity that began with the passage of the Economic Recovery Tax Act of 1981, however this was not the only merger wave that occurred in that time frame. Unusual merger activity was also witnessed in the 1960s. The termination of 1960s wave was accompanied by quite a few regulatory events that depressed such transactions. Firstly, the Williams Amendments had en larged the cost and difficulty of effecting tender offers. Secondly the issuance of Accounting Principles Board Opinions 16 and 17, forced many acquiring firms to boost depreciation expense, goodwill amortization and cost of goods sold. Thirdly the Tax Reform Act of 1969, made transferability of tax attributes (net-operating-loss carry forwards) more restrained. Therefore there was a sudden decline in merger activity from the peak in 1968. Relative to the tax benefits when the non tax benefits of the transaction were small, current management were the most efficient purchasers, as they had an advantage along the hidden information dimension. Therefore 1981 act had increased the incidence of cases in which non tax benefits were less than the common tax benefits of mergers and acquisitions. As a result, there was an increase in the number of transactions involving management buyouts. The annual dollar value of unit management buyouts between 1978-80 increased by a factor of 3, and by a factor in excess of 20 for the period 1981-86. The antitrust proposition mentioned above is appealing as one of the most important reason for diversification, during the 60s and 70s, which simply disallowed mergers of firms in the same industry, regardless of the effects of these mergers o Theories of Merger and Takeover Waves Theories of Merger and Takeover Waves Merger Wave The American economy experienced two great takeover waves in the postwar period, first in the 1960s and the second in the 1980s. Both waves had a deep affect on the structure of corporate America. The main trend in the 60s was diversification and conglomeration. In contrast the 1980s takeover reversed the previous process and brought US corporations back to specialization. In this respects, the last thirty years were a roundtrip for corporate America. This paper is an overview of the salient features of the two takeover waves. 1.1 The 1960s Conglomerate Merger Wave The merger wave of the 1960s was the major since the turn of the century (Stigler, 1968). A typical characteristic of the 1960s transaction was a friendly acquisition, frequently for stock, of a smaller private or public firm which was outside the acquiring firms main line of business. During this period unrelated diversification was widespread among the large companies. Rumelt (1974) has reported that the fraction of single business companies in the Fortune 500 decreased from 22.8% in 1959 to 14.8% in 1969. Further, the portion of conglomerates with no dominant businesses increased to 18.7% from 7.3%. There was also a considerable move to diversification among companies that retained their core business. The driving force behind the 1960s wave was high valuations of company stocks and large corporate cash flows. However the management was unwilling to pay out the high cash flows as dividends, and on the other hand able to issue equity at attractive terms therefore, turned their atte ntion to acquisitions (Donaldsoni. 1984).Dividends were considered as a complete waste, and acquisitions as a very attractive way to conserve corporate wealth. There are two sets of arguments used to explain why companies diversify. The first set argues that firms diversify to increase shareholder wealth. A number of authors have discussed different aspects of diversification that can potentially raise shareholder wealth. Williamson (1970), suggest that firms diversify to beat imperfections in external capital markets. Through diversification, managers create internal capital markets, which are less prone to asymmetric information problems. Lewellen (1971), argues that conglomerates can carry on higher levels of debt since corporate diversification reduces earnings variability. if conglomerate firms are more valuable than companies operating in a single industry If the tax shields of debt increase. Shleifer and Vishny (1992), state that conglomerates may have a higher debt capacity since they can sell assets in those industries that suffer the least from liquidity problems in bad states of the world. Finally, Teece (1980) argues that divers ification leads to economics of scale. The second set of arguments states diversification as a product of the agency problems between shareholder and managers. Amihud and Lev (1981) argue that managers follow a diversification strategy to protect the value of their human capital. However, Jensen (1986) suggests that companies diversify to increase the private benefits of managers. Similarly, Shleifer and Vishny (1989) suggest that managers diversify because they are better at managing assets in other industries. Thus, diversifying will make skills more indispensable to the firm. 1.2 The 1980s Merger Wave Form a longer historical perspective, Golbe and White (1988) presented time series evidence of U.S. takeover activity from the late 1800s to the mid-1980s. Their findings have suggested that takeover activity above 2 to 3 percent of GDP is unusual. However, the greatest level of merger activity occurred around 1980s, at roughly 10 percent of GNP. By this measure, takeover activity in the 1980s is historically high. The size of the average target in the 1980s had increased extremely from the modest level of the 60s. By 1989 28%, of Fortune 500 companies were acquired and many transactions, particularly the large ones, were hostile. Further the medium of exchange in takeovers was cash rather than stock, they were characterized by heavy use of leverage. Firms were purchased by other firms by leveraged takeovers by borrowing rather than by issuing new stock or using solely cash on hand. Other firms restructured themselves, borrowing to repurchase their own shares. The 80s was also characterized by latest forms of control changes, which included bustup takeovers. Bustup takeovers involved the sell off of a substantial fraction of the targets assets to other firms. (Bhagat, Shleifer, and Vishny, 1990; Kaplan, 1997). 2 Merger Motives The following sections will explain the motive behind the two merger waves. 2.1 Managerial Motives Agency theory predicts that unless managers are strictly monitored by large block of shareholders they will certainly act out of self-interest. Amihud and Lev (1981) have provided proof that unless closely monitored by large block shareholders managers will attempt to reduce their employment risk through diversification. Lane et al.(1998) in this study have reexamined Amihud and Lev findings about agency theory Using a sample of 309 US firms that diversified between 1962 1970, from the Federal Trade Commission (FTC) Statistical Report on Mergers and Acquisitions (1976). This study falls in the third broad category[1] of agency studies. However this analysis only examines the strategic behaviors of managers when they are not under siege and are also not in a situation, in which their interests are clearly in conflict with those of shareholders. Specifically, firms without large block shareholders are expected to engage in more unrelated acquisitions and show higher levels of diversif ication than firms with large block shareholders (Jensen and Meckling (1976)) Using Multiple Regression, the study found no evidence for the standard agency theory predictions that management controlled firms are linked with strategically lower levels of diversification and lower levels of returns than are firms with large block shareholders. It was found that Ownership structure and diversification are largely independent constructs. Thus, managers may be are worthy of more trust and autonomy than what the agency theorists have prearranged for them. Rather than seeking to restrict managerial discretion through extreme oversight, a more balanced approach by principals is needed. Some safeguards are essential as conflicts of interests between managers and shareholders do arise in certain situations, therefore, the assumption that such conflicts dominate the day-to-day management is not realistic. Matsusaka,(1993) takes a deep look at the astonishingly high pre-merger profit rates of target companies during the conglomerate merger wave. The main goal of the study is to assess how important was managerial discipline as a takeover motive. The analysis uses an extensive data set of 806 manufacturing sector acquisitions that took place in 1968, 1971 and 1974. The sample was collected from New York Stock Exchange listing statements. Sample of 609 observations was taken from 1968, 117 from 1971, and 129 from 1974. The results did not differ in any vital way by year, so observations from the three periods were pooled. Because antitrust enforcement was strict in the late 1960s and early 1970s, it was safely assumed that the sample mergers were not motivated to increase market power Ravenscraft and Scherer (1987). This allowed the investigation to focus on a narrow set of merger motives. Profitability[2] throughout the study was measured as a rate of return on assets. The theory identified two basic characteristics of mergers motivated to discipline target management. First it wsa observed that the target was underperforming its industry and the only reason to discipline the managers was that they were not maximizing profit. It could be because of incompetence that they were pursuing their own objectives. The second, the target company had publicly traded stock and the only posibility to discipline management was by electing an appropriate board of directors. In this situation a takeover was necessary to effect a change as the diffused stock ownership resulted in free-rider problems. Owners can remove bad managers of privately owned firms, as they are closely held. The problem occurs in large publicly traded firms with diffuse ownership. The statistical results revealed that both public and private targets had extremely high profit rates prior to acquisition compared to their size classes and industries. Therefore, takeovers were not motivated to discipline target managers during the conglomerate merger wave. The second finding of the study is that public targets were not as particularly profitable as private targets. It was also found that the largest public targets had the lowest profit rates. A credible interpretation of the evidence is that managerial discipline may have been significant for just a small set of acquisitions that involved large publicly-traded targets. Matsusaka (1993) leaves the bigger question unexplained. Why buyers time and again sought high profit targets during the merger wave. There is a simple clarification, that high quality assets are generally favored to low quality assets, as high quality assets are more expensive. In addition to explaining why firms seek high-profit targets, an asset complementarity theory implies that firms tend to divest their low-profit divisions Palmer and Barber (2001) have determined the factors that led large firms to participate in the1960s wave. The theoretical approach, of the study conceptualizes corporate elites (managers and directors) as actors. However it is assumed that these actors have interests which have arisen from positions held in organizational and institutional environments, and from multidimensional social class structure. Often Acquisitions are deviant and innovative ways by which corporate these elites can increase their status and wealth. Corporate elite diversify to the extent that their place in the class structure provides them with the capacity and interest to augment their wealth and status in this way. The authors have examined how the firms top directors and managers class position influenced its tendency to employ diversification in the 1 960s. More specifically the following arguments on social status[3] have been tested empirically. Firstly, Firms run by top managers who attended an exclusi ve secondary school or whose family was listed in a metropolitan social register were less likely than other firms to complete diversifying acquisitions in the 1960s. Secondly, Firms run by top managers who were Jewish were more likely than other firms to complete diversifying acquisitions in the 1 960s. Thirdly, Firms run by top managers situated in the South or west were more likely than other firms to complete diversifying acquisitions in the 1960s. The study selected a sample of the largest 461 publicly traded U.S. industrial corporations from the Federal Trade Commissions Statistical Report on Mergers and Acquisitions (1976), between January 1, 1963, and December 31, 1968. This particular time period was chosen because as the merger wave took off at the end of 1962 and crested in 1968. The results of the study were found through count and binary regression models. The findings of the study are consistent with that of Zeitlin (1974). According to him top managers capacities and interests are shaped by their social class position. Corporate elite members differ in their social class position. It is this variation that influences the behavior of the firms they command. The results indicate that social club memberships and upper-class background influenced a firms propensity to complete diversifying acquisitions in the 1960s. Network embeddedness and status influenced acquisition likelihood in opposite directions. Corporations that were run by chief executives who were central in social networks but marginal with respect to status were more likely than other firms to complete diversifying acquisitions in the 1960s. Therefore, individuals with high status had small interest in adopting innovation. Corporate elites can inhibit the spread of an innovation when it threatens their interests. As observed by Hayes and Taussig (1967), One must never under estimate the moral suasion that the business and financial communities can bring to bear on those who engage in practices of which they disapprove. In this respect, the analysis provides additional evidence that intraclass conflict shaped corporate behavior during the 1960s merger wave. It seemed that in the 1960s, it was not concentrated ownership but, ownership in the hands of capitalist families that reduced a firms tendency to complete diversifying acquisitions. Further, as predicted by agency theory , concentrated ownership would lower acquisition rates most when in the hands of the CEO or other top managers, as opposed to outsiders, However it was found the reverse to be the case. Overall, there was very little support for any of the agency theory in the 1960s merger wave. Further, the results provided no support for several of the class-theory hypotheses. Firms headquartered in the South or West run or by Jewish CEOs did not have a greater propensity to complete diversifying acquisitions during the 1960s. The process of diversification of American firms reached its height during the merger wave of the late 1960s. Matsusaka(1993)evaluated the 1960s merger wave. In an attempt to do so the author has proposed a number of explanations that drove managers to diversify during the conglomerate merger wave. There are reasons to suspect that managers may have pursued a diversification strategy even when it impaired the shareholder. They may have entered new lines of business to protect their organization-specific human capital or establish themselves. On the other hand, they may have been pursuing size as an end and because of strict antitrust opposition to horizontal and vertical mergers they had to expand by buying into unrelated industries. The study has evaluated whether manager were diversifying for their own advantage or in the interest of shareholders returns .To do so the author inspected the effect of diversification on the value of his firms equity. Thus, if the value of a firm declined upon announcement of an acquisition, then its management was not acting to maximize shareholder wealth. One explanation for conglomeration stated in the study, stems from Managerial-Discipline theory. Firstly, Firms were taken over to discipline or replace their bad managers ie â€Å"Managerial-Discipline. Secondly, Managerial Synergy theory states that the bidder management wanted to work with target management, not replace it. In this case the acquirer management believed that the target management would complement to their skills. Therefore firm that had Managerial-discipline problem were likely to have had low profits, and on the other hand managerial-synergy targets were likely to have had high profits. Another explanation is that buyers were motivated by earnings-per- share (EPS) manipulation. This explanation states that conglomerates have a high price-earnings ratio (P/E). [4] Therefore the bidder management was bootstrapping, by buying firms with low P/Es. Construction of the dataset began with a list of mergers from the sample of 1968, 1971 and 1974 .The sample was identified from the takeovers from New York Stock Exchange listing statements and the results were presented through regression. The announcement-period return to the bidders shareholders was measured through dollar return, [5] .Regression of the dollar-return measure found that the return to a diversification acquisition was significantly positive. On average their shareholders enjoyed an $11.0 million value increase in value when bidders made a diversification acquisition,. This rejects the hypothesis that diversification hurt shareholders and is thus inconsistent with the idea that diversification was driven by managerial objectives. On the other hand, bidders who made related acquisitions cost their shareholders $6.4 million on average. Thus, the hypothesis that the markets reaction was the same to related acquisitions and diversification is rejected, suggesting that there was a market premium to diversification. Using descriptive statistical summaries it was found that both diversifying and horizontal buyers preferred to buy firms that were profitable. For both type of acquisitions the average operating profit was more than 5% in excess of the targets industry average. Therefore fame of high-profit targets argues against the importance of a managerial-discipline motive for both types of acquisition and in favor of a managerial-synergy motive. This is because Managerial-discipline takeovers should have been directed at low-profit firms, whose profitability needed improved. The motive was Managerial-synergy as the targets were takeovers were high- profit firms, this is because synergy-motivated managers were looking for good partners Matsusaka(1993). Another factor linked to the managerial theories is whether or not the targets management was retained.Top management is said to have been retained if it meet the following criteria. Firstly It was reported in the Wall Street Journal that the acquired firms management would continue to operate under the new management. Secondly, it was indicated in the buyers listing statement that the targets management would be retained. Lastly, when the merger took place at least one of the top three executives of the target firm was still managing the firm three years later from when the merger took place. According to the above mentioned definitions, 61.8% of the managers in the sample were retained and only 3.5% of the acquisitions fell in the Replaced category. The main finding is that buyers earned significantly positive announcement-period returns during the conglomerate merger wave when they made diversifying acquisitions. The hypothesis that conglomerates were driven by empire building or some other managerial objective can be rejected because such explanations imply value decreases to unrelated acquisitions. Another explanation of the conglomerate merger wave is that mergers were driven by an accounting trick rather than expected efficiencies. Therefore, investors watched EPS; when the EPS went up they bid up the price of the stock. According to this argument, Conglomerates, tended to buy companies with lower P/E ratios than their own in order to increase their EPS and boost their stock prices. There was no evidence that firms earned positive returns which inflated EPS in this way. The study indicated that early conglomerators earned significantly positive returns simply because they were first. They may have gained some rents to organizational innovation. Possibly the men who built the first conglomerates had a unique talent for diversification, which the market rewarded. Hubbard, Palia (1999), have examined the likelihood that internal capital markets were formed to alleviate the information costs associated with the less well-developed external capital markets of the time; that is, whether they were expected to create value by the external capital markets in the 1960s.In this paper, the authors have inspected a form of cross-subsidization that occurs when a financially unconstrained bidding firm takes over a financially constrained target firm and as a result forms an internal capital market.The study examined whether the external capital markets expected that the formation of internal capital markets in the 1960s were value-maximizing for the bidding firm. However, existing research has argued that internal capital markets can be value-enhancing. As argued by Geneen(1997), the financing and budgeting expertise that a firm possesses is not necessarily related to its degree of diversification. Accordingly, the internal capital market hypothesis for all acquisitions is tested. The study also tests the bootstrapping explanation for conglomeration in the 1960s, which takes place when firms with a high price-earnings ratio (P/E) took over low P/E target firms and fooled the stock market with an increased combined earnings-per-share. In the 1960s, external capital markets were less developed in terms of company-specific information production than in later years. The authors have classified company-specific information into two general categories. Firstly, production information; and secondly, financing and budgeting expertise. However, in this study information-intensive activities were introduced. This was because; it assists the manager to internally allocate capital across divisions of a diversified firm. It was suggested that diversified firms were perceived by the external capital markets to have an informational advantage, because external capital markets were less well developed at that time. Comparing it to the current decade, there was less access by the public to computers, data- bases, analyst reports, and other sources of company-specific information. Not only this there was less large institutional money managers and the market for risky debt was illiquid. The authors selected a sample of 392 acquisitions that occurred during the period from 1961 through 1970. Diversifying acquisitions were defined as those in which the bidder and target do not share any two- digit SIC code Matsusaka(1993), and related acquisitions as those in which they do share a two-digit SIC code. Further the Wall Street Journal was used for announcement date as the event date. Four measures of abnormal returns to the conglomerate bidding firm were calculated. These measures are as follows. Firstly, the usual percentage returns or the cumulative abnormal returns from five days before to five days after the event date. Secondly the percentage returns until date of last revision or the cumulative abnormal returns from five days before to five days after the date of the last revision (Lang et al. (1991)). Thirdly, the dollar returns or the percentage return times the market value of the bidder six days before the announcement (Malatesta(1983); Matsusaka(1993)). Lastly , the investment return defined as the change in the value of the bidder divided by the purchase price (Morck et al. (1990)). Tobins r ratio[6] is used as a proxy for a firms capital market opportunities. The evidence from these measures is mixed. Positive abnormal returns for all four measures were shown for related acquisitions. On the other hand, two of the four measures had shown statically significant positive abnormal returns for diversifying acquisitions in. Not only that diversifying acquisitions do not significantly earn less than related acquisitions in two of the four measures. Thus, evidence suggests, the capital markets believed acquisitions to be generally good for bidder shareholders during the 1960s. More significantly, it was found that when financially unconstrained buyers acquired constrained target firms, highest bidder returns were earned. Further, bidders generally retain target management, signifying that management may have provided company- specific operational information and the bidder on his part also provided capital budgeting expertise. Therefore, external capital markets expected information benefits from the formation of the internal capital markets. The study found no evidence in support of the bootstrapping hypothesis, as the coefficient on the dummy variable[7] was not statistically different from zero. This result is consistent with Matsusaka, (1993), who also finds no evidence for bootstrapping.Therefore, firms merged to form their own internal capital markets as there was a deficiency of well-developed external capital markets in the 1960s. Some firms apparently had an information advantage over the external capital markets and were expected to produce value in an internal capital market. In the 1960s diversified acquisitions were rewarded by financial markets, the informational advantage that acquiring firms appeared to possess was likely to be in the capital budgeting, allocation process and operational aspects of each division. Bidder firms generally retained the target management as it would facilitate them running the operational part of each target firm. The Motives discussed in the above mentioned articles are appealing; however evidence from the stock market suggests that shareholders preferred their firms to diversify. Using a data set from the 60s and early 70s, Matsusaka (1993) reported that, when the company announced an unrelated acquisition, the stock price of the bidder increased on average of $8 million. However, on the announcement of a related acquisition, the bidding firms stock price fell by $4 million. The difference between the two returns is quite significant. Thus it appears that investors fully believed that unrelated acquisitions benefited their firms relative to the alternatives. Thus the managers just did what the stock market told them to do that is to diversify. Evidence from 1980s stock market suggested that shareholders, again, liked what was happening. Shleifer, and Vishny (1992) found that in the 1980s, stock prices of the bidding firms rose when they bought other firms in the same industry, and fell with unrelated diversification. It is clear that the market disapproved unrelated diversification. Therefore it does not astonish that, in light of such market reception, managers stopped diversifying and did what the stock market directed them to do. 2.2 Legal Motives Matsusaka (1996) investigated whether the antitrust enforcement of the 1960s led firms to take on the diversification goal, by preventing them from expanding within their own core industries. If correct, diversification should have occurred more less frequently when small firms merged than when large firms merged since small mergers were less likely to have attracted antitrust attention. Further the author examined the diversification patterns in the United Kingdom, Canada, Germany, and France in the late 1960s and early 1970s, where none of these countries had legal restrictions on horizontal growth similar to those in the Unites States. The US Clayton Antitrust Act was the antitrust legislation in the postwar period (1950 Celler-Kefauver amendment to Section 7). The act, prohibited mergers that would substantially lessen competition, or tend to create a monopoly. This new law was used by the antitrust authorities and the courts to limit the number of mergers between vertically related and firms in the same lines of business. The strictness of the antitrust environment in 1968 is illustrated by the observation that in the earlier 12 years, all antitrust cases that reached the Supreme Court had been resolved in support of the government. The study indicates the following two implications. Firstly, large horizontal mergers were more liable to have been challenged on antitrust grounds than small horizontal mergers. Secondly mergers between unrelated firms were unlikely to have been blocked, regardless of size. Firms diversified in 1960s, since antitrust authorities prevented them from expanding in their home industries. Later when antitrust policy became less rigid in the 1980s, firms expanded horizontally, leading them to refocus on their core business. Stigler (1966) was perhaps the first to present evidence on the antitrust hypothesis, concluding that, the 1950 Merger Act has had a strongly adverse effect on horizontal mergers by large companies. The author selected a sample of 549 mergers (that took place in 1968) from the New York Stock Exchange. Results of the study were reported through Logit regressions .It was found that bidders were as likely to have entered new industries when they made small acquisitions as when they made large acquisitions, and small buyers were as likely to have diversified as large buyers. Further the total number of diversification acquisitions concerning small companies was high.Though, according to the antitrust hypothesis; diversification should have been widespread primarily in large mergers where same industry acquisitions were prohibited by tough antitrust enforcement. Secondly assembled international evidence indicated that diversification took place in many industrialized nations in the 1960s and 1970s, although restrictions against horizontal combinations were unique to the United States. Yet, most other industrialized Western nations[8] experienced diversification merger waves and general movements toward diversification in their largest companies (Chandler (1991)).Thus most of the evidence, is not consistent with the antitrust hypothesis, signifying that other explanations for corporate diversification should be emphasized not the anti trust hypothesis. Scholes and Wolfson (1990) state, that the changes in U.S. tax laws[9] in the 1980s had obvious affect on the desirability of mergers and acquisitions. However such transactions were not only motivated by tax factors but also non tax factors[10]. Tax laws can have number of affects on mergers and acquisitions , which can include the following capital losses, presence of tax-attribute carry forwards such as net operating losses , investment tax credits, and foreign tax credits, among others, that might be cashed in more quickly and more fully by way of a merger; the desire to step up the tax basis of assets for depreciation purposes to their fair market value; the desire to sell assets to permit a change in the depreciation schedule to one that is more highly accelerated. The authors in this study have examined the effect of changes in tax laws passed in 1980s on merger and acquisition activity in the United States. The authors selected the annual values of mergers and acquisitions from 1968 through 1987 in nominal dollars. The data source for nominal values was W. T. Grimm and Company for 1968-85 and Mergers Acquisitions (1987-88, rev. quarterly) for 1986 and 1987. Using time series analysis it was found that the dollar volume of merger activity between 1980-1981 increased from $44.35 billion to $82.62 billion (86%) in nominal terms. The percentage increase was approximately twice as large as the next largest percentage increase in annual merger and acquisition activity over the 1970-86 periods. There was spectacular increase in merger activity that began with the passage of the Economic Recovery Tax Act of 1981, however this was not the only merger wave that occurred in that time frame. Unusual merger activity was also witnessed in the 1960s. The termination of 1960s wave was accompanied by quite a few regulatory events that depressed such transactions. Firstly, the Williams Amendments had en larged the cost and difficulty of effecting tender offers. Secondly the issuance of Accounting Principles Board Opinions 16 and 17, forced many acquiring firms to boost depreciation expense, goodwill amortization and cost of goods sold. Thirdly the Tax Reform Act of 1969, made transferability of tax attributes (net-operating-loss carry forwards) more restrained. Therefore there was a sudden decline in merger activity from the peak in 1968. Relative to the tax benefits when the non tax benefits of the transaction were small, current management were the most efficient purchasers, as they had an advantage along the hidden information dimension. Therefore 1981 act had increased the incidence of cases in which non tax benefits were less than the common tax benefits of mergers and acquisitions. As a result, there was an increase in the number of transactions involving management buyouts. The annual dollar value of unit management buyouts between 1978-80 increased by a factor of 3, and by a factor in excess of 20 for the period 1981-86. The antitrust proposition mentioned above is appealing as one of the most important reason for diversification, during the 60s and 70s, which simply disallowed mergers of firms in the same industry, regardless of the effects of these mergers o

Charlotte Haldanes The Last Great Empress of China :: Chinese History Essays

Charlotte Haldane's The Last Great Empress of China â€Å"Never again allow any women to hold supreme power in the state. It is against the house-law of our Dynasty, and should be strictly forbidden. Be careful not to permit eunuchs to meddle in Government matters. The Ming Dynasty was brought to ruin by eunuchs, and its fate should be a warning to my people†(Haldane 259). These were the final words of the last great empress of China, Tzu Hsi. In a sense this statement was ironic. For almost 50 years this one woman ruled China with a graceful but iron fist. The Last Great Empress of China, written by Charlotte Haldane, is the story of how Tzu Hsi (1861-1908, rose to power and managed to keep it. Known by several names through out the course of her life, Tzu Hsi was intelligent, beautiful, and had a voice that could charm anyone. Chosen as an Imperial Concubine in the third class, Yehonala (as she was known at the time) took great care to win the favor of the current Empress Dowager. Her next step was to win the favor of the young Emperor Hsien Feng, which she accomplished with the help of the Chief Eunuch, who she had also won over. In her quest for ultimate power the luckiest event that befell her was the birth of her son. Because the Empress Consort Sakota failed to produce an heir, Yenonala’s son was to become the heir apparent, raising her to the position of first rank concubine. Throughout the course of her life, Tzu Hsi played her cards well, continuously increasing her power. Tzu Hsi’s thirst for power caused her to be the center of several scandals over the course of her reign. It is said that she arranged the death of the Empress Consort Sakota (also known as the Tzu An) and two influential concubines whom she deemed a threat to her authority. Not being able to accomplish these deaths on her own, Tzu Hsi turned to those closest to her, the royal eunuchs. Though the eunuchs as a rule were not to speak unless spoken to first, the Chief Eunuch, whoever he was at the time, became her closest confidant.