Business Task 1 on individual report Essay Example for Free

stock Task 1 on indivi forked report probeDespite its future day sparing prospects, the unite Arab Emirates continues to suffer from somatic politics issues. The development of corporeal organisation in the realm has whoppingly been make ford by religion (Gellis et al., 2002). The rules governing the practice of collective governance retain been signifi masstly watchd by Islamic Sharia. This reflects the cultural and religious characteristic of the region (Islam and Hussain, 2003). Islamic Sharia specifies a second of hol modest values such as trust, integrity, honesty and justice which argon similar to the core values of incorporate governance codes in the West. However, a survey of corporate governance in a number of Gulf countries such as unite Arab Emirates suggests that the region continues to suffer from corporate governance weaknesses.2.0 Reasons for the expression including use of suitable differentiate and data The building of the above dev otedaments and formers for the structure and effects on the surgical procedure of self-coloreds has been vital subject of debate in the finance literature. existential manifest suggests that privately held tightens tend to be more efficient and more profitable than publicly held squiffys. This shows that self- leave behind structure matters. The question no(prenominal)e is how does it see firm implementation and why this kind of structure? This question is significant since it is ground on a research agenda that has been strongly promoted by La Porta et al. According to these studies, failure of the legislative theoretical account to provide sufficient protection for external investors, entrepreneurs and founding investors of a company tend result nourish man-sized positions in their firms because resulting in a saturated self-possession structure. This finding is interesting because it implies that possession structure can venture the operation of the firm in one track or the different. It is trusted the lack of regulations in corporate governance gives managers who intend to mishandle the flow of specie for their own ain interest a low stop level. The semiempirical results from the past studies of touchs of possession structure on consummation of corporate suck been inconclusive and mixed up. In response to corporate governance issues and their furbish up on corporate act, Shleifer and Vishny (1997) and Jensen (2000) drive suggested the need for improved corporate governance structures so as to enhance transpargonncy, right and responsibility. incorporate governance reform and the introduction of innovative methods to limit abuse of agent by take in management bring forth been justified by recent large scale accounting and corporate failures such as Enron, HealthSouth, Tyco world(prenominal), Adelphia, Global Crossing, WorldCom, Cendant and the recent global monetary crisis. According to Monks and Mino w (1996) numerous corporate failures suggest that real corporate governance structures ar not bating effectively. bodily failures and accounting scandals initially appear to a U.S phenomenon, resulting from excessive greed by investors, overheated paleness markets, and a winner-take-all mind-set of the U.S society. However, the give out decade has shown that irregularities in accounting, managerial greed, abuse of power, be global phenomenon that cannot be expressage to the U.S. Many non-U.S firms such as Parallax, Adecco, TV Azteca, Hollinger, Royal Dutch Shell, Vivendi, chinaware Aviation, Barings Bank, etc. score witnessed failures in corporate governance and early(a) forms of corporate mishaps. In addition to corporate governance failures, global standards have dec taskd significantly and unethical and questionable practices have become widely accepted. The net touch on has been a reduction in the amount of faith that investors and shareowners have in the efficien cy of capital markets. There is no universally accepted corporate governance fashion model that the interest of shareholders and investors are adequately protected as well as ensuring that enough shareholder richesiness is being created (Donaldson and Davis, 2001 Huse, 1995 Frentrop, 2003). Much of the debate on corporate governance has focused on understanding whether the placard of Directors has enough power to ensure that earn management is making the right decision. The traditional corporate governance framework often ignores the unique effect that the owners of the firm can have on the hop on and frankincense the firms top management. The traditional framework in that valuefore ignores that fact that the owners of the firm can influence the board and thus top management to act of make particular decisions. Corporate governance studies are in that locationfore yet to identify and deal with the complexities that are inherent in corporate governance processes. enth ronement choices and owner preferences are stirred among some other things by the extent their degree of risk aversion. Owners who have scotch coincidences with the firm will be interested in protecting their interests even if it is reasonably unmingled that such protection will result in poor action. According to Thomsen and Pedersen (1997) blasphemes that job a dual office as owners and lenders would discourage noble risk projects with great profit potential because such projects whitethorn hinder the firm from meeting its financial obligations if the project fails to realize its expected cash flows. The administration besides plays a dual role in that it serves as both an owner and a regulator. Therefore owners who play a dual role in the firm often face a trade-off in the midst of promoting the creation of shareholder value and meeting their other specific objectives (Hill and Jones, 1992). Existing corporate governance frameworks have often ignored these issues in UAE. Rather, much of the emphasis has been on the effectiveness of the board in ensuring that top management is working towards meeting the goals of shareholders. Present corporate governance frameworks lack the ability to supervise owners and their influence on top management. The framework lacks the ability to align the role played by firm owners, board of directors and managers interests and actions with the creation of shareholder value and welfare motivation of stakeholders.Discussion of the possible future structure of the sedulousness The joined Arabs Emirates, and mainly Abu Dhabi, is enduring to accession its deliverance by reducing the total proportion impact of hydrocarbons to Gross Domestic Product. This is currently being done by growing enthronement in vault of heaven areas analogous services in telecommunication, education, media, healthcare, tourism, aviation, metals, petrochemicals, pharmaceuticals, biotechnology, transportation and trade. Signi ficant investments have been made by United Arab Emirates to render itself as a regional trade hub. United Arab Emirates is withal member of the World Trade institution (WTO). In addition, there are ongoing negotiations to establish free trade agreements with other regions and countries such as the EU. These factors will contribute collaterally to the regions integration into the global economy. United Arab Emirates is currently working towards diversifying their economies from the rock oil colour area into other sectors. This diversification is expected not only to increase trade among member countries but also to increase the regions trade with other countries and regions (Sturm et al., 2008).How the structure modifys dodge decisions will power structure has an impact on firm performance in United Arab Emirates energy production owned sector. This region has witnessed significant economic ontogeny over the last few decades. The region is also facing turbulent times with respect to corporate governance practices, resulting in poor firm performance. Corporate governance issues are not limited to the United Arabs Emirates as part of GCC Countries. From a global point of view, corporate governance has witnessed significant transformations over the last decade (Gomez and Korine, 2005). As a result, there has been an interest in the research upkeep accorded to corporate governance. The credibility of current corporate governance structures has come under scrutiny owing to recent corporate failures and low corporate performance across the world. The risk aversion of the firm can be directly impinge oned by the monomania structure in place. Agency problems occur as a result of inequality in interests amid principals (owners) and agents (managers) (Leech and Leahy, 1991). The board of directors is thereby conceiveed as an intermediary between managers and owners. The board of directors plays four definitive roles in the firm. These includ e monitoring, stewardship, monitoring and reporting. The board of directors monitors and controls the discretion of top management. The board of directors influences managerial discretion in two ways internal influences which are imposed by the board and external influences which relate to the role played by the market in monitoring and sanctioning managers. B Contribution of the sector to the economy of your chosen country Analysis of contribution of sector United Arab Emirates remain major global economic player because it has the highest oil reserves. UAE together with the other Gulf Cooperation Council accounts for over 40% of global oil reserves and remains important in supplying the global economy with oil in future. As a result, investment spending on oil exploration and development of new oil fields is on the rise. Global oil demand is currently on the rise. This growth is driven mainly by emerge market economies, as well as the oil producing UAE as part of GCC countries. In addition, Europe and the U.S are witnessing depletions in their oil reserves. This means that these regions will become increasingly dependent on the Gulf region which includes UAE for the supply of oil (Sturm et al., 2008). The importance of the United Arabs Emirates as a global economic player is therefore expected to increase dramatically in the near futureUse of appropriate data and other leaven By the year 2011, the GDP of United Arab Emirates totaled to 360.2 billion dollars. Subsequently in 2001, per annum growth of GNP varied from about 7.4% to 30.7%. As part of the chief crude oil suppliers, the United Arab Emirates was at first cut off from the universal recession by high prices on oil that rose to a record 147 US dollars per barrel in the month of July in 2008. Nevertheless, the nation was lastly influenced by the excavating worldwide recession which resulted to a decline in oil demand, reducing the oil prices to a rock-bottom amount no t exceeding a third of the peak of July 2008. In the last 2008 months, the shake rumbling through global economies were lastly experienced in this section.Oil (million barrels) turn up reserves, 2013 Total oil supply (thousand bbl/d), 2012 Total petroleum consumption, 2012 Reserves-to-production ratio97,800 3,213 618 95Natural Gas (billion cubic feet)Proved reserves, 2013 Dry natural gas production, 2012 Dry natural gas consumption, 2012 Reserves-to-production ratio215,025 1,854 2,235 116UAE summary energy statisticsC Critical appraisal of sustainability targets on argument plan of your chosen organisation Oil firms in United Arab Emirates is still quite immature. more or less businesses are controlled by a few shareholders and family self-control is overabundant. Most large and small businesses are family businesses (Saidi, 2004). The state is also significantly involved in the management of companies (Union of Arab Banks, 2003). This is contrary to the term quo in Western democracies where firms are owned by a diverse group of shareholders which makes self-possession to be completely separated from control. The monomania structure in United Arab Emirates suggests that stewardship and monitoring nerves of non-executive directors (NEDs) is absent in firms based in United Arab Emirates. self-control soaking up has remained high in the region because of practices such as rights issues which change existing wealthy shareholders, and influential families to subscribe to new shares in Initial Public Offerings (IPOs) (Musa, 2002). According to a study of the corporate governance practices of five countries by the Union of Arab Banks (2003), ownership of corporations is concentrated in the hands of families. In addition, corporate boards are dominated by imperative shareholders, their relatives and friends (Union of Arab Banks, 2003). There is a no illume disengagement between control and ownership. Decision making is dominated by share holders. The number of independent directors in the board is real small and the functions of the CEO and Chairman are carried out by the similar soul. The high concentration in firm ownership therefore undermines the principles of good corporate governance that are prevalent in western settings (Yasin and Shehab, 2004). This grounds is consistent with findings by the World Bank (2003) in an investigation of corporate governance practices in the Middle East North Africa (MENA) region which also includes the Gulf region.1.0 Objective of empirical recount The empirical evidence on the impact of ownership structure on firm performance is mixed. Different studies have made use of different samples to arrive at different, contradictory and aroundtimes tall(prenominal) to compare conclusions. The literature suggests that there are two main ownership structures in firm including scatter ownership and concentrated ownership. With respect to concentrated ownership, most of the em pirical evidence suggests that concentrated ownership damagingly reckons performance (e.g., Johnson et al., 2000 Gugler and Weigand, 2003 Grosfeld, 2006 Holmstrom and Tirole, 1993). Different studies have also focused on how specifically concentrated ownership structures affect firm performance. For example, with respect to government ownership, Jefferson (1998), Stiglitz (1996), and Sun et al. (2002) provide theoretical arguments that government ownership is apt(predicate) to positively affect firm performance because government ownership can facilitate the resolution of issues regarding the ambiguous blank space rights. However, Xu and Wang (1999) and Sun and Tong (2003) provide empirical evidence that government ownership has a negative impact on firm performance. On the contrary, Sun et al. (2002) provide empirical evidence that government ownership has a positive impact on firm performance. It has also been argued that the kin between government ownership and firm per formance is non-linear. Another commonly investigated ownership type and its impact on firm performance is family ownership. Anderson and Reeb (2003), Villanonga and Amit (2006), Maury (2006), Barontini and Caprio (2006), and Pindado et al. (2008) suggest that there is a positive connective between family ownership and firm performance. Despite the positive impact some studies argue that the impact of family ownership is negative (e.g. DeAngelo and DeAngelo, 2000 Fan and Wong, 2002 Schulze et al., 2001 Demsetz, 1983 Fama and Jensen, 1983 Shleifer and Vishny, 1997). The impact of alien ownership has also been investigated. Most of the evidence suggests that foreign ownership has a positive impact on firm performance (e.g., Arnold and Javorcik, 2005 Petkova, 2008 Girma, 2005 Girma and Georg, 2006 Girma et al., 2007 Chari et al., 2011 Mattes, 2008).With respect to managerial ownership, it has been argued that the relationship is likely to be positive. Despite this suggestion Dem setz and Lehn (1985) observe a negative relationship between dispersed ownership and firm performance. institutional ownership has also been found to have a positive impact on firm performance (e.g. McConnell and Servaes, 1990 Han and Suk, 1998 Tsai and Gu, 2007). Furthermore, some studies suggest that there is no link between insider ownership and performance. Very limited studies have been conducted on the impact of ownership structure on firm performance in GCC countries like UAE. For example, Arouri et al. (2013) provide evidence that bank performance is affected by family ownership, foreign ownership and institutional ownership and that there is no significant impact of government ownership on bank performance. Zeitun and Al-Kawari (2012) observe a significant positive impact of government ownership on firm performance in the Gulf region. The pervasive endogeneity of ownership has been cited as a potential reason why it is difficult to disentangle the relationship betwe en ownership structure and firm performance. In addition, the relation may be a function of the type of firm as well as the pointedness of observation in the life of the firm. This study is motivated by the mixed results obtained in previous studies and the limited number of studies that have focused on UAE as part of GCC countries. The objective of the study is to explore in more details the factors that motivate particular types of ownership structure and the potential impact of ownership structure and firm performance in the Gulf region2.0 Empirical test The empirical evidence will focus on how different ownership structures affect firm performance. Firms are often characterized by concentrated and dispersed ownership. Concentrated ownership is expected to have a positive impact on firm performance owning to the increased monitoring that it provides. Dispersed ownership has been found to be less frequent than expected. Empirical evidence suggests that most firms are cha racterized by various forms of ownership concentration. Given this high level of ownership concentration, there has been an increasing concern over the protection of the rights of non-controlling shareholders (Johnson et al., 2000 Gugler and Weigand, 2003). Empirical evidence shows that ownership concentration at best results in poor performance. Concentrated ownership is addressly and has the potential of promoting the exploitation of non-controlling shareholders by controlling shareholders (Grosfeld, 2006). Holmstrom and Tirole (1993) argue that concentrated ownership can contribute to poor liquidity, which can in turn negatively affect performance. In addition, high ownership concentration limits the ability of the firm to diversify (Demsetz and Lehn, 1985 Admati et al., 1994). There are various forms of concentrated ownership such as government ownership, family ownership, managerial ownership, institutional ownership and foreign ownership. In the next section, the literature r eview will focus on how these separate ownership structures affect firm performance.2.1.1 giving medication Ownership The impact of government ownership on firm performance has attracted the attention of many researchers because the government accounts for the largest proportion of shares of listed companies in some countries and also because government ownership can be used as an instrument of intervention by the government (Kang and Kim, 2012). Shleifer and Vishny (1997) suggest that government ownership can contribute to poor firm performance because Government Owned enterprises often face political insistence for excessive employment. In addition, it is often difficult to monitor managers of government owned enterprises and there is often a lack of interest in carrying out business process reengineering (Shleifer and Vishny, 1996 Kang and Kim, 2012). Contrary to Shleifer and Vishny (1997) some economists have argued that government ownership can improve firm performance i n less developed and emerging economies in particular. This is because government ownership can facilitate the resolution of issues with respect to ambiguous property rights. The empirical evidence on the impact of state ownership on firm performance is mixed. For example, Xu and Wang (1999) provide evidence of a negative relationship between state ownership and firm performance based on data for Chinese listed firms over the period 1993-1995. The study, however, fails to find any link between the market-to-book ratio and state ownership (Xu and Wang, 1999). Sun and Tong (2003) employ ownership data from 1994 to 2000 and compares legal person ownership with government ownership. The study provides evidence that government ownership negatively affects firm performance while legal person ownership positively affects firm performance. This conclusion is based on the market-to-book ratio as the measure of firm performance. However, victimization blow over on sales or gross ea rnings as the measure of firm performance, the study provides evidence that government ownership has no effect on firm performance. Sun et al. (2002) provide contrary evidence from above. Using data over the period 1994-1997, Sun et al. (2002) provide evidence that both legal person ownership and government ownership had a positive effect on firm performance. They explain their results by suggesting that legal person ownership is another form of government ownership. The above studies treat the relationship between government ownership and firm performance as linear. However it has been argued that the relationship is not linear. Huang and Xiao (2012) provide evidence that government ownership has a negative net effect on performance in spiritual rebirth economies. La Porta et al. (2002) provide evidence across 92 countries that government ownership of banks contributes negatively to bank performance. The evidence is consistent with Dinc (2005) and Brown and Dinc (2005) who inv estigate government ownership banks in the U.S.2.1.2 Family Ownership Family ownership is very common in oil firms in UAE. There is a difference between family ownership and other types of shareholders in that family owners tend to be more interested in the long-term survival of the firm than other types of shareholders(Arosa et al., 2010).. Furthermore, family owners tend to be more concerned about the firms record of the firm than other shareholders (Arosa et al., 2010). This is because damage to the firms reputation can also result in damage the familys reputation. Many studies have investigated the relationship between family ownership and firm performance. They provide evidence of a positive relationship between family ownership and firm performance (e.g. Anderson and Reeb, 2003 Villalonga and Amit, 2006 Maury, 2006 Barontini and Caprio, 2006 Pindado et al., 2008). The positive relationship between family ownership and firm performance can be attributed to a number of factors. For example, Arosa et al. (2010) suggests that family firms long-term goals indicate that this category of firms desire investing over long horizons than other shareholders. In addition, because there is a significant relationship between the wealth of the family and the value of the family firm, family owners tend to have greater incentives to monitor managers (agents) than other shareholders (Anderson and Reeb, 2003). Furthermore, family owners would be more interested in offering incentives to managers that will make them loyal to the firm. In addition, there is a substantial long-term presence of families in family firms with strong intentions to preserve the name of the family. These family members are therefore more likely to forego short-term financial rewards so as to enable future generations take over the business and protect the familys reputation (Wang, 2006). In addition, family ownership has positive economic consequences on the business. There are stron g control structures that can motivate family members to communicate effectively with other shareholders and creditors using higher quality financial reporting with the resulting effect being a reduction in the cost of financing the business. Furthermore, families are interested in the long-term survival of the firm and family, which reduces the opportunistic behavior of family members with regard to the distribution of earnings and allocation of management,. Despite the positive impact of family ownership on firm performance, it has been argued that family ownership promotes high ownership concentration, which in turn creates corporate governance problems. In addition, high ownership concentration results in other types of costs. As earlier mentioned, La Porta et al. (1999) and Vollalonga and Amit (2006) argue that controlling shareholders are likely to undertake activities that will give them gain unfair advantage over non-controlling shareholders. For example, family fir ms may be opposed to pay dividends . Another reason why family ownership can have a negative impact on firm performance is that controlling family shareholders can easily favour their own interests at the expenditure of non-controlling shareholders by running the company as a family employment service. Under such circumstances, management positions will be limited to family members and extraordinary dividends will be paid to family shareholders. Agency costs may educate because of dividend payments and management entrenchment. Families may also have their own interests and concerns that may not be in line with the concerns and interests of other investor groups. Schulze et al. (2001) provide a discussion, which suggests that the impact of family ownership on firm performance can be a function of the generation. For example, noting that agency costs often arise as a result of the separation of ownership from control, they argue that first generation family firms tend to ha ve limited agency problems because the management and direction decisions are made by the same individual. As such agency costs are reduced because the separation of ownership and control has been completely eliminated. Given that there is no separation of ownership and control in the first generation family firm, the firm relationship between family ownership and performance is likely to be positive (Miller and Le-Breton-Miller, 2006). As the firm enters second and third generations, the family property becomes shared by an increasingly large number of family members with diverse interests. The moment conflict of interests sets in the relationship between family ownership and performance turns negative in accordance to. Furthermore, agency problems arise from family relations because family members with control over the firms resources are more likely to be generous to their children and other relatives. To summarize, the relationship between family ownership and firm performa nce may be non-linear. This means that the relationship is likely to be positive and negative at the same time. To support this contention, a number of studies have observed a non-linear relationship between family ownership and firm performance (e.g. Anderson and Reeb, 2003 Maury, 2006). This means that when ownership is less concentrated, family ownership is likely to have a positive impact on firm performance. As the family ownership concentration increases, minority shareholders tend to be exploited by family owners and thus the impact of family ownership on firm performance tends negative. Small countries have a relatively weak diamond of competitive advantages.D. Analysis1.0 Potters Diamond Model The competitive forces advantages or analysis ought to be fixed on the main competition factors and its impact analysis on the business (Porter 1998, p.142). The state, and home wealth cannot be inherited -3554730607695Faktorski uvjeti00Faktorski uvjeti-27546301293495Vezane i podravajue industrije00Vezane i podravajue industrije-332041536195ansa00ansa it ought to be produced (Porter 1998, p.155). This wealth is influenced by the ability of industry to continually upgrade and innovate itself, and this is achievable exclusively by increase means in production in all parts of fiscal action. The model of Porter concerns aspect which circuitously or openly affects advantage of competition. The aspect structure a place where given manufacturing sector like in this case, oil sector, state or region a learn and act on the way of competing in that environment.Left0-3686175215392000Each diamond (oil) and the field of diamond (oil) as the whole structure consists of main influences that makes the oil sector competition to be successive. These influences entail every ability and resource vital for competitive advantage of the sector data forming the opportunity and providing the response to how accessible abilities and resources ought to be ruled each interest gro up ride and the is most crucial, oil sector pressure to innovating and investing.Swot analysisStrengthsThe oil sector has many historic period producing oil and so is well established.Comparatively lots of sub-sectors for industrialist stability and support.WeaknessesComparatively out of date scientific foundation.Inadequate well educated professionals and residents in comparison to the new industry needs.Lesser costs of work cost in oil sector due to low salary from regular salaries in UAE.Opportunities The likeliness for resources application of EU agreement funds, as is the state resourcesReasonably good quality of 11 % tweak students share that are likely to be absorbed into this oil sector.Contribution in motivational and investment projects that help in developing the economy of UAE every time.ThreatsExpansion of oil production capacity of economies of South-Eastern that have competed with low prices of products and little costs of production.Loan jobs and production g lobalisation.Reinforcement of local competition of adjacent economies, and thus reinforcing actions that attract direct overseas exploitation of the oil sector in UAE through investments. point of referencesAdmati, A., Pfleiderer, P., and Zechner, J. 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