How The effect of information asymmetry affects Essays

How The effect of information asymmetry affects Essays How The effect of information asymmetry affects Essay How The effect of information asymmetry affects Essay Academic Writing In English for Graduate Students, Spring 2014 How The effect of information assortment affects on business decisions He Jung Gang Business Department, Korea University Paying dividends to shareholders may benefit to some companies chief executive officers (CEO). It is because they receive stock options as an incentive for any dividends Selectivenesss. The shareholders of some firms vote on whether to pay dividends or to Invest In valuable projects. A CEO may try to make encourage hardliners to vote to parlor dividends using information asymmetry. Information asymmetry means a situation where one party has more or superior information compared to another in a transaction. This harmful situation, in which one partys lack of knowledge may lead to disadvantages of, often happens in business decisions. Some companies have tried for shareholders to limit access to financial information to pursue them shareholders to agree to pay for dividends rather than to spend money for on investing investment, especially in R business and growth options. Early studies have found that dividends have a significantly negative influence on investment (Peterson, 1983) due to information asymmetry, even if dividends should not affective no effect. This essay will summarize how information asymmetry affects business decisions in R investments and growth options. First of all. In R Investment. Higher Information asymmetry between CEO and shareholders can occur due to greater uncertainty on the future benefits relative to capital investment, leading to moral hazard problems (Chant, 2001). Executives may Orca shareholders to choose to pay dividends rather than to pursue valuable investment projects on limited internal funds. It is because having little financial information provided by CEO leads shareholders to make an Invaluable sub-optimal business decisions. To receive funding from outside Investors, firms may spend money for on conference events If needed or for hilling to make roll the collection of data for reporting for to outside investors. Therefore, firms are likely to cost high for spend a lot to secure funding for R investments (Hall, 2010). Secondly, growth options mean that a company invests to growth of potential future outputs In future. Information asymmetry can also occur in growth options. It Is because growth options have greater uncertainty and Involve unverifiable future cash flow reports (Smith, 1992) and shareholders may be more likely to have difficulties to understanding or estimate estimating future cash flow repossesses reports. When greater competition for internal funds between paying dividends and investing projects occur, companies may be forced to forgo the investments as Coos re reluctant to cut dividends (Lintier, 1956). Information asymmetry will play a vital role negatively to affect business decisions. Again, the higher costs of raising funds As can be seen, due to information asymmetry between executives and shareholders, firms forgo valuable investment projects especially in R and growth options to pay dividends. In summary, information asymmetry plays a crucial role in investment decisions negatively because shareholders can vote to pay dividends rather than to invest in valuable projects in a situation where little data is provided.

How to write a winning business plan - Emphasis

How to write a winning business plan How to write a winning business plan Whether youre setting up a new business venture or trying to get the go-ahead for a project, theres one essential document you need. Rob Ashton, Chief Executive of Emphasis, gives a step-by-step guide to writing a good business plan. Why you need one Theres a memorable conversation in Lewis Carrolls novel Alice in Wonderland, where Alice asks the Cheshire cat for directions. She says it doesnt matter where she gets to, as long as she gets somewhere. This leads the cat to reply: Then it doesnt matter which way you go. If you dont have a crystal-clear vision of where you want your business to go, youll be as confused as Alice when you hit a crossroads. Your business plan is your route to growth and success. But in order to write it, you need to know what you really want to achieve. This means youll have to spend time examining the strengths and weaknesses of your business, a process that has numerous pay-offs in itself. Researching your own company helps you to take a critical look at what you have to offer and who your competitors are. This enables you to better navigate the industry minefields and gives you a benchmark against which to measure success. Many people think of business plans as a necessary evil, written only to gain external funding. Instead, look at yours as an essential planning tool, whatever your financial situation. Remember, if you dont plan where to go, youre inadvertently planning on going nowhere. Crafting your business plan Heres a seven-step guide to writing your business plan. Work through each section and youll have an ordered, content-rich document that gets you where you want to go. Step one Description of the business After the executive summary (see step seven), the first thing youll need to do is describe your business. Get started by asking the following questions: What do I sell or offer? Why? To whom do I sell? What is the history of the business? What is my vision for the future? What is different about the services I offer? What is the legal structure of the company? Think about your audience carefully before you write the description. Ask yourself what words and phrases they will understand and be careful not to include too much jargon. Step two Market research Think about your industry and what you think the future trends will be. Then analyse your competition. Determine what size of the market they hold and then clearly define where you fit into the mix. Step three Marketing and sales strategy Ask yourself why companies buy what you offer, and how you sell it. Think about how you are going to reach the organisations that need your services and what pricing plans youll offer. Whether youre an in-house department, specialist contractor or a large multi-service company, therell be a variety of ways to reach prospective clients. Step four Management and personnel team Many facilities management companies claim that people are their best asset. Think carefully about your management team and outline the background, experience and qualifications of each individual. The people on your team will often make or break your success. Fully evaluate their credentials and look out for any skill gaps that could be improved with training. Step five Operations Analyse the location of your business, in terms of advantages and disadvantages. Your own premises, production facilities and IT systems must be excellent. Make sure you address any weaknesses in your plan with recommendations for improvement. Step six Financial forecast This section requires you to translate the contents of your plan into numbers. Include cash flow statements, profit and loss forecasts and a sales forecast. Dont forget that if youre looking for funding, you need to spell out how much you need and how youll repay the loan. Step seven The executive summary Leave this until last, even though it goes right at the beginning. Once youve followed all the other steps, youre in a position to write this stand-alone document, which outlines the key points in your entire plan. Keep it to a maximum of two pages. Remember, some people will only read this section so make it shine. Tip: rather than trying to distil the full document down, follow your original document plan. Just write less in each section this time (a couple of sentences or a paragraph, rather than several pages). Finally, the ink may be dry but your business is constantly changing. Your business plan is a dynamic document, so youll need to update it regularly.