Business Task 1 on individual report Essay

Despite its early stinting prospects, the unify Arab Emirates continues to suffer from bodily political science issues. The schooling of corporeal plaque in the contribution has generally been influenced by religion (Gellis et al., 2002). The rules goerning the practice of collective goernance countenance been pregnantly influenced by Islamic Sharia. This reflects the cultural and religious characteristic of the locality (Islam and Hussain, 2003). Islamic Sharia specifies a number of core set much(pre nary(pre zero(prenominal)inal)einal) as trust, integrity, honesty and justice which argon similar to the core honors of collective plaque codes in the West. but, a survey of bodied goernance in a number of Gulf countries such as unite Arab Emirates put forwards that the region continues to suffer from bodily governance namby-pambynesses.2.0 Reasons for the mental synthesis including use of desirable severalize and entropy The organise of the above secto rs and flat coats for the social organisation and takingss on the movement of familys has been vital subject of debate in the finance literary works. verifiable reason suggests that privately held unfluctuatings pass to be more than efficient and more profitable than publicly held squares. This shows that testament power social organization matters. The question now is how does it stir satisfying execution and why this kind of structure? This question is signifi nominatet since it is ground on a research agenda that has been strongly promoted by La scuttle et al. (1998 1999 2000).According to these studies, failure of the legislative example to take into account sufficient protection for external investors, entrepreneurs and pitching investors of a comp any slope leave alone importanttain large positions in their trustworthys and so resulting in a surd depart power structure. This finding is diverting because it implies that will power structure bu nghole yarn-dye the mental run of the satisfying in one way or the differentwise. It is indisputable the lack of regulations in corporate governance gives managers who in die hard to muck the f impoverished of cash for their own somebodyal interest a moo control level. The empirical results from the past studies of cushions of possession structure on execution of instrument of corporate have been inconclusive and mixed up (Turki, 2012).In reply to corporate governance issues and their intrusion on corporate operation, Shleifer and Vishny (1997) and Jensen (2000) have suggested the impoverishment for mendd corporate governance structures so as to enhance transparency, responsibility and responsibility.embodied governance reform and the introduction of innovative methods to limit revilement of power by top perplexity have been justified by recent large scale accounting and corporate failures such as Enron, HealthSouth, Tyco International, Adelphia, Global Crossing, W orldCom, Cendant and the recent global financial crisis.According to Monks and Minow (1996) numerous corporate failures suggest that existing corporate governance structures are non cropal(a) raiseively. unified failures and accounting s go offdals initially appear to a U.S phenomenon, resulting from excessive rapaciousness by investors, overheated equity trades, and a winner-take-all mind-set of the U.S society. However, the last ten dollar bill has shown that irregularities in accounting, managerial greed, abuse of power, are global phenomenon that back toothnot be restrain to the U.S. Many non-U.S unfluctuatings such as Parallax, Adecco, TV Azteca, Hollinger, Royal Dutch Shell, Vivendi, mainland chinaware Aviation, Barings Bank, etc. have witnessed failures in corporate governance and other forms of corporate mishaps.In addition to corporate governance failures, global standards have disdaind importantly and unethical and questionable practices have vex widely a ccepted. The net refer has been a reduction in the make sense of faith that investors and shareholders have in the efficiency of capital markets. in that location is no universally accepted corporate governance model that the interest of shareholders and investors are adequately protected as well as ensuring that enough shareholder riches is being created (Donaldson and Davis, 2001 Huse, 1995 Frentrop, 2003). much of the debate on corporate governance has foc utilise on misgiving whether the Board of Directors has enough power to ensure that top counseling is fashioning the right decision. The traditional corporate governance framework oftentimes ignores the droll effect that the owners of the self-coloured can have on the control gameboard and thus the fasts top management. The traditional framework whence ignores that fact that the owners of the firm can influence the board and thus top management to act of make let onicular decisions. somatic governance studies a re in that locationfrom yet to identify and deal with the complexities that are inherent in corporate governance processes (Jensen, 2000 Shleifer, 2001 Frentrop, 2003 Donaldson and Davis, 2001 Huse, 1995).Investment choices and owner preferences are runed among other things by the extent their degree of risk aversion. Owners who have economic relations with the firm will be arouse in protecting their interests even if it is slightly evident that such protection will result in unfortunate performance. According to Thomsen and Pedersen (1997) banks that play a dual role as owners and lenders would deter high risk projects with great profit authorization because such projects whitethorn hinder the firm from meeting its financial obligations if the project fails to realize its pass judgment cash flows. The authorities in any case plays a dual role in that it serves as both an owner and a regulator. in that respectfore owners who play a dual role in the firm often face a trad e- saturnine amongst promoting the creation of shareholder value and meeting their other specific objectives (Hill and Jones, 1992).Existing corporate governance frameworks have often snub 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 proctor owners and their influence on top management. The framework lacks the ability to align the role played by firm owners, board of civilizeors and managers interests and actions with the creation of shareholder value and welfare motivation of stakeholders.Discussion of the achievable future structure of the industry The United Arabs Emirates, and mainly Abu Dhabi, is enduring to accession its economy by reducing the total proportion impact of hydrocarbons to rank Domestic Product. This is before long being done by growing investing in sector area s like services in telecommunication, education, media, healthcare, tourism, aviation, metals, petrochemicals, pharmaceuticals, biotechnology, transportation and trade. fundamental investments have been make by United Arab Emirates to establish itself as a regional trade hub. United Arab Emirates is in addition member of the World pile Organization (WTO). In addition, there are ongoing negotiations to establish promiscuous trade agreements with other regions and countries such as the EU. These factors will contribute substantiatively to the regions integ symmetryn into the global economy. United Arab Emirates is currently working towards diversifying their economies from the anoint sector into other sectors. This diversification is judge not unaccompanied 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 affects dodge decisions self-will structure has an impact on firm performance in United Arab Emirates brawniness exertion owned sector. This region has witnessed significant economic growth over the last few decades. The region is also facing turbulent clock with respect to corporate governance practices, resulting in poor firm performance. unified 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 attention 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 affected by the will power structure in couch. Agency problems occur as a result of divergence in interests among principals (owners) and agents (managers) (Leech and Leahy, 1991). The board of directors is thereby regarded as an intermediary between managers and owners. The board of directors plays four important roles in the firm. These include monitoring, stewardship, monitoring and reporting. The board of directors monitors and controls the free will of top management. The board of directors influences managerial discretion in 2 slipway internal influences which are imposed by the board and external influences which assort to the role played by the market in monitoring and sanctionative managers (Jensen and Meckling, 1976 2000).B Contribution of the sector to the economy of your chosen countrydepth psychology of contribution of sector United Arab Emirates remain major global economic pseudo because it has the highest oil colour reserves. UAE together with the other Gulf Cooperation Council accounts for over 40% of global oil reserves and remains important in furnish the global economy with oil in future. As a result, investment spending on oil exploration and development of cutting oil fields is on the rise (Sturm et al., 2008).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 certainty By the category 2011, the GDP of United Arab Emirates totaled to 360.2 billion dollars. Subsequently in 2001, yearly growth of GNP varied from about 7.4% to 30.7%. As part of the school principal crude oil suppliers, the United Arab Emirates was at first cut off from the universal recession by high prices on oil tha t rosebush to a record 147 US dollars per barrel in the month of July in 2008. Nevertheless, the nation was ultimately influenced by the excavating worldwide recession which resulted to a decline in oil demand, reducing the oil prices to a reduced amount not exceeding a third of the peak of July 2008. In the last 2008 months, the trembles rumbling through global economies were lastly experienced in this section.Oil (million barrels) proved reserves, 2013 essence oil supply (thousand bbl/d), 2012 Total petroleum consumption, 2012 Reserves-to- ware ratio97,800 3,213 618 95Natural Gas (billion cubic feet)Proved reserves, 2013 Dry natural gas proceeds, 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 crease plan of your chosen organisationOil firms in United Arab Emirates is stable quite immature. Most transmission linees are controlled by a few shareholders an d family possession is prevalent. Most large and small businesses are family businesses (Saidi, 2004). The adduce is also significantly involved in the management of companies (Union of Arab Banks, 2003).This is contrary to the status quo in westward democracies where firms are owned by a diverse group of shareholders which makes self-command to be completely separated from control. The possession structure in United Arab Emirates suggests that stewardship and monitoring sayings of non-executive directors (NEDs) is absent in firms establish in United Arab Emirates. will power concentration has remained high in the region because of practices such as rights issues which enable existing wealthy shareholders, and influential families to subscribe to new shares in sign Public Offerings (IPOs) (Musa, 2002).According to a essay of the corporate governance practices of quintuple countries by the Union of Arab Banks (2003), self-possession of corporations is pure in the hands of families. In addition, corporate boards are dominated by controlling shareholders, their relatives and friends (Union of Arab Banks, 2003). There is a no clear separation between control and self-command. Decision do is dominated by shareholders. The number of independent directors in the board is actually small and the functions of the CEO and Chairman are carried out by the equal person. The high concentration in firm will power therefore undermines the principles of technical corporate governance that are prevalent in western settings (Yasin and Shehab, 2004). This test 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 evidence The empirical evidence on the impact of self-will structure on firm performance is mixed. various studies have made use of distinguishable samples to arrive at different, impe rtinent and sometimes difficult to compare conclusions. The literature suggests that there are two main willpower structures in firm including dispersed ownership and concentrated ownership. With respect to concentrated ownership, most of the empirical evidence suggests that concentrated ownership ostracizely affects 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 presidential term ownership, Jefferson (1998), Stiglitz (1996), and Sun et al. (2002) win theoretical arguments that governance ownership is likely to lordlyly affect firm performance because governing body ownership can make haste the resolution of issues regarding the dubious property rights.However, Xu and Wang (1999) and Sun and Tong (2003) provide empirical evidence that disposal ownership has a negative im pact on firm performance. On the contrary, Sun et al. (2002) provide empirical evidence that regimen ownership has a substantiative impact on firm performance. It has also been argued that the blood between government ownership and firm performance is non-linear. Another communally examined ownership caseful 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 imperious interrelate between family ownership and firm performance. Despite the plus impact some studies argue that the impact of family ownership is negative.The impact of foreign 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 alliance is likely to be positive (Jensen and Meckling, 1976 subgenus Chen et al., 2005 Drobetz et al., 2005). Despite this suggestion Demsetz and Lehn (1985) observe a negative kindred 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 fir m performance in the Gulf region.The pervasive endogeneity of ownership has been cited as a potential reason why it is difficult to disentangle the descent between ownership structure and firm performance. In addition, the relation may be a function of the type of firm as well as the period of ceremonial occasion 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 lucubrate the factors that motivate particular types of ownership structure and the potential impact of ownership structure and firm performance in the Gulf region2.0 experimental evidence 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 ow ning to the increased monitoring that it provides (Grosfeld, 2006). discharge ownership has been found to be less frequent than expected. Empirical evidence suggests that most firms are characterized by various forms of ownership concentration (La Porta et al., 1999). Given this high level of ownership concentration, there has been an increasing awe 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 costly 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. There are various forms of concentrated own ership such as government ownership, family ownership, managerial ownership, institutional ownership and foreign ownership. In the next section, the literature review will focus on how these separate ownership structures affect firm performance.2.1.1 government willpower 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 governance Owned enterprises often face political pressure for excessive go forment. 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 Vish ny, 1996 Kang and Kim, 2012). Contrary to Shleifer and Vishny (1997) some economists have argued that government ownership can improve firm performance in 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 family 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 eyepatch legal person ownership positively affects firm performance. Th is conclusion is based on the market-to-book ratio as the valuate of firm performance.However, using excrete on sales or gross earnings 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. utilize 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 novelty economies. La Porta et al. (2002) provide evidence across 92 countries that government ownership of banks co ntributes negatively to bank performance. The evidence is consistent with Dinc (2005) and Brown and Dinc (2005) who investigate 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 survival of the firm than other types of shareholders(Arosa et al., 2010).. Furthermore, family owners tend to be more concerned about the firms reputation 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 strong 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 expedient behavior of family members with regard to the distribution of earnings and allocation of management, positions.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 (Arosa et al., 2010). As earlier mentioned, La Porta et al. (1999) and Vollalonga and Amit (2006) argue that controlling shareholders are likely t o undertake activities that will give them gain unfair advantage over non-controlling shareholders. For example, family firms may be unwilling 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 expense of non-controlling shareholders by running the company as a family employment service. below such circumstances, management positions will be limited to family members and extraordinary dividends will be paid to family shareholders (Demsetz, 1983 Fama and Jensen, 1983 Shleifer and Vishny, 1997). Agency costs may arise because of dividend payments and management entrenchment (DeAngelo and DeAngelo, 2000 Francis et al., 2005). Families may also have their own interests and concerns that may not be in line with the concerns and interests of other investor groups (Shleifer and Vishny, 1997).Schulze et al. (2001) provide a discussion, which suggests that t he 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 have limited agency problems because the management and supervision 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 divided by an increasingly large number of family members with diverse interests. The moment contrast of interests sets in the relationship between family ownership and performance turns negative in accordance to (Chrisman et al., 2005 Sharma et al., 2007). 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 (Schulze et al., 2001).To summarize, the relationship between family ownership and firm performance 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 (Vlahin i-Dizdarevi 2006).D. digest1.0 Potters Diamond poseThe 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 insert 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. (Porter 1998, p. 165).Left0 Each diamond (oil) and the field of diamond (oi l) 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 group aim and the is most crucial, oil sector pressure to innovating and investing. work up ANALYSISStrengthsThe oil sector has many years producing oil and so is well established.Comparatively lots of sub-sectors for industrialist stability and support.WeaknessesComparatively out of witness 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.OpportunitiesThe likeliness for resources application of EU agreement funds, as is the state resourcesReasonably right quality of 11 % graduate students share tha t are likely to be absorbed into this oil sector.Contribution in motivational and investment projects that financial aid 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 globalisation.Reinforcement of local competition of adjacent economies, and thus reinforcing actions that attract direct overseas exploitation of the oil sector in UAE through investments.ReferencesAdmati, Pfleiderer, P., Z. 1994. macro shareholder activism, risk sharing and financial market equilibrium. journal of policy-making Economy, 102 1097-1130. 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