Business Task 1 on individual report Essay

Despite its future eco nary(prenominal)eic prospects, the United Arab Emirates continues to suffer from incarnate giving medication issues. The evolution of embodied g overnance in the region has largely been influenced by religion (Gellis et al., 2002). The rules governing the practice of corporate governance ready been significantly influenced by Moslem Sharia. This reflects the cultural and religious characteristic of the region (Islam and Hussain, 2003). Islamic Sharia specifies a number of core values such(prenominal)(prenominal) as trust, integrity, honesty and justice which atomic number 18 similar to the core values of corporate governance codes in the West. However, a survey of corporate governance in a number of disjunction countries such as United Arab Emirates refers that the region continues to suffer from corporate governance weaknesses.2.0 Reasons for the organize including use of suitable narrate and data The social organization of the above sp here of influences and reasons for the structure and cause on the cognitive process of truehearteds has been vital subject of reflect in the finance literature. Empirical evidence suggests that privately held plastereds tend to be more(prenominal) efficient and more profitable than publicly held business degenerates. This shows that self-command structure matters. The question now is how does it affect tight process and why this kind of structure? This question is significant since it is establish on a research agenda that has been self-coloredly promoted by La Porta et al. jibe to these studies, failure of the legislative framework to provide sufficient security department for external investors, entrepreneurs and founding investors of a go with tend will maintain large positions in their truehearteds thus resulting in a unvoiced will federal agency structure. This commenting is interesting because it implies that self-possession structure can affect the achievement of the slopped in one way or the different. It is indisputable the lack of regulations in corporate governance separates managers who intend to mishandle the flow of cash for their own personal interest a low control direct. The empirical results from the past studies of encounters of possession structure on performance of corporate have been inconclusive and mixed up. In answer to corporate governance issues and their impact on corporate performance, Shleifer and Vishny (1997) and Jensen (2000) have suggested the request for improved corporate governance structures so as to enhance transp arncy, accountability and responsibility. unified governance reform and the introduction of innovative methods to limit abuse of forefinger by drop dead management have been justified by upstart large scale accounting and corporate failures such as Enron, HealthSouth, Tyco Inter countryal, Adelphia, Global Crossing, WorldCom, Cendant and the recent global financial crisis. According to Monks and Minow (1996) numerous corporate failures suggest that existing corporate governance structures are not working sumively. incarnate failures and accounting scandals initially appear to a U.S phenomenon, resulting from excessive greed by investors, overheated equity markets, and a winner-take-all mind-set of the U.S society. However, the last decade has shown that ir standardities in accounting, managerial greed, abuse of power, are global phenomenon that cannot be limited to the U.S. Many non-U.S firms such as Parallax, Adecco, TV Azteca, Hollinger, Royal Dutch Shell, Vivendi, mainland China Aviation, Barings Bank, etc. have witnessed failures in corporate governance and some other forms of corporate mishaps. In addition to corporate governance failures, global standards have declined significantly and u boodlehical and questionable practices have be arise widely accepted. The net impact has been a step-down in the amount of faith that inves tors and shareholders have in the efficiency of capital markets. There is no universally accepted corporate governance simulate that the interest of shareholders and investors are adequately protected as well as ensuring that enough shareholder wealth is being created (Donaldson and Davis, 2001 Huse, 1995 Frentrop, 2003). Much of the debate on corporate governance has focused on understanding whether the Board of Directors has enough power to ensure that top management is making the right decision. The conventional corporate governance framework often ignores the unique effect that the owners of the firm can have on the board and thus the firms top management. The traditional framework therefore 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 therefore yet to identify and deal with the complexities that are inherent in corporate governance processes. Investment choices and owner preferences are abnormal among other things by the extent their degree of risk aversion. Owners who have economic relations with the firm will be interested in protecting their interests even if it is reasonably evident that such protection will result in poor performance. According to Thomsen and Pedersen (1997) banks that play a dual consumption as owners and lenders would admonish spunky risk projects with great profit potential because such projects may hinder the firm from face- sour its financial obligations if the project fails to realize its evaluate cash flows. The presidency a homogeneous 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 between 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 monitor 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 constancy The United Arabs Emirates, and mainly Abu Dhabi, is abide to increase its economy by reducing the total proportion impact of hydrocarbons to Gross Domestic Product. This is currently being done by growing enthronisation in sector areas like services in telecommunication, education, media, healthcare, tourism, aviation, metals, petrochemicals, pharmaceuticals, biotechnology, transportation and trade. Significant investments have been made by United Arab Emira tes to establish itself as a regional trade hub. United Arab Emirates is similarly member of the World Trade Organization (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 positively to the regions integration into the global economy. United Arab Emirates is currently working towards diversifying their economies from the oil sector 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 affects strategy decisions Ownership structure has an impact on firm performance in United Arab Emirates energy labor owned sector. This region has witnessed significant economic growth over the last few decades. The region is also facing turbulent times with respect to corporate governance practices, resulting in poor firm p erformance. 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 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 now affected by the self-will structure in place. office problems occur as a result of divergence in interests between 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 perceptiveness 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 abstract of contribution of sector United Arab Emirates remain major global economic player because it has the highest oil reserves. UAE together with the other disjuncture Cooperation Council accounts for over 40% of global oil reserves and remains important in preparation the global economy with oil in future. As a result, investment spending on oil exploration and development of new oil palm is on the rise. Global oil demand is currently on the rise. This growth is driven mainly by emerging market economies, as well as the oil producing UAE as part of GCC countries. In addition, Europe and the U.S are witne ssing depletions in their oil reserves. This means that these regions will become increasingly dependent on the disjunction 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 evidence By the year 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 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 ultimately influenced by the excavating worldwide recession which resulted to a decline in oil demand, reducing the oil prices to a reduced amount not special a third of the peak of July 2008. In the last 2008 m onths, the trembles rumbling through global economies were lastly experienced in this section.Oil (million barrels)Proved reserves, 2013 numerate 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 juiceless 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 business plan of your chosen organisation Oil firms in United Arab Emirates is still quite immature. Most businesses are controlled by a few shareholders and family possession is prevalent. Most large and small businesses are family businesses (Saidi, 2004). The accede is also significantly involved in the management of companies (Union of Arab Banks, 2003). This is contrary to the status quo in Western democracies where firms are owned by a diverse group of sha reholders which makes will power to be completely separated from control. The self-will structure in United Arab Emirates suggests that stewardship and monitoring aspects of non-executive directors (NEDs) is absent in firms based in United Arab Emirates. Ownership ingress has remained high in the region because of practices such as rights issues which modify existing wealthy shareholders, and influential families to subscribe to new shares in Initial Public Offerings (IPOs) (Musa, 2002). According to a regard 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 predominate by controlling shareholders, their relatives and friends (Union of Arab Banks, 2003). There is a no clear separation between control and ownership. Decision making is dominated by shareholders. The number of item-by-item directors in the board is very small and th e functions of the CEO and Chairman are carried out by the same person. 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 evidence 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 ownership structure on firm performance is mixed. Different studies have made use of different samples to arrive at different, contradictory and sometimes backbreaking to compare conclusions. The literature suggests that there are two main ownership structures in firm including dispersed ownership and concentrated ownership. With respect to concentrated ownership, most of the empirical evidence suggests that concentrated ownership prejudicially 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 political sympathies ownership, Jefferson (1998), Stiglitz (1996), and Sun et al. (2002) provide theoretical arguments that government ownership is belike to positively affect firm performance because government ownership can hurry the resolution of issues regarding the ambiguous property rights. However, Xu and Wang (1999) and Sun and Tong (2003) provide empirical evidence that government ownership has a ban 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 relationship between government ownership and firm performance is non-linear. Another commonly check intod 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 link 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 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 relationship is likely to be positive. Despite this suggestion Demsetz and Lehn (1985) observe a negative relationship between dispersed ownership and firm per formance. 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 between ownership structure and firm performance. In addition, the relation may be a function of t he type of firm as well as the termination of observation in the life of the firm. This bring 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 field of operations 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 shew The empirical evidence will focus on how different ownership structures affect firm performance. tightens are often characterized by concentrated and dispersed ownership. tough ownership is expected to have a positive impact on firm performance owning to the increased monitoring that it provides. disperse ownership has been found to be less frequent than expected. Empirical evidence suggests that most firms are characterized 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 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 bending 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 review will focus on how these separate ownership structures affect firm perfor mance.2.1.1 Government 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 pressure 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 in less developed and emerging economies in particular. This is because government ownersh ip 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, using return 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. 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 justify 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 transition 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 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 semipermanent survival of the firm than other types of shareholders(Arosa et al., 2010).. Furthermore, family owners tend to be more have-to doe with about the firms reputation of the firm than other shareholders (Arosa et al., 2010). This is because impose on _or_ oppress 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-t erm goals indicate that this category of firms longing 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 effec tively 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 parceling 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 be. 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 firms may be unwilling to pay dividends . Another reason why family ownersh ip 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. Under such circumstances, management positions will be limited to family members and extraordinary dividends will be paid to family shareholders. Agency costs may arise 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 have limited agency problems because the management and supervision decisions are mad e 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 performance may be non-linear. This means that the relationship is likely to be positive a nd 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 emulous advantages.D. Analysis1.0 Potters Diamond Model The competitive forces advantages or outline 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 group aim and the is most crucial, oil sector pressure to innovating and investing.Swot a nalysisStrengthsThe 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 date scientific foundation.Inadequate well enlightened 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 likelihood for resources application of EU agreement funds, as is the state resourcesReasonably good quality of 11 % graduate 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 globalisation.Reinforcement of local competition of adjacent economies, and thus reinforcing act ions that attract direct afield exploitation of the oil sector in UAE through investments.ReferencesAdmati, A., Pfleiderer, P., and Zechner, J. 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