Oil and Petroleum industry in UK Essay Example | Topics and Well Written Essays - 1750 words

Oil and Petroleum industry in UK - Essay Example However, there are industries, like the oil and petroleum industry, which have managed to keep their competitiveness and remain intact from global market pressures. Current paper focuses on the oil and petroleum industry of the UK. The specific industry is considered as highly profitable, as analysed further below. Still, the industry has been related to anti-competitive behaviour, supporting the development of oligopolies. The characteristics and the competitive behaviour of the above industry are explored in this paper. Emphasis is given on the industry’s potentials to control anti-competitive behaviour and promote the equal development of its members. 2. Oil and Petroleum industry in UK 2.1 Current supply and demand conditions The oil and petroleum industry of UK is highly developed, a fact related to the country’s high efficiency in terms of oil and gas. Indeed, it has been proved that a percentage of 99% of oil and gas produced in UK is extracted from ‘the se abed surrounding the country’ (Oil & Gas UK 2012). The producing fields of the oil and petroleum industry of UK have been estimated to 383 (Oil & Gas 2012). ... For example, the country’s oil and gas production of 2009 reached high levels, covering ‘the two-thirds of the local energy needs’ (Department of Energy and Climate Change 2012). The particular industry also supports that UK economy; the contribution of the industry in the UK economy has been estimated to ‘an average of ?8 billion annually’ (Department of Energy and Climate Change 2012). In the context of the global market, the performance of the oil and petroleum industry of UK can be characterized as quite satisfactory, leading to the classification of UK as one of the most powerful oil and gas producers worldwide. Indeed, ‘in 2008 UK ranked 14th’ (Department of Energy and Climate Change 2012) in terms of its oil and gas production. It should be noted that the industry’s key firms have been estimated to 30 (see Table 1, Appendix); however, among these only 3 are those that share the key part of the oil and petroleum industry of U K (see those firms highlighted in Table 1, Appendix). 2.2 Collusive behaviour in the industry Collusive behaviour reflects the use of practices that are opposed to market ethics or to the law. In the oil and petroleum industry of UK such practices may have occurred but have not clearly reported or identified. However, there are signs that indicate the existence of such practices. For example, in a report published by the Department of Energy and Climate Change of UK (2012) it is explained that the production of oil in UK has reached up to now ‘the 40 billion barrels even if the potential for 20 more billion barrels existed’ (Department of Energy and Climate Change UK 2012).

Efficiency in a Unit of a District Health Authority Essay

Efficiency in a Unit of a District Health Authority - Essay Example Also, managers will have a hard job ÃŽ ¿f finding out how to improve things. Good communication ensures that people are all aiming and working towards one common goal. By communicating effectively the management can explain objectives and employees have the chance to share their views. There are many ways that managers can communicate with the staff it can be written or verbal. There is a lack ÃŽ ¿f formality with staff and the workplace is ÃŽ ¿f a relaxed atmosphere. There is not a lot ÃŽ ¿f organisational structure evident this is apparent as the dietary department is run by a team and there is no manager, however, there is a senior nurse. Nurses had to help with administrative duties to help clear the backlog. They were doing the job ÃŽ ¿f the receptionist; the receptionist was not carrying out their duties. There are a mixture ÃŽ ¿f views on how the department should be run. It is good to have a mixture ÃŽ ¿f views however this can cause conflict and also shows lack ÃŽ ¿f direction. When employees have different views they will priories differently. With a proper organisation, chart introduced it would help to overcome the informality within the department as it would clearly state the different staff levels and make objectives become unified. Authority will then flow through the hierarchy. Hierarchies can motivate staff. Maslow’s hierarchy ÃŽ ¿f needs show that different things motivate people and that they have needs to be satisfied. Employees must be satisfied to work properly. He also theorized that a person could not recognise or pursue the next higher need in the hierarchy unit her or his recognized need was substantially or completely satisfied, a concept called Prepotency. According to various works of literature on motivation, it suggests that individuals often have problems consistently articulating what they want from a job and this would have been no different in the case ÃŽ ¿f East Neasden’s clinical staff. Therefore, a problem could be that the non- clinical staff such the general manager ignored that these members ÃŽ ¿f staff said that they want, instead of telling them what he ( the new general manager) wants, based on what managers believe most people want under the circumstances.  Ã‚  

Social structures in different cultures Essay Example for Free

Social structures in different cultures Essay The best way to study social classes and the diversity of such in a culture would be to begin by defining what social class is. In order to make a more accurate study, it was part of my method to interview someone with actual exposure to this type of social strata. I believe that on interviewing him, a real true-to-life and accurate first-hand observation may be given. As, he was an Armenian, I place this culture as my basis and standard. Now, to begin would be to define what social class is. His best definition would be a separation of people based on the amount of money a family holds. This would then dictate their classification and status in society. The amount of money they would have as a clan would serve as a basis for their status and how they are placed by the general public. Basically, the greater amount of wealth possessed by a family garnered from their business and labor, the higher their status in society and in the social strata. The only exception to this would be those involved in the mafia or similar shady dealing, whereas the source of money is questionably from jobs of ill-repute. These would then have the family classified as being part of corrupt politics, and may give the family a bad name despite the amount of wealth. In the culture under study, I saw the classification was basically between the poor and rich. There was a wide separation between these two, as middle class was small in quantity. It is a widespread phenomenon and a social stratum that is of general knowledge throughout the country. Families that are part of the rich may be those that own homes and have adequate sources of water and facility. They would be the ones who would wear more clothes, be seen to carry themselves with more â€Å"class†, and in fact those who would be the ones who hire people from the lower classes as their servants or employees. Those who are not, namely the poor, would be those in the more congested areas and towns, where luxuries such as heated water are not within access. They would be the general masses and rabble who live day to day just trying to make a living and get by. Because of the wide separation between rich and poor, there is few middle class. The distinction between the strata is evident. Either one is among the select who are born into comfort and of that more comfortable environment, or one is born into the rough real world where the grind of everyday life involves effort, blood, sweat and tears. The difficulty with the social class system is that it is an evident source of injustice and inequality amongst the people. For example, when you get in trouble with the police, rich people always get off after they pay the police through bribery/ On the other hand, poor people go to jail.  The fact that the rich have more wealth, most especially due to their separation from the poor by a wide margin, gives them the power to roam freely with more privilege and leniency to bend rules set by the government. They have the power to live above the law and move things to their advantage because of the money that they possess. It is also within their reach to be treated with a double standard, where the poor may be treated as usually guilty and less trusted, while the rich get off the hook.   The rich are the ones more likely to be driving cars however they will not be fined for overspeeding and the like. The poor however may not be committing the crime but will be under greater suspect, because of the fact that they are poor. There are also other disadvantages to this system. The poor stay poor and get poorer. The rich stay amongst themselves and stay rich. There is a vast separation and no room for getting better. The lack of education stays the same and there is no room for growth. As the wealth stays within the rich, it is very hard for the poor to elevate themselves to a higher standard, and by virtue of their birth into the poor, they stay poor. It is only the rich who have benefits and stay within them. This was again reiterated during my interview. The interviewee being of the richer strata stated that because he was from a wealthier community, he and all those with him knew that they would remain wealthy. Also, by living in a wealthy area, they had a clean and beautiful location, which was patrolled by police for top security, among a multitude of other benefits. The division spreads all over the place as another example of its effect is its extent to the workplace. The rich people have better jobs in business regardless of their level of education because it’s who they know not what they know and the poor work in factories or do not work at all. In terms of schooling, everyone is allowed equal opportunity to schooling. However, again because of the amount of resources, only the rich kids can continue to learn in college so poor kids are stuck with high school level educations. The rich are college educated and the poor are high school educated, that is, if they stay in school in the first place. Because however they are on the streets, the poor have better skills rather than knowledge.  Now recently, a change is staring to happen with more scholarships given out to poorer children. However, this can only do so much. As there is a widespread division between the rich and poor, the amount of uneducated folk is widespread and the access that the poor have to a chance of uplifting their standard is small. The educational system although provided for all still is one that is founded on financial capability, hence still catering mostly to keep the higher standard of the rich, and keeping inaccessible to the poor. In terms of politics, it is the same. It’s not what you know it’s who you know in Armenian politics. Even though a democratic voting system is in place, there still is too much corruption where the lower classes voice is not heard. The rich have money and money defines the power that they have, Due to the fact that they have money, they can steer the economy in a way that their opinions are more listened to and theirs are followed more. Plus, due to the fact that it is they who are more educated, they are able to use this to their advantage. The point here is not only that they have more control. It is also the fact that due to their control, they can put hindrance to the country’s growth, as instead of allocating wealth and decision to the growth of the poor, the enlargement of the middle class, the lessening of the poor, their effort are maintained on keeping the rich with the rich. The economy is on a standstill and there is no progress. The only exception to all these divisions would be that of religion. As believed, all men are equal in God’s eyes, and here there are no biases. Under the eyes of their God, all men, rich or poor, are alike and are his children.

Helen Of Troy Analysis

Helen Of Troy Analysis In this essay, we analyze and compare the icon of beauty, Helen of Troy in one historical source as well as one contemporary source. More specifically, we refer to William Butler Yeats poem, No second Troy and Wolfgang Petersens movie Troy. We compare the symbol of Helen in these two sources in terms of intertextuality, polyphony and ideology. In the following part of the essay, we first give a brief background of the ancient myth of Helen; then we compare the poem No Second Troy and the film Troy in three aspects; finally, we give a conclusion of our analysis and comparison. Background Helen, also known as Helen of Troy and Helen of Sparta, is a mythological figure in ancient Greece. Her myth finds its origin in the Mycenaean age and the name Helen was first shown in Homers poem. According to most prehistoric myths (e.g., Iliad and Odyssey), She was born in Sparta and was the daughter of Leda, queen of Sparta, and Zeus. Ovids Heroides indicates that Helen spent her youth in Sparta and had the classical physical education, such as practicing arms and hunting. When Helen came to her marry age, a number of kings and princes all over the world were enchanted by her beauty and sent in precious gifts to court her. In order to select an ideal husband for Helen without offending other suitors, Odysseus suggested to let all the suitors swear not to retaliate the chose one. In the end, Menelaus became Helens husband. After several years of their marriage, the young Trojan prince, Paris, came to Sparta for diplomatic reasons. Previously, Zeus asked Paris to claim the most bea utiful goodness and Aphrodite promised him the most beautiful woman. Paris then chose Helen of Sparta. Some historical sources state that Helen was abducted by Paris to Troy, while others claim that she was willing to follow Paris and to leave Menelaus. The abduction of Helen became the direct cause of the war between the Trojan and the Greek. The English dramatist Christopher Marlowe depicted Helen as having a face that launched a thousand ships. In Iliad, Helen actually regretted to run away and gradually discovered that her lover Paris was not as brave and capable as his brother Hector at all. The descriptions of Helen in the Trojan War were ambiguous and usually conflict each other. After the fall of Troy, Helen returned to Sparta and was back to live with Menelaus, as stated in Odyssey. Yet in the play Orestes, Helen left the mortal world and was taken to Olympus. William Butler Yeats (1865 C 1939) was an Irish poet, who was awarded the Nobel Prize in Literature in 1923. Yeats met Maud Gonne, an Irish nationalist in 1889 and ever since then, she became a major subject in Yeats poems. No Second Troy was approximately written around 1908 and it indeed refers to Maud Gonne. Troy, the epic war film directed by Wolfgang Petersen in 2004, was adapted from Homers great poem The Iliad. The film basically follows the story line in Iliad and re-presents the grand scenes in the Trojan War. It mainly features the characters of Achilles, Hector, Paris, Agamemnon, Menelaus and Helen. Analysis and Comparison Intertextuality Intertextuality refers to the relationship of one text to other similar texts, which shows the interaction among different sources. Both the film Troy and the poem No Second Troy are mainly based on the description of the Trojan War in ancient Greek myths and Homers Iliad, yet they all make adaptations to express different emotions. Yeats used the story of Helen as a background of his poem. The content of the poem is consistent to the mythology history in terms of its literal description that beauty causes a crucial war (Have taught to ignorant men most violent ways, With beauty like a tightened bow). However, in the original story, Helen was involved in the Trojan War and she regretted her decision when seeing so much death and sadness caused by the war. Since Yeats intended to compare the symbol Helen to Maud Gonne, Helens character in his poem was changed to fit in with Maud Gonnes personality. In Yeats poem, Helen takes initiative in the war and uses her beauty to her advantage ( Was there another Troy for her to burn?). The readers can clearly feel her determination and perseverance (Being high and solitary and most stern). Troys plot also has several obvious deviations from the book. Firstly, the Gods are not introduced into the film. While in Homers writing, the Gods actually played a key role in the Trojan War. For example, Poseidon supported the Greeks and Aphrodite was on the Trojan side to protect Paris. The omission of Gods makes the characters look more realistic thus become closer to our life and easier to understand; but on the other hand it cannot present a clear origin and history of each character. Secondly, in Iliad, later Helen discovered Paris cowardice when he dared not to fight to death with Menelaus and disgusted his behavior; while in Troy, the love between Helen and Paris was pure and sweet all the time. Indeed, Helen was even glad that Paris gave up fighting to save his life. Such adaptation is common in the context of intertextuality. These texts are built upon each other but they each serve different purpose and convey complex feelings. In our case, Yeats changed Helens character to show his sorrow caused by Maud Gonnes rejection and nationalism; Wolfgang changed Helens feeling for Paris to makes his character as well as their love more pleasant to the audience. Polyphony In music, polyphony refers to music consisting of different independent melodic voices. Borrowing this concept to literature, we define a text as polyphony if it organizes diverse points of view and voices. In No Second Troy, Yeats expressed both praise and criticism for Maud Gonne in the name of Helen. Before the poem was written, he had proposed to Maud for four times in total, starting from 1891, then 1899, 1900, and finally in 1901. Unfortunately, she refused to marry Yeats repeatedly. While Yeats was in deep sorrow because of his unfruitful love, he understood such behavior was rooted in Mauds nationalism and feminism (Why should I blame her that she filled my days / With misery, or that she would of late). Maud Gonne was a famous female revolutionist in Ireland. She wanted to resist British colonization and liberate Ireland; in order to achieve this goal, Maud took active part in campaigning for nationalism in Ireland. Maud is an unusual woman who does not want to enjoy in a pe aceful life with husband and children; she devoted herself to revolutionary activities in Ireland. It is her beauty as well as her determined character that attracted Yeats (That is not natural in an age like this, / Being high and solitary and most stern?), but her ardency in revolution also resulted in their lasting turbulent relationship, the source of Yeats sorrow. In the film Troy, the Trojan people, especially Priam and his royal families had mixed feelings for Helen as well. When Helen was first brought to the palace, Priam looked very kind and welcomed her warmly. Nevertheless, when later he was alone with Hector, he blamed him for allowing Paris to take her home. We can see that on one hand, as a father, he was glad to have such a gorgeous daughter-in-law; on the other hand, as the king of Troy, he did not want to see his country involved into a war. When they got married, the Trojan people gathered around to have a look at their beautiful princess; but later when the war b egan, Helen was blamed for all the subsequent death and sufferings. In reality, people usually do not have a pure and definite feeling for a person or some things, thus in literature, some works do not maintain a single voice and express opinions in several different angles. Helen is undoubtedly an icon of beauty, yet at the same time there are sins underlying such beauty; people also remember the tragedies induced by her. Ideology Ideology is one of the most important concepts in cultural studies. It represents a system of beliefs, and influence the way people think. Ideology forms the political and social relation in a society. The two sources in this essay show different ideologies in two distinct periods and places in human history. To understand Maud Gonne/Helens character in No Second Troy, first we need to review the dominant ideology in Irish society, which is based on conservative, capitalistic Christianity. Therefore, womens traditional role is defined as mothers and wives. They play a minor role in political and social activities, such as social reforming and the Irish revolution. Under this circumstances, Maud was an unusual women in her time (That is not natural in an age like this) and always bore a mind of resurrection; she was not controlled by the tradition in her society, but persisted in fighting for the freedom of Ireland and tried to stimulate high spirits among Irishmen. She cofounded the nationalist organization, Daughters of Erin and after turning down Yeats proposal several times, she married a fellow activist, Maj. John MacBride. In the movie Troy, the story of Helen happens in ancient Greek and Sparta. Its social ideology is indeed similar to that of Mauds society in terms of womens role. In the gender-stratified society at that time, women were usually powerless and can only subordinate to men. Helen, as an especially beautiful woman, was put in an even more disadvantageous situation, since her beauty was used by men and became her burden. Being a possession of men, she had no control over herself. In the movie, we can see that Helens destiny is much bound with the man she was with. In Sparta, Agamemnons rule resulted in a loose alliance since Achilles held a different ideology which is conflict to the dominant one and he always wanted to fight for his own. Under this fragile regime, Helen had a weak character and lacked conviction, thus she was easily persuade d by Paris to run away her husband and country. In Troy, Priams rule represents a good dominant ideology. People live in a harmonious society. During the war, Prince Hector encouraged his people to focus on the future of Troy instead of personal interests. In Priams family, Helen felt warmth, saw sacrifice and gradually she learnt to care for others. In history, womens personality is often defined by the political affairs at that time. In No Second Troy, Helen initiated the war and had clear aims; in Troy, Helen was involved in the war and failed to prevent the tragedy. Conclusion The two sources No Second Troy and Troy are both based on Iliad and other Greek myths about the Trojan War. The major story line is the same in both materials, with subtle changes tailoring to the audience and purpose of the material. The two works also show a mixed feeling for the character Helen. People admire and love her beauty but also regard her as the source a trouble in the terrible war. In addition, the figure Helen in Yeats poem and the film represents two opposite characters. In No Second Troy, Helen / Maud Gonne has a strong personality. She is open-minded, resistant, and unwilling to obey the tradition. In Troy, Helen is described as a subordinate to the men loved her. She is weak, following the flow and cannot take responsibilities. The two disparate personalities are mainly formed by the social and political status at that time. Although in both No Second Troy and Troy, women play a minor role in forming the trend of the society, Helen in Troy did not realize the right s of women and was totally helpless among mens politics and wars, while Helen in No Second Troy is not content to follow mens order and act as a good lady. Instead, she took her steps and fight for freedom for her people and country.

Was the War of 1812 Pointless? :: American America History

Was the War of 1812 Pointless? The War of 1812 proved to be the most serious challenge to face the United States since the country's birth. This 'Second war of Independence' perhaps changed American history as we know it though. This essay will discuss the causes for this war assessing whether there actually were valid reasons for the United States and Britain going to war or whether the whole 1812 war was just born out of "pointless aggression" The war of 1812 was a very unnecessary war. It broke out just as one of its chief causes (The Orders in Council) was removed and its greatest battle (New Orleans) was fought just after peace was signed. The war was unnecessary from a British point of view but for the Americans it was inescapable. The Royal Navy had kidnapped 3,800 American sailors and pressed them into service. The Orders In Council had deprived the United States of a profitable trade with France and can be seen as having ruthlessly subordinated American economic interests to the political interests of the British Empire. American farmers also blamed the orders, perhaps unfairly, for a fall in agricultural prices that produced a depression in the West in the years immediately before the war. On the frontier it was universally believed that Indian restlessness war stirred up by British agents although really American oppression has to be seen as a big cause of this too. America's war with Britain seemed inevitable although the Americans did everything they decently could to avoid it, although there seemed to be endless provocation by Britain, for example in 1807 when a British frigate, the leopard opened fire on an American frigate the Chesapeake. The choice before America, Jefferson the former president and his successor Madison agreed was war or submission - to fight or to undo one of the main achievements of the revolution and accept total defeat in international affairs to England. As John Quincy Adams put it "It was not a matter of dollars and cents, no alternative was left but war or the abandonment of our right as an independent nation" The offences committed against the United States were the major provocation's for the war, reasons other then vindication can be regarded as rationalisation. There was an obvious anger for what British had done to America and many Americans merely wanted revenge but the war was fought for much more then that.

Essay --

â€Å"And lawfully by this the Jew may claim a pound of flesh, to be by him cut off nearest the merchant's heart. Be merciful.† (IV. 1. 231-233). Throughout the trial scene, despite the heavy tension in the air, a subtle, reoccurring idea floated in and lingered. It was the idea for Shylock to show Antonio mercy. However, the Jew disregarded it. Yet, Portia managed was to show the court that Shylock fiercely wanted the Law upheld. The intent of the Law and the grace of Mercy clashes as the course of the trial progresses. Consumed by determination to uphold his bond, Shylock found the thought of showing mercy to the merchant ridiculous. The Duke said to Shylock, â€Å"Shylock, the world thinks, and I think so too, that thou but leadest this fashion of thy malice to the last hour of act; and then 'tis thought thou'lt show thy mercy and remorse more strange than is thy strange apparent cruelty.† (IV. 1. 17-21). To this, the Jew responded: â€Å"You'll ask me, why I rather choose to have a weight of carrion flesh than to receive three thousand ducats: I'll not answer that: but, say, it is my humor: is it answer'd?† (IV. 1. 40-43). The Duke many a times asked the Jew to show mercy, and only that, nothing more and nothing less. Blinded by wrath, Shylock ferociously made it clear to the court, even before Portia’s appearance, that he wanted his bond. Showing mercy was out of the question. At that point, the grace of mercy had long disappeared from Shylock’s mind. The thought of ridding Antonio, the great merchant of Venice, from his hair replaced it. Shylock anticipated seeing red. It was all he could think about: seeing Antonio’s crimson flesh as he cut it off without hesitation and in the absence of grace. The Jew wanted the Law, his side of the La... ... drop of Christian blood, thy lands and goods are, by the laws of Venice, confiscate unto the state of Venice.† (IV. 1. 307-312). Shylock demanded he wanted the law, and Portia made sure to give him exactly what he wanted. The tables turned on Shylock; he was advised to practice mercy and now he has to beg for it. Throughout the trial scene, the intent of the Law and the grace of Mercy constantly clashed, as judgment on the bond was determined. Shylock entered the courtroom a confident man with an apt for revenge, though left a man stripped of everything away from him except the clothes on his back. Mercy was asked of the Jew, many times before the intent of the Law was twisted against him. His determination and refusal to show grace ultimately caused his demise. Portia pitted the intent of Law against him and the end, the grace of Mercy was bestowed upon Shylock.

Mitsubishi Corporation Analysis

Capital structure in Japan has been noted to be more highly leveraged than comparative North American firms which brings to mind the question: how is it that Japanese firms have been able to take on such high levels of debt? The answer lies in the environment that Japanese firms have been operating in. More specifically, the levels of debt are likely to have been induced by the lack of alternative sources of finance because of the effect of government regulations, and the different ownership structure in Japanese firms (with institutional lenders being major equity holders). So, the higher leverage has been a consequence of the conditions that Japanese business face-with a more pronounced effect (due to relationships) in companies which are in corporate groups known as keiretsu. These conditions were characteristic of the past. As the benefits of debt are well known in finance theory (tax shields, signaling etc.), the lack of independence and efficiency in decision making borne by Japanese managers seem to be the costs. The result for some firms has been a reduction in debt levels to those more resembling U.S. companies. The questions now have become: What is the optimal debt level for a Japanese firm? Should firms still be taking advantage of the benefits of their keiretsu relationship that have allowed them to take on such levels of debt? Our analysis focuses on Mitsubishi Corporation, a core conglomerate that is part of the larger Mitsubishi Group keiretsu having the capital structure characteristics mentioned above. The report will first explore the circumstances that may have induced Mitsubishi to its present capital structure, then look at more recent events and trends that may affect future financing decisions, and conclude with the Mitsubishi capital structure/optimum debt level analysis. Japanese corporations have outpaced rival firms in the US and Europe in terms of capital investment throughout the 1970†³s and into the 1980†³s. One of the main reasons behind the high level of investment is the better access to capital that Japanese firms have compared to their western counterparts-the result is that Japanese firms seem to have more debt than their U.S. counterparts. A common motive for taking on more debt is for the tax advantages, but there is little to suggest that there is much difference in the taxation systems between the two countries to support such a reason . The most likely factor for this trend in Japan has been the result of the close relationships that Japanese firms have with each other in a keiretsu. In Japan the majority of companies are formed into enterprise groups called keiretsu (which translates as â€Å"series† or â€Å"group†. The basic features of a keiretsu are as follows: cross-share holding agreements, interlocking directorates, intra-group financing, joint investing, and a consistent pattern of dealing among group members. The largest of the keiretsu are Mitsubishi, Mitsui, Sumitomo, Fuji, Daiichi Kangyo, and Sanwa (the latter three are centered around Japan†s largest commercial banks. Together, these six corporate groups account for a quarter of total Japanese business assets. Prior to the Second World War, several large monopolistic companies dominated Japanese industry. They were known as zaibatsu – the dominant four were Mitsubishi, Mitsui, Sumitomo and Yasuda. During the post-war Occupation the holding companies of the zaibatsu that controlled member firms were dissolved. Many firms subsequently regrouped to create the keiretsu we see today. Types of keiretsu: Vertical and Horizontal Vertical keiretsu are arranged hierarchically along production and distribution lines and organized under a principal manufacturer. The benefits of this network include increased efficiency and customer service, decreased distribution costs, simplified marketing channels, rationalized inventory controls and the facilitation of effective information sharing between members. Also, the principal manufacturers receive the benefit of being in a dominant position, which creates a high degree of bargaining power. Horizontal keiretsu are large groups of Japanese companies in a wide range of industries, organized around a commercial bank. Direct competition is avoided between member firms by only having one company in any line of business. The success of this type of keiretsu is attributed to their cross- shareholding and the availability of bank loans to their members. This is supplemented with personnel exchanges and consensus decision making between member firms. Being in a horizontal keiretsu also means that a stable core of long-term shareholders is in place for a company. For our purposes we will be focusing on the capital structure and other features of firms in a horizontal keiretsu. The economic environment that Japanese firms operated in favored highly leveraged capital structures. The following are some of the factors, besides belonging to a keiretsu, that have had an effect on a Japanese firm†s capital structure. The reluctance of Japanese managers to raise equity capital stems from the operations of the Japanese stock markets. Firstly, the Tokyo Stock Exchange is less stringent on disclosure requirements as compared to the NYSE, for example, which causes sharp asymmetric information differences between corporate insiders and the market. The result of this asymmetry is a severe underpricing of new share offerings and a reluctance to issue on management†s part. Firms, therefore, had a preference for bank debt which was less likely to suffer from such pricing effects. Secondly, equity has been an expensive form of finance in the past. The notion of issuing shares at market value is a recent phenomenon whereas traditionally firms issued equity at a historical par value of 50 yen with a fixed dividend. Investors typically demanded a 20 to 30 percent annual dividend on the par value (in essence the instrument was a preferred share), which were paid out of after-tax cash flows. Loans on the other hand were easily obtained through an affiliated bank at reasonable interest rates, and provided a tax shield through the deductible interest payments. Government Regulations and the Bond Market Table 1 shows how the domestic bond market in Japan began to open up during the 1980†³s. Until that time, strict bond issuing criteria that applied internationally kept most firms out of the domestic and foreign bond markets. Government regulations worked against issuing corporate bonds. The government saw corporate bonds as a competitive threat to the its own bonds since interest rates would have to be raised in order for the government†s bonds to compete with those of the top corporations. It wasn†t until 1985 that unsecured straight-debt corporate bonds were even issued. These conditions meant that firms had a reliance on their bank for debt financing; and as a result of their close relationships to banks, had a lower cost of capital and the ability to invest more than those who did not. Structure of Corporate Ownership in Japan The structure of corporate ownership in Japan is quite different compared to their counterparts in the West, with ownership being highly concentrated in Japan. Japanese laws allow institutional investors to exert more control over firms and their management inducing them to seek higher levels of share ownership. Indeed, there is a striking difference between Japanese and US corporate ownership. Ownership by financial institutions (particularly commercial banks) is far greater in Japan than in the US. Japanese commercial banks and insurance companies hold approximately two to three times the number of outstanding shares of public firms than their US counterparts do. On top of being a predominant shareholder, financial institutions play the simultaneous roles of also being the largest creditors of the firms as well being an important long-term commercial business partner. For example, it has been shown that out of 344 manufacturing corporations, financial institutions own 34.48% of the common equity and individuals own 29.53% . Therefore, many Japanese firms have access to more debt since financial institutions have highly concentrated ownership in firms. Ownership concentration does not differ significantly between keiretsu and independent Japanese firms . With high ownership concentration and cross-share holding by banks, suppliers and customers, keiretsu firms are better able to monitor decisions of firms within the group and direct management†s actions to benefit the whole and to act as a collective rather than just being contractual business partners. During the high growth era, the government of Japan†s Ministry of Finance directed investment to high growth industries. To ensure that investment capital was available to firms in these industries, implicit guarantees on the liabilities of financial and non-financial corporations were given to lenders. The provision of a safety net for the loans made the banks eager to lend money to finance rapid expansion in these industries, and the corporations willing to borrow it. Banks were also threatened by market bonds since they posed direct conflict to their business in two ways. First, there was a fear that interest rates on bank deposits would have to be raised from their artificially low rates to keep funds from migrating to other investment instruments. Second, banks did not want to lose their traditional customers for loans to the capital market. Because of their presence in the management and the board of directors in firms within the keiretsu structure, they were able to effectively keep these companies financing their operations with loans. This was relatively easy since most firms could not issue bonds anyhow until recently. The keiretsu system helped to reduce many of the direct and indirect costs faced by Western firms, which may have allowed firms to raise their debt levels. A major benefit arising from keiretsu affiliation is the reduction in costs of financial distress for member firms thus allowing them to take on a higher debt to equity ratio than otherwise possible. This is mainly attributed to keiretsu banking relationships and the consequent high levels of share ownership by financial institutions. Since a Japanese keiretsu is primarily financed by its main bank, to which a firm has close ties to, the extent of financial distress is greatly reduced. Hypothetically, when a firm within a keiretsu is entering financial distress, its main bank will coordinate rescue efforts by arranging loans from other banks as well as itself. In extreme cases, the bank will even find a company within the same keiretsu to merge with the distressed firm. In the event of a bankruptcy, the main bank will bail out the keiretsu firm by absorbing all losses by taking a subordinated position to other debt holders, eliminating the need for squabbling between the other claimants. The other features of the keiretsu, namely cross-ownership of shares and intra-group financing, also decrease the cost of financial distress. Since all firms within a keiretsu have some sort of stake in the distressed firm, it is in their best interest to try to keep that firm in operation . Aid from companies in the keiretsu can come in the form of stretched receivables, favorable transfer pricing and direct management incentives. To decrease the probability of bankruptcy and to increase the likelihood of recovery by a financially distressed firm, it would be ideal to expand, invest, and allow their organizations to grow. This is consistent among keiretsu firms since in times of financial distress, they tend to invest 46 percent more compared to non-keiretsu firms . Firms in financial distress generally have problems in raising capital, which may be in part due to a free rider problem. Firms with diffuse groups of creditors are faced with this problem because individual debt holders would not be willing to refinance the firm or renegotiate debt claims even though it would be in their collective best interests to do so. This problem is absent however, when a keiretsu firm is primarily financed with bank loans from a single creditor. Free rider problems are less severe or eliminated in keiretsu organizations. In addition, keiretsu firms tend to stay out of Japanese bankruptcy courts. Since financially distressed keiretsu firms are bailed out internally, the direct costs of bankruptcy such as legal and advisory fees, are vastly reduced. American firms on the other hand see the majority of disputes, arising from financial distress, ending up in bankruptcy courts. This problem in the US corporate system can be partially attributed to the wide use of bond financing. A multitude of bondholder claims are more difficult to restructure than a single bank loan and US bankruptcy legislation prevents companies from changing the principal, interest, and maturity without unanimous consent from bondholders. Therefore, keiretsu firms do not incur these large costs of financial distress, which can reach up to five percent of firm value, incurred by their US counterparts. In the end, the lower costs of financial distress is another reason why Japanese firms can take on more debt and thus lower their costs of capital even more with increased utilization of their tax shields. A financial keiretsu, through its network of corporate cross-shareholdings and strong relationship with a main bank, serves as an effective system for monitoring the actions of a member firm. Member firms are in unique positions to serve as mutual monitors because the success of a single firm is in the best interests of the entire keiretsu. As keiretsu firms typically have seats on other member firm†s board of directors, they can make sure that the actions of management are in accord with the interests of the entire group. The main bank acts as the primary lender and as a major shareholder, also tends to have its own executives sit on the board. This dual role ensures that the banks will be looking out for the interests of both bond and equity holders of the firm. The costs of monitoring are not as high as they are in the US system for any one party since the ownership is not as diluted. Hence, each member has a signficant interest in monitoring the firm†s activities and the free rider problem is alleviated. This system of corporate governance effectively makes sure that management pursues long run value creation. Agency costs are reduced in a keiretsu because of the unique relationships within the group. Shareholders cannot participate in moral hazard activities such as transferring risk to debt holders or transferring wealth from them by encouraging management to take on negative NPV projects. Both the higher level of debt and the structure of ownership, i.e. the bank being a creditor-owner and the high proportion of shares being cross-held within a keiretsu, serve the purpose of keeping managerial interests in accord with the group. The lower agency costs also results from the fact that most of the debt is short-term and secured.