Corporate Governance On The Capital Investment Decision - Free Essay Example

Sample details Pages: 13 Words: 4034 Downloads: 1 Date added: 2017/06/26 Category Statistics Essay Did you like this example? ABSTRACT This paper investigates the factors that determine the sensitivity of the investment-cash flow relationship. The Q model assumption is used to relate the investment opportunities available to the managers with its liquidity constraints due to asymmetric information and managerial discretion of internally sourced free cash flow. The result purports that there is a positive relationship between the degree of the Investment-Cash flow relationship and Q, found in low or no dividend paying firms. Don’t waste time! Our writers will create an original "Corporate Governance On The Capital Investment Decision" essay for you Create order It is evident that the results are in support of Myers Maljuf (Myers Maljuf, 1984) pecking order theory of the investment-cash flow relationship. TABLE OF CONTENTS LIST OF TABLES Introduction Overview Through various studies over the years, different scholars and financial analysts have been able to establish a relationship of cash flow on firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment spending. It was significantly proven by (Modigliani Miller, 1958) that a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial status is irrelevant for real investment decisions in a world of perfect and complete capital markets, after controlling for the cost of capital. In case of managerial discretion, based on (Jensen, 1986) free cash flow theory, firms increase investment (including projects with negative present value) based on the availability of cash flows with incentive of increasing firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ value beyond level of optimal investment. Moreover, an agency costs also appreciate the borrower net worth by charging a premium on the external financing. The discussion above explains that the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment decisions are dependent on the availability of internal funds, as cost advantage over external fund is evident. While choosing an appropriate capital structure, there are certain trade-offs which affects the decision. These trade-offs include tax advantage through acquiring debt against the bankruptcy cost which advocates the use of equity. Keeping this in view, various different models have been supported to explain this corporate capital structure behavior. Pecking Order Theory, initially mitigated by (Donaldson, 1961) describes the financing practice as prioritizing the means of financing, which is necessary for the management to counter against asymmetric information. Either they should generate the funds internally or acquire funds externally through debt rather than equity. Implications to the pecking order theory involves the positive impact of leveraging on the market price, which means, financing through debt sends a positive signal into the market about the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s future prospects. Furthermore, intermediaries also undermine the role of management as the financial intermediaries such as investment banks function as the insider to the firm. Consequently, keeping an eye on the firms operations and influencing the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s capital financing decision. However, Pecking order theory of (Myers Maljuf, 1984) argues that the firms operating in imperfect or incomplete capital markets where the cost of external capital exceeds that of internal funds, the financial structure may be appropriate to the investment decisions of companies facing uncertain prospects. Gauging the level of corporate investment in any firm is based on the corporate governance; market position of a firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s asset against its book value can be termed as Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q ratio. Identified by (Chung Pruitt, 1994), Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q as proportion of firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ market value to replacement cost of its assets. Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q can be considered an effective tool for determining financial performance as the data can be collected readily from a balance sheet. When calculating Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q ratio, the replacement cost can be determined approximately by the book value of firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s plant and equipment. Approximate q can be replaced with the actual Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q to make the calculations unproblematic and data can be readily available without any discrepancies. Problem Statement To study the impact of corporate governance on the capital investment decision through cash flow and Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q interaction in relation with Capital Investment HypothesEs H0: Firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ cash flow having a significant impact on its capital investment will be linked with high Q values. (FCF Theory) HA: Firms being liquidity constrained due to least payout will have significant investment-cash flow sensitivity, and will be linked with high Q values in the market. (PO Theory) Outline of the study The report contains the contemplation of research data that will study the phenomenon of cash flows and investment discussed earlier in this paragraph. The study categorizes firms according to characteristics (such as dividend payout, size) which will help measure the level of constraints faced by firms. The study will help readers to understand the complexities of Pecking order theory and Free Cash Flows concept with regard to asymmetric information available and corporate governance which influences decision of the firms. To measure the effect that cash flow-financed (internally sourced) capital spending and Q has on firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment, Ordinary Least Square Regression model will be used to estimate the function. To compute the influence on the Investment, instruments used are: (1) Cash Flow, (2) Approximate q, and (3) an interaction of both variables are created. Through studying the parameter estimates of interaction variable, positive influence on investment will support the Pecking Order hypothesis and negative influence will govern the Free Cash Flow hypothesis. The equation hypothesized in the next part is linear. Definitions Pecking Order Theory: (Myers Maljuf, 1984): à ¢Ã¢â€š ¬Ã…“A firm is said to follow a pecking order if it prefers internal to external financing and debt to equity if external financing is used.à ¢Ã¢â€š ¬? Free Cash Flow Theory According to (Jensen, 1986), à ¢Ã¢â€š ¬Ã…“free cash flow theory, high cash flow and low debt create agency costs associated with conflicts between manager and share holder over the payout of this free cash, which is the cash left after the firm has invested in all available positive net present value projects.à ¢Ã¢â€š ¬? Capital Structure à ¢Ã¢â€š ¬Ã…“A careful and systematic analysis of how claims against a corporations assets can or should be determined, assessed, and accounted for.à ¢Ã¢â€š ¬? (Riahi-Belkaoui, 1999) Capital Investment Decision à ¢Ã¢â€š ¬Ã…“Capital Investment decisions are those decisions that involve current outlay in return for a stream of benefit in future years.à ¢Ã¢â€š ¬? (Drury, 2006) Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q à ¢Ã¢â€š ¬Ã…“Tobins q is a measure of investors expectations concerning a firms future profit potential. It is defined as the ratio of the market value of a firm to the replacement cost of its assets.à ¢Ã¢â€š ¬? (Strecker, 2009) Literature Review Vogt (Vogt, 1994) explained the capital spending behavior of companies with respect to change in dividend cash paid, cash flows, sales, and market value of assets. The regression equation models the variables to proportion of fixed assets, and distributes the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ data in segments of Dividend Payout Groups and Asset Groups. Primarily, Dividend Cash has a strong negative impact on capital spending; it explains that in order to finance additional fixed investment firm needs to sock cash by reducing their dividend. Cash flow, Sales, and Q Ratio having a positive coefficient demonstrates that with an increase in future cash flows, the firm will improve its capital spending. A relationship has been developed between the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment decision and the firmà ¢Ã¢â€š ¬Ã¢â€ž ¢s financial status by Cleary (Cleary, 1999), financial status has been studied with respect to the liquidity constraints. The data is classified into groups through a discriminant analysis on basis of dividend payout policy. Groups taken into study have made possible to identify firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ which are more financially constrained more likely to be investment-cash flow sensitive, furthermore, availability of internal sources of funds have a greater impact on firms with high credit worthiness, and vice versa. It has been proposed that the various ownership structures make managerial decision based on the interaction between investment and the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ liquidity constraints. The study conducted by Dedoussis Papadaki (Dedoussis Papadaki, 2010) mentioned that the management can be held separate from its ownership, even on basis of the nationality of the company. On the other hand, it also explained that the relative shareholding of CEO and the controlling shareholders can also be the basis of separation. The sample used in the study was separated and grouped on basis of dividend payout, asset size of the firm, age of the firm, source of control, and kind of ownership. On the given sampling criterion; greater asset size firms, older firms, lower Q (high investment opportunity), and high dividend payout firms showed higher cash flow sensitivity towards investment. Findings support that the Low Q, small, and new firms under the generalized model are facing asymmetric information problems. Indeed these firms are expected a priori to face financing problems that affect the cost of their external financing. On the other hand, low Q, old and low dividend firms are more likely to face managerial discretion problems that result to over-investment. The impact of Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s Q is mainly used to determine the investment opportunity of the firm. In this article, marginal Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s Q has been taken to evaluate the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment and Research Development expenditures. The asymmetric information (AI) hypothesis proposed that firms provided with a profitable investment-project may not be able to source it through internal cash flows and the high financial cost of borrowing funds externally due to lack of awareness of firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment opportunity in the capital market. On the other hand, agency or managerial discretion (MD) hypothesis constructs the investment-cash flow relationship on the assumption that managers are well qualified in context with proficiency they obtain from managing a huge and fast paced firm and thus exceeding the wealth shareholders beyond their expectations. (Gugler, Mueller, Yurtoglu, 2004) Taking in viewpoint the impact of capital structure on the capital investment decision, firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment demands is the more susceptible towards cost-of-capital or tax-based capital incentive. Whereas, capital structure seems irrelevant as against internal sources of funds can be effectively substituted with sources of funds generated externally. The size of the investment project can be a deterministic factor towards it. Fazzari, Hubbard, Peterson, Blinder, Poterba (Fazzari, Hubbard, Peterson, Blinder, Poterba, 1988) explicates that cash flow/investment relationship is more sensitive when taken in reference with firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ dividend behavior. Comparison based on firms having more or less liquidity constraints can be further improved when compared on a division based on the scale of the firms, i.e. young or small firms versus large ones. This way the researchers can address the problem of firms lacking the asymmetric information. Under the impression where capital investments decisions mainly pertains to the capital structure or choosing the appropriate source of investment, Schaller (Schaller, 1993) conducted three different empirical tests to determine that information asymmetries have a huge influence on the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment behavior. Differences among the informational base of investors and creditors was also considered a capital market imperfection. Ownership status and age of the firms has an impact on the cost of equity financing, mature firms pay comparatively less price for it than young firms. Same aspect goes for the firms with concentrated with comparison to dispersed ownership. Borrowing is considered a more rational source for investment-projects. Pledgeable assets generate greater borrowing capacity, which afterwards makes firms invest more in pledgeable assets. As suggested by Almeida Campello (Almeida Campello, 2007), such a phenomenon can be termed as a credit multiplier. In case of financially constrained firms, a multiplier relates to the sensitivity of firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment-cash flow relationship that is reflected as the increase in the tangible assets of the firm. Therefore, it is proposed that with fewer tangible assets firms are more likely to be financially constrained. The sensitivity of investment-cash flow relationship is evidently influenced by the tangibility of a firm, as latter discussed. Managers while making capital investment decision considers externally-sourced funds costlier, therefore, overconfident managers over assessing the profitability of an investment-project invests more when having abundant internal funds to utilize. However, deciding not to source externally in case where they are short of internal funds to generate. There has been an evidence of significant relationship between the managerial discretion and investment-cash flow sensitivity. Equity concentrated firms are more likely to be influenced by overconfident managers, unless compensation tools can be used to reduce the effects of managerial overconfidence. (Malmendier Tate, 2005) Goyal Yamada (Goyal Yamada, 2004) have explained the impact of asset pricing in the stock market against investment-cash flow sensitivity. Overvalued stock prices triggers an increased in investment spending and are cut back when stock are being undervalued, consequently, inflated prices collateral assets attract higher level of external financing. Inflationary pressures primarily determined by the economic monetary policy impacts on the variation of cost on external financing, though it reflects highly on cost of external financing, marginally impacts less on the investment-cash flow sensitivity. It has been observable that less financially constrained firms have significantly higher investment-cash flow sensitivity. Characterizations of firms based on financial constraint can sometimes create confusion. Firms having unusually high cash holdings can either be characterized as unconstrained based on the opportunities it has to invest or constrained based on the assumption that it needs to have a precautionary savings to invest in future investment projects. Therefore, financial constraints cannot be used as an influential determinant for investment-cash flow sensitivity. (Kaplan Zingales, 1997) Hu Schiantrlli (Hu Schiantarelli, 1998) put into picture the effect of general economic factors and various firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ characteristics on the value of the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ net worth. Mainly financial status is the most important determinant for the level of asymmetric information problem that managers face. A strong balance sheet position can reflect good sign of firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ performance which enhances the market value of the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ asset to its stake holders, mainly investors and creditors. Q models assumption also assists in determining the sensitivity of the investment-cash flow relationship, where the indicators determine the investment opportunity and the sources of funds to choose from. Understanding the market influence in proxy of q can also give a clear picture to the movements in the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ investment over a period. Net worth of firms helps manager determine if the sourcing of funds externally is a viable option in contrast to the investment opportunity which underlies. (Hubbard, 1998) Research conducted on the investment-cash flow sensitivity addresses many aspects of the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ financial strength. Further study by Calomiris Hubbard (Calomiris Hubbard, 1995) shows that when firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ tax taken under investigation also reflected a significant influence on the volume of spending on investment-projects. They explored the impact of surtax margin, as a tax experiment, on the cost of internal and external funds. Surtax when levied on undistributed profits, obligate the firms to incur certain cost on the internal funds. This effects the managersà ¢Ã¢â€š ¬Ã¢â€ž ¢ decision to invest and is also reflected on the investment-cash flow sensitivity against the surtax margin. As a result to evade burden of higher cost on internal funds, firms with high surtax-margin exhibits elevated sensitivity in investment-cash flow relationship. Quan (Quan, 2002) discusses the Pecking Order theory with reference to the Modigliana-Miller proposition that works under the assumption of perfect market. Here it is stated that value of the firm is irrelevant and based on a few limitations the choice of financing can be determined via gauging the strength of the firm. These factors pertain to the imperfect market and influence the managers to make their capital investment decision. Once the assumptions are released the financing structure shows a clear picture. The association between Free Cash Flow theory and Agency theory has always been under the limelight when there is a question of retaining the undistributed profits. FCF Theory taken under consideration gives out an option to the management to hold on to excess cash sacrificing the shareholders opportunity cost. These excess funds can be generated to better internal operational efficiency or at managersà ¢Ã¢â€š ¬Ã¢â€ž ¢ discrepancy to source its investment-projects. (Wang, 2010) Research Methods The chapter explains the model used in the given research study. The study focuses on analyzing the influence of Cash Flows and Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q on Corporate Investment. The equation represented by a dependent variable as a ratio of capital spending to the beginning net fixed asset (I/K) predicted by independent variables: (1) ratio of cash flow to the beginning gross fixed asset (CF/K), and (2) beginning Tobins q (Q). Method of Data Collection Main source of collecting the required data is from secondary sources. It includes the Balance Sheet Analysis of Joint Stock Company listed in Karachi Stock Exchange provided by State Bank of Pakistan consisting of data of our relevant variables. The data was taken in annual terms to conduct this research. Sampling Technique The Convenience sampling or grab or opportunity sampling would be use in this research. Sample population selected because it is readily available and convenient. Sample Size The sample period taken under study covers 8-years period beginning at the start of 2000 and ending at the close of 2008. The data was taken from a sample of 70 (non-banking and non-financial) companies which are listed on Karachi Stock Exchange and included in KSE-100 index. Research Model Statistical technique Ordinary Least Square Regression technique is used to study the impact of variables included in the study. It helps studies the relationship between a dependent variable and several independent variable. It also assumes the relationship to be linear or à ¢Ã¢â€š ¬Ã…“straight line,à ¢Ã¢â€š ¬? where the values of predictors lies directly proportional to Criterion variable. SPSS Software is used to develop the regression model and evaluate the influence of predictors on dependent variable. Results Findings and interpretation of results Aggregate Sample: Table : Represents the model summary of regression estimates for the full sample of 69 firms The predictors, i.e. main effects of Cash Flow and Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q and an interaction variable of both combined, included in the model explains 78.5% of Investment (Table 1) shown mentioned as R Square. Least variation in Adjusted R Square suggests that the variable to observation ratio in the given model is sufficient. Casewise diagnostic was also conducted to eliminate the outliers in the data to improve the results. Table : Studies the F-statistics to test whether the model predicts the dependent variable significantly The F-statistics (Table 2) is significant and it determines the regression model with the given predictors can significantly predict the outcomes at a 0.05 significance level. Table : The parameter estimation for full sample of 69 firms with respect to dependent variable, t-statistics is used to test the null hypothesis ÃŽÂ ²1 = ÃŽÂ ²2 = ÃŽÂ ²3 = 0 The coefficient values of all predators included in the test are significant at a 0.05 significant level (Table 3), which shows that they have a strong influence on the investment of the firm. The standard coefficient shows that Cash Flows have a much greater impact on Investment than market value on the firm, which is exemplified through Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q. Dividend Payout groups: Table : Presents the sample statistics for 69 KSE listed (non-banking and non-financial) companies which are included in the KSE-100 index. The three rows distribute the statistics into High, Medium, and Low payout policies. Average dividend-to-income ratios of greater than 0.35, between 0.35 and 0.10, and less than 0.10 define High, Low, and Medium dividend-payout firms, respectively. While studying the dividend-payout groups (Table 4), the descriptive helps to identify characteristics to confirm whether the data being studied has the authenticity and the behavior pattern which commonly related to the groups assigned. The values of Investment, Cash Flow, and Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q associated with the groups are in complete correspondence with the hypothetical occurrence. Firms having a higher (lower) dividend payout have greater (lower) market value, and lower(higher) level of cash flows and investments. Table : Represents the model summary of regression estimates of 69 firms split by High, Medium, and Low dividend-payout policies. The model helps explains 81.9%, 66.7%, and 80% data in High, Medium, and Low dividend-payout firms (Table 5), shown in R Square. Least variation in Adjusted R Square suggests that the number of observations is sufficient with respect to variables in each group separately. Table : Studies the F-statistics to test the null hypothesis of ÃŽÂ ²1, H = ÃŽÂ ²1, M = ÃŽÂ ²1, L The F-statistics (Table 6) in each dividend payout group is significant and it determines that each regression model with the given predictors can significantly predict the outcomes at a 0.05 significance level. Table : Shows the parameter estimation for each payout groups with respect to dependent variable, t-statistics is used to test the null hypothesis ÃŽÂ ²1 = ÃŽÂ ²2 = ÃŽÂ ²3 = 0 The coefficient values of predators in High and Low dividend payout groups are all significant at a 0.05 significant level (Table 7), which shows that they have a strong influence on the investment of the firm. Except for Medium dividend payout group, which has insignificant coefficient values of Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q, showing no impact on the investment. The standard coefficient shows that Cash Flows have a much greater impact on Investment than market value on the firm, which is exemplified through Tobinà ¢Ã¢â€š ¬Ã¢â€ž ¢s q. Hypothesis Assessment Summary Hypothesis Independent Variables B t Sig. Comments Firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ cash flow having a significant impact on its capital investment will be linked with high Q values. (FCF Theory) Cash Flow ÃÆ'— Q H0: ÃŽÂ ²3 0 ÃŽÂ ²3,H = .135 5.295 .000 Rejected ÃŽÂ ² 3,M = .072 .991 .324 ÃŽÂ ² 3,L = .140 5.482 .000 Firms being liquidity constrained due to least payout will have significant investment-cash flow sensitivity, and will be linked with high Q values in the market. (PO Theory) Cash Flow ÃÆ'— Q HA: ÃŽÂ ²3 0 ÃŽÂ ² 3,H = .135 5.295 .000 Accepted ÃŽÂ ² 3,M = .072 .991 .324 ÃŽÂ ² 3,L = .140 5.482 .000 Dependent Variable: Investment (I/K) Table : Summarizes the results and explains that the hypothesis accepted is directly in correspondence with the aggregate hypothesis. As illustrated (Table 8) capital spending of low payout firms is positively and strongly influenced by the interaction term, consistent with the PO hypothesis, the parameter estimate for the high payout firms are also positive but marginally significant. Conclusion, Discussions, Implications And Future Research Conclusion The results illustrated above demonstrates that the positive relationship between the degree of the Investment-Cash flow relationship and Q represented latter in the aggregate data (Table 3) is concentrated in low or no dividend paying firms. This finding is in further support with the PO hypothesis. Discussions The objective was to study and test the causes of universal relationship between Cash Flow and Investment Spending. Hence, two hypotheses were included in the research to study the source of this relationship: the free cash flow hypothesis (FCF) hypothesis, which works on the assumption that managers prefer investing its free cash flow excessively into investment projects that are not profitable, and the pecking order hypothesis (PO) purports that managers are prone to investment comparatively less than the opportunity provided due asymmetric information-induced liquidity constraint. As advocated in favor of Pecking Order Theory by (Fazzari, Hubbard, Peterson, Blinder, Poterba, 1988) and many others, for groups which consists of small firms with low-dividend payout to fund capital spending, exhibits heavy reliance on cash flow and cash changes. The relationship can be more significantly studied when the impact of larger q value is associated with this group. Evaluating the impact of corporate governance on investment-cash flow relation requires a critical judgment as to how do the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ cash flow and the existing market value influence the investment decision. Financially constraint firms may have a larger impact on liquidity associated matters and managers might take discretion in choosing the right sources to tap. Agency cost may be involved in making such a decision where managers may consider paying dividend as a higher opportunity cost as it reduces the firmsà ¢Ã¢â€š ¬Ã¢â€ž ¢ free cash flow to exploit new profitable investment projects. Implications and Recommendations In the current market situation where external pressures existing can also be taken into proxy. When managers making a capital investment decision they need to take in view other non-financial aspects that also influences the decisions to a certain extent. Furthermore, financial intermediaries having a certain level of involvement and sharing information sensitive to the market can also be a major factor that might be giving a varying result against Investment. Investing in profitable-investment projects can bring in greater resources to the firm in future and it entails a huge decision burden upon the shoulders of the managers. Shareholders expecting to earn a greater return through investing in them can also be undermined when manager decided to have a low payout policy. Funds generated internally is a possibility where there is a healthy cash flow, but it is also preferable if this free cash is invested into marketable security for allocating the resources into a profitable venture for a time being to make it a positive impression. Future Research In future studies there may be more aspects of cash flow-investment relationship which can be studied for assessing the degree impact it has on this relationship, i.e. sales, debt performance, capital structure, firm size, etc. The research study may also be improved if the observation of firms are increased that will in turn reflect a more clear picture about the relationship in the current scenario.

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Question: Discuss the impacts of cross cultural management on business. Answer: Cross cultural management Cross cultural management can be referred to the management of business teams while considering the diverse cultures, preferences, practices of consumers in the context of global or international business context. Thus, while developing the business, the leaders should have to consider the conflicts that could be raised while working in the cross cultural context and the leaders should such management skills to handle these kinds of skills (Ting-Toomey and Chung 2012). Many organizations thus need to adapt and modify their business approaches and processes fir competing on a level in diverse field where no geographical boundaries remains. The international business has been started hundreds years back, however, the importance of intercultural interaction has enhanced as more people started to access wider markets through the help of new technologies. Different professions require the inclusion of cross cultural management as the part of their training or program curriculum. Communication is a major part in the cross cultural management. The leaders of businesses should have training to achieve appropriate cross cultural communicational skills for dealing with people from different culture in global context. In this context, the organization needs to understand what are the requirements for managing a business in cross cultural context (Yu and Ko 2012). The cross cultural management needs to understand the ways by which national culture affects the management practices. It also seeks to characterize the differences and similarities through the cultures in different management practices as well as the organizational con text. The cross cultural management also seems to enhance the effectiveness of global management. Most of the large organizations consist some business relations with different stakeholders in some other countries belonging from other cultural context and the organizational members have to deal with them regularly. The cross cultural management assists those members of the organization to understand other cultures better while working together with people from other culture. The use of effective cross cultural management through the business team can enhance the ability of innovative and critical thinking skills and experience of the team members and thereby making them capable of contributing in the enhancement of organizations competitive position in the global market. A number of social and cross cultural theories can help to gain an insight of the effect of cross cultural management in the business. Acquiring the cross cultural skills help to make employees more self-sufficient which enhance their performance efficiency and thereby enhancing the entire business performance and sustainability (Thomas and Peterson 2014). Japan as a country A Paleolithic culture was the first known habitat of Japanese archipelago around 30,000 BC. The class followed by Mesolithic towards Neolithic semi-sedentary hunter-gatherer culture including the ancestors of both Ainu people and yamato people. It happened during 14000 BC. Around 300 BC, Yayoi people entered in the Japanese island. The nation appeared in the written history of Chinese Book of Han first. Japan is a constitutional monarchy and the power of Emperor is limited here. He has depicted that the symbol of State and of the unity of the people. The prime Minister has the power along with other elected people of the Diet, whereas the sovereignty is vested in Japanese people. The current Emperor of Japan is Akihito. The legislative organ of Japan is the national Diet, seated in Chiyoda, Tokyo. The current population of Japan in recent days has been estimated to be 127 million, within which 80% people lives on Honshu. The society is culturally homogeneous and linguistically composed of 98.5% ethnic Japanese (Caligiuri and Tarique 2012). The dominant and native ethnic population of Japan is Yamato people and the indigenous Ainu and Ryukyan peoples are the minority groups. The country has second longest overall life expectancy at birth in the world with 83.5 years for the people born in 2010-2015. However, change in demographic structure has raised a number of social issues in the community. The economic growth of the country started in the period known as the Edo period. Japan expanded economically during the Meiji period since 1868. Growth slowed during 1990s which has been followed by global slowdown in 2000. Three quarters of gross domestic product is provided by the service sector (Kawar 2012). 84 to 96% Japanese population are the followers of Buddhism or Shinto. Japanese beliefs have also been influenced by Taoism and Confucianism from China. In Japan, 99% people talks in Japanese, being their first language. In addition, Ryukyuan languages are also used. While analyzing educational system, there are two top-ranked universities. 75.9% high school graduates attend university, trade school, junior college or other higher educational institute (Lin et al. 2012). Decision making in Japans management The decision making process in slow in Japanese management. Thus, the length of decision making process is a very common issue of a person who works in a Japanese company. The root of the decision-making process in the Japanese firm is in the feudal period. At that period wide range of Japanese people lived in rice farming villages and they realized that it is much better to take decision together, collectively. The senior people in the community led the decision making process. The Japanese companys decision making pattern is much similar to the rice farming villagers. In the classic Japanese decision making process a long process is done. The purpose of the things are addressed, then data related to those deliverables are gathered and analyzed, then a consensus requirement is set which needs to be met and then the senior most people in the organization is being convinced for gaining the final guidance (Peltokorpi and Froese 2012). Finally, after gaining approval from the senior peo ple, the decision making session is completed. As a result, the decision making process in the company takes longer period than the other national culture. However, from the viewpoint of the Japanese community, this slow procedure can lead to the best possible decision for the business. The feudalism culture has gone from the Japanese culture long time ago, but the behavioral pattern is rooted in the society till date and it influences the decision making processes in the Japanese organizations. In contrast, the decision making process in American company is quite faster. The workers in Japanese company have mixed feelings about their native decision making process. The employees will admire that the decision making process takes longer time and which is quite frustrating as it is not subjected to change. However, the decision making process has advantages if executed properly. It proves that all the departments in the firm are participating in the decision making and are agreed to implement the decision in the workplace. As the process allow many people to take part in the decision making process, it makes the group to feel valued. In addition, the thorough data collection process help to make well thought out decision. Besides the positive part of the decision making process, the challenge is the quickening rate of the technological progress (Hartley 2012). In this situation, the employees who are working in the Japanese company, feels as handcuffed, if they try to respond to the request of a customer quickly. Thus, the Japanese companies are at the risk of remaining behind in the global competition. Implications for manager of a different culture working in Japan From the review of the Japanese management culture, it has been seen that the decision making processes of the organizations in Japan is quite slow than the other countries. Thus, while working in a Japanese company from a cross cultural background, the employee has to consist the cross cultural communication skills to interact with the employees in a cross cultural context. A cross cultural training for the employee can be suggested which can help the employee to adjust in the new environment. The training would help the employee to understand their business processes, pros and cons, cultural background and language related knowledge. The key differences in business culture including communication style, leadership style and human resource practices would be discussed (Peltokorpi and Froese 2012). In the Japanese companies, most of the employees stay in a company throughout their carrier, thus they are less worried about employee retention. Thus, for the employee working in the Japa nese company, it would not be a concern. However, language is a major concern, as 99% people speak in Japanese. The Hofstedes cultural dimensions theory established by Geert Hofstede discusses about the effects of culture in a society on the members values as well as how these values link to behavior. According to this theory, while working in a different cultural background, people have to adapt the norms and values of the new environment in order to sustain in the new environment. Therefore, the employee has to understand the importance of the culture-difference awareness. The training session would include some basic myths which would help the employee to engage himself in the new environment. These myths are, Dont Worry Be Happy, All Apologies, Down with the sickness, Hard Days night and taking care of Business. Long working hour is common in Japanese company, thus the employee would have to adapt working in longer period. Another important fact in Japanese company is that, people cannot take sick leaves; they believe that it is better to die rather than taking a sick leave. Therefore, the person has to take good care of him in spite of getting sick. Here, employees always needed to apologize, in spite of the situation (Mathews and White 2012). Therefore, the manager or the employee needs to adapt to apologize in this situation for reducing organizational conflict. In addition, the employee also needs to build patience in taking organizational decision makin g, as this process is slow in the Japanese companies (Froese et al. 2012). Conclusion In conclusion, it can be said that this report highlights the management and trends of Japanese cross cultural management. Here, the concept of cross cultural management has been discussed along with the impacts of cross cultural management upon business. In this context, the management and decision making procedures in Japan has been discussed here. In this context, the suggestion for a manager from a different cultural background working in a Japanese company has been discussed. It has been identified that the Japanese decision making process is slower than other nations which is a common issue regarding the cross cultural management. This assignment highlighted how to manage in such situation. Reference List Caligiuri, P. and Tarique, I., 2012. Dynamic cross-cultural competencies and global leadership effectiveness. cia.gov, 2016.Welcome to the CIA Web Site Central Intelligence Agency. Froese, F.J., Peltokorpi, V. and Ko, K.A., 2012. geert-hofstede.com, 2016.Cultural Insights - Geert Hofstede. [online] Geert-hofstede.com. Hartley, J., 2012.Communication, cultural and media studies: The key concepts. Routledge. Kawar, T.I., 2012. Cross-cultural differences in management.International Journal of Business and Social Science,3(6). Lin, Y.C., Chen, A.S.Y. and Song, Y.C., 2012. Does your intelligence help to survive in a foreign jungle? The effects of cultural intelligence and emotional intelligence on cross-cultural adjustment.International Journal of Intercultural Relations,36(4), pp.541-552. Mathews, G. and White, B. eds., 2012.Japan's changing generations: are young people creating a new society?. Routledge. Peltokorpi, V. and Froese, F.J., 2012. The impact of expatriate personality traits on cross-cultural adjustment: A study with expatriates in Japan.International Business Review,21(4), pp.734-746. Peltokorpi, V. and Froese, F.J., 2012. The impact of expatriate personality traits on cross-cultural adjustment: A study with expatriates in Japan.International Business Review,21(4), pp.734-746. Thomas, D.C. and Peterson, M.F., 2014.Cross-cultural management: Essential concepts. Sage Publications. Ting-Toomey, S. and Chung, L.C., 2012.Understanding intercultural communication. New York, NY: Oxford University Press. worldvaluessurvey.org, 2016.WVS Database. [online] Worldvaluessurvey.org. Yu, J.Y. and Ko, T.G., 2012. A cross-cultural study of perceptions of medical tourism among Chinese, Japanese and Korean tourists in Korea.Tourism Management,33(1), pp.80-88.

USING ELEMENTS OF HIP-HOP CULTURE AS A MEANS OF INCREASING STUDENT IN

USING ELEMENTS OF HIP-HOP CULTURE AS A MEANS OF INCREASING STUDENT INTEREST AND LEARNING AMERICAN GOVERNMENT USING ELEMENTS OF HIP-HOP CULTURE AS A MEANS OF INCREASING STUDENT INTEREST AND LEARNING AMERICAN GOVERNMENT By John H. Mayberry, Jr. For ED 7999: Terminal Masters Project Submitted to the Office for Graduate Studies, Graduate Division of Wayne State University Detroit, Michigan In partial fulfillment of the requirements For the degree of Master of Arts in Teaching 2004 MAJOR: SECONDARY SOCIAL STUDIES EDUCATION Approved by: ________________________ Dr. Bob Pettapiece Date CHAPTER ONE INTRODUCTION TO THE PROJECT Introduction One of the myriad challenges that face conscientious educators is the need to get and keep the attention of their students. With all of the fast-paced, mind-grabbing activities that students have at their fingertips, the task of sitting in a classroom and listening to a teacher talk to them (or at them) about anything can be everything but interesting. Teachers may have become comfortable with the way they do things in their classrooms; their ways are easy to them, it does not require creativity, and it can be perceived as a threat to their role as the classroom authority and expert in subject matter to be asked to change. However, the methods that some educators use may not result in student learning and mastery of the subject matter. Educators, as professionals, must be willing to develop, emulate, and initiate new strategies if there is the possibility that the use of these strategies would lead to improved student learning. One strategy that has been found effective is using elements of popular culture in teaching social studies. By starting with and using cultural items with which students are familiar and can relate, student interest in studying the subject may increase, resulting in better performance in the classroom, and better feelings about studying social studies. The teacher must become familiar with the culture that the students are immersed in, whether it is music, television, fashions, or other elements of their culture. The teacher must also be willing to connect the students culture to the subject matter being studied. This presents a challenge as many teachers, because of the differences in age, usually do not identify with the same popular culture as students. Purpose of the Study There were two questions to this study. First, would studying American government through the means of Hip-Hop culture result in increased student interest in the subject matter? Secondly, would studying American government through the means of Hip-Hop culture result in improved student performance in the course? By taking a look at these two questions, it may be possible to determine if infusing elements of popular culture is an effective educational strategy for teaching social studies. Significance of the Study This study should be of interest to social studies educators. If we wish to understand our students and reach them, we should understand the world that they dwell in. By understanding hip-hop culture, as well as popular culture as a whole, we, as educators, might find and develop strategies and activities that will have a positive affect on students desire to study social studies and their understanding of social studies concepts and information Population The population of this study included 10th graders from two sections of an American government course in an urban high school. All of the students were African-American ages 14-16. There were twenty-nine students in the traditional class (3rd Hour) and 31 students in the non-traditional class (5th Hour). Summary This study will demonstrate two things: First, studying American Government through the means of hip-hop culture will result in an increased interest in studying American Government, and secondly, studying American Government by using hip-hop culture will result in improved student performance. CHAPTER TWO REVIEW OF RELATED LITERATURE Introduction This chapter contains a review of literature related to the concept of using elements of popular culture in teaching in general, and social studies in particular. Research The inclusion of popular culture forms into the educational realm has a long history and has been accepted as a legitimate teaching strategy, in some realms. For example, using elements of popular culture in educational films and videos has been a welcome reality for decades. Yet, research in the field of popular culture forms like dramatization, television commercials, and rock and rap videos, how it pervades the lives of young people, and how schools should respond, is