What is speculative bubble?“A (speculative) bubble is a continuing growth in the price of an asset that cannot be justified by its fundamental value” (Hoshi and Kashyap, 2001) usually upon expectation of the rise of the asset priceA speculative bubble ended with collapse of the asset price, such as stock and/or real estate. Then agencies… Continue reading Speculative bubble in Japan
Author: rocker8942
Fiscal rules adopted by the UK government
The objectives of fiscal policyOver the medium term, to ensure sound public finances and that spending and taxation impact fairly within and between generations: andOver the short term, to support monetary and, in particular, to allow the automatic stabilizers to help smooth the path of the economy. (HM Treasry, 2003)The ultimate objectives of fiscal rules… Continue reading Fiscal rules adopted by the UK government
Examine the view that cost of capital is the most important influence on the level of investment
To see why the cost of capital is considered to be a significant influence on firms’ investment, we can consider first the capital budgeting decision of firms It would have been beneficial to note why investment and therefore understanding the determinants of investment is important –for example investment is a key element for economic growth,… Continue reading Examine the view that cost of capital is the most important influence on the level of investment
The payment of cash dividend may help to minimize possible conflicts of interest between managers and shareholders, and between managers and holders of the firm’s debt
In general, the managers may pursue selfish strategies if the firm has plenty of cash flow. So, dividends can reduce agency costs by reducing cash flows and serving as a discipline mechanism on management.With large dividends, the firm may fall short of cash to invest in profitable new project. Then another way to make fund… Continue reading The payment of cash dividend may help to minimize possible conflicts of interest between managers and shareholders, and between managers and holders of the firm’s debt
discuss the significance of varying cash dividend payments for large firms quoted on stock markets
Empirically companies payout dividends with high ratio, and they spend much time and energy on deciding how much to pay out as dividends to maximize firm’s value.According to Gordon(1959)’s dividend discount model, firm’s value goes positively with the change of dividend payout, because capital gains are more risky than dividends.(1)But in 1961, Modigliani and Miller… Continue reading discuss the significance of varying cash dividend payments for large firms quoted on stock markets