Cash Conservative and Low-Leverage Firms - Dissertation Example

Download file to see previous pages The foundations of a firm’s financial theory can be found in the firm’s organizational culture and structure, the national financial policies, investors, and economic factors. In business, decision-making processes include different perspectives which are reflected in the corporate governance policies. The perspective is relative to the source of financial wisdom, accompanied by the degree of inclusion of Values and Ethics. Theorists have come to believe that contributions to an engaged, politically aware form of multicultural theorizing may cast some light on debates about corporate governance and social responsibility, policy-making strategies, and profits.

Distinctly, attic eccentric people, for example, Hayek (1976) stressed the fact that the present-day permissive pre-occupation on ‘the mirage of justice’ could lead them to overlook the procedure that permissive strategies depend too heavily upon the market which is not a centralized one and positioned on individual firms, and the final product of this cannot be deduced and is unforeseeable. According to an empirical study by Iona, Leonida, and Ozkan (2004): “The final result also tells that legislative occupancy, board formation and, to some extent, ownership congregation are vital elements of the possibility of organizations taking up middle-of-the-road financial schemes.” The strategies of cash holding and leverage are traditionally used as factors to determine the level of conservatism in a firm’s financial policy.

Corporate executive management experience challenges when the interests of the business are coupled with the personal interests of the investors, the organization, or the managerial cabinet. This occurs frequently during periods of financial distress. The Agency theory developed amongst concerns for property rights, business economics, business law, and political philosophies, to include the studies of economists and business analysts (Reference for Business, 2013). This paper will investigate the existence and magnitude of financial conservatism in firms in the United Kingdom and in Germany through empirical research of their financial data with regard to financial crises.

1.1 The United Kingdom and Germany
In relation to this, the same predicament is there. It should not be ignored that the markets and macroeconomic variables have a great connection with each other. But it has to be investigated as to what extent they affect each other and how much realism the relationship on an individual basis, looking upon the market as well.

The London stock market has a unique sense and interpretation. The governing part is played by The Pound Sterling, regardless of its execution; good or bad. The envisioning relationship between the UK and macroeconomic determinants has been observed to verify if this decline built up or deteriorated the economy.

When the graphs are in view, shaky trends have been witnessed, appreciation and depreciation of the British Pound Sterling, and political shifts over the last three decades. Many economists and researchers have considered this policy to be fruitless now. Investigations relating to the general increment in the price levels and other various macroeconomic points provide diverging prospects of the UK’s economic positions. ...Download file to see next pages Read More