Iroquis Theater

Theatre Fire changed the way we now regulate codes for many buildings. Some codes that were done due to the fire are explained thoroughly in this paper. Two online articles were used to write the paper. Iroquois Theatre Fire could have been prevented, but due to what happened at the theatre we now have mandatory codes every public building must follow before opening, making patrons safe. Rushing the construction was a bad decision; filling the theatre above Its capacity as an even worse mistake.Government officials made sure all these new regulations were followed through after the fire. On a Wednesday afternoon a fire that would change the codes for many public buildings happened at Iroquois Theatre. Many people called the theatre â€Å"fireproof†, but that wasn't the case that Monday afternoon. While many people watched the second act of a play, the fire started. A spark from a malfunctioning light ignited a drop curtain and it spread quickly catching thousands of square fee t on fire.Due to ruddier construction to open the theatre right away, roof vents had been sealed off, preventing the heat, smoke and gases from escaping the fire causing many people to die. A fire curtain was supposed to be lowered in case of fire, but the stagehand trained to do so was out sick. These made many government officials think of how codes are important to prevent many deaths, or a fire. Reasons why we have exit signs on top of exits were because of the Iroquois Theatre Fire.Iroquois Theatre Fire caused 602 lives to leave to heaven when a fire like that could have been prevented y many ways. Many law, regulations, and codes were made due to this fire, which changed our lives. Due to these regulations a fire can be handled the right way and people can get out of buildings faster. A regulation that is mandatory for buildings to have now is an exit sign on top of doors and clearly marked, and operable easily. In the theatre fire there was fire exits, but were either blocked or not marked to keep out unpaid patron out.Now fire exits are mandatory to be in a building and clearly marked. At the time fire sprinklers were a new thing, due to the rushed construction the theatre didn't have them, fire sprinklers are now a mandatory for theatre stages. It Is said the sprinklers could have raised the chances of this fire spreading as fast as It did, now buildings aren't allow to open If fire sprinklers aren't In the ceiling. The City of Chicago also rewrote its fire code to mandate outward-swinging doors In theaters, which now makes it safe for people to walk out of places In case of a fire happening.A crash bar was made for all public building's doors making It easy to run out of a building. On that night after workers couldn't extinguish the fire people started to go crazy and couldn't get out. All doors were blocked as people were trying to get out, due to having more people than the occupancy allowed. Since doors were blocked people stomped on each other t o force their way out. The fire wasn't the reason why many deaths happened, people stomping on each other killed many to the people.

Arts or Protection of Enviroment

Obviously, both of these two choices have their own reasons that our society could get benefits from each of them. In the past several decades, remarkable achievements have been made in the arts, while our natural environments are increasingly getting worse and even more difficult to handle. Under these current circumstances, I believe that it is not so hard to make decision about this question. The company should choose to protect the environment.The first and the most important thing is that we must survive on this planet that allows us almost every possibility, including supporting the arts or something like. These days, our natural environments are under the threats of contamination, global warming, extinction of species, etc. For example, the oil leaking on the Gulf of Mexico, has contaminated a large amount of sea area. And this not only has a negative effect on ocean-life, also it has influence on our life strongly. Therefore, it is very worthy to costing some money to protect the environment.Furthermore, spending some money on protecting the environment is a good investment to a company. It is from fact that our every activity is based on our environment. As far as I am concerned, if the company spends some money on environmental friendly issue, it will gain more public attention and earn more supports by which the company could grasp the best opportunity to develop more successfully. In return, the company would also do more and more things that good to the environment.Finally, giving some money to protect the environment is one thing, and doing the precedent to protect environment is quiet another. If a company take a good example for protecting environment, it is easy to imagine that this successful precedent will provoke the public and also other companies to protect our brittle environment. By means of this, I believe that more environmental protection programs which are running for our wellbeing will come into being. In view of the above concerns, the company should choose to protect the environment rather than to support the arts.

Report Generator for Bayanan Barangay Hall Essay

Computer technology has been widely used in different fields, nowadays; computer is the main system that is being used from large and wide scale manufacturing up to small scale industries. The defining feature of modern computers which distinguishes them from all other machines is that they can be programmed. In recent times, the world has witnessed a rapid increase in technological innovations. This era ushered in the advent of the electronic computer system among other modern technologies. At present the computer technology has permeated nearly all aspects of human organizational roles and education. Computer encompasses almost all facets of human endeavors. So much has been written on it and its relatedness to all areas of human disciplines, which include computer/information technology, engineering, agriculture etc. However, in the field of case records their role is much less well defined, for here the organization of data as a preliminary to computer input is the real stumbling -block. Barangay Bayanan is one of the barangay in the City of Muntinlupa. It is bounded between Barangay Alabang and Barangay Putatan. With residents for about 35,865 the hall is strategically located along Bayanan Bay walk, Muntinlupa City. Transactions are currently done manually wherein, information about the citizens are being process by just simply writing the citizen’s name, age, location and other personal information. Producing report such as Barangay Clearance, various certificates etc. is done manually by ink and paper, which is very slow and consuming much efforts and time. Furthermore, the duplication of produced report to each citizen is often result to data management problem such as slow processing, inaccuracy of report and many others. These problems are typical of a manual or traditional system. This research aims to consider a computerized report generator is needed to avoid redundancy and to quicken the generation of reports from the replacement of the current manu al system. The general objective of the study is to design and develop a report generator that would serve as proposal to help Bayanan Barangay Hall to their operation and provides an easier, faster, more organized, secured, and accurate system.  The specific objective of the study is to identify the problems encountered by Bayanan Barangay Hall and also create a report generator that will improve the scope such as citizens, staff and administration. In general scope, the focus of this study is directed towards the design and development of a report generator for Bayanan Barangay Hall with its administration, staff, and citizens are selected. The report generator has a secure log-in for administration and staff. For its limitation, the study is limited only to citizen-data entry person transactions. The inventory report, payroll of the staff and the payment for the service rendered is not provided by the report generator because it will only focus in generating reports after the registration of the citizen’s information is being done by the authorized personnel.   This part describes the relationship between the dependent variables, independent variables and intervening variables of existing system and proposed report generator.

Communications Essay about Running a Night Club

Communications about Running a Night Club - Essay Example existing for such a business, however the disadvantage could be that there will be a higher level of competition for the business that is proposed to be set up. Another issue that needs to be considered is the question of overheads. Some very popular nightclubs in Dublin, such as the Bodytonic, actually started off in a small sweaty basement, but it is now a thriving nightclub with many branches. Therefore, starting off small appears to be a better business proposition because it would keep the overhead costs down. There would be lower maintenance expenses, because it could be started in the basement of a private house and can later be expanded after it starts making money. Since the private house in question may be a little out of the way, it may be necessary to carefully advertise the opening of the new business and to post signs and directions to reach the nightclub. This could be done using some cheap form of advertisement, such as flyers or word of mouth rather than incurring a great deal of expense for advertising in the well known magazines. Some large arrows and hand written signs strategically placed could also serve to provide the right directions, so that the party crowd can move from the general nightclub area to the proposed establishment. One of the most important factors that must be taken into consideration is the current recessionary atmosphere, where most businesses are struggling to pull in enough customers to sustain their expenses. Therefore, the club fees may need to be low at first, so that it encourages people to come and sample the music. If the advertised entry fees are lower than what is available at other clubs, it would provide an incentive for customers to choose the new establishment instead. Also, other promotional measures may need to be considered, such as for example, allowing free entry for a partner, so that this encourages couples to come to the new nightclub rather than patronizing the already existing ones. Another

Should trial by jury be retained present the arguements for and Essay

Should trial by jury be retained present the arguements for and against retaining the jury system in criminal court cases. Ref - Essay Example Regardless of the historical subsistence, trial by jury it has gone a long way to constitute the subject matter of extreme censure. If this academic pondering has to be based on reason, it is obligatory to accept that trial by jury is not the only way to establish guilt. It shall be necessary to evaluate the arguments on both sides and determine if trial by jury should be totally retained, rejected or if some modifications can be made to it. What Is The Underlying Principle Behind Trial By Jury? There is a connectedness between democracy and the jury system. Remember that the law should mirror the needs of the society; directly serving the people. Trial by jury allows a group of people, representing a fair majority of the public, to ensure that the law is not misdirected. The blend of society ideas into the criminal law system has been amongst the most persuasive argument for the establishment and continuance of trial by jury. Therefore, it was not mere supposition when Lord Devlin a sserted that trial by jury must exist to serve as a ‘little parliament†1. Trial by jury gives the jury the authority to mix law with facts; jurors therefore freely pursue the ‘prejudices of their affections or passions’2 and find not guilty when their high opinion for the law is presided by the certainty that to penalize would be unfair3. Are There Any Advantages Of Trial By Jury? Trial by jury is the â€Å"best blend of logic and common sense†4. Remember that the understanding of 12 men is almost the best way to arrive at a reasoned verdict, better than that of one person. Trial by one’s peers is a bastion of democracy. Lord Devlin referred to this as â€Å"the lamp that shows that freedom lives†5. The jury deliberates in the jury room where jurors are free from the heat and controversy of external influences on the case. Trail by jury is the best means to determine credibility and reliability of witnesses in criminal proceedings. It is probable that one mind can easily err. This position was reiterated by Lord Devlin when he said: â€Å"The impression that a witness makes depends upon reception as well as transmission, and may be affected by the idiosyncrasies of the receiving mind; the impression made upon a mind of 12 people is more reliable. A judge may fail to make enough allowance for the behaviour of the stupid because by his training he regards so much as simple that for the ordinary man may be difficult. The jury hears the witness as one who is as ignorant as they are of lawyers’ ways of thought†6. There is public participation in the trial process. A good system of law is highly rated as a superior section of civilization, which in its absence; the people lose confidence in the law. This is connected to the notion of popular opinion, whereby society’s standards of justice becomes the only arbiter of guilt7. Inclusion of the society is a mature way to express democracy, and to see thr ough the eyes of the society, a better way to legitimize trials and verdicts. Therefore, moral credibility becomes a legal feature and the legal system becomes more open. What does trial by jury encompasses Trial by jury exists in most common law jurisdictions. For example, in the United Kingdom, offences listed as ‘indictable’ offences have to be tried by judge and jury. There are equally numerous offences which can be tried by the judge or judge and jury8. Statistics however prove that just about an

Work Now trends (complete part one) Essay Example | Topics and Well Written Essays - 250 words

Work Now trends (complete part one) - Essay Example On the other hand, this gives the temporary employees a chance to determine their level of interest in that company. Working as a temporary employee gives the employees an advantage over the external applicants in times of a vacancy announcement. In the recent research, about 58% of the employers will prefer to pick the temporary workers in the next five or so years to external applicants (Jim, 2006). People working as temporary employers have a chance to associate with employees who may help them gain the permanent position or at times provide them with leads, and end up getting better positions elsewhere. Other than the above-mentioned impacts of temp-to-fulltime to the employer, the costs associated with hiring permanent workers is higher compared to that of the temporary employees. As the main aim of any business is maximization of profits, this strategy saves on costs; hence, more profit. People go for temporary jobs for experience, extra cash or if they have no other source of income. However, temp-to-fulltime strategy has its own shortcomings. With this kind of employment, nothing is guaranteed. Sometimes a company genuinely needs a temporary employee for just a specified time for various reasons. It gets frustrating for a person who took up that job with expectations of ever having that position permanently. One has to try to be perfect in everything, as the slightest mistake would mean immediate dismissal. This is not fair for everyone makes mistakes. These employees enjoy lesser benefits and lower income compared to their counterpart. This is despite the fact that they often do most of the work. The best secret to make any temporary job a permanent one is to perform excellently and assimilate into the company and its culture in the shortest time possible. Coming in early, offering to stay late in the office, complete the given assignment, and presenting it in time and having the right mindset are

Operant Conditioning Paper Essay Example | Topics and Well Written Essays - 750 words

Operant Conditioning Paper - Essay Example Operant Conditioning is widely used not only in psychology but also in other different settings. A person behaves in a particular way due to the response (stimuli) he experiences in his environment. When these responses are reinforced, then the person or animal is conditioned to respond. Operant Conditioning does not use the trial and error method in determining a person’s reaction to a certain response. It is directly experienced by the individual through a certain experience in his environment. Reinforcements mean â€Å"to strengthen or make strong† but they can be both positive as well as negative. A reinforcer is called positive when the reinforcement is presented or takes place. On the other hand, a negative reinforcement is when the reinforcement is withdrawn. In order to suppress a person’s behavior, negative reinforcement is utilized, but that doesn’t mean that negative reinforcement is punishment. Negative reinforcers are often used to correct a person’s behavior by removing the positive reinforcer and replacing it with the negative one. This helps the individual to condition or respond in a different way by reducing the consequence or threat of punishment, thereby changing his behavior for the better. Operant Behavior is moulded according to the consequences an individual receives in the environment. The freedom of a person is affected in the process. (Skinner, 1971) If the individual has experienced positive reinforcing consequences usually feel a sense of freedom, but this is not the case in negative consequences. According to B.F Skinner, â€Å"The experimental analysis of operant behavior has led to a technology often called behavior modification†.  (B.F Skinner, 1971) Between the positive reinforcement and Negative reinforcement, the one that is most used in the correction of behavior is the Negative reinforcement. In such an environment, the trouble causing consequences are removed and replaced with other consequences,

Youth Connexions Literature review Example | Topics and Well Written Essays - 1250 words

Youth Connexions - Literature review Example Connexions link the work of the government departments with those of the voluntary and private sector groups and the careers and youth services. All the support and services that are needed by the young people during their teenage years are brought together by Connexions (Bekaert 2005, p165). In the year 2003/2004, close to 3.6 interventions were made with the young people. By March 2004, nearly 100,000 teenagers aged 16 – 18 years left the ‘Not in Education Employment or Training’ group and entered training, a job with training or education (Department for Work and Pensions 2004). Connexions provide practical assistance in the choosing the right careers and courses. It also offers access to a number of personal development activities such as volunteering activities, performing arts, and sport. Advice and assistance is also provided on issues such as homelessness, sexual health, and drug abuse. Connexions provide an all inclusive support to the young people. A per sonal adviser is made available to these young people. The personal advisers have different roles depending on the need of the young person. Some are career advisers and others it is personal adviser who provides an in-depth support to the young person, and to help them in the identification of learning barriers and find solutions and gain access to a more specialist support. The personal adviser works in a number of settings such as colleges, community centres, one-stop shops, on an outreach basis, and schools (Bekaert 2005, p165). Connexions has its own website that has all the information for the personal advisers and other professionals; this is the national website for the Connexions. A national Connexions website for the young people also exists. Another website for Connexions is the Connexions Direct and it assists the user with information and advice in regard to issues such as housing, health, career and learning options, relationships with friends and family, activities to participate, and money. The local Connexions partnerships website also exists (Bekaert 2005, p165). There are proposals to sustain Connexions in regions where its performance is good and there are still indications that the guidance and support provided by Connexions is supposed to go local as much as possible. The responsibility for organizing the focus of the services in regard to working with the young people should have a coherent and holistic response approach and should lie within the future of the Children’s Trusts (Hine and Wood 2009, p177). The Connexions Strategy The proposal for the Connexions strategy was signed in 2000 by the Prime Minister and 7 Cabinet Ministers. The intention of the strategy is to coordinate policy in a number of partner agencies; they include colleges, training providers, schools, drug action teams, employers, leaving care teams, social service, the youth service, teenage pregnancy coordinators, and the voluntary sector. The primary aim of t he strategy is to offer support service to all 13 – 19 year olds through a system of personal advisers; the services are delivered by multi-agency teams (Roche 2004, p97). The Connexions Service There are around 47 Connexions partnerships that cover England. Each of the Connexions partnership has an extensive workforce that works directly with the young people. The workforce is composed of professional qualified personal advisers and delivery staff who work under the supervision of the qualified professional personal advisers. The main focus of the Connexions service is the young people and their primary objective is the promotion of the welfare of the young people (Great Britain

Legal & Regulatory Regulations Essay Example | Topics and Well Written Essays - 2000 words

Legal & Regulatory Regulations - Essay Example However, the same perceived advantages of a partnership, if enjoyed without caution, lead to a loss of credibility both in the eyes of prospective employees and prospective financers. There are myriad advantages and disadvantages to both the business forms seen from any angle that may have a bearing upon the choice of business structures. However, one thing is certain that it is next to impossible to run a company without qualified professional help,- and associated costs,- if benefits are to be obtained and penalties to be avoided. The principal advantages of a company are of course, the vaunted limited liability, greater flexibility in tax planning, a greater social perception of credibility, and an ability to raise funds formally through the sale of equity shares. Partnerships that maintain detailed auditing and have themselves audited by professionals are on the same footing as start-up limited companies with respect to an external loan, - for any financier, including a bank, would want personal guarantees from the directors of a new company in order to give a loan, just as they would demand collaterals from the partners of a partnership. Further, as research has shown, there is almost no discrimination shown by banks between male and female owned businesses when it comes to a loan (Carter & Shaw 2006). The principal difference in approach is that "While female applicants are required to demonstrate evidence that they understand the nature and implications of business ownership, male applicants are required to demonstrate trustworthiness through social stability, evidenced by marriage." (Carter & Shaw, 2006, pg 65). We know our subjects' mindset is entrepreneurial, that they have started with a small business, and have put it into running with economic viability. They have set short term (expansion of premises and staff) and long-term goals (countrywide expansion), and are working only with the product with which they have gained experience. Thus, they seem to understand the nature and implications of business ownership. That they are receiving conflicting opinions from "business associates" does not rule out the possibility of having accountants or lawyers as business associates. The abundance of contested litigation in the country is proof enough that professionals quite often, and with regularity, hold differing opinions upon the same issues. Thus, what remains is to assess the non-financial capital of Peggy and Nancy before choosing the business structure appropriate to their situation and for their needs. Their cast is of typical woman entrepreneurs (Carter & Shaw, 2006) as their choice bu siness of a fruit juice bar and choice of structure as a partnership shows a low level of overall capitalization at start-up. including low requirements for (a) start-up and ongoing funding (financial capital); (b) attributes and skills (human capital); (c) tangible assets including facilities and equipment (physical capital); (d) organizational relationships, structures, routines, culture and knowledge (organizational capital); (e) technological knowledge or process based skills and experience (technological capital); and (f) relationships and network, social, professional, political, etc. (social capital). Their business is dependent upon personal clients rather than corporate clients, and they have no previous

Steps in a jury trial Essay Example for Free

Steps in a jury trial Essay A jury trial is a manifestation of democracy, wherein ordinary citizens have their cases heard and deliberated by people like themselves. A jury trial, based on the idea of an impartial jury, can serve justice, because they are mandated to deliberate on the facts of the case alone. This paper analyzes the steps in a jury trial, including the constitutional trial rights that are enacted during a jury trial. The jury trial rights are expressed in the U.S. Constitution in three ways: the grand jury, the criminal jury, and the civil jury. The Fifth Amendment provides the right to a grand jury: â€Å"No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury†¦Ã¢â‚¬  The Sixth Amendment states the importance of an â€Å"impartial† and fair jury to criminal proceedings: â€Å"In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district†¦Ã¢â‚¬  The Seventh Amendment asserts the right of the people to a civil jury: â€Å"In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved†¦Ã¢â‚¬  This paper proceeds to the steps in a jury trial. The first step is the selection of a jury. The trial court judge mails a request to a panel of prospective jurors to attend the jury assembly room for the purposes of the jury selection process (Judicial Council of California [JCC], 2010). After the arrival of the jurors, the judge and lawyers ask the jurors questions for the purpose of assessing, whether the jurors are free of bias, or prejudice, or anything that might obstruct with their ability to be fair and impartial, in a process called voir dire. It is important to find a fair and impartial jury, which the Sixth Amendment asserts. The Fifth Amendment also stresses that the accused in a criminal case has a right to a trial by a fair and impartial jury.In essence, the right to jury trial guarantees to the criminally accused a fair trial by a panel of impartial, indifferent jurors.[1] The law permits the judge and the lawyers to â€Å"excuse† some jurors from service for diverse reasons (JCC, 2010).   Ã‚  Ã‚  If a lawyer seeks to have a juror excused, he or she must use a challenge to excuse the juror (JCC, 2010).   Ã‚  There are two kinds of challenges: for cause or peremptory. Under a for cause challenge, the law provides several reasons that jurors may be excused â€Å"for cause† (JCC, 2010). For example, a juror who is related to one of the parties in the case may be excused for cause. There is no limit to the number of for cause challenges. As for a peremptory challenge, this is a challenge given without the need to provide a reason. The law provides only 10 peremptory challenges in criminal cases and 6 in civil cases (Code of Civil Procedure sec. 231 as cited in JCC, 2010). The procedure of questioning and excusing jurors will continue, until 12 persons are chosen as the jurors for the trial (JCC, 2010). The second step is the trial itself. There are three main duties of the juror: 1) Jurors should not speak to others about the case, especially the lawyers and parties from either side, and even with their family and friends. It is important to avoid being influenced by other people who have not heard the whole facts of the case; 2) Jurors should not make a conclusion about the case without hearing all the facts.   Jurors should only discuss their opinions with fellow jurors and it is their duty to deliberate the facts of the case; 3) Jurors should not conduct a personal investigation of the case (JCC, 2010). If they have questions about the evidence, they should ask the bailiff about it, and he/she will make further decisions (JCC, 2010). During the trial, the jurors will listen to the opening statements of the lawyers (JCC, 2010).   Ã‚  The lawyer for the plaintiff in a civil case or the prosecutor in a criminal case may make an opening statement which expresses their viewpoints about the evidence (JCC, 2010).   Ã‚  The defendants lawyer may also provide an opening statement after the plaintiffs attorney (JCC, 2010).   Afterwards, the lawyers will present the evidence, in forms of written documents or objects, which will all be called as Exhibits (JCC, 2010).   After the presentation of the evidence, the lawyers will present their closing arguments (JCC, 2010). A critical part of the jury trial is the deliberation. After a trial, the jury proceeds to an assigned private room to discuss evidence and testimony, so that it can reach a verdict. Jurors also have a duty to select a foreperson. The jury should select a competent foreperson. The forepersons responsibility is to see that discussion is facilitated in an organized manner, all issues are completely and freely deliberated, and all jurors are allowed to freely participate in the discussions (JCC, 2010). The final stage in a jury trial is the verdict. All jurors should discuss and vote on each issue of the case. In a civil case, the judge will inform the jurors how many of them must agree in order to reach a verdict. In a criminal case, the unanimous agreement of all 12 jurors is compulsory (JCC, 2010).[2] People have a right to a jury trial, wherein the jury is impartial and fair. The Constitution provides for this right, as well as the rights of the jurors to have an open and complete deliberation on the facts of the case. The jurors, thus, must be aware of their rights and duties. Being a juror means that they are expected to be people of integrity and to seriously pursue their duties. For in every verdict they provide, lay the fate of fair and truthful convictions. References Dennis v. United States, 339 U.S. 162, 171-172, 94 L.Ed. 734, 742, 70 S. Ct. 519 (1950). Fifth Amendment.(no date). U.S. Constitution. Retrieved May 31, 2010 from   http://www.gpoaccess.gov/constitution/pdf2002/023.pdf Irvin v. Dowd, 366 U.S. 717, 722, 6 L.Ed. 2d 751, 755, 81 S. Ct. 1639 (1961). Judicial Council of California (JCC). (2010). Trial process: Three main steps of a jury trial. Retrieved May 31, 2010 from http://www.courtinfo.ca.gov/jury/process.htm Seventh Amendment. (no date). U.S. Constitution. Retrieved May 31, 2010 from http://caselaw.lp.findlaw.com/data/constitution/amendment07/ Sixth Amendment. (no date). U.S. Constitution. Retrieved May 31, 2010 from http://caselaw.lp.findlaw.com/data/constitution/amendment06/ United States District Court . (no date). The Eastern District of North Carolina, New Bern Division. [1] See Irvin v. Dowd, 366 U.S. 717, 722, 6 L.Ed. 2d 751, 755, 81 S. Ct. 1639 (1961). [2] What happens when there is no verdict? â€Å"If a jury cannot arrive at a verdict within a reasonable time and indicates to the judge that there is no possibility that they can reach a verdict, the judge, in his or her discretion, may dismiss the jury. This situation is a mistrial, sometimes referred to as a hung jury, and may mean the case goes to trial again with a new jury† (JCC, 2010).

Main Advantages In Harmonization Of International Accounting Accounting Essay

Main Advantages In Harmonization Of International Accounting Accounting Essay Introduction The main purpose of this report is to point out the main advantages that could be benefited from International accounting and the obstacles to the harmonization of this system. The history of accounting began 600 years ago when first accounting records were found; the system of bookkeeping pair was gradually introduced in the early 14th century in some trading centres in Italy. After that due to increasing trade around the world people from all regions started to do book keeping and in different timeà ¢Ã¢â€š ¬Ã¢â€ž ¢s different committees, joint stocks and mechanisms were found to do international level trading. As the world developed more there was a need of a system for dealing with international finances therefore in June 1973 International Accounting Standards Board Committee (IASC) was established as a result of the agreement made between accounting bodies in Australia, Canada, France, Germany, Japan, Mexico, Netherlands, England, Ireland and the United States, and these countr ies were IASC Board at that time. IASC operated from 1973 to 2001 until it evolved into IASB (International Accounting standards board). IASB possess advantages that can benefit the whole world but there are obstacles to the harmonization of international accounting, both advantages and obstacles are listed with details in the report. The report then moves on to the three issues that may arise in relation to the provision of relevant and reliable information in financial statements such as both of them are related to each other that the emphasis on one will hurt the other. And in the last part of the report the qualitative characteristics of financial statements such as timely, relevant, reliable and comparable as defined in the Framework are explained and discussed. Main advantages in harmonization of international accounting There are many advantages linked with the harmonization of international accounting. Main of them are listed and explained below: The economy of the world can be benefited by more educated decisions which could result in the improvement of global economic growth. The accounting information can be explained by the experts, this would reduce the risk of investment. By adapting international accounting the companies and industries could increase the ability to compare with similar companies and industries and make investment decision with more intelligence. Harmonization of international accounting would facilitate entrepreneurs and financial experts from all over the world to invest internationally. It would reduce the cost of reconciling account information for multi-national companies. Stock exchanges from all over the world could benefit from the standardization of international accounting, as more companies begin to adapt the international standard, they will become more eligible for listing. Obstacles in harmonization of international accounting: Despite of useful advantages of international accounting, there are barriers which prevent harmonization of international accounting from exceeding; some of them are as following: Different countries have different accounting methods that are regulated in different degrees by their government. Another issue is that many capital markets have adjusted into the international business without International accounting and they believe that present system is working well enough and International accounting would only complicate things. Naturalism is another threat to harmonization of international accounts as countries are wary of ceding control of their accounting regulation to outsiders. Poor countries believe that harmonization of international accounting is an implantation of standards by powerful countries. IASB (International Accounting Standards Board): IASC (International accounting standards board Committee) was established in 1973 which evolved in IASB (International accounting standards board) in 2001. IASB is an independent regulatory body based in U.K. It has 15 members from 9 countries each with various functional backgrounds. The board aim is to develop a single-set of high quality, understandable, relevant, comparable and enforceable global accounting standards. IASB presented four frameworks; first and second in 1989, third in 2001 and the fourth and present one in 2010. The framework of IASB describes the basic concepts of preparing and presenting the financial statements for external users. The qualitative characteristics of financial statements according to IASB frame work are following: Understandable Relevant Reliable Comparable Issues in provision of relevant and reliable information Relevance and reliability both are essential for the better quality of the financial information but both are related to each other in such a way that effect on one will hurt the other and vice versa, for example accounting information is relevant when it is provided in time but in initial stages it is not very reliable but as it becomes reliable with time it does not remain relevant. Second issue with the provision of two qualities is that the two qualities are not independent of each other, that is, perceived relevance by users is dependent on the perceived level of reliability. The third problem is that the level of reliability cannot remain or increase with the introduction of fair value measurement; as such, the discussion has assumed the presence of a relevance reliability trade-off i.e. the move to relevance is decrease to reliability.

Colobus Monkey :: essays papers

Colobus Monkey In Africa there are many types of animals, one of them is the Colobus Monkey. There are different types of Colobus Monkeys: there is the white Colobus, the red Colobus, and the olive Colobus. The Colobus Monkey is a long tailed tree living primate. The Colobus Monkey can be found all over Africa. The Monkey’s hair color varies from were the live. The Colobus Monkey is very unique. It comes in many types of color, is very active in social behavior and is very smart as shown in their lifestyle. The Colobus Monkey comes in many unique colors. The black and white Colobus is found across the equator of Africa. There are five species, among which the color varies from all black to a skunklike black and white pattern. Black and white Colobus monkeys weigh up to nine kg, or twenty pounds. They live in small social groups of about ten animals, that includes one adult male plus females and their offspring. The red Colobus Monkey is found across Africa from Zanzibar to Senegal. Their color is highly variable, ranging from a bright white and red in the monkeys of Eastern Africa to a dark gray and orange in Western African monkeys. They also weigh up to nine kg, or twenty pounds. Males are usually bigger than females. The red Colobus lives in large groups of up to one hundred individuals, including mostly males. It is a major prey of the chimpanzee in forest, where they both live. The olive Colobus is found in the forest of coastal West Africa. It is the most drably colored of the African Colobus Monkey, being a fairly uniform gray-brown. It weighs only ten pounds and lives in groups of six to eight individuals. After giving birth, the females sometimes carry their infants in their mouths. The red Colobus is a little bit smaller than the black and white group. The olive Colobus is the smallest of all at only four hundred fifty-mm. head and body length. â€Å"The Colobus Monkey doesn’t live in very many places. The Colobus Monkey lives in the tropical areas and forest. They are found in the tropical region of Africa.† (mcsd.org/webmac/schools/ogs/colobusmonk.htm) This backups information on where the primate is located.

Clear Channel and the Cultural and Socio-Political Ramifications of Med

Clear Channel and the Cultural and Socio-Political Ramifications of Media Consolidation I.INTRODUCTION In 1996, Congress passed the Telecommunications Act thereby lifting restrictions on media ownership that had been in place for over sixty years (Moyers 2003; Bagdikian 2000: xviii). It was now possible for a single media company to own not just two radio stations in any given local market, but eight. On the national level, there was no longer any limit on the number of stations a company could own – the Act abandoned the previous nation-wide ownership cap of forty stations (20 FM and 20 AM). This â€Å"anti-regulatory sentiment in government† has continued and in 2004 the Federal Communications Commission (FCC) approved a new rule that would allow corporations to own â€Å"45 percent of the media in a single market, up from [the] 35 percent† established by the 1996 Act (Croteau & Hoynes 2001: 30; AFL-CIO 2004). Companies can now also own both a newspaper and a television station in the same city (AFL-CIO 2004). This deregulation has led to a frenzied wave of mergers – most notably the Viacom/CBS merger in 1999, the largest in history (Croteau & Hoynes 2001: 21). Ownership of the media has rapidly consolidated into fewer and fewer hands as companies have moved to gobble up newspapers, television stations, and radio stations across the country. Perhaps no other company has benefited more from this deregulation than the company which is the focus of this essay – Clear Channel Communications, Inc (CC). The Telecommunications Act and the actions of the FCC paved the way for the rise of this radio industry behemoth. In 1995, the company owned 43 radio stations nationwide. By 2002, it owned 1,239, making it the largest radio company in th... ...in Dubious Times. Urbana, IL: University of Illinois Press. McChesney, Robert W. and John Nichols. 2002. Our Media, Not Theirs: The Democratic Struggle Against Corporate Media. New York: Seven Stories Press. Moyers, Bill. 2003. â€Å"Transcript: Bill Moyers Interviews Larry Klayman.† NOW: With Bill Moyers, July 11. Retrieved November 4, 2004 (http://www.pbs.org/now/printable/transcript_clearc_print.html). Open Secrets. 2004. â€Å"TV/Radio Stations: Top Contributors to Federal Candidates and Parties.† Retrieved October 7, 2004 (http://www.opensecrets.org/industries/contrib.asp?Ind=C2100). Spivak, Laurie. 2004. â€Å"Culture War May find WMD.† Retrieved October 2, 2004 (http://www.alternet.org/story/18090). Turner, Ted. 2003. â€Å"Monopoly of Democracy?† The Washington Post, May 30. Retrieved October 28, 2004 (http://washingtonpost.com/ac2/wp-dyn/A56132-2003May29?language=printer). Clear Channel and the Cultural and Socio-Political Ramifications of Med Clear Channel and the Cultural and Socio-Political Ramifications of Media Consolidation I.INTRODUCTION In 1996, Congress passed the Telecommunications Act thereby lifting restrictions on media ownership that had been in place for over sixty years (Moyers 2003; Bagdikian 2000: xviii). It was now possible for a single media company to own not just two radio stations in any given local market, but eight. On the national level, there was no longer any limit on the number of stations a company could own – the Act abandoned the previous nation-wide ownership cap of forty stations (20 FM and 20 AM). This â€Å"anti-regulatory sentiment in government† has continued and in 2004 the Federal Communications Commission (FCC) approved a new rule that would allow corporations to own â€Å"45 percent of the media in a single market, up from [the] 35 percent† established by the 1996 Act (Croteau & Hoynes 2001: 30; AFL-CIO 2004). Companies can now also own both a newspaper and a television station in the same city (AFL-CIO 2004). This deregulation has led to a frenzied wave of mergers – most notably the Viacom/CBS merger in 1999, the largest in history (Croteau & Hoynes 2001: 21). Ownership of the media has rapidly consolidated into fewer and fewer hands as companies have moved to gobble up newspapers, television stations, and radio stations across the country. Perhaps no other company has benefited more from this deregulation than the company which is the focus of this essay – Clear Channel Communications, Inc (CC). The Telecommunications Act and the actions of the FCC paved the way for the rise of this radio industry behemoth. In 1995, the company owned 43 radio stations nationwide. By 2002, it owned 1,239, making it the largest radio company in th... ...in Dubious Times. Urbana, IL: University of Illinois Press. McChesney, Robert W. and John Nichols. 2002. Our Media, Not Theirs: The Democratic Struggle Against Corporate Media. New York: Seven Stories Press. Moyers, Bill. 2003. â€Å"Transcript: Bill Moyers Interviews Larry Klayman.† NOW: With Bill Moyers, July 11. Retrieved November 4, 2004 (http://www.pbs.org/now/printable/transcript_clearc_print.html). Open Secrets. 2004. â€Å"TV/Radio Stations: Top Contributors to Federal Candidates and Parties.† Retrieved October 7, 2004 (http://www.opensecrets.org/industries/contrib.asp?Ind=C2100). Spivak, Laurie. 2004. â€Å"Culture War May find WMD.† Retrieved October 2, 2004 (http://www.alternet.org/story/18090). Turner, Ted. 2003. â€Å"Monopoly of Democracy?† The Washington Post, May 30. Retrieved October 28, 2004 (http://washingtonpost.com/ac2/wp-dyn/A56132-2003May29?language=printer).

The Coach That Never Came :: essays research papers

The book, â€Å"The Coach That Never Came† was a very interesting book. In the beginning, John, Steve, Mike, and Craig were all talking about their new baseball coach that they were going to be getting that day. The boys had never heard of the man and no one in the town seemed to know who he was. The boys talk about their new coach all day while they are in school. After school was over that day, the boys went to the baseball field to prepare for their first day of baseball practice. Practice was to start at 3:30. It was 3:45 now, and their new coach hadn’t arrived yet. The boys, along with the rest of the team, waited around for awhile for their coach to come. After waiting for about an hour, they became curious and decided that they would go to Coach Anderson’s house to see why he wasn’t at practice. Craig said that he knew where the coach lived, because he had heard his mother talking on the phone about him. As the boys arrived at the house, they saw that the door was partially open, so they decided to let themselves in since no one answered the door when they knocked. As the boys entered the house, they couldn’t decide on which room they wanted to go in first. They quickly decided on that when they saw a person lying on the floor in the kitchen. The boys quickly ran out of the house and ran to Mike’s house to call the police. When the police arrived to Mr. Anderson’s house, they told the boys that their coach had a heart attack and died. The boys were very upset by this since they had never even met the man. Eventually, the story goes on and the boys get a new coach, but they never really get over what the found that day.   Ã‚  Ã‚  Ã‚  Ã‚  I feel that one of the main characters in this book would have to be Craig. He has black hair, green eyes and is of average height. Craig was just a usual guy until all of this happened to him. He received good grades in school, and was a great student. Craig’s parents were very proud of him and thought that he was the greatest son that anyone could ever have. Craig is a senior at Central High School, and was already crowned Homecoming King.

Pros and Cons of Fast Food

The Good and Bad of Fast Food The Good and Bad That Fast Food Brings To Our Society Shawn Guzman E. C. P. I. English 110 The Good and Bad That Fast Food Brings To Our Society In this day and age everyone has had some form of fast food. There are many options to choose from all around the world. If one was to travel down any main city block, he or she may be overwhelmed with the many options to choose from. The most popular options may be McDonalds, Burger King, Pizza Hut, and Subway just to name a few. The choices are almost endless. The availability to eat fast food is everywhere.It is very hard not to notice when there are advertisements on television, magazines, and all over the internet. The advertisements offer great deals, large quantities, great gifts and more. It can become very hard to avoid the temptation. That is what these franchise’s marketing groups are targeting. There are many questions asked about how unhealthy fast food is. There are constant debates that fas t food is bad for you. I believe if you eat too much of anything it may be unhealthy. Fast food has been around for a long time and seems like it will be around in the future as well.There are good and bad things about fast food that many people are aware of. That’s why there are always debates about the pros and cons of fast food. The way that fast food is portrayed to be unhealthy is understandable and there are many reasons to support that, but there are also many reasons why people think fast food is great and is not getting any less popular. A very good thing about fast food is the availability. There are many locations to eat fast food. At any spare moment driving down the street people can pull over to one of many chains of fast food restaurants to eat.There are different varieties to choose from such as Chinese food, pizza, Mexican, and maybe the most popular hamburgers and fries. Every year there are more and more locations popping up that offer different varieties t o choose from. Franchises like Wendy’s and McDonalds seems like there are locations everywhere. McDonalds operated their first location back in 1955 and now McDonald's is the leading global foodservice retailer with more than 32,000 local restaurants serving more than  60 million people in 117 countries each day (Our history, n. d. ). Fast food is very convenient for a lot of people that are on the go.Many households may not have the time to cook a well home cooked meal. A single parent that that gets up in the morning and has to get ready for work, while taking care of a child, may not have the time to cook breakfast. This is a time when the parent may elect to get a breakfast on the way to work. After a long day of working a fulltime job, that person may not have the time or energy to cook a meal at home. That is when fast food may be very convenient. Many households may not have the time to sit down as a family, and eat breakfast, lunch or dinner.This is a perfect time w hen fast food may come in handy. Many fast food locations have very affordable prices. If you can go to a specific location and eat a full course meal for under five dollars, that may be very affordable. With the state of economy being the way it is today in the U. S many people might not be able to afford the cost of grocery shopping. People may prefer to purchase an inexpensive meal to feed each other. Imagine a single parent has a child that is hungry and the parent only has five dollars. There are locations now such as McDonalds that have what they call, â€Å"The Dollar Menu. Based on McDonald’s website, people can order variety of breakfast sandwiches, hamburgers for lunch, and even soft drinks, for just $1 dollar a piece (Dollar menu, n. d. ). The average person can purchase 5 different items with 5 dollars. That can feed a couple of people in a household. Some may say this can turn out to be very costly if done on a regular basis, although there can be many reasons w hy this can be perceived as an affordable and viable option. There may be many that believe fast food is completely unhealthy, when that is not necessarily true.If fast food is eaten at moderate rates it is not necessarily an unhealthy issue. Currently based on the U. S Food and Drug Administration (FDA) they state: FDA regulations require nutrition information to appear on most foods, and any claims on food products must be truthful and not misleading. In addition, low sodium, reduced fat, and high fiber must meet strict government definitions. FDA has defined other terms used to describe the content of a nutrient, such as low, reduced, high, free, lean, extra lean, good source, less, light, and more.So a consumer who wants to reduce sodium intake can be assured that the manufacturer of a product claiming to be â€Å"low sodium† or â€Å"reduced in sodium† has met these definitions. (Food label, 2008) The label for the food has nutritional facts on it. The labels are suppose to state how much calories an item has in it, or how much salt and sugar the item contains. These facts are helpful to determine if the item is healthy or not. Even though most of these fast foods can contain a high volume of cholesterol or fats, if taken in moderation it may not be unhealthy.It may seem that fast food is the most unhealthy food in the world, and rightfully so. There are so many negatives about fast food, that some people may think why even eat it at all. The effects of eating too much fast food can be very costly. Even though it may seem like fast food is so delicious and there are so many different options, is it really worth it in the end? One of the unhealthy ingredients in most fast food is Trans fat. Trans fat is â€Å"fat produced from the industrial process of hydrogenation, in which molecular hydrogen (H2) is added to vegetable oil, thereby converting liquid fat to semisolid fat. (Trans, 2011) Some of the specific fast foods that contain Trans fat are items such as pizza dough, French fries, and fried chicken just to name a few (Trans, 2011). There are so many different types of fast food that uses some form of Trans fat. There are many health risks that can start from eating too much fast food that contains Trans fat. There have been many studies to determine if Trans fats or saturated fats cause heart disease. At one point in the late 1980’s some test confirmed that saturated fats lead to heart disease, this caused many to believe there was no harm in eating fast food that contain Trans fat.The consumption of Trans fat rose drastically during that time. It wasn’t until the 1990’s that test confirmed that Trans fat was actually a higher risk to cause heart disease than saturated fats (Trans, 2011). Either way it seems that both types of fat can cause some form of heart disease if too much is consumed. The best thing is to have a healthy diet. Fast food can be the start of an unhealthy diet. There are ple nty of unhealthy ingredients in most fast food meals. Many people may say that there is a gain of weight when eating fast food. People who eat a lot of fast food probably have a better chance of being overweight.If someone eats more than a couple of fast food meals a week most likely they are not in proper shape. Eating too much of any fast food is not healthy for any one. When eating foods that are unhealthy they mostly contain fats, salts, or some type of sweetening. These types of ingredients may be addictive. People who’ve been eating fast food for a while may believe that it is too hard to just stop eating. Some people may say just stop eating fast food, but is it really that easy? Certain ingredients may be addictive or have some type of mental power.A former director of the FDA Dr Kessler states: When it comes to stimulating our brains, Dr. Kessler noted, individual ingredients aren’t particularly potent. But by combining fats, sugar and salt in innumerable ways , food makers have essentially tapped into the brain’s reward system, creating a feedback loop that stimulates our desire to eat and leaves us wanting more and more even when we’re full. (Parker-Pope, 2009) In this article Dr Kessler continues to make valid points on how it seems that fast food restaurants use this to they’re advantage.Some of these restaurants have scientist that try to figure out the perfect combinations of sweets and fats that seem overwhelming to the human taste buds (Parker-Pope, 2009). With the food scientist making food irresistible, it makes it that much harder to put down the hamburger or French fries that taste so good. So just think that if these scientists, that work for these fast food restaurants, make it that much harder to stop eating fast food, people are going to continue eating fast food. That is when people start to gain weight.When people keep eating even though they are no longer hungry, that can lead to being overweight an d obesity. Those are big problems in our society and why fast food is a contributor to that problem. The negative perception about fast food being unhealthy is true because of the tactics that are sometimes taken. Some of the tactics used by fast food restaurants are their marketing campaigns. For example the McDonalds Happy Meal that is marketed toward children. These Happy Meals can be purchased at a reasonable price and also come with a toy. It is very hard to tell hildren no when they see that a toy comes with the fast food they are about to eat. Most of the time a child doesn’t even care about the meal itself. Imagine trying to feed your child a healthy meal, but they frequently see their most popular cartoon character or super hero toy being given away free with an unhealthy McDonalds Happy Meal. This is what many parents have to deal with. Finally someone is trying to change this from being a problem. Currently San Francisco city officials are trying to ban Happy Meals from being sold with toys if they don’t meet certain nutritional standards.The San Francisco Supervisor Eric Mar, who started the proposal, said: I do believe that toys and other incentives attached to foods that are high in sugar, fat, and calories are a major reason for the alarming rise for childhood obesity in this country, Mar said. This is a very modest ordinance that is an incentive for the industry to take responsibility for healthier choices for children and parents. (Martinez, 2010) Hopefully if one city or state stands up for our children others may follow.This can be the start of what our nation needs to start getting back to eating healthier. Fast food companies need to be controlled somewhat on how they are marketing their unhealthy food to little children. There are a lot of arguments about if fast food is healthy or unhealthy. Some people believe fast food is very affordable and convenient, with plenty of options to choose from around every corner. The way ou r nation is always on the go, it is hard to argue with a person wanting to just grab a bite while on their way to work, or when taking their children to school.Sometimes it feels like there is not enough time in the day to cook, and fast food is a perfect option at the end of the day. As for fast food being unhealthy, is not a real debate. There are current test that clearly show that as being the case, but quantity and regularity seems to be more of a problem. If a person eats too much fast food on a regular basis than that can prove to be deadly. We are in the land of the free, where we believe in freedom of choice. If someone wants to eat fast food that is a choice they can make for themselves, whether it is healthy or not.References Dollar Menu. (n. d). McDonalds. com. Retrieved Jan. 1, 2011, from: http://www. mcdonalds. com/us/en/food/meal_bundles/dollar_menu. html Food Label Helps Consumers Make Healthier Choices. (2008). Retrieved Dec. 27, 2010, from the world wide web: http: //www. fda. gov/ForConsumers/ConsumerUpdates/ucm094536. htm#moreinfo Martinez, Michael. (2010, Nov. 8). Ban on low-nutrition Kid-toy meals draws nearer in San Francisco. CNN. com. Retrieved Jan. 3, 2010, from http://www. cnn. com/2010/US/11/04/california. fast. ood/index. html? iref=allsearch Our History. (n. d). McDonalds. com. Retrieved Jan. 2, 2011, from http://www. mcdonalds. com/us/en/our_story. html Parker-Pope, T. (2009, June 22). How the Food Makers Captured Our Brains. The New York Times on the Web. Retrieved Jan. 4, 2011, from the world wide web: http://www. nytimes. com/2009/06/23/health/23well. html? _r=1=health Trans fat. (2011). In Encyclop? dia Britannica. Retrieved Jan. 1, 2011 from http://www. britannica. com/EBchecked/topic/1085248/trans-fat

Academic Performance of Working Students

CHAPTER 1 THE PROBLEM AND ITS SETTING Introduction Education in the largest sense is any act or experience that has a formative effect on the mind, character or physical ability of an individual. In its technical sense, education is the process by which society deliberately transmits its accumulated knowledge, skills and values from one generation to another. Education is universally recognized as a fundamental building block for human development and one of the strongest instruments for reducing poverty, and is a powerful driver for development of individuals and society—improving health, gender equality, peace, and stability. The Commission on Higher Education (CHED 1995) states that higher education is primarily bridge between the world of learning and the world of work industrialization has increased the demand for more differentiated skills. The Laguna State Polytechnic University System has been founded to help each student to develop into a total person: who is well equipped with knowledge and skills; one who fits the modern world of technologies; and one who is ready and capable to meet the challenges of life. A bachelor’s of science degree in Hotel and Restaurant Management (HRM) will provide with all the skills needed to success in a wide variety of hospitality management careers. The program allows the students to understand the principles involved in leading a successful hospitality organization. At the same time, they will have the opportunity to practice these principles in applied courses and through an internship. It can individualize the degree program to fit the career field that most interested one. The career hotel and restaurant management concept deal with the preparation for gainful and successful and satisfying life and equip them with knowledge and social relations as well as manipulative skills in developing impotent attitudes and values in work is the aim of hotel and restaurant management course in general. Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as: â€Å"A person in the service of another under any contract of hire, express or implied, oral or written, where the employer has the power or right to control and direct the employee in the material details of how the work is to be performed. † Black's Law Dictionary Working students can be categorized into two groups: those who primarily identify themselves as students but who work in order to pay the bills and those who are first and foremost workers who also take some college classes. Almost two-thirds of undergraduates who work consider themselves â€Å"students who work†; the other third consider themselves â€Å"workers who study. â€Å"CHED said working students today are mostly into food service, entertainment and sales, apart from their usual stints as library and research assistants. CHED advised working students to get jobs that are not that demanding and that are more closely related to their courses. Working students are ubiquitous in higher education. Students are more likely to work than they are to live on campus, to study full time, to attend a four-year college or university, or to apply for or receive financial aid. Students work regardless of the type of institution they attend, their age or family responsibilities, or even their family income or educational and living expenses. Working while enrolled is perhaps the single most common major activity among in all diverse undergraduate population. Most of the remaining two-thirds of working students state that their primary reason for working is to pay tuition, fees, and living expenses, with upper-income students more likely to work in order to earn spending money or gain job experience. It is difficult to understand the role that work may play in helping dependent students pay for college because income and educational expenses do not appear to significantly influence the likelihood that students will work, the amount that they work, or the amount that they earn.

Indian Stock Markets

Current Issues India's capital markets February 14, 2007 Unlocking the door to future growth India’s capital markets have experienced sweeping changes since the beginning of the last decade. Its market infrastructure has advanced while India Special corporate governance has progressed faster than in many other emerging market economies. But in contrast to several developed countries and Asian economies, India’s capital markets are still shallow, implying that further reforms are needed to make India a world-class financial centre. At nearly 40% of GDP, the size of India’s government bond segment is comparable to many other emerging market economies. Its corporate bond market, however, remains small and is dwarfed by those of the United States, South Korea and Malaysia. India boasts a dynamic equity market. The sharp rise in India’s stock markets since 2003 reflects its improving macroeconomic fundamentals. However, the large size of insider holdings and the small presence of institutional investors belie these impressive figures. Innovative products such as securitised debt and fund products based on alternative assets are starting to break ground. But an enabling environment is not yet in place and there remains an overriding need to increase domestic investors’ knowledge regarding the merits and risks of capital market investing. A vibrant, well-developed capital market has been shown to facilitate investment and economic growth. We believe that persistent reforms in the sector can support India’s already impressive growth trend in the coming years. Financial deepening beckons in India Stock and bond market capitalisation (end-2005), % of GDP Author Jennifer Asuncion-Mund +49 69 910-31714 jennifer. [email  protected] com Editor Maria L. Lanzeni Technical Assistant Bettina Giesel Deutsche Bank Research Frankfurt am Main Germany Internet: www. dbresearch. com E-mail: marketing. [email  protected] com Fax: +49 69 910-31877 Managing Director Norbert Walter China Germany Brazil Argentina Mexico Indonesia 40 60 Thailand India UK 50 0 180 Korea Japan USA Bond market 150 100 200 Malaysia 0 20 80 100 Stock market 120 140 160 Sources: Federation of World Exchanges, BIS, IMF, DB Research Current Issues Introduction India's stock markets: Scaling new highs BSE index 16000 14000 12000 10000 8000 6000 4000 2000 0 90 92 94 96 98 00 02 04 06 Source: Bloomberg Improving macroeconomic fundamentals, a sizeable skilled labour force and greater integration with the world economy have increased India’s global competitiveness, placing the country on the radar screens of investors the world over. The global ratings agencies Moody’s and Fitch have awarded India investment grade ratings, indicating comparatively low sovereign risks. These positive dynamics have led to a sustained surge in India’s equity markets since 2003 (see chart 1), attracting sizeable capital from foreign investors. Net cumulative portfolio flows from 2003-2006 (bonds and equities) amounted to USD 35 bn. Moreover, India’s stock market has outperformed world indices in recent years. And, despite its increasing correlation with world markets in recent years (see chart 2), India still offers diversification in global portfolios. The bond market is dominated by government bonds. Government bond issuances, resulting from persistently high fiscal deficits, as well as specific regulatory requirements, have underpinned the supply and demand conditions in India’s debt capital markets. Nearly 90% of total domestic bonds outstanding are government issuances (i. e. Treasury bills, notes and bonds), squeezing out corporate and other marketable debt securities (see chart 3). Initiatives to lift the corporate bond market from its nascent stages have been slow to progress, leaving companies unable to realise their optimum capital structure as a result. And unlike the derivative instruments that are available for equities, those for fixed income instruments (e. g. options in interest rates) in the organised exchanges have failed to take off, limiting the price discovery in the secondary markets. We believe that India’s economic transformation is irreversible. Against this backdrop, greater efficiency in financial intermediation is required to support investment and growth, but this will require structural changes in India’s public finances and the dismantling of unwieldy regulations. The paper follows an analysis of supply (bonds, equities and derivatives) and demand conditions (household and institutional investors) in India’s capital markets. Some stylised facts regarding India’s capital market infrastructure and corporate governance are first presented, followed by an analysis of its fixed income, equity and derivatives markets. Later, the paper discusses the classes of investors in India’s markets and the constraints they face in optimising the risk/return objectives of their portfolios. Finally, some brief comments regarding the link between economic growth and capital markets reform conclude the paper. 1 Stock market still offer diversification benefits MSCI India and World Indices (USD) rolling correlation 0. 7 0. 6 0. 5 0. 4 0. 3 0. 2 0. 1 0. 0 96 98 00 02 04 06 2 Source: Datastream Government issuance leads the local bond market Domestic bonds outstanding, % of total* Corporate bonds 3% Others 4% PSU bonds** 6% State loans 15% I. Capital markets development supported by steady infrastructure reforms Government bonds 68% 3 Treasury bills 4% *As of March 2006. ** PSU = Public Sector Undertakings. Source: National Stock Exchange India’s financial market began its transformation path in the early 1990s. The banking sector witnessed sweeping changes, including the elimination of interest rate controls, reductions in reserve and 1 liquidity requirements and an overhaul in priority sector lending . Persistent efforts by the Reserve Bank of India (RBI) to put in place 1 Asian Development Bank Institute (2003). February 14, 2007 2 India's capital markets effective supervision and prudential norms since then have lifted the country closer to global standards. India embarked upon comprehensive financial reforms over a decade ago†¦ Around the same time, India’s capital markets also began to stage extensive changes. The Securities and Exchange Board of India (SEBI) was established in 1992 with a mandate to protect investors and usher improvements into the microstructure of capital markets, while the repeal of the Controller of Capital Issues (CCI) in the same year removed the administrative controls over the pricing of new equity issues. India’s financial markets also began to embrace technology. Competition in the markets increased with the establishment of the National Stock Exchange (NSE) in 1994, leading to a significant rise in the volume of transactions and to the emergence of new important instruments in financial intermediation. A. Innovations have strengthened market infrastructure †¦ heralding improvements in its market infrastructure Market infrastructure has strengthened markedly heralded by steady reforms. The government bond and equity markets have moved to 2 T+1 and T+2 rolling settlement cycles in recent years , which significantly compressed the transfer of cash and securities to the relevant counterparties, thereby reducing settlement risks. The seamless move toward shorter settlement periods has been enabled by a number of innovations. The introduction of electronic transfer of securities brought down settlement costs markedly and ushered in greater transparency, while â€Å"dematerialisation† instituted a paper-free securities market. Together, these mechanisms eliminated forgery of share certificates. Straight-through processing automated the complete workflow (i. e. front, middle and back office and general ledger) involved in the financial transaction, thus doing away with multiple data re-entry and avoiding delays and errors. On the initiative of the Reserve Bank of India and the cooperation of public and private institutions, the Clearing Corporation of India Limited (CCIL) was established in 2001 to facilitate the clearing of trades and transactions in the foreign exchange and fixed income markets, catalysed by the extensive use of information technology. Stronger legal framework needed* Government effectiveness Regulatory quality B. Good corporate governance, but overall legal framework needs improving Continuing efforts by the SEBI to upgrade the corporate governance framework have positioned India at an above-average level against other emerging market economies, according to the Institute of International Finance (IIF), the global association of financial 3 institutions . Since March 2006, listed companies have been required to submit quarterly compliance reports to the SEBI, facilitating the valuation of companies and bringing it in line with the Sarbanes-Oxley Act. Notwithstanding, enforcement remains a challenge due to a still limited number of adequately trained staff to implement the rules. Nor are companies subject to substantial fines or legal sanctions, which reduce their incentives to comply. In turn, this reflects the ongoing gaps in India’s legal system, and somewhat undermines the steps to promote India’s capital markets further. Although India does have a functional legal system, the country’s law enforcement still lags behind the more advanced economies of Hong Kong and Singapore according to the World Bank (see chart 4). This implies that efforts to raise corporate governance need to be accompanied by a stronger 2 3 Rule of law Control of corruption 0 HKG 2 IND 4 SGP 6 * The 4 governance indicators are measured in units ranging from -2. 5 to 2. 5, with higher values corresponding to better governance outcomes. Data have been rescaled to 0-5. Source: World Bank Governance Index 2005 4 National Stock Exchange Fact Book (2006). Institute of International Finance (2006). 3 February 14, 2007 Current Issues Private corporate bonds outweighed by PSU bonds Distribution of issuance*, % 100 80 60 40 20 0 2004 2005 2006 Private corporate bonds PSU bonds *As of end-March of the year. Source: National Stock Exchange legal framework to bring greater stability in its capital markets and foster investor confidence. II. A sizeable but largely skewed capital market For over a century, India’s capital markets, which consist primarily of debt and equity markets, have increasingly played a significant role in mobilising funds to meet public and private entities’ financing requirements. The advent of exchange-traded derivative instruments in 2000, such as options and futures, has enabled investors to better hedge their positions and reduce risks. 5 In total, India’s debt and equity markets were equivalent to 130% of GDP at the end of 2005. This is an impressive stride, coming from just 75% in 1995, suggesting issuers’ growing confidence in marketbased financing. However, the size of the country’s capital markets relative to the United States’, Malaysia’s and South Korea’s remains low, implying a strong catch-up process for India. A wide range of instruments for investors Market segment Issuer Government Securities Central Government Instruments Zero Coupon Bonds, Coupon Bearing Bonds, Treasury Bills, STRIPS Coupon Bearing Bonds Govt. Guaranteed Bonds, Debentures A. Debt markets shaped by the public sector India’s debt markets are divided into two segments. The government bond segment is the larger and more active of the two, with issuers comprising the central government – accounting for 90% of the total – and state governments. The Reserve Bank of India (RBI) has maintained its role as the government’s debt manager and regulator of government-issued papers. The corporate bond market represents the other segment, with Public Sector Undertakings (PSU), corporates, financial institutions and banks being the primary players. PSU bonds by far outweigh the size of private corporate bonds (see chart 5), reflecting a number of factors, foremost of which are the lists of regulatory requirements for private issues. Regulatory oversight of the segment falls under the purview of the Securities and Exchange Board of India (SEBI). Each issuer has a range of instruments available in the market (see chart 6). Since institutional investors, especially banks, have remained the primary participants in fixed income securities, India’s bond markets have predominantly been wholesale. Government bond issuances rule the roost State Governments Public Sector Bonds Government Agencies/ Statutory Bodies Public Sector Units Private Sector Bonds Corporates PSU Bonds, Debentures, Commercial Paper Debentures, Bonds, Commercial Paper, Floating Rate Bonds, Zero Coupon Bonds, Inter-Corporate Deposits Certificates of Deposits, Debentures, Bonds Banks Financial Certificates of Institutions Deposits, Bonds Source: Bombay Stock Exchange The government bond segment is the oldest and largest component of the debt market. Its size has taken off exponentially over the past decades, with the total stock of debt outstanding at roughly USD 280 4 bn as of June 2006 , increasing three and a half times since 1995. This translates to roughly 35% of GDP, in line with several large Asian economies and is not significantly lower than that of the United States (see chart 7). With growing demand from institutional investors such as insurance companies and pension funds, bonds with maturity extending to 30 years are now available, the longest in non-Japan Asia (see chart 8). 4 India’s fiscal year runs from April of the current year through March of the following year. Data are based on the BIS (2006). February 14, 2007 4 India's capital markets A sizeable government bond market % of GDP 50 2001 2005 40 30 20 10 0 Local tenors stretching out Government bond yield curves, % 12 10 8 6 4 2 0 3M 6M 1Y 2Y 3Y 5Y 10Y 15Y 20Y 30Y Indi a Malaysia Thailand Indonesia Philippines Japan South Korea Source: Bloomberg Malaysia South Korea Thailand India China USA 8 Source: BIS 7 High fiscal deficits have encouraged large public borrowings Total public deficit, % of GDP 12 10 8 6 4 2 0 2000 2002 2004 2006E The contours of the government bond market began taking shape around 1992 as a result of the government’s broad-based attempts to 5 reform the financial sector. Advances in the segment benefited from a host of reforms, such as the move toward an auction-based sale of government securities, appointment of Primary Dealers, acting as market makers, and the implementation of delivery-versus-payment (DVP), mitigating the risks associated with trading and settlement. In 1997, the establishment of the Ways and Means Committee was a landmark event as it virtually ended the automatic monetisation of government deficits. In the same year, foreign institutions were permitted to invest in government-issued securities, thus broadening the institutional investor base. Zero-coupon bonds and index bonds represent novel products in the marketplace, but have so far received only tepid response from participants. Why have government bonds dominated? Sources: Reserve Bank of India, DB Research 9 India's public debt high against its peers Average of total public debt, % GDP, 2001-2005 100 80 60 40 20 0 BBB median BB median India Public sector fiscal dynamics and government regulations largely dictate the current state of affairs. That the size of the government bond market is large is not surprising due to persistently high fiscal 6 deficits and the resulting high public sector borrowing (see chart 9). Although the total public deficit has been declining since 2003, government debt has remained high, averaging 85% of GDP over the past 5 years. This places India’s public debt considerably higher than similarly rated countries (see chart 10). Banking regulations compound the problems. Banks are mandated to invest 25% of their net demand and time liabilities (i. e. eposits) in government bonds or other approved government securities, the socalled statutory liquidity reserve (SLR). The SLR has stayed at this level since it was reduced in 1991 from 38%. But in view of the (perceived) risk-free nature of these assets – requiring less provisioning in their books – banks tend to hold an even greater percentage of government bonds in their portfolios than prescribed by 7 the SLR . Large holdings o f government bonds expose banks to 8 interest rate volatility (thus affecting banks’ income) and could impact 5 Source: Standard and Poor's 10 6 7 8 The Development of Bond market in India in http://www. iimcal. ac. in/community/FinClub/dhan/dhan1/art15-bond. pdf Rawkins, Paul (2006). The IMF put the figure at roughly 41% in 2005, well in excess of the 25% SLR (IMF Article IV report, 2005). In 2004, the Reserve Bank of India allowed for a one-off reclassification of government securities to held-to-maturity from trading or available-for-sale securities in order to mitigate the losses from rising interest rates. 5 February 14, 2007 Current Issues Credit growth is surging†¦ % yoy 40 35 30 25 20 15 10 5 0 90 92 94 96 98 00 02 04 their capital adequacy in an environment of sharply increasing interest rates. This alone calls for greater diversification of income sources (such as fee-based income) aligned with more prudent credit risk assessment. Despite the super charge growth in bank credit over the past two years (see chart 11), India’s credit-to-GDP ratio remains low in contrast to other countries in Asia, implying still low penetration of bank intermediation in the country (see chart 12). Similar restrictive regulations to the SLR exist for the insurance sector and the pension fund system, thereby preventing a large portion of their capital from being channelled to other higher-yielding investment assets, which would enhance the risk/return profile of their portfolios. Insurance companies (carrying out the business of general insurance) are mandated by the Insurance Regulatory and Development Authority (IRDA), the regulatory body for the insurance industry, to invest at least 25% of their total assets in government securities and 9 state government securities . Pension funds face slightly higher requirements, although in both cases, investment in government paper may well be above the statutory level to preserve the safety of their assets. Corporate bond market: A huge potential awaits In contrast to the government bond market, the size of the corporate bond market (i. e. corporate issuers plus financial institutions) remains 10 very shallow (see chart 13), amounting to just USD 16. 8 bn , or less than 2% of GDP at the end of June 2006. A well-developed corporate bond market would give companies greater flexibility to define their optimum capital structure. By the same token, investors would benefit from having a wider range of asset classes to diversify their fixed income investments. Within India’s corporate bond market, state-owned Public Sector Undertakings (PSUs) have persistently outstripped private corporate issuances. PSUs and private companies can raise debt capital either by private placement or public issue, with the former being the preferred method by far. The growth of private placement of debt has shown a marked increase over the past decade, rising over four-fold in fiscal year 2004/2005 to roughly USD 12. 6 bn from USD 3 bn in fiscal year 1995/1996 (see chart 14). The preference for the private placement route arises from less onerous regulatory requirements, such as the type of disclosures and registration requisites, than those 11 for public issues . Also, the considerably higher costs associated with public issuance have deterred corporates from accessing funds through this route, in addition to the fact that private debt placements can be customised in accordance with individual issuers’ needs. Corporates are not mandated to obtain and disclose credit ratings from an approved credit rating agency, although companies themselves have increasingly sought to do so in recent years. In fiscal year 2004/2005, 93% of companies that raised bonds through 12 private placements obtained credit ratings . There is a preference to raise funds with maturities between three to five years, which suggests that companies remain cautious of borrowing over the medium-term segment, and also reflects investors’ still limited demand for longer tenors. Trading, clearing and settlement practices in the corporate bond market are less developed than in the government bond segment. 9 10 11 12 Source: Reserve Bank of India 11 but financial intermediation remains low Bank credit, % of GDP 2002 2003 2004 160 140 120 100 80 60 40 20 0 China Emerging Asia Western Europe India Source: IMF 12 Corporate bond market has yet to develop % of GDP 2001 2005 1. 6 0. 7 45 40 35 30 25 20 15 10 5 0 Malaysia South Korea Thailand India China USA Source: BIS 13 The Insurance Regulatory and Development Authority (2001). Bank for International Settlements (September 2006). National Stock Exchange (20 05) National Stock Exchange (2005). February 14, 2007 6 India's capital markets Private placement towers over public issuance Bond market, USD bn 16 14 12 10 8 6 4 2 0 1995 1997 1999 2001 2003 Deals are usually conducted over the counter and are struck between counterparties. In cases wherein brokers intermediate (often by telephone), they are required to report the transaction to the exchange, which facilitates post-trade information. Corporate debt can also be traded via an electronic order book system, but this has largely been unpopular in the absence of general retail interest in 13 such securities . Moreover, the more advanced clearing and settlement infrastructure for government bonds allow repo transactions for this segment, a facility that is not accessible for corporate bonds. The large size of the government bond segment in comparison with its corporate equivalent explains its large trading activity in the secondary market, accounting for over 70% of turnover (see chart 15). By contrast, turnover in the corporate segment amounts to just 3. 6%, largely because of the limited supply owing to the preference for private placements mentioned above. In addition, large domestic institutional investors, such s pension funds and the insurance sector, are still restricted from allocating large portions of their investible funds in the corporate bond segment. Not only does this constrain the segment’s development, but it also limits investors’ ability to enhance their returns by diversifying their fixed income instruments investments. Nonetheless, the potential for the s egment to pick up is promising, judging by large corporate debt being raised in the international capital markets. And the propensities to borrow are expected to grow further, arising from companies’ reassessment of their capitalisation. Nearly 50% of their financing comes from reinvested capital, while the rest arise from external sources either by raising equity or from bank 14 and other financial institution borrowings. Shareholders’ calls for higher dividend payment and the quest to bring corporate cost of capital to optimum levels will support a rise in capital market financing in the future. At the same time, the pension fund system is moving toward defined contribution mechanism which should provide impetus to the demand for corporate bonds. Corporates seize borrowing opportunities abroad Public issues Private placements 14 Source: National Stock Exchange Government bonds remains most actively traded Turnover, % (March 2006) 3. 6 1. 6 22. 1 72. 7 Govt sec Corp bonds T-bills Others Source: National Stock Exchange 15 Indian corporates have gone on a borrowing spree abroad†¦ Corp. debt outstanding, USD bn* 12 10 8 6 4 2 0 2001 2002 2003 India 2004 2005 Malaysia China A more aggressive trend in overseas borrowing by Indian corporates has recently developed (see chart 16), fuelled by fewer listing requirements, lower cost of funding and better liquidity in the secondary markets. The trend also stands in contrast to the sovereign’s absence in the international capital markets, reflecting the government’s conservative approach to external debt management as a result of the current account crisis in 1991/1992. At the end of 2005, the total amount of bonds outstanding raised by 15 corporates abroad amounted to USD 6. 7 bn , over two and a half times its size in 2001. This represents 60% of the value of corporate issuance in local markets. To put this in perspective, if this amount of issuance had been made in the domestic capital markets, the size of India’s corporate debt market would be 2. % of GDP instead of just 1. 5% of GDP. Indian companies continued to exert their presence in the international bond markets in 2006, outpacing their Asian counterparts (see chart 17). This strong appetite coincided with the still comparatively lower international interest rates (e. g. Ranbaxy’s USD 400 m 5-year convertible bond issue fetched 5% ve rsus 7. 5% for a 13 14 15 *As of December of each year. Source: BIS 16 Bank for International Settlements (2005). Handbook of Statistics (2006), Securities and Exchange Board of India. Excluding financial institutions. 7 February 14, 2007 Current Issues 6 †¦ and there's no retreat in 2006 USD bn 3 2 1 0 -1 Q3/05 China Q4/05 Q1/06 India Q2/06 Malaysia Source: BIS similar tenor in the domestic market) . It also coincided with the better valuation by foreign investors of Indian companies, indicative of their improving global competitiveness. Structured finance offers immense potential Securitisation is an attractive growth segment in India’s debt markets. The market is still in its nascent stages, where current activities primarily occur between banks, non-bank financial institutions and asset reconstruction companies through private placements. Paving the way for a secondary market is the implementation of the proposed changes to the Securities Contracts Regulation Act, which would 17 reclassify securitised debt as true marketable securities . Nevertheless, securitisation has developed robustly in recent years. Asset-backed securities (ABS) are the predominant asset class in India’s securitised segment. This should not come as a surprise given the large component of retail loans in banks’ and non-bank financial institutions’ balance sheets. The ABS market has risen exponentially since 2002, in tune with the sharp pick up in credit growth since then (see chart 18). In 2005, India’s ABS market volume was roughly USD 5 bn, making it the fourth-largest in Asia-Pacific (see chart 19). Mortgage-backed securities (MBS) volumes are just a small fraction of the ABS market. Growth so far has been slack, explained by the absence of a secondary market and the prepayment and interest rate 18 risks arising from prepayment/repricing of the underlying loans . But the growth of commercial bank credit for housing, averaging approximately 90% since 2002, suggests that mortgage-backed securities is a segment that will take off, so long as market infrastructure and regulatory provisions are firmly grounded. Other securitised assets backed by corporate loans, receivables and toll revenues have sprung recently, indicating the promising potential of the segment. As the government embarks upon modernising its infrastructure, the need to develop the structured finance segment will become crucial. Collateralised mortgage backed securities (CMBS), collateralised loan obligations (CLO) and collateralised debt obligations (CDO), which are actively traded in the United States, are innovations awaiting the Indian market in line with a maturing economy. Permitting foreign investors in the market will play a significant role in pricing and transparency. But for now, incomplete legislative and market norms may not allow the country to fully exploit the potential of securitisation activities. 17 Securitisation is picking up†¦ USD bn Volumes in ABS Volumes in MBS 5. 0 6 5 4 3 1. 8 0. 8 0. 3 0. 0 0. 3 2003 0. 7 0. 7 2 1 0 2002 2004 2005 Source: BIS 18 †¦ with India's ABS issuance a decent fourth place in Asia USD bn Korea Japan India Australia 120 100 80 60 40 20 0 2000 2001 2002 2003 2004 2005 Source: BIS B. Vibrant equity markets The development of India’s equity capital markets has taken a more progressive trajectory than the bond market, largely reflecting the government’s laissez faire approach in the segment. At 90% of 19 GDP , its size is comparable to that of other emerging countries, although is still small relative to many developed markets (see chart 20). 19 16 17 18 19 Hindu Business Line (2006). Kothari, Vinod (2006) and Bank for International Settlements (2005). Bank for International Settlements (2005). Based on the capitalisation of the Bombay Stock Exchange as of December 2006. February 14, 2007 8 India's capital markets India's equity market comparable to other emerging markets Local market capitalisation, % of GDP (2005) 200 150 100 50 0 Mexico Malaysia Brazil India Thailand Korea EU Indonesia Japan China USA Source: IMF 20 Indian equity markets have been volatile Standard deviation of rolling two-year weekly returns, index in USD 6 5 4 3 2 1 0 96 98 00 02 04 06 21 MSCI India MSCI World Source: Datastream Of India’s 23 stock exchanges, equity trading is most active in the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). Since the NSE’s inception in 1994, it has caught up with the BSE in terms of capitalisation but exceeded it in turnover. The BSE boasts of over 4,000 listed companies, surpassing stock exchanges in the US. This explains its slightly higher market capitalisation over the NSE, although its lower turnover implies that inefficiencies remain due to the high proportion of untraded companies. Its share of total equity turnover is just 33% compared to 66% of its rival, the NSE. The increase in the limit for foreign direct investment in the stock exchanges to 49% announced early this year is expected to lend more dynamism to the equity capital markets. The investment limit for a single investor was set at 5%. It did not take long after the new limit was announced that the New York Stock Exchange (NYSE), Goldman Sachs, General Atlantic and Softbank Asian Infrastructure Fund all acquired a 5% stake in the National Stock Exchange (NSE). Increased foreign presence is expected to help the NSE to inch forward to the global markets, generate a wider customer and investor base and offer more innovative products. The Bombay Stock Exchange is also courting strategic investors. If it succeeds, this should help speed up the process of consolidating the thousands of inactive listed companies n the board. Moreover, the move will enhance its competitive strength against the NSE, which has diminished over the past decade. Higher volatility, improving performance Benchmarking the risk/return characteristics of India’s equity markets against the world average shows that India’s stock market has 20 historically been more volatile (see chart 21), while its returns have, until recently, underper formed. This should not come as a surprise as the past decade witnessed several political and economic uncertainties, undermining business and investor confidence. Only from 2006 has India’s stock market begun to outperform the world’s index as momentum to liberalise the economy gathered pace and investors began to take notice (see chart 22). Reflecting the recent sharp run-up in equity prices, India’s stock markets today rank among the most expensive in the world (see chart 23), raising concerns over a correction, especially if earnings disappoint. However, sustained economic growth combined with continued market-friendly capital market reforms should prove to be supportive factors for superior returns in the medium run. Indian equities returns: catching up MSCI total return index, 1994=100 300 250 200 150 100 50 0 94 96 98 00 02 04 06 MSCI India MSCI World Source: Datastream 22 20 Since the world index is a composite of indices and therefore, by nature, more diversified, it is expected to exhibit less volatility than the country index. 9 February 14, 2007 Current Issues Are India's equity prices stretched? Price/earnings ratio, times 30 25 20 15 10 5 0 96 98 00 02 04 06 In terms of sectoral composition in benchmark indices, India’s stock market is broad-based, putting it roughly in line with the world index (see chart 24). The higher weight of the IT sector today reflects the country’s increasing turn toward a knowledge-based economy. But this may change, with consumer discretionary and consumer staples projected to get a larger share of the pie in tandem with rising incomes and as household preferences become more discerning. The shares of financials and healthcare sectors are also expected to increase markedly as industry consolidation picks up and the door to foreign direct investment is widened. Foreign investors seize local market opportunities Reflecting India’s improving macroeconomic fundamentals, increasing corporate profitability and competitiveness, and greater integration with the world economy, foreign institutional investors’ (FIIs) participation grew steadily over the past 3 years (see chart 25). True, FII invest in local bonds and equity, but their interest has largely been on the latter. The inflow of portfolio capital continues to test new highs and in recent years has outpaced the inflow of foreign direct investment (FDI). India’s accounting standards, although still not in full convergence with international practices, combined with the quarterly reporting frequency mandated by the SEBI on listed companies, offer guidance in corporate valuation. Greater inflows are still to be expected, arising from international investors’ quest for higher returns and improved portfolio diversification, buttressed by ongoing structural changes in India’s economy and its financial markets. Sustained inflow of capital will not only bring greater liquidity in the market, but foreign presence will encourage further market transparency. Overseas listing inching up Domestic companies, both large- and small-cap, have been allowed to list abroad by way of American Depository Receipts and Global Depository Receipts (ADR, GDR) since 1992. Owing to global and local market conditions (e. g. global liquidity, stock market crashes, economic and financial crises), the amount raised through the ADR route since its inception has been quite volatile. Only in recent years have issuances picked up steadily, with the amount raised in fiscal year 2005/2006 exceeding USD 2. 5 bn, a level not seen in over 10 21 years (see chart 26). As one of the measures to allow greater capital account convertibility, the RBI has allowed two-way fungibility for Indian ADRs/GDRs. This allows holders of the instruments to cancel them with the depository and sell the underlying shares in the market. The company can then issue ADRs anew to the extent of the shares converted into local shares. This was not the case in the last decade, which limited companies’ ability to access capital abroad. Further room for improvement Impressive though the developments may be, India’s stock markets still have some room for improvement. For one, the shareholder pattern needs to be broadened, as ownership is concentrated in the 22 promoters and company insiders show an increasing presence. This implies that minority shareholders’ interest is minimal, which needs to be increased for the sake of an improved corporate governance. 21 MSCI India, USD MSCI World, USD MSCI India average for the period Source: Datastream 23 India's equity market composition is broad-based % 100% 80% 60% 40% 20% 0% MSCI India MSCI World Utilities Telecommunication services Materials IT Industrials Healthcare Financials Energy Consumer staples Consumer discretionary Source: Datastream 4 Foreign investors flock to India's capital markets 15 10 5 0 01 02 03 04 05 06E 1200 800 400 0 Foreign direct investment, USD bn (left) Portfolio investment, USD bn (left) Net new number of FIIs (right) Sources: Reserve Bank of India, Deutsche Bank Research 25 22 Four of the top 25 ADR listings as of December 2005 are Infosys Technology (USD 884 m), ICIC I Bank Ltd (USD 466 m), Satyam Computer Services Ltd (USD 323 m) and HDFC Bank Ltd (USD 300 m). Data are from Citigroup Corporation (http://wwss. citissb. com/adr/www/adr_info/YE2005_DR. pdf). Promoters include family members, relatives and close associates. February 14, 2007 10 India's capital markets ADR issuance makes a strong comeback USD bn 3. 0 2. 5 2. 0 1. 5 1. 0 0. 5 0. 0 1992 1994 1996 1998 2000 2002 2004 The presence of institutional investors in the equity market is also low, resulting from the restrictive investment guidelines set by the government for the insurance industry, banks and pension funds. Of note, while only 18% of the listed companies in the NSE are owned by retail investors, they account for an estimated 85% of the trading 23 volume, according to a recent paper by McKinsey . This suggests that retail investors tend to speculate in the stock market rather than follow a strategy of pursuing long-term benefits. A resumption in privatisation is also key to further developing India’s equity markets. Since FY 2003/2004, privatisation activities have dwindled, driven in part by the lack of political consensus to keep it on track (see chart 27). The sluggish process prevents publicly owned companies from accessing more efficient sources of funding. It also interferes with their movement toward market-disciplined processes and better corporate governance. Source: Securities and Exchange Board India 26 C. Financial derivatives march ahead While some form of financial derivatives trading in India dates back to the 1870s, exchange traded derivative instruments started only in 2000. Then, stock index futures, with the Sensex 30 and the S CNX Nifty indices as the underlying, began trading at the BSE and NSE. Since their inception, the basket of instruments has expanded and now features individual stock futures, and options for stock index and individual stocks. Among the four asset classes, single-stock futures have the lion’s share, accounting for nearly 60% of the turnover in the NSE’s derivatives segment (see chart 28). In its relatively short life span, single-stock futures are outperforming those in other global derivatives market (see chart 29). The security largely owes its success to the timing of its introduction: it came into stream shortly after â€Å"badla†, a futures-like practice which permitted traders to carry forward sizeable net positions until the next settlement period, was 24 banned. The key difference with badla is that a clearing corporation owned by the NSE guarantees the futures transaction, thereby reducing settlement risks. The derivative instruments traded in the exchanges reflect many of the features of the underlying instruments. First, as with the wholesale debt and equities segments, the NSE has steadily outpaced the BSE in terms of trading in the derivatives segment over the years. The NSE thus reflects the market’s overall activity and sentiment. 100% 80% 60% 40% 20% 0% 2001 2002 2003 2004 2005 Index futures Index options Stock futures Stock options No clear signs of commitment to privatisation INR bn 20 Privatisation proceeds Average, 1991-2005 15 10 5 0 91 93 95 97 99 01 03 05 Sources: Department of Disinvestment, Ministry of Finance 27 Stock futures most popular derivatives segment Exchange-traded derivatives, % total turnover Second, equity derivatives have developed more rapidly than their fixed income counterparts. Exchange-traded derivatives for interest rates failed to take off when introduced by the NSE in 2003, largely 25 reflecting a flawed contract design. Interest rate derivatives are primarily traded over-the-counter (OTC), and although any domestic money or debt market rate may be used as a benchmark rate, the Mumbai Interbank Offered Rate (MIBOR) and Mumbai Interbank Forward Offered Rate (MIFOR) are those that are widely used. Interest rate swaps and forward rate agreements are instruments available for managing interest rate risks, although the former is by far the preferred choice. The overnight interest swap (OIS) is estimated to trade between USD 500 million and USD 1 billion per 26 day. A survey by FitchRatings of India’s derivatives market in 2004 23 24 25 26 Source: National Stock Exchange 28 Farrell, Diana et al. (2006). Gorham, Michael et al. (2005). FitchRatings (2004). FitchRatings (interview). 11 February 14, 2007 Current Issues Single-stock futures: India is world leader World ranking in terms of volumes traded 2005 National Stock Exchange Johannesburg Stock Exchange BME Spanish Exchanges Euronext Liffe Borsa Italiana OMX Athens Stock Exchange Budapest Stock Exchange Australian Stock Exchange Warsaw Stock Exchange 1 2 3 4 5 6 7 8 9 10 2004 1 4 3 2 6 5 7 8 9 10 estimated that trading volumes at the end of the year amounted to roughly INR 30 bn, a three-fold increase from January 2004. This is expected to have picked up even further since then, spurred by sustained uncertainty over the interest rate outlook, leading market participants to hedge their exposures. Tenors up to 5 years are the most liquid in the OIS market despite the fact that the yield curve stretches out to 30 years. Fitch attributed this to the absence of counterparty lines for longer maturities and partly by the lack of risk management tools for interest rate exposures longer than 5 years. There are a number of factors, though, which mitigate the risks in OTC derivatives for interest rates. One is that the 27 majority of counterparties have ratings that are investment-grade. Another is that India as accepted International Swaps and Derivatives Association (ISDA) documentation before striking any agreement with counterparties. However, combined with banks’ and other institutional investors’ large exposures to government bonds, and the prospects of a deepening bond market in general, the need to develop exchange-traded futures and options for interest rates is evident. This will significantly reduce risks inherent in the OTC markets through centralized settleme nt, enhanced risk management and multilateral netting. Source: World Federation of Exchanges 9 Household sector the largest saver in the economy % of total savings 120 100 80 60 40 20 0 -20 2000 2001 2002 2003 2004 Households Public sector Private corporates Source: Reserve Bank of India III. Right mix of investors, but participation is still low A vibrant secondary market is characterised by the active participation of retail and institutional investors, underpinned by their longterm investment goals, with adjustments made in accordance with their short-term liquidity needs and in response to the business cycle. With a population of over 1 billion, India offers a large pool of potential investors. Indian households are by far the largest saver in the economy, constituting nearly 80% of the economy’s aggregate saving (see chart 30). Insurance companies, pension funds, mutual funds and foreign institutional investors (FIIs) form India’s institutional investor base. Combined, their assets account for about 25% of GDP (see chart 31). This represents a significant increase compared to the mid-1990s, prior to the opening up of many of the sectors, such as the insurance industry, to competition. But, to put it in perspective, the combined size of the Indian institutional investors sector amounts to less than half of US mutual fund assets alone. By and large, Indian investors tend to be conservative in their investment decisions, with a general preference for safe returns and capital preservation. As for large domestic institutional investors such as pension funds and insurance companies, their investment style has largely been the result of regulation. 30 Households are ultraconservative in their investment decisions Composition of household financial savings, % (average, 2000-2005) 9. 17. 2 12. 8 42. 0 12. 5 2. 4 Currency Deposits Shares and debentures Government securities Small savings Insurance funds Provident and pension funds Sources: Securities and Exchange Board of India, Reserve Bank of India A. Indian household investments: low risk, low return 3. 9 The lion’s share of households’ total financial savings, roughly 50%, is placed in bank deposit account s (see chart 31). The rest of the pie is 28 spread over small savings accounts , at just over 10%, and a combined 25% in insurance and pension funds. Because of these institutions’ conservative approach to investing, they appeal very strongly to households. 27 31 28 FitchRatings (2004). Small savings accounts are direct claims against the government. February 14, 2007 12 India's capital markets Over the past 5 years, households had a mere 5% of their savings invested in the stock market on average. Granted, the general aversion to riskier instruments such as equities is not only a product of the public’s preference for safe returns. India’s equity markets have experienced several candals in the past, resulting occasionally in substantial capital losses to many investors. This has essentially discouraged a considerable number of them to return to the stock markets, although in the past two years confidence has gradually regained some ground. How many households are investing in the capital markets? A joint survey by the Securities and Exchange Board of India and National Council for Applied Economics Research ( SEBI-NCAER) in March 2003 estimated that only 13 million households out of the total 177 million surveyed have investments in the capital markets. This is equivalent to a mere 7% of total Indian households. The robust economic expansion since the survey and the resulting increase in per capita GDP (see chart 32) may have widened the household investor base, but possibly not enough to considerably increase market volumes. A key ingredient to reduce households’ risk aversion is improving their understanding of long-term investment, particularly in the equity market. Regarding bonds, there is a concerted effort among the RBI and SEBI, as well as the BSE and NSE, to raise retail investors’ knowledge about the mechanics and risk/return tradeoffs of debt securities. However, the thin volumes can be expected to persist so 29 long as the government continues to provide savings schemes , which reduce incentives to invest in fixed-income instruments. India's GDP per capita steadily rising USD 900 800 700 600 500 400 300 200 100 0 00 01 02 03 04 05E 06F Sources: Institute of International Finance, Reserve Bank of India, DB Research 32 B. Institutional investors: Easing regulations will unlock capital market growth Nearly 25% of households’ total financial savings are allocated in insurance and pension funds, dominated by the government-owned Life Insurance Company of India (LIC) and the Employee Pension Fund (EPF). The LIC continues to hold a near monopoly of the industry, accounting for nearly 75% of the business, despite the opening up of the industry to private competition in 1999. Similarly, although mutual funds have been permitted to offer pension plans, a majority of the public retirement scheme remains under the control of the EPF. The guaranteed rate of return of 9% they offer is a strong incentive for investors to place their financial savings with the institution. Overall, just roughly 10% of the labour force is enrolled in a pension scheme. The rest of the workers rely on their families for support at old age or on their accumulated savings. Stringent asset allocation guidelines constrain returns Portfolio allocation decisions by the insurance and pension fund sector remain deeply regulated, requiring each to invest between 25 to 50% of total funds in government bonds or government-approved securities. Just over 85% of the LIC’s total investments are in public securities – most of which are of long-term maturities – and about 15% in private securities. Given India’s young labour force, it will take quite a number of years before a rush for redemption occurs, suggests that the LIC may not necessarily be optimising its portfolio returns. Portfolio managers’ tendency to follow a buy-and-hold strategy precludes efficient duration management and the opti- A small institutional investors sector Assets, % of GDP Insurance companies Pension funds Mutual funds Foreign institutional investors 0 5 10 15 Sources: Various domestic associations, IADB, author's estimates 33 29 Small savings schemes sponsored by the government offer guaranteed annual returns of 3. 5% to 9% (Reserve Bank of India). 13 February 14, 2007 Current Issues misation of the portfolio’s risk/return profile. At the same time, the underdeveloped corporate bond markets inhibit fixed income portfolio managers to exploit relative value across different segments. Suboptimal returns are also generated by the limited exposure allowed in the equity markets as a result of stringent regulation. Simply put, there is significant room to improve upon households’ long-term wealth creation, but this will call for the relaxation of portfolio asset allocation rules prescribed by the government. Greater private participation will encourage competition in the insurance and pension funds, bringing product innovations in the market that better match investor risk/return requirements. Creating more active markets with greater foreign presence Foreign institutional investors (FII) and mutual funds are accorded considerable leeway in their asset allocation decisions in contrast to the insurance and pension fund sectors. Because they can adjust their positions in response to changes in their liquidity needs or the economic environment, they tend to set the tone in market sentiment or influence prices despite their comparatively small size. FIIs can invest across a variety of instruments in the local markets but are subject to limits. Current regulations permit all FIIs combined to own no more than 24% of any Indian company’s total paid-up capital. Investments over the threshold are subject to the approval of the company’s Board of Directors. There are ongoing calls to raise the limit further, which remain in constant debate among the policymakers, due to their concerns about potential destabilising effects of sudden capital withdrawal. In 2004, maximum allowed FII investment in government securities, including Treasury bills, was raised to USD 2 bn from USD 1. 75 bn and in corporate bonds to USD 1. 5 bn from just USD 0. 5 bn. Hedging foreign currency exposures in the forward market is permitted. Assets under management of mutual funds have soared USD bn 70 60 50 40 30 20 10 0 09/93 09/04 09/05 09/06 Although efforts to welcome FIIs are encouraging, the total amount of investment limits accorded to them is still meagre. Easing FII controls would accelerate the deepening and broadening of the capital markets, but this would require redressing capital account regulations aimed at preserving market stability in case portfolio positions are unwound. Mutual funds are a viable long-term saving vehicle The landscape of the mutual fund industry has undergone significant changes since the establishment of the Unit Trust of India in 1964, which for decades held the monopoly. By the mid 1990s, barriers to entry were gradually dismantled, allowing domestic and foreign private institutions to enter the fray. Assets under management have grown to around USD 65 bn in September 2006 nearly 10% of GDP (see chart 34), quadrupling in value since 1993. At its current growth rate, the sector’s size will double over the next 10 years. With intense competition came the adoption of measures to improve transparency. Restrictions on investment in debt instruments and money markets were loosened. A number of different schemes 30 are now available in the market , which appeals to investors’ varying investment objectives and constraints. The listing of openended schemes allowed investors the flexibility to adjust their fund exposures, while regulations against fund managers’ use of Source: Association of Mutual Funds of India 34 30 These include assured return, balanced, floating rate, fund of funds, gilt, growth, income, liquid and money market funds. February 14, 2007 14 India's capital markets Still very low penetration of mutual funds Households' investment by type, %* 39. 2 20. 9 6. 2 44. 7 erivatives have been relaxed, allowing them to hedge their positions. Given the rapid growth of the industry in the past 3 years, can the Indian mutual fund industry be characterised as having come of age? Not when seen in the light of the low share of mutual funds in the household sector’s total investment pie (see chart 35). One promising development announced in the Budget in 2006 was the lifting of overseas investment limits by mutual funds to USD 3 bn from USD 2 bn. This will allow domestic fund managers to offer new opportunities in higher-yielding funds, such as those dedicated to emerging markets and alternative investments (e. . commodities), which are currently not available in the local market. Combined with rising per-capita income, improving awareness of capital market investing and pension fund reforms will make mutual fund investing a viable long-term investment vehicle. 27. 5 76. 2 17. 3 5. 5 UTI scheme Fixed deposits EPF/PPF Post office Others 8. 5 Mutual fund Fixed Bonds LIC IVP, NSC NCC IV. The road ahead 35 Source: Securities and Exchange Board of India Capital market liberalisation is good for GDP growth Real GDP growth per capita, % 6 5 4 3 2 1 0 -1 -2 India’s regulators have been active in seeking ways to develop the country’s financial markets, and a culture of introducing greater risk management is starting to set in. The main challenge ahead is to strengthen the political will to further ease regulations in the capital markets and the limits prescribed to market participants. India’s economy is expected to benefit enormously from the process of gradual capital market liberalisation. Empirical evidence has shown that emerging market economies that have heralded changes in their 31 financial markets experienced higher growth and investment (see chart 36). India is no exception, with per-capita GDP and domestic investment rising post-liberalisation. Economies which pursued deeper financial market reforms, and whose per-capita incomes were roughly similar to India’s prior to their liberalisation periods, not surprisingly experienced even greater rewards. Drawing from these countries’ experiences, India’s growth potential can experience a sustained pick-up if it stays on the path of reforming its capital markets. Full capital account convertibility no longer appears to be a pipe dream, going by the RBI’s reconsideration of the Tarapore 32 Committee’s roadmap to capital account liberalisation . Early in 2006, the conditions for full capital account convertibility have been re-examined against issues such as exchange rate management, prudential safeguards to monetary and financial stability and 33 implications of dollarisation in India . Although full convertibility is still not expected to occur overnight, the momentum towards that goal seems to have accelerated. Jennifer Asuncion-Mund (+49 69 910-31714, jennifer. [email  protected] com) Mexico Malaysia India Chile Investment growth per capita, % 6 4 2 0 -2 -4 Mexico Malaysia India Chile Thailand Pre-liberalisation average Post-liberalisation average Official liberalisation date: India, 11/92; Chile, 01/92; Mexico, 05/89; Malaysia, 12/88; Thailand, 09/87 Source: Federal Reserve Bank of St. Louis Thailand 31 32 36 33 Bekaert, Geert et al (2003). A committee headed by S. S. Tarapore submitted its recommendations for full capital account convertibility in 1997, shortly before the Asian financial crisis. In the event, authorities delayed the implementation of the Committee’s prescriptions, opting for calibrated measures instead. Reserve Bank of India (2006). 15 February 14, 2007 Current Issues Bibliography Bank of International Settlements. BIS Quarterly Review (various issues). Basel. Switzerland. Bekaert, Geert, Campbell R. Harvey and Christian T. Lundblad (2003). Equity Market Liberalization in Emerging Markets. 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Lee, Kyungjik and Martin Hohensee (2004). The Indian Bond Market. Deutsche Bank Global Markets. Singapore. Mohan, Rakesh (2006). Monetary Policy and Exchange Rate Frameworks: The Indian Experience. Singapore. National Stock Exchange (2005). Indian Securities Review: A Review. Mumbai. India. National Stock Exchange. NSE Factbook (various issues). Mumbai. India. Patil, R. H. (2001). Broadbasing and Deepening the Bond Market in India. Wharton University. Pennsylvania. USA. Rawkins, Paul (2006). India’s Public Finances: Do They Matter? Deutsche Bank Research. Current Issues. Frankfurt am Main. Germany. Reserve Bank of India. RBI Annual Report (various issues). Mumbai. India. Securities and Exchange Board of India. SEBI Annual Report (various issues). Mumbai. India. Sharma, V. K. and Chandan Sinha (2006). Developing Corporate Bond Markets in Asia: The Corporate Debt Market in India. Basel. Switzerland. Shirai, Sayuri (2002). 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