Importance Of Institutional Investors Finance Essay - Free Essay Example

Sample details Pages: 5 Words: 1638 Downloads: 8 Date added: 2017/06/26 Category Finance Essay Type Analytical essay Did you like this example? Assess the importance of institutional investors for financial markets. Institutional investors are organizations which pool large sums of money and invest those sums in securities, real property and other investment assets. They can also include operating companies which decide to invest their profits to some degree in these types of assets. Types of typical investors include banks, insurance companies, retirement or pension funds, hedge funds, sovereign wealth funds, endowment fund, investment advisors and mutual funds. A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods. These financial markets are of two types; capital markets and money markets. Don’t waste time! Our writers will create an original "Importance Of Institutional Investors Finance Essay" essay for you Create order Financial markets facilitate the following; the raising of capital (in the capital markets), the transfer of risk (in the derivatives markets), price discovery, global transactions with integration of financial markets, the transfer of liquidity (in the money markets) and international trade (in the currency markets). Generally these markets are used to match those who want capital to those who have it. There are plenty of paramount reasons of having institutional investors in financial markets, the importance are as elaborated below; Institutional investors have the freedom to buy and sell shares; they can play a large part in which companies stay solvent, and which go under. Influencing the conduct of listed companies, and providing them with capital are all part of the job of investment management. Also they influence in the management of corporations because they will be entitled to exercise the voting rights in a company. According to Cvetanovic (2006); Institutional investors have a high preference for liquid assets. They usually have more power than small investors to press for the lowest possible transaction costs thereby boosting liquidity in terms of share turnover in the market. For instance, in 2009, institutional investors managed financial assets in excess of USD 53 trillion, including some USD 22 trillion in equities (OECD 2011). This, in turn, can reduce the cost of capital which should make it easier for liquidity-constrained firms to obtain fresh capital infusion. Furthermore, institutional investors are small but important players in corporate governance. As large and diversified investors with strong preference orientation they have the potential and the incentive to press for value-maximizing firm governance. So, institutional investors are in the process of financial development in each country and also provide strong contribution to development of financial sector functions (Cvetanovic 2006). Large block acquisitions and disposals by institutional investors may cause major swings in share prices. There are passive investors who just replicate what large investors do in the financial market. Since institutional investors hold large sums of funds, they normally purchase companies shares and at times dispose them. In an event a huge amount of shares are bought by one of these institutional investors such as the pension funds and the insurance companies would result to a major share price rise of such shares. And once the institutional investors dispose the shares of any company they hold, would result in a fall in price of such company shares as investors would predict something wrong with the company. The behavior of institutional investors may also give rise to fads and fashions with potentially unhealthy effects on merger activity. They may cause a disproportionate rise in the share prices of the firms in which they invest. This gives the firms in which they invest a grea ter opportunity to leverage their financial position in an acquisition (Dhaliwal 1992). Financing young or small firms and businesses: Institutional investors do provide finance or private equity to small businesses by buying shares of such businesses. Institutional investors may own private equity firms, which are firms that buy the shares of new or small businesses even though the shares are not tradable on a stock exchange. Private equity firms become co-owners of the companies in which they invest and take an active managerial role in the companies. The expectation may be that the shares will eventually be sold to another private equity firm, to another firm that makes a takeover bid, or through a stock exchange when the shares are accepted for a stock exchange listing (Redhead 2008). . According to Valdez (2007) Cited in Redhead (2008:245) in 2006 the European Private equity Capital Association provides the data of the European Private Equity in 2005. Pension funds provided 24.8% of the finance, ssbanks 17.6% funds of the funds contributed 13.1%, insurance companie s provide 11.1% and individual investor 6%. In light of the assets held by institutional investors relatively to the GDP, Its clear that institutional investor as group manage very important amounts of capital ranging from capital stock equal to 81% of GDP in Germany to 191% in the U.S.A and the U.K 2001. Anglo Saxon Institutional investor hold a significance position through repartition as in Belgium, France, Italy where the active population generates the pension of the retired. These countries have developed a capitalization system where by individual save for their own pension. The Global growth rate of institutional assets/GDP ratio is large and range between 134% in France and 356% in Italy. Also the fraction of total assets invested in stock market is significantly larger in U.K and U.S.A, example in U.K invest around 65% of their resources in the stock market and in U.S.A invested in the stock market (Huyghebaert and Hulle, 2004). In view of the combination of rising weight in the economy and increasing appetite for shares, institutional investors have become an increasingly important investor group in the stock market, especially in Continental Europe. As these investors have demands, behavior and interests different from small individual shareholders, this phenomenon is likely to affect publicly quoted firms and stock markets in general (Huyghebaert and Hulle, 2004). The buy and hold policies of insurance companies and pension funds may eventually create highly volatile equity markets. Institutional investors and the liquidity of the financial markets: This deal with the ease of converting assets held by the institutional investors into cash. For one of the important properties of a stock market is that, as investors assemble information and act upon it, the information becomes reflected into the stock price. Hence the less trading, the less opportunity for information to be (timely) incorporated into the price, and the more uncertainty about the stocks underlying value. Furthermore, as liquidity decreases, fewer investors are interested in the stock, so that overall information collection tends to decline. Finally, since it is more difficult to find interested buyers, an illiquid stock is more costly to turn into cash. As a consequence, the seller of an illiquid stock will have to accept a discount on the selling price. Consequently, as uncertainty about the underlying value increases, as less investors are interested to buy it and as trading becomes more costly, the share price decreases (Huyghebaert and V. Hulle, 2004). The Institutional investor especially mutual funds are liquid since it is easy to acquire, and dispose off, portfolios of shares by means of buying and selling mutual funds. If investors need to invest in mutual fund, they will buy share or stock then they will sell when markets are rising and buy when markets start falling (Huyghebaert and V.Hulle, 2004). The necessary voting strength to influence company directors on which investments to make: This appears to be the case when their investment bank does (or prospectively does) business with the company whose shares are being analyzed. There is a conflict of interest wherein pressure from within their investment bank influences the recommendations of analysts. Good recommendations are favored in order to please corporate clients (or prospective clients). If an analyst makes a negative recommendation on the stock of a company, that company could transfer its business to another investment bank (Redhead 2008).   Ãƒâ€šÃ‚     Institutional Investors  Play a Role in Reducing Information Asymmetries: In the financial market, information is of paramount importance.  Institutional investors  with their large capital usually seek and demand the right information from the firms selling shares of stocks. Firms on the other hand, and in  reaction  to the demand of the  institutional investors  that they want to attract to their company, provide organized and comprehensive financial information to the public, usually by employing information intermediaries to perform the specific role (Balling, Holm and Poulsen, n.d.). In this way, large, complex and incongruent information that are circulated in the financial world is reconciled, thereby reducing the flow of asymmetrical information and attracting more investors.   Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚  Ãƒâ€šÃ‚   Institutional Investors  Influence Corporate Governance to Increase Profitability:  Institutional investors, with their enormous wealth and ownership of the majority of stocks of a firm can influence and wield  power over  corporate governance. There are passive  institutional investors  who do not interfere with the operation of the firm. This was the case before the 1990s. But there are also  institutional investors  who seek to influence control in the management of the company to improve profitability (Bofah, 2010). The latter is a phenomenon called shareholder activism. Activist institutional shareholders stirred  financial markets  of developing nations in the 1990s. In 1992 chief executive officers of very large firms such as IBM, GENERAL MOTORS,AMERICAN EXPRESS WESTINGHOUSE And COMPAQ COMPUTERS HYPERLINK https://ivythesis.typepad.com/term_paper_topics/2009/10/the-american-scholar-.htmlwere fired under the p ressure of  institutional investors. (Latest-Science  articles, n.d.) Conclusively, institutional investors are important for both the financial markets and the country as well. They hold large amounts of funds which are invested in various sectors and so play a huge part in the daily activities of the financial markets through buying and selling of numerous stocks they hold of such companies. In Tanzania, institutional investors such as banks, insurance companies and largely the pension funds, engage much in the financial markets and aid the growth of small firms in the country and boost the economy of the country.

Understand How to Safeguard Children and Young People

CYP 3.1 Understand Children and Young Person development There are many factors that influence child development, and for most of them, we do have some control. When working with children and young people it is important to have a good understanding of what children need to grow, so as professionals we are better able to address the needs. A child’s environment, for example, their family or school play a huge part in their development. Some of the main factors that influence a child’s development are their family, where the child lives, and socio-economic status. These factors often cross over and blend as they are related. Abraham Maslow (1908-70) developed a humanistic approach to create a theory of human needs†¦show more content†¦Primary and Secondary Socialisation are personal choices a child or young person will make as they grow older, as they decide on friendship groups, extra curriculum activities, academic involvement and so on. Professionals working with children and young people may need support and guidance to make the choices which are right for them. Theorists There have been a many number of theories on development and many of them will influence the way professionals work with children and young people. Psychologists have different views and theories about how children learn, some feel that a child’s ability is innate and others that it depends on the opportunities that are given. This is the ‘nature versus nature’ debate. Piaget was the first psychologist to make a systematic study of cognitive development. Piaget’s work includes a detailed observational study of cognition in children. Piaget showed that young children think in different ways to adults. According to Piaget, children are born with a very basic mental structure (genetically inherited and evolved) on which all subsequent knowledge is based. The table below outlines the four stages Piaget’s grouped children’s cognitive development. Piaget’s four broad stages of Cognitive development Stage | Approximate age | Features | Sensori-motor | 0-2 years | * Development of object permanence * Child begins to use symbols (e.g.Show MoreRelatedUnderstand How to Safeguard the Wellbeing of Children and Young People5620 Words   |  23 PagesUnderstand how to safeguard the wellbeing of children and young people Understand the importance of working in partnership with other organisations to safeguard children and young people 1. Explain the importance of safeguarding children and young people All practitioners have a duty to ensure the safety of children in their care. Children (in most cases) are unable to tell anyone if they are being abused, either out of fear, shame or because they are too young. Some children may even notRead MoreUnderstand How to Safeguard the Wellbeing for Children and Young People5125 Words   |  21 PagesCT231 Understand how to safeguard the wellbeing of children and young people 1. 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The education Act work together as well itRead MoreUnit 333 Understand How to Safeguard the Well-Being of Children and Young People3669 Words   |  15 Pagesresponsibilities and limits of learning support staff in ensuring the safety of children and young people in a school, in terms of: †¢ Supporting the ability of children and young people to be resilient, self confident and empowered to make informed choices 6.1, 6.2, 6.3 and 6.4 Explain what is meant by child protection in the wider concept of safeguarding children and young people. 1.2 | Read MoreUnit 025 Understand How to Safeguard the Wellbeing of Children and Young People. Outcome 1 Understand the Main Legislation, Guidelines, Policies and Procedures for Safeguarding Children and Young People.2598 Words   |  11 PagesUnit 025 Understand how to safeguard the wellbeing of children and young people. Outcome 1 Understand the main legislation, guidelines, policies and procedures for safeguarding children and young people. 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Policies and procedures for safeguarding and child protection in England and Wales are the result of the Children Act 1989 and the Children Act 2004 brought more changes that affected the way the child protection system works here in the UnitedRead MoreUnderstand the Main Legislation for Safeguarding Children and Young People1239 Words   |  5 PagesUnit 333 – Understand how to safeguard the wellbeing of children and young people. Outcome 1 – Understand the main legislation, guidelines, policies and procedures for safeguarding children and young people. The safe guarding of children has only been developed in the last 50 years. However it is a vital part of working with children. The legislations, guidelines and policies for safeguarding are updated all the time for the best interest of the children. The current legislations are as follows;

The Roaring 20s Free Essays

Change is an inevitable part of life. With new ideas, opinions, and morals came a new way of life. No time period in American history felt a more drastic change than the 1920s. We will write a custom essay sample on The Roaring 20s or any similar topic only for you Order Now The Roaring Twenties embraced a new culture that focused on enjoyment, art and innovations. The style of clothing, especially for women, went completely against that of the previous generation. Many people were offended by and opposed to the new style of the ‘20s which was epitomized by the flapper. 4 Women’s clothing, which was loose fitting, complimented their efforts to make their chests appear flatter. Cloche style hats were very popular and were tight around the head before flipping out at the base of the neck. 6 Year by year, the length of skirts and dresses grew noticeable shorter until it reached halfway up the knee. 7 Short, flowing skirts made dancing to the new forms of music easier. Music and dance became an important aspect in the lives of Americans. The Harlem Renaissance embraced the new American music, Jazz. Harlem came with a culture all its own. 8 Dances such as the Waltz, Foxtrot, Tango, Charleston, and Lindy Hop were performed to jazz, blues, and rag time music. These quick, energetic dances were seen as scandalous to older generations because of the physical contact they involved. From school to church, dance was involved in every part of life. 10 Entertainment fostered a sense of happiness in Americans after World War I. Movies and sports were two of the most popular pastimes during the 1920s. Silent films could be understood by all and brought happiness and laughter to their viewers. In 1923 the first â€Å"talkie† was created which eventually replaced the silent film. 14 Sportswere enjoyed not only by those who played them but also by those who watched. Among the popular sports of football, boxing, tennis, and golf, baseball remained the fan favorite. In 1927 Babe Ruth hit his record 60 home runs. Thanks to him and others like him, such as Lou Gehrig, baseball became America’s sport. 15 Interestin activities created a sense of unity in Americans. Many fads became the obsession of many Americans. Crossword puzzles became very popular. People would work on them whenever they had a free moment, and soon, contests were being held to see who could complete the puzzles the fastest. Mah-Jongg, and ancient Chinese game, became a national obsession. It replaced the game of bridge, and clubs, even, were opened for players. Many Americans participated in stunts. Flagpole sitters literally sat on flag poles to gain money or attention. Barnstormers performed stunts in airplanes while wing-walkers performed their own tricks on the plane’s wings. 16 Thesecrazes swept across the nation during the 1920s. Many innovations came about during the Roaring Twenties. Henry Ford’s affordable automobile redefined Americans’ way of life. 17 Peoplecould travel farther and faster with a car than with a horse. Vacationing became popular which caused motels and service stations to be established along popular routes. 18 In1927 Ford introduced the Model A which quickly became the most popular car in America. The new innovations of the 1920s were accompanied by new ways of thinking. New medical and scientific discoveries were made during this time. In 1920, Frederick Banting created insulin to treat diabetes. It was the first hope patients with diabetes had of living a normal life, and it even help some of those near deathmake miraculous recoveries. In 1928, Alexander Fleming discovered the possibilities of penicillin in fighting bacteria. It wouldn’t be until several years later, however, that it would be used to save lives. 19 Theconflict between evolution and creation caused much tension. In 1925, John Scopes taught the theory of evolution to his class and was arrested. Eventually, evolution was taught in most science classes. 20 These new ways of thinking changed life in American. The Roaring Twenties is characterized as a positive and optimistic time,however, it did have its negatives. With the manufacture of alcohol made illegal by Prohibition, many people turned to speakeasies and bootlegging to get their alcohol. 21 Prohibition was supposed to lower the crime rate, but more corruption and organized crime emerged. 22 The murder rate in 118 cities was higher that one in every 100,000 in 1927. 23 Despite this problem, the positives of the Roaring Twenties outweigh the negatives. The Roaring Twenties was characterized by a lifestyle of enjoyment, art, and innovations. The 1920s focused on optimism. After World War I, Americans sought happiness in music, dancing, movies, and sports. New inventions made life easier, and all appeared well. But every up has its down, and the Roaring Twenties was no exception. Notes Feinstein, Stephen. The 1920s. (Berkeley Heights, NJ: Enslow Publishers, Inc. , 2001), 26 Scott, Robert. â€Å"The Roaring Twenties: A Historical Snapshot of Life in the 1920s†. available from http://www. 1920-1930. com; Internet; accessed 15 April 2009. Feinstein, The_ 1920s, _25. Langley, Susan. Roaring ‘20s Fashion: Jazz. Atglen, PA: Schiffer Publishing Ltd. 2005), 95. Laubner, Fashions of the Roaring ‘20s, 47. Kallen, Stuart A. The Harlem Jazz Era. (Farmington Hills, MI: Lucent Books. 2004), 24. Scott, â€Å"The Roaring Twenties†. Scott, â€Å"The Roaring Twenties†. Feinstein, The_ 1920s_, 7. Scott, â€Å"The Roaring Twenties†. Scott, â€Å"The Roaring Twenties†. Feinstein, The_ 1920s. _ 32. Feinstein, The_ 1920s. _21. F einstein, The_ 1920s. _9. Scott, â€Å"The Roaring Twenties†. Scott, â€Å"The Roaring Twenties†. Scott, â€Å"The Roaring Twenties†. Feinstein, The_ 1920s. _11. Frederick Hoffman, â€Å"The Spectator,† The Literary Digest, (2 July 1927). Bibliography Feinstein, Stephen. The 1920s. Berkeley Heights, NJ: Enslow Publishers, Inc. , 2001. Kallen, Stuart A. The Harlem Jazz Era. Farmington Hills, MI: Lucent Books. 2004. Langley, Susan. Roaring ‘20s Fashion: Jazz. Atglen, PA: Schiffer Publishing Ltd. 2005. Laubner, Ellie. Fashions of the Roaring ‘20s. Atglen, PA: Schiffer Publishing Ltd. 1996. Scott, Robert. â€Å"The Roaring Twenties: A Historical Snapshot of Life in the 1920s,† Available from http://www. 1920-1930. com. Internet; accessed 15 April 2009. How to cite The Roaring 20s, Essay examples