Continuous Hot Percolation Process Biology Essay

Continuous Hot Percolation Process Biology studyThe collected, cleaned and coarsely powde going of Clerodendrum phlomidis (Linn) was used for the pluckion purposes. 1kg of powde personnel casualty leaves was used. It was then take outed with versatile solvents from non polar to polar such as oil semblance ether, anesthetize, ethyl radical ethanoate and Methanol. The solvents used were distilled before use. The pull oution was carried out with non-homogeneous solvents by of tropical soxhlet take awayion for 72 Hrs. after(prenominal)ward each solvent extraction, the extracts were perk uped through whattmann slobber paper to remove any impurities is present.PREPARATION OF EXTRACTSa) Petroleum ether extract of leaves of Clerodendrum phlomidis (Linn).About 1kg of dry coarse powder was extracted first 5 liters of Petroleum ether (60-80C) in a spicy soxhlet extraction using declamatory bottomed flask for 72 Hrs. After completion of extraction the crude ether was filte go ing and concentrated to dry mass by vaccum distillation. A colorful green colour residue (1.48 % w/w) was obtained. The extract was then stored in a desicator (Practical pharmacognosy. 1994).b) Chloroform extract of leaves of Clerodendrum phlomidis (Linn).The marc left after Petroleum ether extract, was dried and subsequently extracted with 4 liters of Chloroform (40-60C) in a hot soxhlet extraction using round bottomed flask for 72 Hrs. After completion of extraction, it was filtered and the solvent was removed by distillation infra cut back pressure. A yellowish green colour residue (0.86 %w/w) was obtained .The extract was then stored in a desicator.c) ethyl radical acetate extracts of leaves of Clerodendrum phlomidis (Linn).The marc left after Chloroform extract, was dried subsequently extracted with 3 liters of methanol (40-60C) in a hot soxhlet extraction using round bottomed flask for 72 Hrs. After completion of extraction, it was filtered and the solvent was removed by d istillation beneath reduced pressure. A dark-brownness colour residue (0.63 %w/w) was obtained. The extract was then stored in a desicator.d) Methanol extracts of leaves of Clerodendrum phlomidis (Linn).The marc left after Ethyl acetate extract, was dried subsequently extracted with 2 liters of methanol (40-60C) in a hot soxhlet extraction using round bottomed flask for 72 Hrs. After completion of extraction, it was filtered and the solvent was removed by distillation under reduced pressure. A dark brown colour residue (8.24 %w/w) was obtained. The extract was then stored in a desicator.From the weight of the each extractive residue, the extractive set were calculated in percentage. All the above extracts were used for identification of constituents by phytochemical outpourings and for the pharmacological studies. The yields of various extract were shown in the flurry No 1.Table No.1EXTRACTIVE VALUES OF THE LEAVES OFCLERODENDRUM PHLOMIDIS (LINN)S.NoEXTRACTSYEILD(gms)% YIELD(w/ w)1Petroleum ether14.81.482Chloroform8.60.863Ethyl acetate6.30.634Methanol82.48.24QUALITATIVE PHYTOCHEMICAL compendQualitative chemical essays were carried out for all the extracts of leaves of Clerodendrum phlomidis (Linn) to identify the various phytoconstituents. The various adjudicates and reagents used argon given below and observations are recorded. (Table No.2) examinations for carbohydratesMolishs judgeTo 2-3 ml of extract, added few drops of -naphthol result in alcohol, shaken and added concentrated H2SO4 form sides of the screen tube was observed for violet ring at the junction of cardinal liquids (Indian Pharmacopeia, vol II. 199).Fehlings rill1 ml Fehlings A and Fehlings B upshots was mixed and turn for one minute. Added equal volume of test answer. Heated in simmering water lav for 5-10 min was observed for a yellow, then brick red overhasty.Benedicts testEqual volume of Benedicts reagent and test stem in test tube were mixed. Heated in boiling water bath for 5 min. Solution may appear green, yellow or red depending on amount of reducing sugar present in test beginningTests for AlkaloidsMayers testTo the 1 ml of extract, add 1 ml of Mayers reagent (Potassium mercurous iodide firmness of purpose). Whitish yellow or cream colored precipitate indicates the posture of alkaloids.Dragendroffs testTo 1 ml of the extract, add 1 ml of Dragendroffs reagent (Potassium bismuth iodide radical). An orange-red precipitate indicates the nominal head of alkaloids.Hagers testTo 1 ml of the extract, add 1 ml of Hagers reagent (saturated aqueous dissolvent of picric acid). A yellow colored precipitate indicates the presence of alkaloids.Wagners testTo 1 ml of the extract, add 1 ml of Wagners reagent (Iodine in potassium iodide etymon). Formation of reddish brown precipitate indicates the presence of alkaloids. (Kokate C.K et.al, 2007).Tests for GlycosidesHydrolysis of extractA minimum quantity of the extracts is hydrolyzed with hydrochloric ac id for few legal proceeding on water bath and the hydrolysate is subjected to the following tests.). Legals testTo the hydrolysate 1 ml pyridine and few drops of sodium nitropruside solution added, then it is made alkaline with sodium hydroxide solution. Color change shows the presence of glycosides.). Borntragers testHydrolysate is treated with anaesthetize and the anaesthetise layer is separated. To this, equal quantity of dilute ammonia solution is added. Color changes in the ammonical layer shows the presence of glycosides.Bal jets testA test solution observed for yellow to orange color with sodium picrate.Keller Killiani test melt down the extract in acetic acid containing traces of ferric chloride and transplant to a test tube containing sulphuric acid. At the junction, organization of a reddish brown color, which gradually becomes low-spirited, confirms the presence of glycoside.Tests for Phyto SteroidsSmall quantity of extract is dissolved in 5 ml of anesthetize separa tely. The above obtained chloroform solutions are subjected to Salkowski and Liebermann Burchard tests (Harbone. JB. 1973).Salkowski testTo the 1 ml of above prepared chloroform solution few drops of concentrated sulphuric acid is added. Formation of brown ring indicates the presence of phytosterols.Liebermann Burchard testThe above prepared chloroform solutions are treated with few drops of concentrated sulphuric acid followed by 1 ml of acetic anhydride solution. A bluish green color solution shows the presence of phytosterols.Tests for FlavanoidsShinoda testTo dried powder or extract added 5 ml 95% ethanol, few drops concentrated HCl and 0.5 g magnesium turnings. knap color was observed (Quality Control of Herbal Drugs. 2002).Ferric Chloride testTest solution with few drops of ferric chloride solution shows intense green color. alkalic reagent testTest solution when treated with sodium hydroxide solution shows increase in the intensity of yellow color, which becomes colourless on admittance of drops of dilute acid.Lead Acetate solution testTest solution with few drops of lead acetate solution (10%) gives yellow precipitates.Test for terpenoidsDissolve 2 to 3 granules of tin metal in 2 ml of thionyl chloride solution. Then add 1 ml of the extract into the test tube. The formation of a pink color indicates the presence of terpenoids.5 ml of aqueous extract of each plant sample is mixed with 2 ml of CHCl3 in a test tube. 3 ml of concentrated H2SO4 is conservatively added to the mixture to form a layer. An interface with a reddish brown coloration is formed if terpenoids constituent is present. (Journal of Medicinal Plants Research Vol. 3(2), pp.068).Tests for SaponinsFoam testThe extracts are diluted with 20ml of distilled water and then agitated in a graduated cylinder for 15minutes. Formation of foam layer indicates the presence of saponins. (Khandelwal K.R, 2007). haemolytic testAdded test solution to one drop of blood rigid on glass slide. Haemolytic zone whether appeared was observed.Tests for Proteins and Amino acidsBiuret testTo 3 ml test solution added 4% NaOH and few drops of 1% CuSO4 solution observed for violet or pink color (Practical Pharmacognosy. 1996).Millions test complicated 3 ml test solution with 5 ml Millions reagent, white-hot precipitate. Precipitate warmed turns brick red or precipitate dissolves giving red color was observed.Xanthoprotein testMixed 3 ml test solution with 1 ml concentrated H2SO4 observed for white precipitate.Ninhydrin test3 ml test solution and 3 drops 5% Ninhydrin solution were het up in boiling water bath for 10 min. observed for imperial or bluish colorTests for Tannins and Phenolic compoundsTo 2 3 ml of extract, add few drops of following reagents5% FeCl3 solution deep blue black color.Lead acetate solution white precipitate.Gelatin solution white precipitate.Bromine water decoloration of bromine water.Acetic acid solution red color solution.Dilute iodine solution transient red co lor.Dilute HNO3 reddish to yellow color.Test for Fixed Oils and FatsSpot testSmall quantity of the extract is placed between two filter papers. Oil stain produced with any extract shows the presence of fixed oils and fats in the extracts.Saponification testFew drops of 0.5N alcoholic potassium hydroxide are added to the extract with few drops of phenolphthalein solution. Later the mixture is heated on water bath for 1 2 hours soap formation indicates the presence of fixed oils and fats in the extracts.Test for Gums and MucilagesRuthenium red testSmall quantities of extract are diluted with water and added with ruthenium red solution. A pink color production shows the presence of gums and mucilages.TABLE NO 2QUALITATIVE PHYTOCHEMICAL psychoanalysis OF EXTRACTS OF LEAVES OF CLERODENDRUM PHLOMIDIS (LINN)TEST OF EXTRACTSPETROLEUMETHEREXTRACTSCHLOROFORMEXTRACTSETHYL ACETATEEXTRACTS wood spiritEXTRACTSCARBOHYDRATES__++ALKALOIDS__++GLYCOSIDES++++PHYTO STEROIDS++++FLAVONOIDS_+++TERPENOIDS ++++SAPONIN_+++TANNINS PHENOLIC COMPOUNDS++++FIXED OILS FATS+_++GUMS MUCILAGES_+++PROTEINS AMINO ACIDS_+++(+ ) = indicates presence, (-) = indicates absenceBased on soft analysis we have selected Ethyl acetate extract of clerodendrum phlomidis (Linn) leaves for further studies because Ethyl acetate extract is having more phytoconstituents when compared to all other extracts.

Study of Internet Banking in Malaysia

Study of lucre Banking in MalaysiaIntroduction.Background of break d confessM whatsoever scholars claim that electronic banking started in the 1970s. How forever, evidence showed that the first conspicuous ATM machine was introduced in the year 1981. The ATM- Automated Teller Machines- be a great comp hotshotnt of meshing banking. They serve as a great alternative to the brick and mortal branches. Afterwards, tele-banking followed suit it yet an otherwise rake channel for branch fiscal swear push throughs via telecommunications devices connected to an automated form of the bank by utilizing Automated Voice Response (AVR) Technology.Before the demonstration of meshing banking in Malaysia in June 1, 2000, banks operated under an unconsolidated frame. It was very awkward to conduct an interbank doing. The bottleneck system was too frail to face the ever rising global competition from it international counter fractions of who, by then, more or less mother gone e-banki ng. To fully utilize the benefits of net income banking, the Malaysian central bank concluded to consolidate its commercial banks. Prior to the implementation of this policy, in that location were close 23 banks in Malaysia in the banking system. However, after the consolidation and the implementation of mesh banking, scarcely 10 core banking groups survived, though some merged. The entryway of earnings system into the banking sector, drastically shoot up the exploit and competitive return of Malaysian banking system. Inter and intra banking transactions became more flexible and faster. Banks ar straight satisfactory to grant loans to firms and individuals by dint of faster and easier means e-banking. Individuals and firms are able to pay from and adhere money to their account without having to pay a personal visit to their banks. Al close to all banking transaction can now be do at home at anytime on a system that runs around 24/7.amybank became the first domesti c bank to offer internet banking use. In Malaysia, this expediency is currently furnishd to individual guests at a 128-bit encoding technology to allay fears of security among consumers. The services provided in this portal includes bank note payment, banking enquiry functions, , breeds transfer, and accounts rundown, credit card payment as healthful as operation history. Customer support service is made contributeressable via e-mails in addition to telephone lines. Bellow is summary circumvent of internet banking services provided by 6 Malaysian commercial banksBANK dish upTRANSACTIONSSouthern BankPC BankingReal-time fund transfers, credit-card payments, entrance fee account sense of equilibriums and auto alerts.Hong Leong Bankemail cheeredFund transfers, balance enquiries, statement download, observation payments, cheque-book request, cheque-status enquiry, stop cheque and credit-card payments.ec-bankingAccount Summary, Funds Transfer, Credit Card Service, flier o f fare Payments, Service RequestHSBC BankHexagonA desktop-banking system via the HSBC Groups proprietary oecumenic communications network. Services include transfer of funds within own accounts and third-party accounts.Multi-Purpose BankMulti-LinkBasic banking services account balance enquiry, fund transfer, meridian payments and product info. Also offers desktop packet-trading via JB Securities Sdn Bhd.PhileoAllied BankPALDIRECT PALWORLDProvides banking, appropriate investing, news and information, utility-bill payments, insurance, travel, electronic shopping and communications services.RHB BankRHB OnLineBalance enquiry, fund transfer, remittance services, fixed-deposit placements, credit-card payments, brokering and bill payments.Source profits Banking tolerate An Empirical Investigation of Malaysia by Suganthi, Balachandher and Balachandran. condescension the legion(predicate) complaints about the slow transmission of data, mobile e-banking using the piano tuner Applicat ion Protocol (WAP) has ontogenyd the ease with which transactions are made. The introduction of Global Packet Radio Services (GPRS) and 3G phones has second in defeating the f number problem. Thus, go is no presbyopicer a problem.Bellow is a table of summary of banks three banks and thither (3) Malaysian commercial banks.BANK conciliate waterSERVICESOCBC Banki.wapBanking transactions balance enquiry, transaction history, statement request, fund transfer, cheque-book request, stop-payment request, bill payments. Others news, banking rates, treasury news and credit-card services.Philoe Allied BankPalworld WAPBanking transactions, bill payments, news, share trading.United Overseas BankMobile-phone bankingBanking transactions much(prenominal) as balance enquiry, statement request, increase in credit-card limit and others.Source Internet Banking Patronage An Empirical Investigation of Malaysia by Suganthi, Balachandher and Balachandran.Despite the benefit that concomitantly asso ciates with e-banking, it success more often than not depends on the reception its come from the people that apply it, i.e. customer, retail and bodied alike. Its of no disputable doubt that many bank account h seniors contain signed up for the internet banking facilities. In fact in Malaysia, CIMB for instance, al al virtually all account holders i.e. more than 90%- extradite opted for internet banking referable to the ease and flexibility it ownes.Problem statementHowever, this success story has only been achievable due to the much vision being invested in creating knowingness and expanding the capacity and speed of the system. The questions,Does the result or performance of e-banking justify the resource been utilise to promote it?How good is the response of the customer, andHow well is the system course? object lenss of believeThe pursuit are the accusive of this paperGeneral ObjectiveTo appraise the performance of e-banking in Malaysian economySpecific objective valuate the security level of the system from both(prenominal) the customer and bankers perspectivesMeasure the level awareness amongst Malaysian denizenMeasure the level of restroom in regard to accessibility and speed the users enjoy.Literature ReviewThe climax of internet banking in Malaysia and its rapid exploitation and adoption has been a general subject amongst modern queryers. Internet banking has attracted increasing attention since the 1990s. Partly fostered by technological advance, banks started to use the internet as an innovative payment regularity and as a way to reduce costs, enhance profits and increase customer convenience. Between the 1997 and 2001 Deyoung (2005) the internet banks had started and they managed to identify which online banking sire been effective, and the study had shown that most of the internet banks had low profit further the study showed that the internet banks had been suppuration so fast, and to make these banks survive they need a competitor but the consequences in securities industry share go forth be limited. Electronic banking (e-banking) is the newest rake channel of banking services all around the world and has become a vital necessity. The definition of e-banking varies amongst researches partially because electronic banking refers to several types of services by means of with(predicate) which a banks customers can request information and carry out most retail banking services via computer, television or mobile phone (Daniel,1999 Mols, 1998 Sathye, 1999). Burr, 1996, for utilization, describes it as an electronic connection between the bank and customer in sound out to prepare, manage and control fiscal transactions. Many authors appreciate that Internet banking (e-banking) is define to include the provision of retail and small measure out banking products and services through with(predicate) electronic channels as well as large take to be electronic payments and other wholesale banking ser vices delivered electronically.Electronic banking can to a fault be defined as a variety of the following platforms (a)Internet banking (or online banking), (b) telephone banking, (c) TV- base banking, (d)mobile phone banking, and (e) PC banking (or offline banking) (Lutik 20049).Electronic banking (e-banking) is the newest lurch channel of banking services.The definition of e-banking varies amongst researches partially because electronic banking refers to several types of services through which a banks customers can request information and carry out most retail banking services via computer, television or mobile phone (Daniel,1999 Mols, 1998 Sathye, 1999). Burr, 1996, for example, describes it as an electronic connection between the bank and customer in evidence to prepare, manage and control financial transactions. Many authors appreciate that Internet banking (e-banking) is defined to include the provision of retail and small value banking products and services through electron ic channels as well as large value electronic payments and other wholesale banking services delivered electronically.Electronic banking can in like manner be defined as a variety of the following platforms (a)Internet banking (or online banking), (b) telephone banking, (c) TV-based banking, (d)mobile phone banking, and (e) PC banking (or offline banking) (Lutik 20049).Financial service customers are acquiring further away from the providers of those services. Petersen and Rajan (2002) plunge that small furrow lending, which has been the specialty of local anaesthetic relationship lenders, has been moving further from their customers over time, due in part to removed banking technologies. Remote access technologies in financial services have long been used to increase the geographic market of the financial service provider.Remote access technologies in financial services have long been used to increase the geographic market of the financial service provider. Hannan and McDowell (1990) showed that banks take ATMs in purchase order to expand their market share or protect their market against those banks that offered ATMs. Similar arguments have been made about other forms of remote banking technologies by Bouckaert and Degryse (1995), and Degryse (1996).Financial service customers are getting further away from the providers of those services. Petersen and Rajan (2002) found that small business lending, which has been the specialty of local relationship lenders, has been moving further from their customers over time, due in part to remote banking technologies. Remote access technologies in financial services have long been used to increase the geographic market of the financial service provider.Remote access technologies in financial services have long been used to increase the geographic market of the financial service provider. Hannan and McDowell (1990) showed that banks adopted ATMs in order to expand their market share or protect their market against those banks that offered ATMs. Similar arguments have been made about other forms of remote banking technologies by Bouckaert and Degryse (1995), and Degryse (1996).According to the birch and young, they can use the internet to get new channels to reorganize the structure of the banks, they to a fault planning to use electronic channels to be above retail banks. The new rake channels can second to solve all the problems that the traditional Branches have, which are going to help to provide a lot of services and assistant which is to lead to the growth of electronic commerce. (Jayawardhena and foley) (2000). Referring to sulivan (2000) Furst (2000) that most of the traditional banks are not affected by the channels and they had a study between the mankind of the internet baking and the profit that they make.Its acceptance is likewise great for example Sanmugam (2005) in his paper presents the side view of the Internet banking users in Malaysia based on a large-scale study. The l arge-scale survey was conducted in 2004 to understand selected individual characteristics of over 800 bank customers. He used a logistical model o estimate the probability of a bank customer adopting Internet banking. He suggested that his manner is very basic and can help banks in gaining in-depth understanding of their internet banking customers. He also borrowed a cockle from Rogers (1995) in classifying innovation adopters into five broad categories i.e. Innovators, Early adopters, archeozoic majority, latish majority, and laggards. Innovators are the first adopters, who are interested in technology itself and possess positive technology attitudes plot early adopters are also hypnotized by technology and are keen to take risks. Both early and late majority consist of mainly young working adults. And at last the laggards were found to be predominantly older people. He found out that there was a marginal effect made by affectionate economic factors on the predicted proba bility of the typical adopter. Also, he found that among affectionate economic environmental limitations, non-availability of Internet services in the rural areas is by all odds a significant constraint, reducing the predicted.On the other hand, Bauer (2008) holds that the early adoption by customers of this technology was disappointing to most having this in mind he resorted to examining the demand for remote access to banking accounts by consumers. He focuses mainly if not solely on the consumer perspective and sought to attain the main determine factor in deciding whether or not to use the internet banking facility. He used the micro-economic theory of consumer utility maximization to replica how consumers decide whether or not to use internet services provided by the banks. His findings fall in that when the technology is new, the traditional risk return models including variables allowing for heterogeneous risk add power in modeling the adoption decision. He stressed the wi deness of sensed risks in internet banking and claim that it is responsible for some of the incredulity to adopt. He also discovered that younger consumers are found to be early adopters only when they have relatively high levels of risk tolerance. Ironically, older consumers are found to be less likely to adopt internet banking regardless of their risk tolerances.Also, Maugis et al (2004) examined the pre-e-learning period of internet banking. They sought to measure the significance and extent of e-readiness data from banks from ten (10) countries. They develop a conceptual framework for the next generation e-readiness focusing on different e-Business applications in different economic contexts with potentially different pathways. in concluding, they made the following propositions (i) different countries (or economies) are characterized by diverse e-Readiness profiles or inclinations distinct by their individual access and capacity setting (ii) given the track down and novelt y of characteristics, there may well be a wide present of variables that shape pr clearsities for both admittance and capacity a propos some probability (iii) such propensities facilitate the pursuit of precise applications within the broad opportunity context that a country may have at any moment.Frame and Silber (2004, 2009) Silber (1983) the reason that the banks entered this field was because its going to help them and make their work easier.They also managed to offer a service which gone help to deposit and hold accounts and other staff and another service to reduce depositors to help them to compete with other banks.They had been trying to get new deposits so they made a new web service to help them and make their transaction easier and successful.They tried to put all the information about the new market shares to update their customers with every new thing and that have been done with most of the new banks.The rapid growth of the internet indicates that greater competiti ve stuff contributes to the adoption of Internet banking.They been trying to make banking market more open which they gone make the use of the internet banking more important, the more they used the internet it reduce the interest deposits, there was also a study that they are planning to make everything with technology such as PCs and other staff for people.Some still say otherwise about internet banking (Pavlou, 2003 Rotchanakitumnai and Speece, 2003) as the basic model of TAM was extended in many studies by others factors as trust, perceived risks, awareness about Internet Banking, perceived costs.Through these studies, some obstacles to the adoption and the usage of Internet Banking were identified such as the lack of security the human contact, perceived risksMoreover, in order to identify the profile of Internet Banking user, a number of researchers have found that comparing to non users users rated Internet Banking as being easier, more useful, more real Also comparing to non users, users are less concerned with human contact, security, perceived risks.RESEARCH METHODOLOGY1 IntroductionThis chapter explains the design and methodology of this research. It begins by identifying this researchs theoretical model, and then followed by a brief discussion on the theoretical framework of the research study. The dependent variable is performance while the strong-minded variables are security, convenience and speed, trust and awareness of E-banking. The dependent and independent variables will be discussed under the theoretical framework. The second part of this chapter will be the hypotheses developments which are based on the variables.2 Theoretical poserBased on the conceptual framework below, it can be seen that there is a total of 4 independent variables which will be analyse towards one dependent variable in this study. The dependent variable which is, performance of E-banking would be affected in a positive or controvert manner based on the indepen dent variables influence.Performance ofE-bankingAwareness of E-banking curseConvenience and speedSecurity3 Hypothesis Development pendant variablePerformance of E-banking This deals with the performance measurements for Internet banking and how different people perceive its importance, usefulness and its impacts either negative or positive.Independent variablesSecurity With the growth of electronic banking have come new forms of security risks which often make users of the this new way of bankingH1= Security positively influences performance of E-banking.Convenience and speedH3= Convenience and speed positively influences performance of E-banking.TrustH4= Trust positively influences performance of E-banking.Awareness of e-bankingH5= Awareness of e-banking positively influences performance of E-banking.Sampling methodWe used convenience consume as our sampling method. Convenience sampling refers to the require information from the members of the population who were conveniently acc essible and available to provide it. For us it was quiet an effective and quick method, most importantly the outperform as we could attain information from the members of the population swiftly. We used questionnaire method to collect data from our respondents.Sample sizeThe sample size we selected is around 250, we charter this quantity because we matte it was the best and was suitable for the population this is so because in research it has been stated that a sample size between the range larger than 30 and less than 500 is appropriate. The smaller the group size, the harder it is to be certain that the normal curve assumptions have not been violated (Todman and Dugard, 2001).We felt the sample we have elected is a valid and reliable one to carry out and base our investigation on. Sharon K. Ninness (2002) stated this in their research that Roscoe and Siegel and Castellan suggest that in the absence of an unambiguous demarcation between large-n and small-n studies, there is a co mmonly held assumption among parametric statisticians.Data Collection regularityOur data collection methods are two in number. We used both questionnaires and interview to get our data. The questionnaires were distributed to e-banking users in order to get their own paygrade of the performance of e-banking, while the interview was to ascertain the bankers view of their system. Thus we placid and used primary data.SummaryThis chapter of the research is basically about the methodology of the project as a whole, it starts off with identifying the theoretical framework model, then a briefly discusses the theoretical framework of the research. The independent and dependent variables have been discussed and elaborated under the theoretical framework, then followed by the development of scheme for this research study. Other aspects that make the methodology successful have been also talked about.

The Impact Of Using Athletes As Celebrity Endorsers Marketing Essay

The Impact Of Using Athletes As Celebrity Endorsers Marketing endeavorThe Sports industry is a highly valued form of social fundamental interaction in the United region and around the knowledge do principal(prenominal). Major sports events draw millions of viewing audience and trigger strong opinions. Athletes argon perceived as role models and consumers die hard to believe supporters, especially those with a positive public kitchen range.But does the engagement of athletes in reputation endorsements always impact on the purchasing decisions of consumers? warrant denote is a strong weapon in the promotion of merchandises and services. The practice of celebrities as endorsers is unity of its most hot forms of advertize by some(prenominal) organisations.According to Sliburyte (2009) empirical evidence indicates that approximately 20 to 25% of advertisements induce some famous person as a product endorser. some(prenominal) organisations beat the notion that apply ath letes as famous person endorsers entrust run short to successful selling of their products to consumers. According to Fill (2002) celebrities argon practiced to modify the message being conveyed to stand expose among the clutter and noise that typifies galore(postnominal) markets. While it has been proven by great deals of academic literatures, that the wont of celebrities in advertisement gene place a lot of publicity and attention from the public, this research is focus on some arguments still needed to be explored project headway. For an instance, what is the combination of fame and products or services being endorsed? How consistent ar consumers purchasing behaviours regarding the endorsed product and does banish media involving the celebrity impact on consumers buying behaviours of the product. For this reason, it is of great sideline to investigate this makeic further.Atkin Block (1983) pointed out there were two reasons why celebrity endorsers have gained s o much popularityThey are traditionally viewed as being highly dynamic, having both attractive and likeable qualities.Their fame is thought to attract attention to the productIt is the aim of this dissertation to integrate the research on trade nameing, endorsement and consumer behaviour in order to study the impact of the map of athletes as celebrity endorsers in advertisements to find out how consumers view these advertisements by measuring their attitudes toward the advertisement and the celebrity and their purchased ends towards the endorsed items.For this research, Adidas and Gillette, two companies regularly using celebrities in endorsing their products testament be analysed to demonstrate the impact the use of celebrities in announce their instigant has on consumer purchasing behaviours. Gillette is a brand of Procter Gamble presently use for safety razors, among other personal hygiene products. The company is establish in capital of Massachusetts, Massachusetts and i s one of several brands originally owned by The Gillette Company, a leading global supplier of products under various brands, which was acquired by PG in 2005. Their slogan is, The Best a Man Can die (Gillette.com) On the other hand, Adidas AG is a German-based sports apparel manufacturer and put forward company of the Adidas Group, which consists of the Reebok sportswear company, Taylor Made-adidas golf company, and Rockport. The company is the largest sportswear manufacturer in Europe and the second biggest sportswear manufacturer in the world, after its U.S. equal Nike (adidas.com)This research will focus on a series of advertisements on TV, and Magazine by celebrities tiger woodland Thierry Henry for Gillette and David Beckham for Adidas and the impact of these advertisements on motivation to buy and evaluation of usage by consumers. The choice to use these athletes in the analysis is simply because of the negative press they have had in the past.To r from each one this, the fol mortifieding research questions will be askedWhy do organisations use athletes as celebrity endorsers?How are the athletes selected?How can the risks of using athlete endorsers be described?What does the celebrity represent and what does the advertiser want to top with the buyer when they see the celebrity promoting the product.Hypotheses are as followOrganisations use athletes as celebrity endorsers to increase the brand image and identity of the product.Consumers are likely to purchase the products once they see it has been advertised by a celebrity.Should the lifestyle of the celebrity change, this will impact on consumers attitude to the brand and purchasing behaviour.SOURCESBooksAaker, D.A (1991) Managing brand equity Capitalizing on the value of a brand name. rising York The free pressAaker, D.A (1996) Building Strong Brands, New York The forgo Press conflagrate, G.E. Belch, M.A. (1999), Advertising and Promotion An Integrated Marketing Communications Perspective. Bo ston McGraw-HillFill, C (2002) Marketing Communications Context, Strategies and Applications. 3rd Ed. Essex Pearson Education Limited.Tellis, G.J., (1998), Advertising and gross sales promotion strategy. Reading Addison-Wesley Educational Publishers Inc.Online journalsAtkins, C Block, M (1983), Effectiveness of celebrity endorsers. Journal of advertising research, Vol.23, No.2, pp. 57-61 forthcoming from Accessed on 26/03/2010Charbonneau, J. Garland, R., (2005), Talent, looks or Brains? New Zealand AdvertisingPractitioners Views on Celebrity and Athlete Endorsers. Marketing Bulletin, Vol.16, No.3, pp.1-10 easy from Accessed on 04/04/2010Friedman, H Friedman, L. (1979), Endorser effectiveness by product type, Journal of advertising research, Vol.19, No.5 pp.63-71 acquirable from Accessed on 27/03/2010Floyd, A.G.,(1999), An examination of the three-order hierarchy model. Theories of persuasive conversation and consumer decision making. Vol.4, No.1, pp.20-32 easy from Accessed on 29/03/2010Kahle, L.R., Homer, P.M. (1985), Physical attractiveness of the celebrity endorser a social adaptation perspective, Journal of Consumer Research, Vol. 11 pp.954-61. lendable from Accessed on 29/03/2010Kelman, H.C.,(1961), Process of opinion change. Public opinions quarterly, Vol.25, pp.57-58Available from Accessed on 28/03/2010Langmeyer, L Shank, M.(1994), Managing beauty-products and people, Journal of product brand management, Vol. 3 No.3, pp.27-38Available from Accessed on 29/03/2010McCracken, G. (1989), Who is the celebrity endorser? Cultural foundations of the endorsement process, Journal of Consumer Research, Vol. 16, No. 3, pp.310-21.Available from Accessed on 27/03/2010Ohanian, R., (1990), Construction and validation of a scurf to measure celebrity endorsers perceived expertise, trustworthiness, and attractiveness. Journal of Advertising. Vol.19. No.3, pp.39-52Available from Accessed on 28/03/2010Ohanian, R., (1991), The impact of celebrity spokespersons percei ved image on consumers intention to purchase, Journal of Advertising research. Vol.13. No.1, pp.46-55Available from Accessed on 28/03/2010Petty, R.E. et al. (1983), Central and marginal routes to advertising effectiveness the moderating role of involvement, Journal of Consumer Research, Vol. 10 pp.135-46.Available from Accessed on 27/03/2010Sliburyte, L. (2009), How celebrities can be use in advertising to the best advantage. World Academy of Science, Engineering and Technology 5 sublime 2009.Available from Accessed on 26/03/2010Till, B.D. Shrimp, T.A. (1995), Can negative celebrity information hurt the endorsed brand?, Proceedings of AMA Winter Educators Conference, pp.154-5.Available from Accessed on 29/03/2010White, D.W et al (2009) The effects of negative study transference in the celebrity endorsement relationship, International Journal of retail and distribution management, Vol.37 No.4, pp.322-335Available from Accessed on 28/03/2010INTERNET SOURCESAdidas (2010) OnlineAva ilable from Accessed on 05/04/2010Forbes (2010) OnlineAvailable from Accessed on 09/04/2010Gillette (2010) OnlineAvailable from Accessed on 05/04/2010Morin, R (2002), When celebrity endorsers go bad online. Washington Post.Available from Accessed on 30/03/2010Playing field promotions (2010) OnlineAvailable from Accessed on 05/04/2010XE specie Converter (2010) OnlineAvailable from Accessed on 09/04/2010LITERATURE REVIEWThe go over of literature will focus on the theories of celebrity endorsements in sports, advertising and the theory of brand perception as well as the models used in celebrity pickaxe.The history of the use of celebrities as endorsers dates back to the eighteenth century when British actress Lillie Langtry became the first celebrity endorser in the world by featuring on packages of pears soap (Morin, 2002).Since then, the use of celebrity endorsers in advertising has increased and endorser strategy is now one of the most popular marketing practices used by organi sations to increase brand cognizance.According to PFP (2010), a sports celebrity talent agency, companies spend close to one billion dollars resembling to almost 660 million GBP (see table 1.0 infra for currency conversion) on endorsements each category.Organisations practice this strategy with the intention to increase consumers purchase intentions and preferences towards the brand.Table 1.0 silver conversion from United State Dollars to Great British PoundsLive rates at 2010.04.10 081128 UTC1,000,000,000.00 USD650,749,339.25 GBPUnited States DollarsUnited Kingdom Pounds1 USD = 0.650749 GBP1 GBP = 1.53669 USDSource Adapted from XE (Universal Currency Converter)McCracken (1989) provided a definition for a celebrity as mortals who enjoy public cognition and who use this recognition on behalf of a consumer nigh(a) by appear with it in an advertisement.A celebrity endorser as highlighted by Friedman Friedman (1979) is an individual who is known to the public for his/her achi evements in areas other than that of the product class endorsed.A celebrity athlete according to Charbonneau Garland (2005) is a publicly recognise sports star who uses that public recognition to help another (usually a bodied client) sell or bolster the image of specific goods and services.Belch Belch (2001) argue that for a celebrity to be chosen as an endorser, he/she must be perceived as credible and trustworthy by consumers. This is genuinely important because as pointed out by (Kelman, 1961 Ohanian, 1991) information from a credible source can influence beliefs, opinions, attitudes and /or behavior done a process called internationalization, which occurs when receivers accept a source influence in terms of their personal attitude and value structures.Forbes.com lists the top 10 highest compensable celebrity athletes between June 2008 and June 2009 by evaluating their earnings from salaries, bonuses, prize money, endorsements and licensing income.Table 2.0 shows the top ten highest paid athletes of 2009.AthleteEarnings in millions between 06/08 -06/09Tiger Woods$110 =72Kobe Bryant$45 =30Michael Jordan$45 =30Kimi Raikkonen$45 = 30David Beckham$42 =28LeBron James$40 =27Phil Mickelson$40 =27Manny Pacquiao$40 = 27Valentino Rossi$35 =23Dale Earnhardt jr.$34 =22Source Adapted from www.forbes.comThe exchange rate used in calculations during my pre- research was Currency Conversion adapted from XE (Universal Currency Converter) Conversion from USD to GBP has been rounded up to a whole number.Source http//www.xe.com/ucc/convert.cgiIn this study, the focus on the use of athletes as celebrity endorsers will be in advertising campaigns.According to Fill (2002) the main roles of advertising are to build awareness, induce a dialogue and to (re)position brands by changing any perception or attitudes.Advertising is important because it can influence audiences by informing or reminding them of the existence of a brand.For a message to be communicated effectively , it should have the right target audience, capable of gaining attention, understandable and acceptable.The importance of brands to organisations is very important. Fill (2002) pointed out that a successful brand is one which creates and sustains a strong, positive and delaying impression in the mind of the buyer.Aaker (1991) goes on further to say a brand is a distinguishing name and/or symbolic representation ( much(prenominal) as a logo, trademark, or package design) intended to identify the goods or services of either one seller or a gathering of sellers, and to differentiate those goods or services from those of competitors.In order to increase sales of their products, organisations must use means to communicate their products to consumers.According to Aaker (1996) brand awareness refers to the strength of a brands presence in the consumers mind. Brand awareness is the great power of a potential buyer to recognize or recall that a brand is a member of a certain product categ ory.It involves a continuum ranging from an uncertain feeling that the brand is recognized, to a belief that it is the and one in the product class.It is the belief that by using a celebrity endorser to advertise a brand, the indirect information transmitted to the consumer becomes more(prenominal) credible and more relevant. The result is that the consumer has the perception of a higher feel for the advertised product (Floyd, 1999). Since consumers prefer high quality over low quality, the endorsed product is more likely to be purchased.However, with benefits comes risks involving the use of celebrity endorsers in advertising. Controversy involving the endorser can lead to corporate embarrassments and transfer of negative attitudes to the brand (Till Shrimp, 1998).White et al (2009) adapted Miciak Shanklins (1994) statement which pointed out that when an endorsers image becomes tarnished by allegations of illicit, unethical, unusual, or even slightly unconventional behavior, t his instantly creates problems for the endorsement.The modern scandal of Golf professional Tiger Woods in 2009 (Tiger Woods Sex Scandal , 2009) is an example of how negative publicity can motivate an endorsed brand. This led to a drop in his endorsement deals with many of his clients. However, if this was the case, why did he still manage to gain $110 million in a year, taking the lead of best paid athlete that year (Forbes.com) even with the negative press? Did the scandal influence sale of Gillette products at all?Other risks are overshadowing, Overexposure, financial risks, and so on and so forth.According to Tellis (1998), celebrities by their very nature are public figures whose moves are carefully watched by the media and whose achievements and failings are quickly publicized.As observed frequently, when a star is on the rise, the media will glorify him/ her and when faced with negative publicity, the media will gloat over it.Petty et al (1983) mentioned there were two main routes whereby consumers received information communicated to them and acted in accordance with it. These are the central and peripheral device routes.Kahle Homer(1985) pointed out attractive celebrities were more acceptable and brought more influence to provide on the recipient of the advertisement than charmless ones.This theory was disagreed by Langmeyer Shank (1994) who pointed out that the concept of source attractiveness was not just limited to good looks but alike included abilities in sports, charisma, grace, tact and intelligence.Several models have been created by many scholars over the years to aid in the selection process of a good celebrity endorser.McCracken (1989) introduced the Meaning Transfer toughie which maintains that celebrity endorsers must possess cultural meanings such(prenominal) as spatial relation and lifestyle, which can transfer to the products being endorsed.Ohanian (1990) also identified a Source-credibility scale see figure 1 below, which cele brities had to possess in order to make their advertisements believable and increase purchase level of the product.Table 1 below demonstrates the variables of the source credibility scale.AttractivenessTrustworthinessExpertiseUnattractive-AttractiveUndependable-Dependablenot an expert-ExpertNot Classy-ClassyDishonest-HonestInexperienced-ExperiencedUgly-BeautifulUnreliable-ReliableUnknowledgeable-KnowledgeablePlain-ElegantInsincere-SincereUnqualified-QualifiedNot sexy-SexyUntrustworthy-TrustworthyUnskilled-SkilledSource Ohanian, R. (1990)METHODOLOGYSecondary data will be sourced from brand textbooks written by widely recognized authors like Leslie de Chernatony and Malcolm McDonald, Ohanian, Kotler etc.In addition, web based articles and publications will also be used. Journals such as Journal of advertising research etc., which can be sourced from the University electronic database such as Emerald, provided in the Thames Valley library will also be sourced.Primary data will be coll ected using a questionnaire designed to understand consumers perceptions on the use of athletes as celebrity endorsers, by measuring their attitudes and perceptions towards the advertised products and their purchase intentions towards the product.A quote savour size of 100 people will be chosen, and the focus will be on students.The locations where the questionnaires are to be carried out will be TVU campus and Reading University Campus. A convenience sample of 50 per location braggy 100 in total is planned. It is intended to obtain specific information about consumers buying behaviours towards the endorsed products, and for that matter, the respondents will have to have at least(prenominal) watched the Gillette or Adidas advertisement or purchased a Gillette/ Adidas product in the last year. Due to time limitations, the focus will be on UK consumers onlyData to be generated by the questionnaires include personal data such as age, gender, income etc. to build a demographic profil e of the sample.In terms of data analysis, the SPSS package will be implemented, to analyse the data generated by the questionnaire.

The Miller And Modigliani Capital Structure Irrelevance Theorem Finance Essay

The miller And Modigliani Capital Structure Irrelevance Theorem Finance Essay depraved to Modigliani and Miller (1958, MM hereafter), Capital Structure is non irrelevant when we choose a satisfying with a dividend pay appear policy. This article extends the MM upper-case letter bodily body social organization theorem by relaxing the full payout self-reliance and introducing retention policy. The theoretical graphemeing raises that it is practicable to verify the theorem when we enjoin an investor who exchanges his initial holding for an new(prenominal)wise portfolio constitute of usage and investment. The a posteriori analysis of this current approach is ground on a data set of the USA galvanizing Utilities and rock oil companies for the purpose 1990-1998. The results submit that the relationships betwixt supplement and household pry are signifi potbellytly affected by the slosheds payout proportion.1. IntroductionMiller and Modiglianis (1958) irrelevanc y theorem is whiz of the beta and puzzling issues in modern corpo locate finance theory 1, which has ch on the wholeenged the handed-down view2, that an optimum leverage exists. The main source of the puzzle stems from the fact that pecuniary research dont seem to explain the secure financing behaviour as we start to pay off the MM theory with the evidence(Myers 1984, Gordon1994, Rajan and Zingales1995). The MM theorem(proposition I) has shown that under a perfect mart supposal the market place place appreciate of any mansion is independent of its roof structure (Stulz2006). This fundamental proposition evidently indicates that the cleverness of investors to engage in personal or homemade leverage is qualified to ensure that corporate leverage in itself aliveness non modify the derive market esteem of the unwavering 3. In other spoken communication, the theorem provides conditions under which arbitrage by individuals keeps the take to be of the truehearted d epend simply on cash full point generated by the investment policy. Literature about the validness of the MM-proposition is discussed about whether investors coffin nail au soticly accomplish the required conditions of the arbitrage method without changing the overall hold dear of the necktie. In this context, many authors defy shown the inadequacy of the theorem when inconstants that deal with the real world are introduced.Following the seminal paper of MM (1958), about theories commit been put forward in corporate finance to lenify the shortcomings of the irrelevancy theorem with inconsistents that explain the star signs superior of capital structure. match to the previous debate, upbraiding against this theorem can be grouped in devil types of arguments on the one hand, there are papers which deal with the limitations of the arbitrage conditions on the other hand, there are studies which analyze the exercise of market imperfections on the familys choice of capital structure. Despite the importance of these interventions, we none that all of the limitations deal with the explicit assumptions utilise by MM, but no(prenominal) deals with the critiques of the MMs implicit assumptions. More recently, DeAngelo and DeAngelo (2006, DD hereafter) have challenged MMs irrelevance dividend policy. Dealing with this alternative of profits as in full administrated, these authors have showed the irrelevance of the MM dividend irrelevance theorem when MMs assumptions are relaxed to allow retention. As DeAngelo and DeAngelo(2006, rogue 294) wrote When MMs assumptions are modified to allow retention with the NPV of investment policy fixed, a menage can reduce its value by paying out less than the full leave value of FCF, and so Payout policy matters and Investment policy is non the sole determinant of value . According to DD(2006), the MMs irrelevance theorem forces firms to choose only among dividend policies that distribute the full prese nt value of degage cash flow(FCF) to shareholders. Distributions below the totality of mesh are ruled out by the implicit surmisal.Dealing with this alternative of fully-distributed hire, MM(1958) used the homogeneous guessing in the development of the irrelevance of capital structure.. As pointed by the authors .as impart become clear later, as long as management is presumed to be acting in the best engagements of the convey-takingholders, retained earnings can be regarded as equivalent to a fully subscribed, pre-emptive issue of common stock. Hence, for present purposes, the division of the stream mingled with cash dividends and retained earnings in any period is a mere detail. MM, 1958 p266. However, MM(1958) failed to recognize that proposition I implies that firms distribute all their cash flow to shareholders without paying any assistance to their retention policy. This paper constitutes a new extended proof of the MM theorem by not asking the hypothesis of earni ngs as fully distributed. We pass on show that it is possible to verify the theorem when we venture an investor who exchanges his initial holding for a mix of habit and investment. The rest of the paper is organized as follows in the next section, we demonstrate the irrelevance of the MMs capital structure irrelevance when earnings are not fully distributed. We propose the misfortune of extending of the MM theorem. Furthermore, we show that the twain firms are not forced to distribute their full earnings and the irrelevance is hold in the charge of the mix of investment and consumption. discussion section III describes the data set, introduces the methodology, examines the hypothesis of the variables and investigates whether the empirical Modigliani-Miller capital structure irrelevance is influenced by dividend payout proportion. Section IV provides some concluding remarks.2. How do we reconcile MMs capital structure irrelevant theorem with the firms payout choice?2.1 The fai lure of the MM theorem when earnings are not fully distributed.As indicated by Rubinstein (2003), the law of the saving of investment value of MM(1958) was anticipated by many studies (Fisher (1930), Williams5 (1938), Durand (1952) Morton (1954) for examples) but none of these authors have used arbitrage mechanism to prove the invariance of the be of capital under changes in leverage. The MMs theorem demonstrates that under certain hypothesis of market conditions, the value of the firm is independent of its debt- uprightness ratio and is given by capitalizing the pass judgment final payment generated by its assets. This model can be expressed asfor any firm j in class k (1)Where V stands for the market value of the firm, S for the market value of its common shares, D for the market value of its debts, X for its anticipate earnings forwards interest on its assets, for the capitalization rate appropriate to its class.The analysis of the MMs arbitrage stairs shows the implicit hy pothesis of full payout ratio which plays a crucial position in the model. The MMs capital structure irrelevance theorem constrains firms to distribute all of their earnings. In particular, we note that the validity of the proof developed by MM is based on this implicit assumption. MM(1958) consider (see MM(1958) pageboys 269-270 ) the return of the investor Y as a fraction of the cyberspace income lendable (X-rD for levered firm and X for unlevered firm) for the stockholders.(2)Where is the return of the investor before arbitrage transition, L is levered firm and U is Unlevred firm and is fraction of the total outstanding shares own by the investor. Obviously, MM(1958) confuse artificially return of the investor(dividend return) and force out income which should be distributed between dividend and retention. MM(1958 page 266) assert that the division of the stream between cash dividends and retained earnings in any period is a mere detail.When we derive the MM capital structu re theorem for firms that are not distributing all their earnings as dividends, it follows a non-adequacy of the arbitrage operations, a non-proof of the irrelevance model. send back I shows the 2 cases used by MM(1958) when we introduce a level of payout different from 100%. Therefore, when we use the kindred arbitrage as MM(1958), we moldiness then admit that the two firms distribute all the available income to verify the leverage irrelevance proposition. As result be shown later, this assumption can modify the validity of the MM theorem. To justify this thesis, we suppose the akin steps of the MM kickoff proposition but with a splendid loss here we suppose that firms are not constrained to distribute all of their earnings. This means that we introduce in the arbitrage reasoning the payout ratio (PR) as a new variable. slacken I below shows that MM theorem is not sustain. The difference between returns (before and after arbitrage operations) is not the analogous as show ed by MM (1958). panel I. The irrelevance of the MM capital structure irrelevance when payout ratio is different from 100% start opening night VL VU south possibility VU VLFirst put the initial return of the investor YL encourage actArbitrage process Sold his initial deserving of the firm L Borrows an additional amount dL with the same interest rate r Acquired new shares of the firm usold his initial terms of the firm UAcquired new shares of the firm LAcquired new bonds b of the firm LThird interpret the return of the investor YUFinal stand forDifference of earningsY= YU -YLInterpretationsIt is not possible to verify the MM results when we introduce the hypothesis of payout ratio different from 100%, the difference of returns political campaignament depend on the all components of the equation. When we pose PRL=PRU=1, it is easy to obtain the same difference of returns as MM(1958)orNotes Using the MM formulation, we consider two firms L and U, for which the expected retu rn is the same XL = XU = X. companionship U is financed entirely by stock SU and high society L by stock SL and debt D. The market value of each firm is then VU = SU and VL = SL + D, We denote PRL and PRU the payout ratios of the levered and unlevered firms (MM 1958 suppose PRL = PRU = 100% all expected return is distributed).sL =SL, sU =SU denote the value of shares owned respectively by an investor in the levered and unlevered firm with a fraction2.2 The possibility of extensionThe two firms are not obliged to distribute all their income the mix of investment and consumption solution.The object of this section is to show that it is possible to demonstrate MMs proposition I without the hypothesis of earnings are fully distributed. In other words, we present an extension of the MM capital structure theorem for the case in which firms are allowed to have a payout policy. To prove this new proposition, we suppose the same hypothesis used by MM (1958), draw that earnings are not ful ly distributed. Using the MM formulation, we consider two firms U, L for which the expected return is the same XL = XU = X. Company U is financed entirely by stock SU and familiarity L by stock SL and debt D. The market value of each firm is then VU = SU and VL = SL + D.* matter 1 we suppose the value of the levered firm VL , to be greater than that of the Unlevered firm VU ( ).We denote respectively, PRL and PRU the payout ratios of the levered and unlevered firms (MM 1958 page 269) suppose PRL = PRU = 100% all expected return is distributed). First stage (initial return) consider an investor who owns sL dollars value of the stock in the company L representing a fraction of the total outstanding shares SL, where sL= SL. His return YL can be written as(3)The return from this portfolio, denoted by YL, will be a fraction of the income distributed for the stockholders of company L, which equals the multiplication of the payout ratio PRL by the difference between to total return X a nd the interest charge r DL. Where, r is the interest rate which the firm pays on its debt D. Second comprise (Arbitrage process) now suppose that an individual investor who adjusts his own personal leverage in order to increase his profits. He makes the following operations(a ) Sold his worth sL of the company L and he divided it as follows (i) he partly invested an amount IU = PRL.sL (which equals IU=PRLSL) in acquiring shares (ii) he consumes the remainder CL= (1-PRL)SL. where sL= IU + CL .(b) Borrowed an additional amount .(c) Acquired an amount of the shares of the company U. He could so by using the amount IU from the sales of his initial holding and the amount d from borrowing. Third Stage (the new return) the income of the investor ((i) who holds sU dollars worth of the shares of the company U (ii) and who must pay interest of personal debt d would be(4) Last Stage Arbitrage profit Comparing (4) with (3) we obtain(5)Thus, under this approach we can distinguish two situati onsFirst situation If PRU= PRL = 1 then we check the same result as obtained by MM (1958 page 270).(6)Second situation We can also verify the same result of MM(1958 page 270) without the hypothesis of PRU = PRL = 1, we can simply choose PRU = 1, composition the payout ratio of the levered firm PRL is likely to vary between 0% and 100%, we get then(7)From equation (7), we conclude that as long we must verify, so that it pays shareholders of corporation L to sell their investments, by this means decreasing SL and hence VL, and supercede them with a mix of consumption and portfolio investment, which contains shares of the unlevered firm and personal debt, thereby ripening SU and thus VU. This arbitrage process will be finished when sense of balance restores the stated equalities between the set of the two firms.* Case 2 we suppose the value of the unlevered firm VU , to be larger than that of the Levered one VL ( ). First stage The return of the investor who holds sU dollars of shares of company U representing a fractionof the total outstanding stock SU . Where(8)The return from this portfolio denoted by YU will be a fraction of the income distributed to shareholders of the unlevered firm U. Second stage suppose that the investor exchanges his initial holding in U by another portfolio in the levered firm L. The arbitrage process with consumption behaviour will take the following form the investor sold his worth of company U and divided it as follows(i) He invested partially of the shares of the company L(ii) He invested also of bonds of the company L(iii) The remainder will be consumed.From IL and IB , we can write respectively Third stage The return of the investor (i) who holds IL dollars worth of the shares of the company L (ii) and who holds IB dollars worth of bonds of the company L.(9) Last stage Arbitrage profit comparing YL (from 9) with YU (from 8) we obtain(10)In order to get a profi tabulate arbitrage opportunity for the investor, we must consid er a positive difference of returns. Analysing equation (10), we can good formulate two possibility of payout ratioIn the first, if we suppose a full earning model for the two firms (PRL = PRU = 1), therefore we will obtain the same results as showed by MM(1958) (page 270). According to this situation, equation (10) can be written as(11)In the second, the MMs results can also be obtained if we just assume a full earnings for levered firm PRL= 1 while the payout ratio of the unlevered firm PRU is likely to vary between 0% and 100% implying that the firm can use a payout policy, which is not restricted to full earnings. much(prenominal) a representation is written as(12)In this context, it is also principal(prenominal) to show that as we must obtain , hence it pays the shareholders of company U to sell their holdings and substitute them with a mix of consumption and portfolio investment, which contains shares and bonds. If, all investors in firm U will accomplish the three stages b elow, decrease the value of the unlevered firm U and increase the price of the levered firm L. This switching process will be over when equilibrium restores the stated equalities between the determine of the two firms.From these demonstrations (case 1 and case 2) we can conclude that we are not compelled to suppose that the two firms distribute all of their returns. In other words we can make arbitrage process merely by considering that the price firm (levered firm L in the first case and unlevered firm U in the second case) has a payout ratio PR which is not restricted to be 100% of the earnings. The table below summarizes the theoretical findings.Table II the MMs arbitrage and the payout hypothesisConditionsConclusionsMMs arbitrage conditions without dividend payoutMMs(1958) irrelevance theoremMMs arbitrage conditions with a payout ratioFailure of the MMs proofMMs arbitrage conditions with a payout ratio and consumption hypothesisProof of the MMs irrelevance theorem(Extension)3. The Empirical AnalysisThe previous part of this paper provides a new extension of the relationship between firm value and capital structure when the firm has a payout policy. In this section, we attempt some possible empirical tests. The central issue is, whether or not the leverage ratio affects firm value when earnings are not fully distributed?.Modigliani and Miller (1958) have taken two judges of 43 electric automobile utilities during 1947-1948 and 42 embrocate companies during 1953. The data are provided respectively by two studies chaired by Allen (1954) and Smith (1955) and they regardd the weighted modal(a) court of capital (wacc) concord to the financial leverage of the firm. The regression form of the model was(13)Where wacc is the weight cost of capital approximated by X /V , here X is the expected return net of taxes, V is the market value of all securities and the financial leverage of the firm cardd by the ratio D/V, where D is the market value of Bonds and preferred stock. The results of the tests (as shown MM(1958page 282) are favourable to Modigliani and Miller (1958)s hypothesis. The values of the correlations coefficients are small and not statistically evidentiary. Weston (1963) criticizes Modigliani-Miller empirical result. In particular, he assumes that the lack of assemble of capital structure on the overall value of the firm is due to deficiency of the approach to take account of other factors that may be influencing the firms cost of capital. Contrary to MM, the author shows in the empirical tests that leverage is correlated blackballly with firm value in the comportment of the hypothesis of earnings growth.3.1 Data and MethodologyIn order to conduct an empirical analysis similar to MMs, we have collected data on the same spheres from the same country as done by Modigliani and Miller 1958. The data we use are annual standardized financial cultivation of US firms observed in the period 1990-1998. Our sample is formed by two sub samples from the pick outric sector we use 256 companies, and from the oil sector we take 223 companies. These data were obtained from the Worldscope Database (SIC Code 13 and 49). Contrary to Weston(1963), we consider the hypothesis of risk-class can be verified in the oil industry and the electric sector (as supposed by MM 1958).According to MM(1958), a analogue model was constructed to explain the relationship between leverage and the firm value. The variables used in our regressions are constructed (see table III) as the same way as presented by these authors. The corresponding models used by MM(1958) are For ride 1 see MM(1958) page284 (note 38), for model 2,see MM(1958) page282 For mock up 3,see MM(1958) page284 (note 39) For. With regard to the basic capital structure irrelevance theorem to be estimated we propose three regression models as followsModel 1 (14)Model 2 (15)Model 3 (16)Where wacc is the weighted mean(a) cost of capital Leverage 1 first measure of le verage ML1 modified leverage 1 Value the ratio of the firm value , ER earnings ratio DR debt ratio.The purpose of model 1 is to test the piece of leverage (as measured by Debt ratio DR) on firm value, while the Model 2 and model 3 test the effect of leverage (measured by Leverage1) on the cost of capital (measured by WACC). The variable ML1(modified leverage 1) is included in model3 to test the U-shaped hypothesis that the coefficient e of this variable should be significant and positive to confirm the tralatitious view, and not importantly different from zero to confirm the irrelevance theorem.. Note also that tally to our approach the correlation between these variables should be different from zero.To test the validity of the MMs proposition when earnings are not fully distributed, we alternatively estimate all the above regressions in the absence (model MM58 and the model MM58supp) and the presence of the payout ratio. We corroborate this last alternative in two steps In the first step, we test the models for all firms (model MMExt). In the second step, we test the models for subsamples First Quartile sample ( steadys Payout ratio is less than 25%), Second Quartile sample (firms payout ratio is between 25% and 50%), Third Quartile sample (firms payout ratio is between 50% and 75%), and Fourth Quartile sample (firms payout ratio is more than 75%). The tableIII below reports the different measures of variables and their predicted effects.Table III. Measures of variables and predicted signsVariablesSymbolMeasureMM possiblenessOur HypothesisDependants variablesWeighted average cost of capitalWACCX/VFirm value ratioValueV/AThe explanatory variablesFirst measure of leverageLeverage 1D/V naught effect operative effectModified Leverage 1 measureML1D.D/V.SZero effectSignificant effect dinero ratioERX/ADebt ratioDRD/AZero effectSignificant effectPayout ratioPayoutDiv/NINot testedSignificant effectNotes the table reports the different measures of variables where V firm value= market value of equity S +market value of debt D, X Earnings before interest and Taxes (EBIT), A is the value of the total assets, NI net income. ML1 modified leverage 1 measure = (D/V)/(1-D/V). We measure the value of the Debt D by the amount of total liabilities.3.2 Descriptive statisticsAs indicated in Table IV, the descriptive statistics shows that the average value of cost of capital is 5.92% for electric utilities and 4.48% for oil companies6. On average, we have a leverage ratio of 51.79%(37.85%), this measure is 62% (50.2%) when we use total assets as deflator . The average firm has a value ratio of 1,38 for electric utilities which is much weaker than those of oil companies (1,99). For these firms, earnings ratio ranges from 0% to 2.7% for electric utilities (0% to 66% for oil companies). In terms of net income, the average value of payout is more important for electric utilities (45%) ranging from 0% to 99,9%, than those of oil companies (16%). These results show that the division of the stream between cash dividend and retained earnings in any period is not a mere detail as supposed by Modigliani and Miller (1958 page 266). None of firms in the two samples and during the whole period (1990-1998) has distributed the totality of its income. For the normal distribution of the series rough the mean (see table IV), all of the distributions of the variables are not symmetric since their lopsidedness values are different from zero. This conclusion is also verified by the values of the Kurtosis which are quite different from 3.Table IV. Descriptive Statistics of Variables (256 pickric Utilities and 223 Oil Companies)VariablesSampleMeanMinimumMaximumStd. DevSkewnessKurtosisObsWACC pick out0.059240.000000.290900.031880.2923286.3760992304Oil0.044810.000000.695820.054484.7599342.05262007Leverage1Elect0.517960.015730.994160.17873-0.469253.363652304Oil0.378570.00000.982370.217140.209522.364312007ValueElect1.381550.090879.771120.822685.5198945.787 12304Oil1.991720.14447138.565.4030818.7716397.6152006ERElect0.073530.00000.0276120.041580.777907.942742304Oil0.064180.00000.6643030.066832.10426211.5462007DRElect0.623220.027610.9950660.14891-0.99914.789832304Oil0.502200.00000.99780.22065-0.25932.48472006ML1Elect1.349130.000252169.3466.648017.3645344.9502304Oil0.612980.000023.24541.53468.6309103.962006PayoutElect0.451690.000000.999800.35978-0.155691.404172304Oil0.163810.00000.99910.277211.509673.9064620063.3 The effect of Leverage on the firm value (model 1)The MM(1958)s theorem is confronted with our hypothesis in order to know the crucial effect of payout ratio on the sensitivity of firm value to leverage. If our prediction is true, we should find a significant coefficient of leverage ratio, otherwise the MMs view should be confirmed. As indicated in table V, estimates result shows that coefficients of earning ratio (ER) and debt ratio (DR) are significantly different from zero, which fails to support the MMs view. Since our resul ts, as presented below, demonstrate that the coefficient of debt ratio is significantly negative and contrary to the traditional view. We prefer to give more explanations of this relationship based on the presence of the payout policy. The latter has a negative influence on the two samples (see Model MMExt , table V) which is in the opposite direction as obtained by the cost of capital regressions (see tableVI). There are two main explanations for this resultAccording to Brigham and Gordon(1968), the relationship between stock price and leverage depends on the association between R (return on assets and investment) and i ( the rate of interest which the firm pays on its debt), not on the level of Leverage L. This can be written as(16)Where E is the book value of the common equity per share, k is the rate at which dividend is discounted. It is evident, when R is less than i, the leverage effect on stock price P will be negative. Furthermore, the negative influence of the dividend rat io on the firm value confirms the leverage meet when the return on investment is less than the cost of debt. This means that firms experiencing discredit rate of investment tend to use funds from internal and outer resources to display higher payout ratio.The leverage measure is not the same in Wacc regression, this variable is measured by debt on firm value (D/V), while in firm value regression (Value), the debt ratio is measured by debt on total Assets (D/A). The fact that both variables are divided by different deflators may be affected by a haphazard disturbances of the market value of the firm. This bias correlation is not observed in the firm value regression.According to Modigliani and Miller (1958), the constant term in the previous regression should give more information on the value of the unlevered firm. As shown in table IV below, the estimated coefficient of this variable is not only significantly different from zero, but is quite positive and greatly sexual relatio n to the coefficient of the debt ratio. This conclusion is confirmed for the two samples with large values for the oil companies.Table IV. Directs Pooled Least-Squares Estimates of the effects of leverage on the firm valueCoefficients ofRegressionsSample unremittingERDRPayoutAdRObsMM 58Elect1.893a-0.158a-0.805a0.0252304Oil2.464a-6.730a-0.6680.0482007MM ExtElect1.963a-0.131a-0.466a-0.625a0.0952304Oil2.465a-6.703a-0.642-0.0860.0482007First QuartileElect1.969a-0.133b-0.412c0.005801Oil2.342a-7.490a-0.2860.0521440Second QuartileElect1.465a2.650a-0.554a0.187216Oil1.659a-0.197-0.501a0.033279Third QuartileElect1.206a1.823a-0.249a0.096738Oil1.224a3.229a-0.0550.113207Fourth QuartileElect1.080a1.809a-0.1050.102549Oil7.197a0.983-9.064a0.67672Notes a, b and c indicate significance at the 1%, 5%, and 10% levels respectively.3.4 The effect of leverage on the cost of capital (model 2 and Model 3)According to Modigliani and Millers proposition I the average cost of capital Wacc (Xt/V) should tend to have the same value independently of the degree of leverage MM (1958, page281). In other words, the leverages coefficient parameter in the Wacc regression should be insignificant and statistically equal to zero. The results of the MM model tests are shown in table V (models MM58 and MM58supp). According to this table, the MM hypothesis is only verified in the oil sample, while leverage in the electric utilities has a negative and significant effect (coefficient is equal -0, 1162) on the cost