Finance

In the equities market, there are about three prominent structures, namely open outcry, Electronic Communication Networks, and NASDAQ stock market. As the name suggests, the open outcry structure means that professionals in this market engage in open outcry as a means of communication in their process of trading. These professionals shout and use their hands to indicate their interest in the equities presented to the market. The electronic communication network (ECN), refers to a kind of computerized system, which makes it possible to trade financial products without having to be physically present for the exchange to take place. NASDAQ has been understood to mean, the National Association of Securities Dealers Automated Quotations. This is a market that uses electronic screen for the trade of equity securities in the United States of America. This study aims at discussing the similarities and differences among these three alternative equity markets. It will take a step further to discuss whether the belief that the open outcry structure will find its replacement soon is founded.

Open Outcry
As already indicated, players in this trading system use hand signals to communicate their intention to either buy or sell securities. This system has been in place for a very long time. In order to express the intention to buy, the professionals in this system hold up their hands, with the palms facing in (Rogow, 2009). When they want to sell, they do the same only that their hands face out and are placed away from the body. These professionals use several signals to communicate information regarding their trade intention. As evident, this system requires that the various persons involved be in a particular trading area, which is usually referred to as trading pit. All of the investors wishing to trade in these securities assemble at this point for business (Garfield, 2000). The wisdom behind this is that when a market functions as an auction, there is a higher possibility of an efficient market prevailing. This means that the person willing to sell quotes the price they want to sell at, then those interested in buying place their bids. The person that makes the highest bid gets the securities. It is assumed that the congregation of both buyers and sellers at this point brings about mutually consented prices.

Electronic Communication Networks
As indicated earlier, ECNs are automated systems of trading. In other words, orders to either sell or buy are automatically matched by a computer, at prices that are already specified. This system differs greatly with the open outcry in that it allows not only market makers and broker-dealers, but also individual investors as well as institutional investors to directly place trades with an Electronic Communication Networks (Rogow, 2009). There is a requirement however, that in order for the individual investors to have their orders routed to an ECN, they must open an account with a broker-dealer. Individuals seeking to trade in securities normally use limit orders (U.S. Securities and Exchange Commission, 2009). These orders are then posted by the ECN to the system where they become visible to other subscribers. When there are orders for matching, the system automatically matches them for execution. This means that only when there are matching orders can there be a transaction. As is evident, this system does not require that persons be physically present, as in the open outcry system, on a trading pit (U.S. Securities and Exchange Commission, 2009). The disadvantage with this system is that only those who are registered with an ECN can gain access to this form of trade. It is also not possible to assess the intention of the traders because there is no direct interaction. At the same time, persons wishing to sell their shares may end up not doing so, if there are no matching orders, which would be done physically in the open outcry structure.

NASDAQ Stock Market
As earlier indicated, NASDAQ makes use of electronic screens to trade in equity securities. It is considered to be the largest of its kind, dealing with over 3700 organizations (NASDAQ, 2009). This makes it the market that has the largest trade volume in the whole world. NASDAQ became the first electronic stock market in the world, starting out as a computerized bulletin board. One remarkable thing that NASDAQ did was to succeed the over-the-counter (OTC) trading system. It provides price quotations on over five thousand stocks that are actively traded over the counter. It is worth noting however, that the stocks of NASDAQ are not placed into the OTC category, because it is currently a stock exchange (NASDAQ, 2009). NASDAQ is considered to be operating as a dealer network. Unlike the open outcry system, dealers in the NASDAQ do not operate from a physical trading pit rather they work through a kind of a telecommunications network. In this case, investors and their buyers or sellers are directly involved in trade. This is made possible by a chain of electronically interconnected companies. The importance of having direct physical interaction between traders is that it not only allows for negotiations, but also a possibility of reading the mood as well as the intention of the partner. This is not possible when using NASDAQ as the avenue of trade, because interaction is only possible electronically.

Similarities between the Open Outcry, ECN, and NASDAQ
A common reality among these three is that, all deal with the trade of securities. It is worth noting that there are some similarities that appear in two of these three, rather than in all three. For instance, the ECN and NASDAQ are both electronic means of trading securities. They both eliminate the need for a physical presence. However, all of the three systems require that for a sale or purchase to be completed, there must be some kind of matching of the offers. For the open outcry, the deal is struck with the highest bid being matched with the lowest asking price. In the ECN, the orders available for buying and selling are matched at a specific price in NASDAQ, the market-maker matches the securities so that a transaction is possible.

Differences between Open Outcry, ECN, and NASDAQ
A very clear difference between open outcry and both the ECN and NASDAQ is that, the last two use electronic devices to conduct business. Whereas open outcry requires that people shout out their proposals, the other two systems are more orderly in that it only requires computerized kind of communication (Investopedia, 2010).

The NASDAQ differs from the open outcry system in that whereas the former operates through a dealer, often known as a market maker, the latter is a kind of auction, where the highest bidding price gets matched with the asking price that is lowest. What this means is that investors in the open out cry system deal directly with each other. In NASDAQ, a market-maker purchases securities and holds them, waiting for those interested to come and purchase them, thus making their profits (U.S. Securities and Exchange Commission, 2009). Ideally they make the market, that is why they are referred to as market makers.
The open outcry requires a physical presence, whereas both NASDAQ and ECN do not. One does not have to be there physically, because trade is in this case made possible electronically. The ECN differs from the others in that it allows for trade after the official hours, because it only requires that orders be available (Oakes, 2005).

The Future of Open Outcry Structure
Some people have argued that this system will be replaced by an electronic trading system. Although the traditional system has remained strong, for instance the New York Stock Exchange (NYSE), it is very probable that this system will be totally replaced. The reason for this claim is that the electronic system seems to have a lot of advantages compared to the open outcry system. Electronic systems eliminate the waste of time witnessed in the open outcry system because the matching is instantaneously done by the machine. At the same time, it offers a cheaper option, because the costs incurred in the traditional system are no longer necessary. Both the dealersbrokers and the market-makers can potentially manipulate the system. However, with an electronic system, chances of this happening seem to be fewer. Furthermore, the electronic system has proven to be more efficient than the traditional one. Michie Ranald, an accomplished financial historian, seems to agree with this assertion. He sees the evolution of the securities market as being far from over. The shift already witnessed implies that a lot more is yet to be seen. It is for these reasons therefore, that I agree with the claim that the traditional system is very likely to be replaced by an electronic system.

Conclusion
As already mentioned the face of the equities market has been undergoing changes which can only be considered revolutionary because these changes mark a paradigm shift from the traditional way of trading. The open outcry structure, which is the traditional way of trading, requires that investors be physically present for trade to actually take place. It involves making pronouncements regarding the expectations of the various parties involved. The ECN does not require that persons be physically present in order for trade to take place. It involves a network of communications, which makes trade possible through automated matching of offers. As aforementioned, this system makes it possible for traders to operate even without official trading hours.

The NASDAQ stock market does not require that investors be present physically in a trading pit. On the contrary, it involves persons interacting electronically through a network, in the presence of a market-maker in order to conduct business. The market maker does the matching of orders, making the trade possible and smooth.

However, all of the three systems require that for a sale or purchase to be completed, there must be some kind of matching of the offers.

PRINCIPLE International trade has facilitated the process of globalization. As a result the concept of the global village has been realized. Advances in technology have also furthered the process of globalization through the expansion of the scope of the international trade.  

PRACTICE The process of the international trade making the world smaller is an accepted convention. The scope of the international trade has also been expanded through advances in the Internet technology. Advances in the communications technology have enabled international businesses to coordinate the supply chain management. Therefore, the connection between technology and international trade, and the consequent process of globalization are well accepted by academics and practitioners.    

PARTICULARS E-commerce is defined as the process of conducting secure transactions over the internet. E-commerce has facilitated the expansion of the international trade. The economic explosion in China means that businesses are rushing to stake their claims to the rising middle class in the country. Chinas entry into the World Trade Organization has enabled foreign businesses to compete in the market. Other trading blocs such as NAFTA and GATT have also facilitated the process.    

PERSONS  Hill (2005) has stated that the socio-cultural complexities arise as a result of the international expansion of businesses. Daniels (2004) has stated that the western economies have matured. One of the major critics of the benefits of globalization has been Mander and Goldsmith (2007) who has argued that the effects of globalization from on the international trade may not be benign.  

PERIOD Chinas entry into the WTO took place in 2006. The e-commerce business model became widely accepted from 1999.

PLACES The main engine of growth has been the foreign direct investment in China.

PHRASES NAFTA, GATT, WTO, IT

PROSPECTS Technology embedded in international business can maximize its efficiency

PROBLEMS The expansion of the international trade may harm the environment. Environmental considerations also have to be taken into account by multinational companies. This means that multinational companies have to develop production processes which are environmentallyfriendly. This increases the cost of production. However since the environmental standards are legally enforced, the multinational companies have to design their operations in accordance.  

PERFORMANCE The rise of e-commerce has facilitated the expansion of the international trade. One of the most important changes in the international business environment is the emergence of the global trading system. The emergence of a global trading system has enabled firms to manage access in the international markets to promote exports. However the global trading process is sometimes hindered by the governmental regulations which are influenced by the local businesses which might not have the operational excellence to compete internationally. This is considered to be one of the disadvantages of the globalization process. However this is an advantage for multinational companies, because this gives them the opportunity to set up operations in a new market and take advantage of the product life cycle in the growth stage. Most multinational companies are suffering from a disadvantage in terms of over-reliance on the mature economies of the West. The emergence of the global trading system has enabled these multinational companies to shift some of this reliance away from the mature economies and enter growing markets.

PUBLICATIONS
Fox, Jeremy. (2001). Chomsky and Globalization. Totem Books.
Laudon, Kenneth.,  Carol Traver. (2007). E-commerce Business, Technology, Society.
South western college pub.
Mander, Jerry.,  Edward Goldsmith. (2007). The Case Against the Global Economy. Earthscan Publications Ltd.

The level of the international trade has risen considerably because of the liberalization of the international financial system which has allowed investors in one country to invest into the assets of another country. The rising level of international trade has also been facilitated by the development of the free enterprise system in different regions of the world. This has meant loosening of the governmental controls and the opening up of the economies to the foreign direct investment. The best example is China in which the flow of the foreign direct investment has averaged a hundred billion dollars for the last ten years. The massive level of investment has been facilitated by the vast size of the market with a phenomenally rising level of demand. As a result, businesses which have been struggling with maturing or declining demand have been rushing en masse to take advantage of the surging growth in the Chinese economy. International trade requires supply chain management coordinated globally. This is making the world smaller as international businesses are focusing on quick delivery of service to create a competitive advantage.

There has been a robust trend of business process reengineering by the embedding of the technological processes into the existing business processes. The strength of this trend has been considerably aided by the fast process of technological sophistication (Naughton, 2005, p. 34). This has also contributed to the massive expansion of international trade. In the context of international trade, the modern business environment is characterized by a considerable level of competitiveness and this is manifest in the fast process of change. Because the international business environment is in a constant process of change, businesses also have to change, as otherwise their very survival would be put in question. This indicates the need for the continuous improvement process. However in order for the process to be effective, the management must have detailed information about the existing industry dynamics. Once the information has been collected, the management needs to act accordingly  by implementing a quick decision making process (McConnell  Brue, 2007, p. 12). In this respect, the issue of information sharing becomes a critical success factor. Addressing this factor has been facilitated to a considerable extent by developments in the communications technology. For example, the technology of video conferencing enables business executives on opposite sides of the globe to hold conferences in real time. This has made the world smaller by reducing the geographical distance between regions in international trade.

Different business models have come into being which have facilitated international business by reducing geographical and cultural distance. The most popular is the e-commerce business model (Laudon  Traver, 2007, p. 43). This business model benefits both the consumers and the businesses by minimizing costs from both sides. However its relevance is even more considerable in the international trade because the essence of the e-commerce business model is the elimination of physical distance which is the principal barrier to the expansion of international trade. By eliminating the distance, businesses and their markets have been brought closer and this is even more apparent in the international business environment. However, the e-commerce business model has been a source of competitive advantage even for businesses which had been confined to domestic operations. For example, Dell Inc. had been implementing this business model in order to implement the strategy of quick response. By implementing this strategy, Dell Inc. had become a market leader in the US within three years of starting operations. What had given Dell Inc. a huge competitive advantage over its competitors was the fact that by implementing the e-commerce business model, it had managed not only to minimize costs but also to respond quickly to customers demands. The cost minimization strategy had been facilitated by the elimination of the need to maintain physical warehouses as a substantial percentage of customers in the US preferred to shop from home rather than to visit the stores. However the e-commerce strategy has not been effective in the Chinese market because of the low penetration of the Internet Technology (Scholte, 2005, p. 43).          

The international trade has made the world smaller because international businesses have invested considerably in integrating the supply chain management. This means that the businesses have been building closer relations with their suppliers. This can be seen in the case of Dell Inc. The company has developed a process of supply chain management which facilitates quick delivery of needed components to the factory floor, enabling the company to deliver the completed order within 2-3 hours after receiving the order (Viotti  Kauppi, 2007, p. 54). This integration has been made possible by the implementation of enterprise resource planning solutions which facilitate instantaneous information transfer. Automation of different processes has also enabled Dell Inc. to cut its costs. The history of Dell Inc. illustrates the market evolution that forces businesses to leave their home countries and expand internationally. Desktop sales in the US had become a maturing industry and consumers tastes and preferences were also changing in terms of quality considerations preceding price considerations affecting their purchase decisions. Thus there were two sources of pressure being exerted on Dell one was the maturing industry and the other that of the effectiveness of its low-cost business model being challenged. These pressures forced Dell to seek entry into the Chinese market which was in the growth stage in terms of the desktop manufacturing industry.

The world has also been made smaller by the process of product standardisation. The feasibility of standardisation in the current business environment is illustrated by the iPod (Fox, 2001, p. 76). Apple has marketed exactly the same product regardless of the international market. This has been facilitated through targeting the teen segment which exhibits similar purchasing patterns regardless of cultural and social contexts. This trend has been strengthened through the advent of the Internet which has facilitated the sharing of information thus weakening the effect of cultural differences. Apple was quick to capitalize upon this homogeneity by standardising the iPod and then launching it internationally through a unified marketing program. In this respect, Apple was successfully able to identify the global customer, the teenager, who has the same needs and desires for trendy and image-oriented products worldwide. This insight enabled the management of Apple to build a promotional campaign that specifically emphasized upon these product features. As a result, the same product could be launched in different international markets. In this respect, the key issue has been to identify the right segmentation characteristics.  

The example above illustrates the effectiveness of the market research and conducting innovations accordingly. With the iPod Apple has developed a product which enjoys the universal appeal regardless of the target market in question. Therefore, the critical success factor is to conduct the new product development process in such a manner that the actual product features will appeal to different geographic customer segments. Given the two options, it is a waste of time to debate the effectiveness of standardisation vs. adaptation. The first option is to capitalize upon the diffusion patterns in lead countries so that interest will be successively generated in the lag countries and thus a sequential entry strategy is facilitated with standardisation. The second option is to develop a product such as the iPod which will appeal to the global customer so that different target markets can be entered simultaneously. Because of the advent of the Internet, the global customer is increasingly becoming a common phenomenon. As a result, it has become feasible to consider economies of scale by targeting the global customer. This is making the world smaller by creating a global village in which cultural distance is reduced. This has been possible through the information revolution in the form of e-commerce.  

E-commerce has become the most critical facilitator of international trade. However that benefit comes at the cost of having to manage the risk of unlawful application of customer-related data. E-commerce facilitates access to detailed information regarding customers lifestyles and their finances and therefore this information used for purposes of criminal intent could result in losses amounting to billions of dollars. The European Union manages this risk by imposing the restrictions from above. These restrictions guide e-commerce companies in how to use their databases so that the privacy of their customers is not violated. In the EU the framework of rules and regulations concerning how data are to be disseminated outside to non-members of the EU is centralized at the governmental level. In the US, protection of data privacy is left to the market and the government does not intervene in this respect. This is the fundamental difference in philosophy between the EU and the US when it comes to data protection. The EU practices enforcement while the US practices a voluntary system.

The implementation of the safe harbor agreement would enhance the volume of trade conducted via e-commerce because consumers are wary of sharing information online. They fear that their privacy will not be respected. This uncertainty surrounding data security restricts the potential of the e-commerce business model. According to one study, consumers preferred that the government should intervene in ensuring data privacy (Mander  Goldsmith, 2007, p. 87). The safe harbor agreement is a step in that direction. It would not only bolster consumer confidence in the e-commerce business model, in the process generating more business for companies that are conducting their transactions through e-commerce, but it would also facilitate international data exchange, in the process enhancing the scope of transnational e-commerce. Therefore data privacy issues incorporated by the safe harbor agreement would remove the biggest roadblock to the expansion of trans-Atlantic e-commerce. The problem is that many companies in the US would find it difficult to enter the safe harbor agreement because of structural complexities in their IT management systems which make it difficult to monitor exposure. However data privacy issues raised by the safe harbor agreement go to the very heart of the business potential inherent in e-commerce and therefore companies which have been neglecting consumer demand for enhanced privacy should use this agreement as a roadmap in the continuing evolution of their information systems.

E-commerce is the primary facilitator of international trade. This is because the speed with which information flows from one country to another becomes instantaneous via e-commerce. However that would not happen unless data protection policies in different countries were standardized. The case of the different policies being implemented in the US and the EU illustrates how the flow of e-commerce might be checked if issues of data protection are not standardized across borders. This lack of standardization has a direct bearing on the state of the economy in both regions because a large volume of business transactions flows back and forth between the two regions and these transactions would be disrupted if the EU and the US could not agree on the standards of data protection. Companies incorporated in the US have no limitations on sending data to countries in the EU because they are exempt from government control. In the US the companies are free to formulate their own policies regarding data privacy. However, these same companies have large scale investments in the EU and therefore the need for data exchange is critical. At some level these are issues of international business and companies in the US and the EU would have to customize their operations in order to be able to effectively globalize their operations. This customization is possible only when companies have detailed market data related to the country they are contemplating moving to. The detailed market data would also have to be available on a continuing basis for monitoring changing market conditions. Therefore the availability of information is critical and that availability would be severely hampered if there is disagreement between the US and the EU regarding data protection. As a result, the scope of international trade would be greatly restricted and economies in both regions would suffer.    

Some of the executive level decisions are concerned with the restrictions that compliance with a safe harbor agreement would impose. Unless the company involved has a very short operating history, it is difficult for the management to anticipate the possible uses for which they would need the customer-related information which has been collected for a long time. Companies in the US which operate complex electronic networks would have a hard time monitoring when data are seen by parties other than company employees. Therefore the decision that has to be made by the management of these companies is how to define confidentiality under the safe harbor approach. In this respect, the Department of Commerce, the EU commission and representations from the business community in both regions would have to reach a consensus that would allow businesses in both regions to comply without having to modify their legacy IT system extensively.

The rise of regionalism is another important change to be taken into consideration. Studies have indicated that multinationals in fact earn most of their revenues from nearby locales rather than from the global trading system. Examples of regionalism are NAFTA, the European Union and the Japan-led ASEAN (Stiglitz, 2003, p. 54). Regionalism is favored over a global trading system because logistics and cultural differences are easier to manage between nearby locales than between countries which are geographically further apart and thus culturally more different. As a result, costs of operations are minimized. Another advantage that regional trade agreements have over global trade agreements is that they take less time to negotiate. As a result, products can be quickly introduced. Another advantage to be noted is the reform that becomes facilitated when countries participate in regional trade agreements. This reform becomes necessary as the markets are deregulated and companies can no longer count on government protection to maintain their competitive advantage. This results in transparency of operations.

Another change in the international business environment is technological advancements. The current business environment is characterized by a high competitive intensity and one of the reasons for this competitive intensity is the fast pace of technological sophistication. The technological sophistication continues to enhance business productivity. This is particularly relevant in international business because in this context the issues of supply chain management are critical because of the geographical distances involved. However because of the advances in information technology, information sharing has become instantaneous, thus making geographical distances more manageable. The fast information sharing has also led to process of decentralization of the decision making authority so that business operations can be customized to a greater extent. In the current competitiveness of the international business environment, access to information has become the most important source of competitive advantage and this process has been facilitated by the process of technological changes. Therefore this is a critical change factor in the international business environment.

The process of international trade would not have been possible without information technology (Wu, 2007, p. 32). For example, the Internet has been the primary engine of globalization. Large corporations have been able to take advantage of sophisticated information technologies like Enterprise Resource planning systems in order to coordinate logistics worldwide (Moss, 2005, p. 78). Without these facilities created by advances in information technology, the notion of globalizing business operations would have seemed far-fetched.

However because geographical distances are irrelevant to operations that are conducted online, international businesses can diversify globally and still maintain their supply chain management in order to ensure maximum effectiveness. In fact, the effectiveness of supply chain management has been multiplied with the introduction of information technology into business processes. With most operations taken online, physical distance in supply chain management is no longer a limiting factor. Therefore international trade is making the world smaller and this has been facilitated by technological change.

Abstract
Strategy has been a constant topic of discussion for managers and business owners today. Nevertheless, many people still have the wrong idea on what constitutes as a strategy. For example, if a manager stated that their corporate strategy is to be the best in the business, or to foster continuous growth, than heshe has definitely the wrong idea about strategy. Strategy is not about reaching corporate goals rather it is bout the unique way we intend to achieve that goal with. Managers and business owners cannot expect to excel in their industries by performing the same activities as their competitors.

In retail banking industry, the strategy includes the development of products, the establishment of new outlets, joint marketing with other industries and many others. Once of strategy that current retail bank conducts is to establish the Shariah unit to target the Moslem customers worldwide.
Concerning the banking industry, this paper will discuss about the main concepts of Islamic finance laws (Shariah) and its comparison to the conventional banking practice. In addition, the focus is on the Islamic financial sector in the Middle East, particularly in the largest 3 active markets of United Arab Emirates, Saudi and Kuwait.

Introduction
Therefore strategies are crucial aspects in a competition since strategy is about doing different things or doing the same things differently as means to achieve corporate goals. In banking management, the realm of strategy is as complicated and as challenging as any other industries. There are as many factors and as many issues to consider when devising banking strategies. This includes establishing marketing programs, managing partnership relations, devising customer acquisition strategies, etc.

Over the century, the conventional banking has been evolving in number of banks and assets as they reach remote areas to target large number of customers. Despite the development of conventional banking practices, within the past two decades, the Islamic banking appears to fulfill the demands of Moslem customers that want to be free of Riba (usury or interest) that conventional banking practices. Concerning these underlying reasons, therefore, the research question for this paper is

Is the practice of Islamic banking principle (Shariah law) provides benefits for customers than the conventional banking especially in the credit crunch period

I choose this research statement or question since it may be different from others who only focus on discussing the development of Islamic banking without explaining the benefits of having Islamic banking practice compared to conventional ones especially amidst the credit crunch period. Therefore, instead of discussing the partial discussion on Islamic banking development, I decide to put emphasis on highlighting the benefits of Islamic banking and its development.

Relation to Previous Research
Shariah law
In the Islamic law concerning the life, in addition to the ban of interests, there are also other laws that Moslem cannot infringe such as drinking alcoholic liquor, gambling, eating pork, pornography and anything else in which in Islamic law (Shariah) this actions considered as Haram (unlawful). Moreover, in Islamic financial banking practice, there are some orders characterizing the development. Some of the features as following Islam permits individuals to gather their economic well-being. However, Islam makes a strict guidance between what is Halal (lawful) and what is Haram (forbidden).

Islam justifies the ownership of wealth for individuals but Islam obligates their believers to spend a portion of their wealth for the Needy and prohibit them to squander and waste it.

Surplus that Moslems got from any business activity is justified and they can retain it but Islam rule to reduce the margin of the surplus for the benefits of the community as a whole. This kind of social participation is called Zakat.

Islam also prevents the collection of wealth in few people by ruling its laws of inheritance.
In general, the economic system that Islam practices is back to the social justice principle by preventing any attempts that would cause any injurious impact and individually self-destructive
(Islamic Banking, 2008 HSBC, 2009b)

Principle of Islamic Bank
The basic principle of Islamic bank practice is the prohibition of Riba (Usury or interest). In this manner, it means that Islamic banking outlaws not only riba, a term that describes the concept of usury but also the concept of interest. The underlying reasons behind the prohibition of Riba are based on Islamic moral guidance and common sense, which becomes the foundation of many religions in the world, including Islam (Islamic Banking, 2008).

Instead of giving interest to their customers, Islamic banking practice adopts the concept participation in the enterprise where customers will put the funds at risk on a profit-and- loss-sharing basis. However, unlike the investment in conventional stock market, this kind of Islamic banking practice does not exhibit speculative scheme since this risks can be alleviated by conducting diversification of risks, careful investment policy, and proper management by Islamic banking or financial institutions (Islamic Banking, 2008).

Based on this laws, in Shariah concept, profit and loss sharing basis become one key financial transaction. This fair treatment will then distinguishes good performance from the bad and the mediocre. By adopting this financial practice, Islamic banking is encouraged to have better resource management since Islamic banks are built to have a clear differentiation between shareholders capital and clients deposits in order to have fair and correct profit sharing based in Islamic Law (Shariah) (Islamic Banking, 2008).

Research Method
To be precise, this paper employs qualitative approaches to a research. Furthermore, there are two approaches in qualitative research, interviews and observations, but this paper carries out the observations methods, especially we employ non-participant observation method especially by analyzing qualitative information from journals, books, magazines and many more.

The reason we choose observation method is due to the fact observation is an important research tool in which it allows us to observe other people in a natural setting or in a more artificial experimental situation. Moreover, by using observation method we can collect and gather data in natural settings concerning what is really going on in a real-life situation.

The most important of conducting observation is it provides researchers with an understanding about the perceptions about things or people we observe. However, since observation deals with someones perception, we plan to avoid preconceptions since it would provide this research with some bias.

The method does not involve direct interviews, which will slightly reduce objectivity and the accuracy of information. We are retrieving data from experts analysis, journals and various publications from available media. Using the data resources above, we are hoping to present an independent and objective analysis toward the matter of Islamic banking practice.

Reflection
The Islamic banking industry shows tremendous development within the past two decades. However, some of the basic principle that Islamic banking practices have been adopted by conventional financial institutions over the centuries ago. This is obvious as depicted in Islamic Finance a Euromoney Publication (1997) that reveals although the western media sees the Islamic banking just evolve at presents but in fact the practice has been evolved since seventh centuries.

In addition to the prohibition of interests, Islamic banking institutions also carefully collect funds from customers or investors in which they only allow source of funds from lawful business practices. Figure 1 shows the comparison between Islamic and conventional banking practices

Figure 1 Source of Funds
Source Ariss and Sarieddine, 2007

Due to the benefits of practicing the Islamic banking, many retail banking start offering the Shariah unit of their banking practice. HSBC, for example, have presented a Shariah unit of their bank. According to Iqbal Khan, CEO of HSBC Amanah, Islamic finance becomes a fastest financial service that continues exhibiting the positive growth within the past two decades (Parker, 2006). The reason is clear since Moslem population holds the second largest population in the world (Figure 2).
HSBC Amanah ( HYPERLINK httpwww.hsbcamanah.com www.hsbcamanah.com), for example, also has appetite to expand into foreign markets that have majority of Moslem population. Iqbal Khan, CEO of HSBC Amanah, says that the presence of HSBC Amanah currently exist in Qatar, UAE, Indonesia, Brunei, Bangladesh, Saudi Arabia, Malaysia, UK, US and Turkey and other countries will follow (Parker, 2006).

Figure 2 Potential Markets for Islamic Bank Services
Source httpbiglizards.netGraphicsForegroundPixMajor_religions_2005_pie_large.png

Figure 3 shows, the local office of HSBC at Dubai in which at first the development of Islamic Bank was only existed in several Arab countries. But as the benefits and offering of Islamic Banks are attractive, the phenomenon of Islamic Banking shows tremendous growth not only in Moslem countries but also in other part of the world.

Figure 3 HSBC at Dubai
Source httpwww.daylife.comphoto0gbx5BX6F81fM

For Islamic banks, innovation also becomes significant factors in the development of the banks. This is because in developing products and services for Islamic banks, they should carefully plan the products and discuss it with the government and Council of Ulamas. Ulamas are considered as collective name that become top class of religious officials in Islam that composes of scholars and other Moslem who understand the Islamic law.

Among the services that are common in Islamic Bank is for personal and business. For personal services, the offering usually covers personal loans, home and vehicle financing, and also investments. Meanwhile, for corporate accounts, the services include investments, trade services etc. Figure 4 shows many kinds of personal and business services that HSBC Amanah offers to customers.

Figure 4 HSBC Amanah Website
Source  HYPERLINK httpwww.hsbcamanah.com12hsbc-amanah httpwww.hsbcamanah.com12hsbc-amanah

Conclusion
Islamic banking is viewed as way out in managing the crisis as the nature of the Islamic banking practice. Concerning the issue, this paper has elaborated about the main concepts of Islamic finance laws (Shariah) and its comparison to the conventional banking practice. In addition, the focus is on the Islamic financial sector in the Middle East, particularly in the largest 3 active markets of United Arab Emirates, Saudi and Kuwait. The success practice is performed by HSBC that open their Sharia unit called HSBC Amanah.

American dollar has been used as the world reserve currency for the better part of the century, where 70 percent of all currencies are reserved in form of dollars. This has contributed to the supremacy of the dollar in world trade and finances. The fact that oil which is of the most traded commodity in the world is only traded in dollars, most countries prefer dollars as their foreign currency reserve (Craig, Humpagee, 2007). The influence of the dollar could deteriorate if Irans proposal to price its oil in euro is accepted.
       
The U.S. economy which has been severely affected by economic, crunch largely depends on the high demand for the dollar to stay competitive. If the 2006 Irans proposal goes through, the euro would become a substitute oil trading currency. The deal would benefit many European countries thus loosening the role of the dollar in international trade (Boris, 2008).
       
There are several factors that have continually influenced the appreciation of the euro over the dollar since its launch. First is the economic magnitude and distribution. The bigger and more dynamic an economy is, the higher its global influence becomes in international trade. Since the EU has a larger population and a more open economy than America, the euro posses a big threat over the dollar (Farugee, 2006). Second, the price and the exchange rate of the euro has been more stable than that of the dollar. This creates confidence and makes investment in euro less risky.
       
Moreover, the growth and integration of the financial markets in Europe has strengthened over the years. This kind of a market increases the flow of cash, reduces transaction costs and lowers the rate of interest. In conclusion, a continued decline in portfolio inclination of U.S. assets will lead to the depreciation of the dollar and appreciation of the euro, thus increasing its use in international trade.

1. The financial management in any corporation or business involves management of money in terms of its value to increase its worth in future (Shim and Siegel, 2000). The concept of money management involves certain uncertainties when planning process is involved and therefore, it is important for financial managers to incorporate the future uncertainties and weakness in value of money. This concept of incorporating the depreciating value of money with todays value is called time value of money where it is implied that the worth of money or a dollar today is more than the dollar one will receive tomorrow (Drake and Fabozzi, 2009).
The concept of time value of money in terms of present and future value holds importance to financial managers since various risk factors are associated with investment decisions that are expected to reap benefits in future. Present value refers to value of money that incorporates the effect of time of value of money (Albrecht, Stice, Stice, Swain, 2007). Understanding the concept of present value leads to more accurate estimation of cost-benefit analysis which helps in analyzing the opportunity cost that an investor is bearing by investing in a certain instrument.

Interest rate is another factor that has resulted in giving increased importance to concept of present value. The variations in interest rates in an economy affect the future value that an investor is expected to receive over time and therefore, any investment considered today has to be made in accordance with present value of money which determines expected future returns (Parameswaran, 2006). Present value of money helps in analysis of future returns that an investment reaps and therefore is a useful tool for financial managers to manage their opportunity costs and investment decisions.

2.
FV  PV (1r)  n
PV 300
n 5
R 3

FV   300(10.03)  n
FV 347.78

PV 550
n 3
R 6

FV   550(10.06)  3
FV 655.05

PV 9500
n 7
R 4

FV   9500(10.04)  7
FV 12501.35
PV 4000
n 10
R 0.9

FV   4000(10.009)  10
FV 4374.93

PV FV(1r)  n
a.   FV 8700
R 2.00
N 3 Years

PV 8700  (1.02)3
PV 8198.3

FV 2500
R 6.00
N 9 Years

PV 2500 (1.06)9
PV 1479.74

FV 7200
R 14.00
N 2 Years

PV 7200(1.14)2
PV 5540.16

FV 440,000
R 9.00
N 8 Years

PV 440,000(1.09)8
PV 220821.20

4. Suppose you are to receive a stream of annual payments (also called an annuity) of 4000 every year for three years starting this year. The interest rate is 4. What is the present value of these three payments

PMT 4,000
N 3 Years
i 4.00
PV
PV               A(1i)  n- 1)i (1i)  n
PV 4,000 (1  0.04) 3 -1  0.04 (1 0.04)  3)
PV 11,100.36

5. Suppose you are to receive a payment of 9000 every year for three years. You are depositing these payments in a bank account that pays 3 interest. Given these three payments and this interest rate, how much will be in your bank account in three years
PMT 9,000
N 3 Years
i 3.00
i         3
FV
FV  A  (1  i) n  1 i
FV 27,818.1

Allgood has been keen to join an entrepreneurial firm and increase her stock of wealth. She envisages a situation where she can buy into a start up firm and make millions when the firm lists on the stock exchange. Her current obligations leave her financially strapped at a time when she needs to save more in anticipation of future expenses related to the unborn child. Garibaldi is very impressed and appears determined to hire her at all costs. His record of accomplishment reveals that anybody working for him is bound to make millions after a few years. Based on these facts, Allgood should take the job at Globevault, accept a percentage of pay in stock options, and wait a few years to see if the value of her shares will skyrocket thus transforming her into a millionaire.

Allgood currently earns 115,000 while Dwight receives 105,000. Their combined income without bonuses is  220,000 per annum that translates to around  18, 335 per month.

They took out a fixed mortgage of 320000 at 6 interest that comes to 339,200. Per annum, they were to pay  9691.4 or  807.6 per month towards this account. Forty percent of the mortgage went to paying monthly assessments, taxes, and insurance. This works out to 11,306. Household expenses, groceries, and utility payments are equal to thirty-five percent of the monthly mortgage payment, which comes to 282.66. School loan repayments total to 425 per month, while recreational expenses amount to  2187.5. Per month, they spend  15,008.76, which is the bare minimum they need to survive.

The unborn child will place an additional burden of  19,000 per annum to their budget so when Allgood is negotiating for her salary she should factor in this expense. She should propose an increment of at least 30 of her current annual pay as the starting point, which works out to  149,500. Allgood should also ask for a 5 ownership stake in form of stock options.

As a rule, start up pay lower salaries that those offered in the industry. Garibaldi should offer her an increment of 10 and an ownership stake of up to 3 in the company. In the event of a successful public listing, Allgood would achieve her goal of financial prosperity.

In the Midway Games deal, Garibaldi earned  24,000,000, the two levels of management made  8,000,000 while the investors made 8,000,000.

The pre money valuation for Globevault was  10,713,043 while the post money valuation is 13,913,043.
After five years, the potential future value of Globevault will be  42,330,331.

Agency problem is a conflict which occurs when an agent, whose obligation is to manage the interests of the principal, misuses the authority given to him and directs the benefits to himself. Also referred to as principal-agency problem, this dilemma exists in many organizations like in a business, club, church, or in government. In finance, agency problem may occur when directors of a public company differ with shareholders on the prudent ways of investing the firms assets (Walker, 1997). Parties that are usually affected by this problem include the stockholders, bondholders and the managers.
         
The management of a company must run the business in such a way that all the stakeholders benefit. Since this conflict cannot be completely resolved without harming the company, organizations usually institute certain measures to control it. These include rewards for good performance, sharing of profits, efficiency wages, creation of various screening procedures and supervisory departments. Agency theories analyzes why the conflict of interest arises between individuals with dissimilar interest in the same business.
         
Another concept of agency problem is the agency cost. This is a cost which arises after the principal allows the agent to make decisions for him. It is further influenced by the fact that owners of the company are not necessarily the ones who manage its activities. Since it is extremely hard to collect all shareholders with small stakes to run the business, day to day control is left to the managers (Droege, Spiller, 2009). Therefore, when ownership is separated from control, shareholders may fear that managers may pursue interest thats not beneficial to them.
               
Owners of a business cannot figure out the extent to which a contract has been finalized. The only way this problem can be resolved is by instituting measures and appropriate incentives that will make agents fulfill the wishes of the principals. According to game theory, conflict can be resolved by aligning the individual interest of an agent to correspond to the principals desire. In job contacting, personal contracts play major roles in determining performance. Incentives that help mitigate the agency problem are different for various fields. Salesmen can receive part or the whole portion of their wages as commission, factory employees can de paid hourly while office workers can receive higher overtime.
               
Manual jobs or unskilled labor such as waiters and parking boys are prone to agency problems. This is because the employees whose wages are low depend largely on tips to cater for their expenses. Such tips come by when employees give favors to customers which lessen the profit of the establishment. Moreover, research has shown that agents who earn according to their performance rarely give support to their fellow colleagues (Graves, 1999). This is setback to the company.
               
According to David and Erik 2009, the agency problem can be related energy consumption. They say that when a new and cost effective energy saving technology is not implemented, market failure occurs. A common situation is between a landlord and a tenant. If the cost of energy is met by the landlord, the tenant will lack the motivation to limit his energy consumption. Therefore, the principal agent problem results from failure to utilize the energy saving technology (David, Erik, 2009)
               
In conclusion, researchers have advised on better incentive techniques and efficient budgeting methods as a way of curbing the agency problem. Managers who doctor the balance sheet to give the impression that the company looks poorer or reduce the share price should be closely monitored by the government in order to save public from exploitation.

The common size financial statements indicate the inherent characteristics of the firms and the industry where they belong. Likewise, the comparative data illustrates historical developments of certain firms which created specific impact on the presented financial highlights a compared with companies that did have similar or unique histories.

In terms of liquid assets, the health, computer and the books and music sectors dominate considering their high demand and turnover of business conducted through cash and card purchases. Computers and tools register the highest among credit grantors. In terms of fixed assets, the retail and the paper firms registered the highest considering their comparative investments in plants and buildings used in the production and store areas. In the intangibles area, it is understandable for health products, tools and newspaper to register high investments in intangibles acquired through years of acquisition and mergers carrying large numbers of patents and property rights.

Along liability positions, the computers, retail and paper industries indicate their heavy reliance on suppliers credit for their revenue generation efforts. Heavy equity infusion and capitalization are likewise evident in the health, retail and newspaper areas due to listing and ROI-prospects of the sectors. On one hand, the cost ratio is greater in highly competitive sectors such as computers, paper and retail considering their high turnover and demand characters. Profitability is paramount among the health, tools and newspaper due to their high-demand and apparent cost efficient active management systems. In terms of net profitability, the health sector is considered more consistent because of its high demand critical character while the rest of the sectors have varying and contrasting net profitability presumably to different degrees of production efficiencies. (Anthony  Govindarajan, 2003)

Ms. Synthasia Electronics (the company) has approached the Bank for a credit line of AED 20 Million as part of its capital restructuring program. A detailed financial analysis of the company, however, reveals that the companys performance over the last year has been dismal with falling profitability levels, high fixed asset growth not being complimented with appropriate growth in profitability (0ver capitalization), rising receivables, inventory buildup and over dependence on supplier credit for liquidity with any change in supplier credit lines enough to bring about an operating collapse given the companys low cash reserves.

In this scenario, and the state of the consumer markets in the UAE along with the prevailing economic outlook, it is recommended that no facilities be granted to Synthasia Electronics for this credit, analyst does not foresee how lending to this institution can bring about any concrete change in its operating position. In effect, major strategy changes at the companys end might be enough to restructure it into a financially viable enterprise, that is, following a more sustained growth policy as far asset acquisition is concerned along with concentration to bring about changes in key operating variables. When this is done, the fundamentals of the company, it is believed, will make a better case for debt investment.

Background
Ms. Synthasia Electronics (the company) has approached the Bank for a credit line of AED 20 Million as part of its capital restructuring program. Formed in the year 2007 through private equity finance, the company is engaged in the electronic goods retail segment with impressive growth in revenue being reported despite the global recession as a result of the subprime mortgage crisis in the United States and the ensuing credit crunch.

However, with falling resilience of the UAE economy to the bleak global outlook, the company feels that new growth opportunities will become restricted as equity investors look towards more liquid investments (stocks and commodities). Hence, adding debt to the company balance sheet might allow it to effectively capitalize on any growth opportunities available.

Key Deliverables
In light of this, we have undertaken a financial analysis of the performance of the company over the past two years with an aim to quantify the financial health of the company in terms of

Sales Analysis
Profitability Analysis
Liquidity Analysis
Return on Equity Analysis (Dupont Method)
Cash Flow Statement For The Year Ended 31st December 2009
It is expected that at the end of this report, the reader will be able to make a clear decision regarding the credit line proposal of the company with respect to its financial health and past financial performance.

Sales Analysis
With the resilience of the UAE economy to the global recession holding strong, the company was able to report impressive sales growth of 35.82 as the same grew from AED 536 Million (2008) to 728 Million (2009). Segmental information is not available at the moment to further dissect this sales growth.

Profitability Analysis
While sales growth has been impressive, it seems that this has not culminated into higher profitability as many expenses to revenue relationships have been disturbed in pursuit of the companys high sales growth strategies to the detriment of ensuring sustained profitability.

The gross profit of the company fell from 70.52 (2008) to 64.97 (2009) as a result of a cost of sales now accounting for 35 of the sales figure as opposed to the previous 29.4 representing higher costs related to stock and its procurement.

Similarly, the net profit margin of the company also suffered as a 53.44 increase in administrative costs led to these rising from AED 174 Million (2008) to AED 267 Million (2009). This failure to curtail costs in an environment of economic uncertainty speaks poorly of the companys cost control measures as the same led to operating margins falling from 14.74 (2008) to 9.34 (2009) as the company reported net profits of AED 68 Million as opposed to AED 79 Million in the corresponding period last year, a decline of 13.92 despite sales growth of 35.82.A major reason for this is the increased depreciation charge of AED 250 M in the current year as opposed to AED 145 M in the previous year due to rapid fixed asset growth by the company. Whereas segmentation of this increase has not been shown, we have assumed it as a separate reason.

Liquidity Analysis
As a base measure of liquidity, we see that the current ratio of the company has fallen from 4.56x (2008) to 0.97x (2009) meaning that whereby an year ago, the company had AED 4.56 in current assets to cover for each 1 AED of current liability, the same has dropped by a wide margin with the company now able to cover only AED 0.97 for every 1 AED of current liability. Probing further, we find that the company exhibits a huge inventory buildup (increased by 1.18x), a buildup of receivables (increase by 94), complete wipe out of the cash position of AED 151 Million (2008) into an overdraft amount of AED 10 Million and an increase in trade payables by 1.27 times.

To synthesize all of this, a look at the cash conversion cycle shows us that the same has increased by 23.5 days from -39 (2008) to -62.5 (2009). Inventory days and receivables days have increased alarmingly by 13 and 10 days respectively while generous supplier credit has allowed the company to stay afloat with payables days increasing from 92 to 130.

Return on Equity Analysis  Dupont Method
Using the Dupont equation (see below), we will look at three core attributes of any firm with regard to its operating performance, management effectiveness and financial leverage and how these factors effect the return to equity holders.

ROE  Net Profit Margin  Asset Turnover  Financial Leverage
YearNet Profit MarginAsset TurnoverFinancial LeverageROE200813.9911.0815.1020098.931.131.1912
As can be inferred from the above, the company has shown a dismal operating performance (due to falling profitability margins as a result of high cost of sales, rapid fixed asset acquisition leading to high depreciation charges and poor cost control) with management effectiveness at the utilization of assets and a slightly higher financial leverage allowing a respectable increase in the return to equity holders.

Cash Flow Statement
A cash flow statement for the year ended 31st December 2009 is annexed herewith as Appendix A. This shows that despite reporting positive cash flow from operations, the companys strategy of rapid fixed asset acquisition have resulted in the company to report a negative cash flow position and end the year with a small overdraft. While CFO was positive by a large margin and CFF represented only fractional amounts of CFO, the companys rapid fixed asset growth was responsible for  the CFI to be negative by AED 460M.

Interpretation, Conclusions  Recommendations
In light of the above, the following interpretations  conclusions are witnessed  made
Sales have been increased primarily as a result of higher credit sales which increase risk of default by customers as proper credit control procedures may not have been adhered to.

Inventory buildup represents obsolete inventory and a future charge to the profit and loss statement can be expected coupled with a slowdown in sales growth.

The supplier credit is the mainstay of the business and any reduction of support will lead to a massive operating collapse.

The company has poor cost control methods as represented by the rise in administrative costs.
The cash flow position at the company is in continuous stress which implies higher credit risk as there is a high chance that operating cash flows will not be enough to meet all counterparty obligations while also catering to the rapid fixed asset growth strategy that the firm is pursuing.

Taking on debt only implies signs of pressure from creditors and equity holders as the former press for payment of outstanding dues in return for continued supply of products while the latter demand improved performance. The improvement in performance, it seems, is being targeted through increasing financial leverage and not tackling key operating issues as a way to inflate the ROE figure.

Hence, it is recommended that the Bank refrains from any lending to this institution as the risks of default are too high given the poor performance depicted in the financial statements and poor financial health that the company is in at the moment. It is reasonable to believe that while the underlying business premise is a strong one, the company has to change its strategy of over capitalization and focus more on operating growth through sales volume and cost controls then on fixed asset growth as there is an increasing mismatch between profitability and fixed asset growth rates. Unless this is achieved, the continuing mismatch will pull down profitability further and put further pressure on cash flows.

Budgets  Performance Measures Advantages
Budgets, while never achieving a final state and continuously staying in the formative process, have been known to be immensely advantageous in terms of meeting key objectives of a firm through the different roles that they play.

Speaking in the context of profit oriented organizations, shareholder wealth maximization is seen as a the overall aim of the firm but the achievement of such a broad task or objective has to be broken down into many smaller objectives like increasing sales and cutting costs to improve profitability. However, these broad objectives still do not tell us how to achieve any of these and by how much. Neither do we see any assignment of targets and responsibilities, any allocation of resources, coordination amongst the various actors in a firm and any control mechanisms. In the end, what we have is a firm which knows what it has to do but is not equipped with the tools to actually do so leading to immense loss of control and communication as activities go uncoordinated and a breakdown as authority, responsibility and accountability do not flow together leading to the firm actually falling short of meeting any of its objectives.

Hence, budgets are important for they help meet objectives by compelling firms to plan and allocate resources appropriately. This helps in communication of plans and hence coordinates firm activities, communicates plans, enables control as responsibility and targets flow hand in hand while at the same time motivate employees as they feel part of the wide spectrum of things while at the same time stay on their toes for now they know that performance evaluation is set to follow.

The same can be said true of performance measures. Firms that intend to grow and meet investor expectations have to continuously assess themselves in terms of what they planned, what they did, were expectations met and what is needed to be done differently. These performance measures can take the form of anything and help in the achievement of the firms objectives as they provide a direction to the firm as to what is to be achieved.

For example, a firm may set increasing profits by 10 per annum. This is a plan and hence activities geared at meeting this objective (as defined in the budget) will be carried out. At the end of the reporting period, any deviations and reasons for them will be noted and corrective action taken. Hence the firm will stay in an act of continuous self assessment while being able to coordinate activities, motivate employees, assigning responsibilities and consequent rewards  penalties for results.

Implications For Lenders
According to BPP (2008), It is absolutely necessary for any investor to ensure that the objectives of the firm and his own are in complete compliance for any deviations can be fatal to the investor in terms of risk return profiling (P. 56). Simply put, as investors of debt capital with a shorter term horizon and a risk return profile geared at income generation with safety of principal invested, budgets and key performance measures help lending officers understand the objectives of the firm going forward and our own.

As an example, the Synthasia Electronics company, unless it stops its fixed asset growth program and concentrates on improving its liquidity position, cannot obtain a loan. This is because their objectives and ours are totally different.

However, to qualify for a loan now, it will have to present its desire to improve on performance measures seen critical by the bank through a forecasted budget. Hence, where liquidity is concerned, the bank may demand a current ratio of at least 11. If Synthasia can show that it is targeting a 11 current ratio and appropriate measures to be taken through the budgetary process (cash discounts, new inventory control methods), then a case can be made in front of the lending officer. Similarly, a plan to wipe out is overdraft position (performance measure) may be accompanied by budgetary measures showing lower fixed asset additions and improving the cash conversion cycle further.

To conclude, what draft budgets and performance measures do is that they show how the firm will act differently in the future, thus allowing the lending officer to make informed judgments about the goal congruence between the firm and the Bank coupled with any negative or positive loan covenants that may be set to ensure that performance is improved and the safety of the investors principal and due return is guaranteed.

Thus, lending officers are enabled to avoid historical bias, that is, taking decisions on the future of the firm based on past performance. This means that as a lending officer, the provision of past performance and expected future performance enables me to actively gauge where the firm is, where it intends to go and whether the Bank can earn a handsome return while minimizing risk.

A financial market is one that allows sellers and buyers to buy and sell financial instruments such as stocks and bonds, and commodities which help businesses grow and make money. A corporation is a form of an organization which is separate from its owners and has limited liability and the shares of the corporation can be easily transferred and the status of the business does not change with the death of any shareholder.

The purpose of financial markets is to allocate resources in the most efficient manner so that the economy can grow. It helps to lenders to lend money to borrowers who need the funds to buy goods or for investing purposes. Therefore, the financial market helps to facilitate the flow of funds from lenders to borrowers.
The corporation uses the financial market for raising funds. For example, if a corporation wants to undertake a project and it does not have enough funds then it can use the financial market to raise funds by either borrowing money from financial institutions such as a bank or it can sell its shares in the market and generate equity depending on its preference.

Corporations need funds to operate and these funds can be raised in two ways. The corporation can either decide to borrow the money or it can sell ownership in the business. If the corporation decides to borrow money then it has to pay interest to the lender on a periodic basis and if the corporation sells its ownership then it can either get listed on the stock exchange and have free trading of its shares or it can sell part of its ownership to the big private investors.

The financial markets are of two types namely the money market and the capital market and both help to raise funds via different manner and for different time period.

A capital market is a market for debt and equity which helps businesses to raise long-term funds. In this market, the money provided by the lender to the borrower if for long term. The two types of capital markets are the stock market where shares are traded and the other is the debt market where bonds are traded.
A primary market is used to raise funds by selling new shares directly to investors. Here, the funds are generated by selling new stock of bonds to the investors through investment banks.

The money market, on the other hand, is one where funds are provided for short-term and here, treasury bills, commercial papers, mortgage backed securities, certificate of deposits, etc are traded.

The money market provides short term debt instruments such as treasury bills which help corporations to raise funds. For example, the government needs money and it does not want to issue long term bonds therefore, it can issue treasury bills which have a maturity of less than one year therefore, the government can get funds and it does not have to pay interest for a long time. The money market instruments that are traded in secondary market include bankers acceptances, certificate of deposits, and commercial papers, etc.
A primary market is a capital market that deals with the issuance of new securities and here, the funding is generated by selling new stock or bonds. A secondary market, on the other hand, is one where previously issued stocks and bonds are bought and sold.

A dealer market is one where trading happens between dealers who trade for their own accounts rather than between agents who buy and sell for others. An auction market, on the other hand, is one where buyers and sellers competitively bid. The price of the instrument depends on the highest price a buyer is willing to pay and the lowest price for which the seller is willing to sell. The bids and offers are then matched and a trade occurs.

In 2001, President Bush implemented the Economic Growth and Tax Relief Reconciliation Act or EGTRRA, which is considered to be a very substantial modification of the states tax policy (Auerbach, 2002). In essence, the tax cuts imply reductions on tax payments for all people, yet the changes introduced are not necessary uniform for all tax payers. Some argue that the tax cut policy is unfair in relation to the high-income stratum, because they end up paying the huge percentage of income tax collections (Landsburg, 2004). Furthermore, the upper class is treated unethically for paying considerably more than the lower class pays, as the main benefits are said to be eventually equally distributed across the different social strata.  

This paper serves as a response to the speculation that the Bushs tax cuts introduce an unfair policy to certain social classes, that is, the rich. After integrating the economic projections, facts and figures, as well as looking at the issue from different ethical perspectives, the conclusions are given in this paper, which supports the viewpoint that contradicts the argument that tax cuts are unethical to the rich.

Introduction
In 2001, President George Bush has initiated a policy called the Economic Growth and Tax Relief Reconciliation Act or EGTRRA that reduced tax rates in all income brackets (Auerbach, 2002). This change in tax policy has immediately aroused different reactions from varying social groups. Basically, there are two opposing ethical views on this policy. These views are deep-rooted in the perennial core issues on the social inequality, wealth distribution, justice and fairness etc.

The first of the arguments states that the tax policy is unfair for the higher-income bracket, because the stratum receives the bigger share of the financial responsibility (Landsburg, 2004). A counter-argument to this, which comes surprisingly as its total opposite is that it widens the social inequality existing between the richer and the poorer of classes- thereby, benefiting the richer class more than it does the lower-income class (Friedman and Shapiro, 2004). While the resulting tax rate after the cut is lower for low-income families, the amount of income of a well-off person, exempt from the government, is much higher. This goes alongside with a valid speculation that in the end, welfare programs and other governmental programs that could have brought benefits to the lower-income classes do not meet this purpose as far as budgeting is concerned.
 
The tax cut policy is made as a response to the US financial situation, to spur economic activity by generating available jobs (Auerbach, 2002). The annual financial reports from the government indeed show an increase in employment rates and economic activities. These are factors considered to be positive for the growth of the countrys economy. However, the side-impacts inspired by the policy have important consequences as well. These should be considered to fully determine whether a policy change brings total benefits, or only partial, to the over-all welfare of the state.

This paper seeks to fully understand the ethical grounds of the tax cut policy. It supports the viewpoint that in order to come up with a sound solution, it is necessary to consider the data from the relevant national economic statistics and scrutinize the policys impacts from different ethical perspectives, namely, utilitarian, Kantian and pragmatic. The aim of this paper to provide counter-arguments to the view that the tax cut policy is unfair to the rich.  

The Broader Picture
To ground for the unjustified provisions of the tax cut policy toward the rich, it is not enough to simply consider the statistical data concerning how much of the overall tax collections has been paid by the higher class. Looking at these statistical figures, the question arises whether it is ethical to pass most of the financial burden to the higher-income class. But we have to consider that there is a necessary interplay of social, political and economic factors that determine the outcome of the tax cut policy.

The Core Arguments
Arguing from the Kantian perspective
Kant, in his universalizability principle, states that for an action X to be considered ethical, it should be a course of actions that all individuals are justified to take under the same circumstances (1797). As for the tax cut policy, it seems that the measure can only be justified if no other means come as a better alternative solution. In the case of tax cut policy, apparently, there is- the reduction on government spending. Bush implemented the tax cut policy on the peak of the US war against Iraq, apparently, a very expensive endeavor that Americans are left to handle. This raises the question on the necessity, whether it is really necessary for the state to spend considerable sums of money on cases, like for instance, the war in Iraq Whether the Iraqi war is ethical or not is to be discussed separately, but the point is whether measures have already been taken to possibly cut down on the governmental expenses by evaluating whether a certain initiative is worth spending much money on it.

Arguing from the utilitarian perspective  
J.S. Mill states that for a particular action X to be justified, it should abide by the greatest happiness principle, that is, it should result the most benefits to the greatest number of people (1863). Having considered the tax cut policy statistics, one can see how much shares in tax collection is being shouldered by the upper-class, and proceed to draw the conclusions that indeed the tax measure is unfair to the high-income stratum given the fact how much they pay and how less numerous they are. Yet, to view things from the utilitarian perspective is to say that regardless of taxes the higher-class pays so long as the consequences improve the society as a whole, the view that this is an unjustified policy becomes easily undermined. If the over-all impact of the tax cut policy, in the end, serves the best interests of all income brackets (or maybe even more advantageous to the high-income stratum), the tax cut policy is readily justified as ethical no matter how wide the inequality exists in the shares of tax payments. It is difficult to think how the high-income class will not get any benefit from the enhanced socio-economic mechanisms and efficient structural improvements that will occur upon the implementation of a certain policy. Anyone can hardly think how the betterment of the society will leave behind this very important social class which plays significant role in the socio-economic and political behaviors.

There is one thing that needs to be taken into consideration, though. The research shows that the economic projections and analyses forecast a steady decrease in national savings and thus, the reduction in national budget. Whether the reduction is a good thing or not, it may be helpful to look at the other aspects or impacts of such reduction, both in short term and long term. This will also lead us in touching the side impacts associated with the Buss tax cut policy.    

Is this really pragmatic
Arguing based on the seemingly positive effects of the policy change is to take the pragmatic view that something is sound as long as it the telos (or end) is good. According to Dewey, morality is a communal concept (1922).   The major consequence of the tax cut policy is apparent in the increased availability of local employments. Apparently, this is a short term effect. On the whole, national savings are reduced because the tax cut policy and its opening of employment opportunities enable households to have higher disposable income (Auerbach, 2002), and this is the long term effect of the policy. When the disposable income increases, we can expect an increase in the amount of household consumption. Increase of the consumption is more likely to result in the reduction of national savings. From here, we need to evaluate carefully whether the compounding benefits make it really worthwhile pursuing the policy. Apparently, the reduction in national income may possibly lead to the reduction in other expenditures considered important in the pursuit of national welfare (i.e., the budget on education, elderly etc.). If we consider the reduction to be made on these very important aspects, the strength of the Bushs tax cut policy is undermined.

The Budget Starvation for the Governmental Programs
One of the strongest valid speculations concerning the tax cut policy is the high possibility that it will starve other governmental programs. One example is the welfare program being adopted in the US. Arguably, when the tax rates are cut and other variables like government spending remains the same we can expect a deficit or reduction in national revenues. This is because the original tax collections have been reduced substantially. The government has to do some adjustments somewhere. Apparently, such adjustments will occur in the government spending. One strongly anticipated possible effects of this is the reduction in the budget for government welfare programs. Is it ethical It depends on how you view welfare programs.

Welfare programs are another issue in the US. In 1992, Robert Wood claimed that the social welfare programs have been a huge failure (the World  I, 1992). The cited reasons include the following (1) the funding for the welfare program gets to be channeled through different people and agencies and this increases the over head costs. For every 1 invested on a welfare program, only 30 cents goes to the poor people (The World  I, 1992) (2) the qualifications and conditions for the receipt of the welfare programs come as a discouragement the citizens from exerting efforts to take initiatives in alleviating themselves. Individuals who are on a welfare program can be sent to jail if they accumulate assets more than 1,000 (The World  I).   Some people say that welfare programs perpetuate poverty and in no way a help to the citizens.      
   
The given descriptions for the welfare programs do not altogether support the viewpoint that welfare programs are wrong and should be eradicated. It simply suggests that that there may be something wrong with the existing welfare system being adopted in the US.  The existing welfare system seems to have its own glitches, making it hard to decide whether they really alleviate poverty or maintain it. Thus, it makes it difficult to ground our judgment that the tax cut policy is unethical because it cuts on the expenditures on a very important welfare system.

Arguments concerning equality
Another argument against the tax cut policy is that it widens the socio-economic gap (Friedman and Shapiro, 2004). The argument that supports this widening inequality gap is apparently unclear in how they define social equality. To judge, whether a policy promotes equality or not, we should have clear distinctions on what equality is. To hope that the socio-economic gap should be eradicated as a measure for social equality is a hope in vain. For one, people have not been born the same- some are more privileged than the others (Dworkin, 1985). It is also impossible to implement equal opportunities for the simple reason that not all of the opportunities are created by the government itself. Some people, because of their privileges (be it skills or endowment, etc.), may be better in finding and creating opportunities for themselves over the others. Further to that, peoples abilities, resources or privileges determine what kind of access they have to certain opportunities.

Thus, it seems that the better way to define the social equality is to say that every individual should be given the necessary access to the opportunities required to help him realize his full potentials, but done so in a way that the access to the opportunity is guarded against exploitation of the others who have greater abilities in accessing the opportunities. This is equality on its very basic sense- equality of access, which then leads to equality of opportunities available. On that note, it is difficult to say whether the tax cut policy is really a culprit in the widening social inequality. Apparently, it is not.

What happens when we do not cut down on taxes
Removing the tax cut policy would result in higher tax rates and the narrowing of the income bracket levels. This results to some individuals being spared from tax responsibilities. The direct effect of this move to the household is the reduction in their disposable incomes. The effect of this, on the national level, is the increase in the government savings. If the government has more funds to dispose, it sounds a very good thing. But one question that may be raised against the possible benefits of this is whether, increasing the budget ensures the establishment of better structures and national welfare- in other words, an issue on funds disposal. Apparently, with the presence of restraints and political factors, proper funds disposal is never guaranteed.

Conclusion
To answer whether the policy change is really biased, it will be necessary to render the ethical judgment based on facts and figures. Discussion on whether the tax cut policy is unethical to the high-income class entails touching certain issues on inequality, justice and distribution, fairness, liberalism, accountability and responsibility, and social responsibility. Only when the position can adequately address these aspects will it be able to be a foolproof understanding.

The tax cut policy is not unfair to the rich, and neither it is to the poorer class. Arguing from the utilitarian viewpoint, we were able to illustrate that the percentage of shares in tax payments collected by the rich alone does not determine whether the policy is ethical or not. We have seen how the short-term impact of the policy seems to benefit the society as a whole, and thus including in the beneficiaries are the high-income class (considering the undeniable amount of protection this class receives from the states because of the special function they have). The tax cut policy is neither unfair to the lower class. We have illustrated that the policy may not necessarily cause a widening socio-economic gap because this scenario is more properly determined by other considerations (endowments, differences, access, etc.)

Despite the ethical grounding that has been provided here, it seems that we may need to look at the side-impacts of the policy, more especially on the important other policy changes it may require in the future. Considering all the economic projections on national savings and its effects on government spending, it seems that an alternative solution is called for. For instance, perhaps, we may need to evaluate again the existing government structures and identify which of them function inefficiently because it may be that the government is channeling funds to such inefficient mechanisms and thus, wasting valuable resources.

Business Ethics Emphasis
Although there are other great centres of finance in the world, when viewed from a truly analytical and comparative point of view, there is no place in the world that offers the same academic and professional opportunities as Hong Kong.  This is because Hong Kong is a truly international centre of finance with all of its complexities and debates, because it is where the East and the West meet in terms of competing financial visions and policy paradigms, and because it is home to academic theoreticians and practitioners in ways that other financial capitals simply cannot match in terms of diversity, activity, and sophistication.  Hong Kong is the future of finance and this is my primary reason for desiring to pursue my finance studies specifically in Hong Kong.  The University of Hong Kong, in turn, is ideally situated both in terms of faculty expertise and access to the bustling world of competitive finance.  Perhaps the most attractive feature of the programme is how it has been designed to integrate theoretical knowledge with specialised training opportunities.

Knowledge and theory, to be sure, are useless if fundamental tenets and principles cannot be applied in ways that progress toward or satisfy specific objectives.  The hands-one experience of the faculty, combined with the opportunities for specialised types of hands-on experiences, distinguishes and legitimises the University of Hong Kongs programme in ways that set it apart from other university programmes throughout the world.

What I therefore seek to gain from the programme, in sum, is a pervasive immersion in the theory, the application, and the environment of finance in a comprehensive manner that will allow me to secure the most well-rounded and advanced type of analytical education possible.  Finally, an additional compelling benefit that I seek to pursue and attain is the forging of social and professional relationships with my peers and my colleagues.  Both Hong Kong and the University of Hong Kong offer a diverse pool of individuals and professionals from whom to learn from and share ideas with in ways that are simply not available in other locations or universities.  These are the benefits and the advantages I seek to secure from the programme at the University of Hong Kong.

The modern world of finance is certainly beset with challenges and opportunities.  To be sure, the are financial imbalances throughout the world and many of these balances have been attributed to the substantive nature of novel financial instruments and some have been attributed to human abuses rather than the inherent fallibility of certain finance instruments and financial principles.  These debates, and the underlying financial bases of these debates, relate specifically to my main research interests.  Specifically, I have been most keenly intrigued by how the evolving and frequently contradictory principles of corporate governance affect finance and how the principles of finance might be better coordinated and clarified through a more cohesive and predictable type of global corporate governance paradigm.  Corporate governance is such an important feature of finance, both in terms of public policy and in terms of substantive and procedural financial issues, because it can provide a more secure and predictable framework within which finance professionals may make decisions and weigh risks more confidently.  I am particularly impressed and attracted to the work of Dr. Joseph P. H. Fan who has engaged in a series of critical examinations of corporate governance in different finance settings in an effort to identify and test the viability of different corporate governance models and features.  Though a sometimes neglected aspect of finance, the public policy and corporate policy issues are quite interesting to me and these are areas of study I would like to pursue in addition to the more specific finance topics and courses.

Finally, on a personal business ethics note, I would like to add that todays interdisciplinary world, in which once unsolvable riddles are being approached and solved in unique ways, illustrates in a superficial manner what educational institutions like the University of Hong Kong have known in a more holistic sense for years more specifically, it is the integration of different types of knowledge that makes communities and the world a more comprehensible and ethical planet to inhabit.  I would bring a firm and well-informed ethical background to the programme

Diversity Emphasis
Although there are other great centres of finance in the world, when viewed from a truly analytical and comparative point of view, there is no place in the world that offers the same academic and professional opportunities as Hong Kong.  This is because Hong Kong is a truly international centre of finance with all of its complexities and debates, because it is where the East and the West meet in terms of competing financial visions and policy paradigms, and because it is home to academic theoreticians and practitioners in ways that other financial capitals simply cannot match in terms of diversity, activity, and sophistication.  Hong Kong is the future of finance and this is my primary reason for desiring to pursue my finance studies specifically in Hong Kong.  The University of Hong Kong, in turn, is ideally situated both in terms of faculty expertise and access to the bustling world of competitive finance.  Perhaps the most attractive feature of the programme is how it has been designed to integrate theoretical knowledge with specialised training opportunities.  Knowledge and theory, to be sure, are useless if fundamental tenets and principles cannot be applied in ways that progress toward or satisfy specific objectives.  The hands-one experience of the faculty, combined with the opportunities for specialised types of hands-on experiences, distinguishes and legitimises the University of Hong Kongs programme in ways that set it apart from other university programmes throughout the world.  What I therefore seek to gain from the programme, in sum, is a pervasive immersion in the theory, the application, and the environment of finance in a comprehensive manner that will allow me to secure the most well-rounded and advanced type of analytical education possible.  Finally, an additional compelling benefit that I seek to pursue and attain is the forging of social and professional relationships with my peers and my colleagues.  Both Hong Kong and the University of Hong Kong offer a diverse pool of individuals and professionals from whom to learn from and share ideas with in ways that are simply not available in other locations or universities.  These are the benefits and the advantages I seek to secure from the programme at the University of Hong Kong.

The modern world of finance is certainly beset with challenges and opportunities.  To be sure, the are financial imbalances throughout the world and many of these balances have been attributed to the substantive nature of novel financial instruments and some have been attributed to human abuses rather than the inherent fallibility of certain finance instruments and financial principles.  These debates, and the underlying financial bases of these debates, relate specifically to my main research interests.  Specifically, I have been most keenly intrigued by how the evolving and frequently contradictory principles of corporate governance affect finance and how the principles of finance might be better coordinated and clarified through a more cohesive and predictable type of global corporate governance paradigm.  Corporate governance is such an important feature of finance, both in terms of public policy and in terms of substantive and procedural financial issues, because it can provide a more secure and predictable framework within which finance professionals may make decisions and weigh risks more confidently.  I am particularly impressed and attracted to the work of Dr. Joseph P. H. Fan who has engaged in a series of critical examinations of corporate governance in different finance settings in an effort to identify and test the viability of different corporate governance models and features.  Though a sometimes neglected aspect of finance, the public policy and corporate policy issues are quite interesting to me and these are areas of study I would like to pursue in addition to the more specific finance topics and courses.

That excellence cannot be attained without diversity it seems, in the modern world, to be a rather intuitive deduction.  Such a deduction is perfectly consistent with the underlying nature of any intellectually honest type of inquiry.  A thesis must be formulated, tested against all of the available data, and conclusions drawn.  Diversity contributes, indeed it is a necessary ingredient, for any type of rigorous analysis.   Social truths cannot exist in a vacuum truths must be tested in the real world and with real people rather than with imaginary prototypes that do not reflect the true diversity of opinion and contrary world views that reflect both our own society and the world at large.  What might seem a perfectly plausible theory to one individual might seem extraordinarily unjust to another individual a traditional approach that seems to one individual to bring the greatest good to society to another individual might threaten to socially ostracise minority opinions and, finally, ethnocentric views inhibit academic inquiry whereas culturally diverse pools of learners break down biases and contribute to more meaningful discussions and theoretical paradigms.  In the final analysis, the University of Hong Kong is an ideal setting in which to study and shares ideas that have profound social implications

Core Essay Emphasis (Goals plus Modern Finance Interest)
Although there are other great centres of finance in the world, when viewed from a truly analytical and comparative point of view, there is no place in the world that offers the same academic and professional opportunities as Hong Kong.  This is because Hong Kong is a truly international centre of finance with all of its complexities and debates, because it is where the East and the West meet in terms of competing financial visions and policy paradigms, and because it is home to academic theoreticians and practitioners in ways that other financial capitals simply cannot match in terms of diversity, activity, and sophistication.  Hong Kong is the future of finance and this is my primary reason for desiring to pursue my finance studies specifically in Hong Kong.  The University of Hong Kong, in turn, is ideally situated both in terms of faculty expertise and access to the bustling world of competitive finance.  Perhaps the most attractive feature of the programme is how it has been designed to integrate theoretical knowledge with specialised training opportunities.

Knowledge and theory, to be sure, are useless if fundamental tenets and principles cannot be applied in ways that progress toward or satisfy specific objectives.  The hands-one experience of the faculty, combined with the opportunities for specialised types of hands-on experiences, distinguishes and legitimises the University of Hong Kongs programme in ways that set it apart from other university programmes throughout the world.  What I therefore seek to gain from the programme, in sum, is a pervasive immersion in the theory, the application, and the environment of finance in a comprehensive manner that will allow me to secure the most well-rounded and advanced type of analytical education possible.  Finally, an additional compelling benefit that I seek to pursue and attain is the forging of social and professional relationships with my peers and my colleagues.  Both Hong Kong and the University of Hong Kong offer a diverse pool of individuals and professionals from whom to learn from and share ideas with in ways that are simply not available in other locations or universities.  These are the benefits and the advantages I seek to secure from the programme at the University of Hong Kong.

The modern world of finance is certainly beset with challenges and opportunities.  To be sure, the are financial imbalances throughout the world and many of these balances have been attributed to the substantive nature of novel financial instruments and some have been attributed to human abuses rather than the inherent fallibility of certain finance instruments and financial principles.  These debates, and the underlying financial bases of these debates, relate specifically to my main research interests.  Specifically, I have been most keenly intrigued by how the evolving and frequently contradictory principles of corporate governance affect finance and how the principles of finance might be better coordinated and clarified through a more cohesive and predictable type of global corporate governance paradigm.  Corporate governance is such an important feature of finance, both in terms of public policy and in terms of substantive and procedural financial issues, because it can provide a more secure and predictable framework within which finance professionals may make decisions and weigh risks more confidently.  I am particularly impressed and attracted to the work of Dr. Joseph P. H. Fan who has engaged in a series of critical examinations of corporate governance in different finance settings in an effort to identify and test the viability of different corporate governance models and features.  Though a sometimes neglected aspect of finance, the public policy and corporate policy issues are quite interesting to me and these are areas of study I would like to pursue in addition to the more specific finance topics and courses.

Corporate Finance Scandal Emphasis
Although there are other great centres of finance in the world, when viewed from a truly analytical and comparative point of view, there is no place in the world that offers the same academic and professional opportunities as Hong Kong.  This is because Hong Kong is a truly international centre of finance with all of its complexities and debates, because it is where the East and the West meet in terms of competing financial visions and policy paradigms, and because it is home to academic theoreticians and practitioners in ways that other financial capitals simply cannot match in terms of diversity, activity, and sophistication.  Hong Kong is the future of finance and this is my primary reason for desiring to pursue my finance studies specifically in Hong Kong.  The University of Hong Kong, in turn, is ideally situated both in terms of faculty expertise and access to the bustling world of competitive finance.  Perhaps the most attractive feature of the programme is how it has been designed to integrate theoretical knowledge with specialised training opportunities.

Knowledge and theory, to be sure, are useless if fundamental tenets and principles cannot be applied in ways that progress toward or satisfy specific objectives.  The hands-one experience of the faculty, combined with the opportunities for specialised types of hands-on experiences, distinguishes and legitimises the University of Hong Kongs programme in ways that set it apart from other university programmes throughout the world.  What I therefore seek to gain from the programme, in sum, is a pervasive immersion in the theory, the application, and the environment of finance in a comprehensive manner that will allow me to secure the most well-rounded and advanced type of analytical education possible.  Finally, an additional compelling benefit that I seek to pursue and attain is the forging of social and professional relationships with my peers and my colleagues.  Both Hong Kong and the University of Hong Kong offer a diverse pool of individuals and professionals from whom to learn from and share ideas with in ways that are simply not available in other locations or universities.  These are the benefits and the advantages I seek to secure from the programme at the University of Hong Kong.

The modern world of finance is certainly beset with challenges and opportunities.  To be sure, the are financial imbalances throughout the world and many of these balances have been attributed to the substantive nature of novel financial instruments and some have been attributed to human abuses rather than the inherent fallibility of certain finance instruments and financial principles.  These debates, and the underlying financial bases of these debates, relate specifically to my main research interests.  Specifically, I have been most keenly intrigued by how the evolving and frequently contradictory principles of corporate governance affect finance and how the principles of finance might be better coordinated and clarified through a more cohesive and predictable type of global corporate governance paradigm.  Corporate governance is such an important feature of finance, both in terms of public policy and in terms of substantive and procedural financial issues, because it can provide a more secure and predictable framework within which finance professionals may make decisions and weigh risks more confidently.  I am particularly impressed and attracted to the work of Dr. Joseph P. H. Fan who has engaged in a series of critical examinations of corporate governance in different finance settings in an effort to identify and test the viability of different corporate governance models and features.  Though a sometimes neglected aspect of finance, the public policy and corporate policy issues are quite interesting to me and these are areas of study I would like to pursue in addition to the more specific finance topics and courses.

Finally, recent corporate scandals, both in the United States and around the world, have rekindled many debates regarding both the importance of corporate governance and the best means for achieving effective types of corporate governance.  Sadly, no consensus has developed about how to best address these concerns.  Indeed, a comparative analysis of corporate governance processes and mechanisms, in the United States and the European Union, highlights the debates that are taking place between those who subscribe to traditional shareholder-oriented approaches to corporate governance and those who are advocating newer approaches and different types of corporate governance frameworks.  It is my goal to use finance as a tool for pursuing corporate governance approaches and policies that are effective in promoting financial transparency without unduly hindering innovation and risk-taking in the field of finance.

University as Microcosm of Society Emphasis
Although there are other great centres of finance in the world, when viewed from a truly analytical and comparative point of view, there is no place in the world that offers the same academic and professional opportunities as Hong Kong.  This is because Hong Kong is a truly international centre of finance with all of its complexities and debates, because it is where the East and the West meet in terms of competing financial visions and policy paradigms, and because it is home to academic theoreticians and practitioners in ways that other financial capitals simply cannot match in terms of diversity, activity, and sophistication.  Hong Kong is the future of finance and this is my primary reason for desiring to pursue my finance studies specifically in Hong Kong.  The University of Hong Kong, in turn, is ideally situated both in terms of faculty expertise and access to the bustling world of competitive finance.  Perhaps the most attractive feature of the programme is how it has been designed to integrate theoretical knowledge with specialised training opportunities.

Knowledge and theory, to be sure, are useless if fundamental tenets and principles cannot be applied in ways that progress toward or satisfy specific objectives.  The hands-one experience of the faculty, combined with the opportunities for specialised types of hands-on experiences, distinguishes and legitimises the University of Hong Kongs programme in ways that set it apart from other university programmes throughout the world.  What I therefore seek to gain from the programme, in sum, is a pervasive immersion in the theory, the application, and the environment of finance in a comprehensive manner that will allow me to secure the most well-rounded and advanced type of analytical education possible.  Finally, an additional compelling benefit that I seek to pursue and attain is the forging of social and professional relationships with my peers and my colleagues.  Both Hong Kong and the University of Hong Kong offer a diverse pool of individuals and professionals from whom to learn from and share ideas with in ways that are simply not available in other locations or universities.  These are the benefits and the advantages I seek to secure from the programme at the University of Hong Kong.

The modern world of finance is certainly beset with challenges and opportunities.  To be sure, the are financial imbalances throughout the world and many of these balances have been attributed to the substantive nature of novel financial instruments and some have been attributed to human abuses rather than the inherent fallibility of certain finance instruments and financial principles.  These debates, and the underlying financial bases of these debates, relate specifically to my main research interests.  Specifically, I have been most keenly intrigued by how the evolving and frequently contradictory principles of corporate governance affect finance and how the principles of finance might be better coordinated and clarified through a more cohesive and predictable type of global corporate governance paradigm.  Corporate governance is such an important feature of finance, both in terms of public policy and in terms of substantive and procedural financial issues, because it can provide a more secure and predictable framework within which finance professionals may make decisions and weigh risks more confidently.  I am particularly impressed and attracted to the work of Dr. Joseph P. H. Fan who has engaged in a series of critical examinations of corporate governance in different finance settings in an effort to identify and test the viability of different corporate governance models and features.  Though a sometimes neglected aspect of finance, the public policy and corporate policy issues are quite interesting to me and these are areas of study I would like to pursue in addition to the more specific finance topics and courses.

Finally, a university setting is in many ways a microcosm of society more specifically, it functions as an intellectual and social springboard from which students can make a more successful transition to society.  One of my fundamental goals is community-based or social in nature.  I fully intend to seek out and secure experiences in the community which will allow me to test and to hone the skills I have learned in the classroom.  These will include volunteer activities as well as private-market experiences, a government role if possible, and my ultimate goal is to bridge the gap between theory and practice.  Ideally, I will be able to enrich my college experience by participating in extracurricular activities at the University of Hong Kong as well as performing some important role in the community.