Behavioral Finance

Behavioral finance is a study which involves the influence of psychology on the attitudes and behavior of investors and its subsequent effects on the markets. Behavioral Studies is still in its development stages, but it is instrumental in determining/ explaining as to why or how markets might be inefficient. The difference between traditional finance and behavioral finance is that traditional finance is based on the following concepts: – Investors have rational behavior – Capital Asset Pricing Model (CAPM) – Markets are efficientBehavioral finance on the other hand says that, the psychological forces interfere with these concepts. It says that there are both internal and external behavioral obstacles towards the value creation of any company. In practical terms it brings forward the errors in judgments made by both individual investors and fund managers and the various biases to which we as humans are prone. Analyzing this will place us in a position to make dec isions which avoid errors/mistakes committed in the past . INVESTORS: Individual investors: An individual investor is a person who purchases small amounts of securities for him/herself.He is not professionally involved in investment services and whatever purchases he/she makes are on an arm’s length basis. Individual investors are highly regulated because they are thought of as amateurs with little or no knowledge. An individual investor is also known as retail investor or small investor . Professional investor: These investors are usually all those businesses which are involved in giving investment services either directly or indirectly for example, investment companies, mutual funds, investment banks, brokerage houses etc.Besides them professional investors could also be individuals which are professionally involved in giving investment services. Professional investors are also known as institutional investors. These investors are subject to fewer regulations probably becau se they are perceived as having superior knowledge to individual investors . Behavioral biases: Individual and Institutional investors are both prone to almost similar biases, because institutional investors are although organizations in their own right but in actual are lead by a handful of managers.Proponents of this study argue that humans are prone to bias in making their judgments no matter how qualified or experienced they may be. They say that humans make frequent use of heuristics, mental shortcuts/rules of thumb to simplify decisions and tasks that are complex. Availability heuristic: With availability heuristic it is believed that for humans the probability of an event occurring is dependent on how easily one can imagine that event happening. The more clear is the image the greater the probability.A related concept is Illusory correlation which describes we imagine and hence interpret evidence. Although this bias is limited for retail investors since not only their investm ents are smaller but they also don’t have various charts, patterns analyzing past year data at their disposal, as for institutional investors this bias is at a much more magnified level because many fund managers use charts and technical analysis which according to them helps in identifying various patterns and price/stock moments . Representativeness heuristic:This concept says that humans are prone making judgments that involve consideration of stereo-types instead of the underlying features. For example, while hiring the selection process takes into consideration the qualifications, relevant experience, personality etc. however this in no way can predict the future job performance of the individual. This also incorporates a related concept called Illusion of validity which puts forward that the confidence in one’s judgment is primarily based on the representation of the situation instead of the characteristics.However, retail investors are more prone to this bias as compared to institutional investors because they have the information that is available to the general public for example, commentaries from financial journalists, analysts which believe that well known companies are good stock-market investment options, but in reality these two factors are largely unrelated . Anchoring and adjustment: This is another important heuristic according to which decisions made by humans are dependent on some key value/number.There is no process or logic behind determination of this value/number it could be any random number. For example, budgeting which involves use of current figures to determine future estimates. Many fund managers use current year figures and current year industry averages to determine future estimates. This bias is a product of our inherent conservatism which leads to our under reaction to new information. Institutional investors are more prone to this bias as compared to small investors. Probably because the managers of investment c ompanies actively use these techniques to draw conclusions.Small investors would hardly be aware so these techniques however those with an accounting background could be an exception . Loss aversion: It is also a key bias. It is based on the concept that humans find it very difficult to accept loss and the state of denial is such that we infact believe that holding onto it for longer periods of time would turnaround things some way or the other. This bias has some major consequences in financial decision-making. For instance, over the years it has been seen that many companies have kept running loss-making units and destroying shareholder wealth to the level at which it was irreparable.The reasons behind the strength of this bias as scholars put it is the shame and regret and feeling the blame for the loss incurred. Individual investors are more prone to this professional investors, a study revealed that individual investors sell those stocks that start to perform well quite soon an d hang on loss-making stocks for longer periods of time hoping that things might take a u-turn. This problem as professional traders put it is named get evenitis. Hindsight bias: It is based on the concept that humans are prone to that feeling â€Å"I knew it all the while† or precisely hindsight bias.To correct this bias is also very difficult because it’s natural for us to make differing conclusions regarding what happened in the past even though those decisions would have been correct according to the data and circumstances at hand then. For example, these days since the global economy is in recession even a layman is heard that this was inevitable. Individual investors are prone to this bias out of human nature, as for institutional investors they are less prone to this because they would be having greater access to information all the time .Over-confidence bias: Humans are naturally over-confident about their abilities normally. This further leads to over optimism i. e. we normally feel that we can be successful in most of our endeavors or do the right thing in most of the situations. However in reality that is not possible. Moreover the more information or data one gathers regarding a task, the more that person feels in greater control this is called Illusion of knowledge. Practically the biggest setback that one has to deal with results unfolds is that they are quite different than what was expected.Individual investors are much less prone to this bias as compared to institutional investors which suffer a lot more, because the over-confidence of a team of managers would prove more lethal financially. For example, 3Com which acquired US Robotics in 2000 made an IPO of its division that made the famous Palm pilots. Although the share prices went as high as $165 making 3Com the fourth largest technology firm then but announcement of a forthcoming product without the infrastructure yet in place saw its share prices dramatically fall to $1. 35 in 2001.This financial blunder was a result of a combined over-optimism of the then senior management. INVESTMENT BELIEFS: Characteristics of the Individual investor’s investment beliefs would be focused on limited aspects probably because they have limited knowledge of the market and they invest smaller amounts as compared to institutional investors. They would probably invest in companies that have good market reputation and which promise a good return within a short span of time. As for institutional investors their investment beliefs would be diverse since they are professionals.It would be important for them to take measures to avoid conflicts of interest. It would also be important for them to develop a clear view of capital markets in order to invest in companies that are expected to yield good returns . CONCLUSION: Behavioral finance has therefore highlighted that financial decision-making of both individual and institutional investors. The errors/mistakes made in yes ter-years both at the individual and organizational level if taken care of in future could result in making sound long-term decisions. WORKS CITED: Blanco. A.Behavioral Finance Possibilities and Limitations of Different Approaches. Wiesbaden, 2003 Fortune. Why CEOs Fail. February 10th 2009 Retrieved from :< http://money. cnn. com/magazines/fortune/>, 1999. Goldberg. J. Behavioral Finance. John Wiley, 2001. Montier. J. Behavioral Finance: Insights into Irrational Minds and Markets. J. Wiley. 2002. Owen. A. S. Behavioral Finance and the Decision to Invest in High Tech Stocks. School of Finance and Economics, University of Technology, 2002 Pompian. M. M. Behavioral Finance and Wealth Management: How to Build Optimal Portfolios That Account for Investor Biases.John Wiley and Sons, 2006. Redhead. K. Personal Finance and Investments: A Behavioral Finance Perspective. Routledge, 2008 Shefrin. H. Behavioral Finance. Edward Elgar Pub, 2001. Shleifer . A. Inefficient Markets: An Introduction to Behavioral Finance. Oxford University Press US, 2000. Stanyer. P, Dimson. E. The Economist Guide to Investment Strategy: How to Understand Markets, Risk, Rewards and Behaviour. Bloomberg Press, 2006. Taffler. J. R. (2001). Management Focus. Thaler. H. R. (1993). Advances in Behavioral Finance. Russell Sage Foundation

Project Management A Critical Evaluation

Project Management A Critical Evaluation Introduction Available literature demonstrates that a project schedule is a fundamental constituent of any project management activity, issues of size or scope of the project notwithstanding. Indeed, as noted by Kerzner (2001), a project schedule not only directs the project stakeholders on when each activity should be done, but it reveals what has already been achieved, whether certain activities are late in terms of delivery, and the sequence in which project activities need to be completed.Advertising We will write a custom essay sample on Project Management: A Critical Evaluation specifically for you for only $16.05 $11/page Learn More It is against this background that the present paper seeks to respond to a few issues related to project scheduling, primarily the identification of activities needed to estimate resources and durations, identification and discussion of some of the milestones that may be contained in a project, and, lastly, the provision o f a summary of how human resources should be assigned to each project activity to guard against lateness or perceived schedule slips. Activities to Estimate Resources and Durations in Project Management An accurate assessment or estimation of the resources and durations needed to complete particular tasks should be an issue of imperative concern for project managers and other stakeholders in the team. Kerzner (2001) notes that while it is true that duration estimation analyzes the time that may be taken to complete either the entire project or subsections within the entire project, activity duration, on its part, is to a large extent dependent on other time and resource approximations. In this perspective, the Work Breakdown Structure (WBS) can be proposed as an activity that can assist the project team to estimate the resources and durations needed. This activity not only defines a project in the context of its deliverables, but provides a framework for breaking down the stated del iverables into consequential units of work (Kerzner, 2001). The author further notes that with this breakdown, team leaders are able to ascertain a proper work hierarchy that operationalizes resource and duration estimations. The second activity that could be proposed entails undertaking a critical path review using the Critical Path Method (CPM) with a view to estimating the overall project duration. It is of significance to note that the CPM has the capacity to calculate the total project duration while basing its estimates on individual task durations and their interrelationships. It therefore follows that the series of project tasks determining the minimum time required for the project should be included as the critical path (Kerzner, 2001).Advertising Looking for essay on project management? Let's see if we can help you! Get your first paper with 15% OFF Learn More The third activity that could be proposed involves undertaking a performance evaluation re view using an effective project management tool, such as the Performance Evaluation Review Technique (PERT). According to Schwalbe (2010), this activity employs a pictorial description of project tasks as a system of dependencies with a view to assess or investigate the most likely time and resource estimates. Forth, the project leader in conjunction with other members can initiate a Resource Breakdown Structure (RBS), which is basically â€Å"†¦a hierarchical structure that identifies the project resources by category and typeâ€Å"(Schwalbe, 2010, p. 222). The information gathered by this structure is fundamentally important in not only determining the costs of resources, but also on how to go about acquiring the resources. Lastly, a Three-Point Estimate (TPE) can be used to estimate activity durations. This activity, according to Schwalbe (2010), revolves around designing â€Å"†¦an optimistic, most likely, and pessimistic estimate [whereby] the optimistic estimate i s based on a best-case scenario, while the pessimistic estimate is based on a worst case scenario† (p. 223). Milestones for the Project Milestones are simply goals or objectives that assist project leaders to keep track of the overall progress for any project, with each milestone indicating a forward movement (Higginbotham, 2008). In essence, milestones not only assist in building continued momentum for the team members, but they show progress to members of staff as well as to other leaders. The SMART (specific; measurable; attainable; relevant; time-bound) criteria can be used to describe project milestones in the context of the outlined case study (Schwalbe, 2010). Under the ‘specific’ term, we can identify and describe the first two project milestones, which may include: A fully functional remote deposit capture must be in place within the next five months to allow a month’s time for any necessary adjustments, and The remote deposit capture must be able to fulfill the core objectives of increasing customer satisfaction and curtailing customer loss. Under the ‘measurable’ term, we can identify and describe the third and forth milestones, namely: The remote deposit capture, upon its commissioning, must be able to improve customer satisfaction levels by up to 25 percent, and The bank must be able to register an increase of about 20 percent in its customer base upon the commissioning of the new project. Moving on, under the ‘attainable’ term of the SMART criteria, we can identify and describe the fifth and sixth milestones, namely:Advertising We will write a custom essay sample on Project Management: A Critical Evaluation specifically for you for only $16.05 $11/page Learn More The staff members need to undergo training to improve their abilities and skills towards the operationalization of the new project, and The need to make heavy investments in information technology (IT) to en sure the goals of increasing customer satisfaction and avoiding the loss of current customers are met after takeoff. Under the ‘relevancy’ term, we can identify and describe the seventh and eighth milestones as follows: Conduct a baseline survey in the fourth month of project implementation to evaluate how other banks are coping with the issues of customer satisfaction, and To conduct a baseline survey to investigate the relevancy of remote deposit capture against the industry’s best practices. Lastly, under the ‘time-bound’ term of the SMART criteria, we can identify and describe the project milestones as follows: We must have the necessary IT infrastructure in place by the lapse of 90 days (three months), and We must be able to test the new IT infrastructure using selected bank customers by the lapse of 150 days (five months) to provide room for any improvement or adjustment. Assigning Personnel to Project Activities It is indeed true that an IT -related project such as the implementation of a remote deposit capture for a banking institution certainly requires personnel from a wide variety of fields, such as software developers, network administrators, java programmers, risk assessors, junior support staff, internet security personnel, subcontractors, and senior personnel such as the chief information officer (CIO), among others. The way that all these personnel are assigned their duties is critical to the success of any IT-related project (Schwalbe, 2010). According to Lock (2007), personnel should be assigned to project activities based on their availability, level of skill and training, and an open mind to learn more. The table next page demonstrates how the tasks will be delegated among the personnel involved Personnel activity M1 M2 M3 M4 M5 M6 Software developers Developing network receivable software Network administrators Networking between main office and branches Java programmers programming Risk assessors Assessing risk in depositing money online Junior support staff Support roles Security personnel Internet security subcontractors Provision of hardware CIO oversight N.B: M1-M6 = the first month through the sixth month (project period) It is indeed true that some projects may fall behind schedule owing to a multiplicity of factors, such as lack of finances, lack of materials, lack of the required personnel, and occurrence of natural catastrophes, among others (Lock, 2007). When such eventualities occur, the project manager or leader may renegotiate the scope/ schedule of the project with the project sponsor, along with other members, to evaluate if it is indeed viable to either reduce the scope activities of the original project or possibly increase the schedule duration to ensure that project scope activities are satisfactorily met (Schwalbe, 2010). Second, the project leader, in collaboration with the project sponsor and other team members, may engage in resource re-allocation to make sure that extra resources are availed to project areas that might have fallen behind schedule. Third, the project members might engage in multitasking, which basically entails working on multiple project activities for a specific amount of time to permit for more than one activity to be completed (Lock, 2007). Other strategies that may be used include increasing dedicated time, project schedule compression, and fast-tracking of activities (Schwalbe, 2010).Advertising Looking for essay on project management? Let's see if we can help you! Get your first paper with 15% OFF Learn More Conclusion The above analysis demonstrates the complexities involved in project management, particularly in making estimations for resources and time durations. The analysis has also touched on project milestones and how such milestones need to be generated to ensure successful implementation of projects. All in all, the underlying task is for the project manager to lead the team using industry-specific best practices in project management to ensure successful implementation (Lock, 2007). Reference List Higginbotham, J. (2008). Project planning: Identify milestones, assumptions, and tasks. Retrieved from volunteercentered.com/2008/03/31/project-planning-identify-milestones-assumptions-and-tasks/ Kerzner, H. (2001). Project management: A systems approach to planning, scheduling, and controlling, 7th Ed. New York, NY: John Wiley Sons. Lock, D. (2007). Project management, 9th Ed. Hampshire: Gower Publishing Ltd. Schwalbe, K. (2010). Information technology project management. Boston, M A: Cengage Learning.

Choosing an Ivy League Business School

Choosing an Ivy League Business School The Six Ivy League Business Schools Ivy League schools attract intellectuals from around the world and have a legendary reputation for academic excellence. There are eight Ivy League schools, but only six Ivy League business schools. Princeton University and Brown University do not have business schools. The six Ivy League business schools include: Columbia Business School - Columbia UniversitySamuel Curtis Johnson Graduate School of Management - Cornell UniversityHarvard Business School - Harvard UniversityTuck School of Business - Dartmouth CollegeWharton School - University of PennsylvaniaYale School of Management - Yale University Columbia Business School Columbia Business School is known for its diverse entrepreneurial community. The schools location in the business hub of New York City provides unparalleled immersion in the business world. Columbia offers many different graduate programs, including an MBA program, executive MBA programs, doctoral programs, and Master of Science programs in several business disciplines. Students who are seeking an international experience should explore Columbia’s pioneering program with London Business School,  EMBA-Global Americas, and Europe, or the  EMBA-Global Asia, created in partnership with the University of Hong Kong. Samuel Curtis Johnson Graduate School of Management Cornell Universitys Samuel Curtis Johnson Graduate School of Management, more commonly known as Johnson, takes a performance-learning approach to business education. Students learn theoretical frameworks, apply them to real-world situations in actual business settings, and receive continuous feedback from qualified experts. Johnson offers the Cornell MBA five different ways: one-year MBA (Ithaca), two-year MBA (Ithaca), tech-MBA (Cornell Tech), executive MBA (Metro NYC), and Cornell-Queens MBA (Offered in conjunction with Queens University). Additional business education options include executive education and Ph.D. programs. Students seeking a global experience should look to Johnsons newest program, the Cornell-Tsinghua MBA/FMBA, a dual degree program offered by  Johnson at Cornell University  and  PBC School of Finance (PBCSF) at Tsinghua University. Harvard Business School The overall mission of Harvard Business School is to educate leaders who make a difference. The school does this through its educational programs, faculty, and influence around the world. HBS program offerings include a two-year MBA program, executive education, and eight full-time doctoral programs leading to a Ph.D. or DBA. HBS also offers summer programs for ambitious undergraduates. Students who like the idea of studying online should explore the schools HBX online programs, which incorporate active learning and the case method learning model. Tuck School of Business The Tuck School of Business was the very first graduate school of management founded in the United States. It offers only one-degree program: a full-time MBA. Tuck is a small business school, and it works hard to facilitate a collaborative learning environment designed to build lifelong relationships. Students participate in a unique residential experience that promotes teamwork while focusing on a core curriculum of general management skills. Their education is then rounded out with advanced electives and seminars. Wharton School Founded more than a century ago in 1881, Wharton is the oldest Ivy League business school. It employs the most published business school faculty and has a global reputation for excellence in business education. Undergraduate students who attend Wharton School work toward a BS in economics and have an opportunity to choose from more than 20 different business concentrations. Graduate students can enroll in one of several MBA programs. Wharton also offers interdisciplinary programs, executive education, and Ph.D. programs. Minority students who are still in high school should check out Whartons pre-college LEAD program. Yale School of Management Yale School of Management prides itself on educating students for leadership positions in every sector of society: public, private, nonprofit, and entrepreneurial. Programs are integrated, combining fundamental core courses with unlimited elective choices. Graduate students can choose from a range of programs at the graduate level, including executive education, MBA programs, a Master of Advanced Management, Ph.D. programs, and joint degrees in business and law, medicine, engineering, global affairs, and environmental management, among others. Yale School of Management does not award undergraduate degrees, but second-, third-, and fourth-year university students (as well as recent graduates) can participate in Yale SOMs two-week Global Pre-MBA Leadership Program.

Why did the U.S. Supreme Court once rule that the federal income tax Essay

Why did the U.S. Supreme Court once rule that the federal income tax was unconstitutional How did Congress react Include proper in-text citations in APA format to support your answer - Essay Example This culminated in the annulment of the federal Income Tax Act of 1894, by the United States Supreme Court, on constitutional grounds. The Court held the levy imposed by the law on the returns from real estate was not sufficiently different from the taxes remitted by the property owners on the same assets. The court, therefore, categorized the duty as a direct tax, which should be apportioned among the different States. This ruling set a remarkable precedent, that, although, not all income taxes amounted to direct taxes; however, it was still unclear whether the income tax fell in either category of taxes. Regardless, the income tax was believed to be illegal because Congress had not yet streamlined the Sixteenth Amendment to be in tandem with the taxation laws. Federal authorities in charge on income tax based their arguments on the fact that the passage of the Sixteenth Amendment permitted the government to implement the income taxes. Additionally, the court concluded that the enactment of such a law would be a recipe for chaos between different social classes. Nonetheless, the ruling prompted Congress to correct the ambiguous issue by ratifying a Constitutional amendment. Shortly after the passing of the Amendment, the legislature enacted another legislation governing income tax; a legal structure, which was largely drawn from the 1894 law. It was, however, clearer on both

Apex Corporation Case Coursework Example | Topics and Well Written Essays - 1500 words

Apex Corporation Case - Coursework Example Conversely, the owners may just be satisfied with a business size that suits their managerial capabilities. Whatever the size of the business, it is the financial health that matters the most to all stakeholders (Meigs & Meigs, 10). In the given assignment, I have to assume that I am an attorney and that a client has approached me to consider whether a managerial position at Apex Corporation would be good to take up. He is already impressed with the salary and benefits they are offering but has no knowledge of accounting or finance. So I am going to have to advise him after looking at Apex’s financial statements for 2001, as the assignment criteria limits our evaluation to this year only. However we might make comparisons between the years 2000 and 2001 Analysis of Financial Statements The financial statements of a corporate enterprise, namely the income statement and the balance sheet are two of the most important summaries of the business activities that have occurred over t he last financial year. We are told that the Apex Corporation is a local manufacturing firm. The third statement that has also found to be of use to stakeholders is the Statement of Cash Flow, which shows how the firm used the cash generated in financing, investment and production activities. Negative or troubling cash flow situations are often the first sign of distress in a business, occurring long before telltale signs emerge on its income statement and balance sheet. The most common ratios that can be calculated for a corporate business entity using ratio analysis are the Current Ratio, the Debt-Equity Ratio, the Receivables Turnover, the Gross Profit percentage, the Net Profit percentage and the Inventory Turnover. This will give an analyst a good picture of the financial strength and viability of the business. Another approach would be a year to year comparison of results, using the common size income statement and balance sheets for 2000 and 2001. Calculation of Financial Rat ios Proceeding with our calculations, we first have the Current Ratio, which is calculated as: Total Current Assets / Total Current Liabilities. For Apex Corporation, this is: For Year 2000: $3,415,807/ $1,546,107= 2.21: 1. For Year 2001: $4,257,700/ $1,616,700= 3:1. So we find that Current Ratio has improved from 2.21:1 in 2000 to 3:1 in 2001. This indicates that there are now more current assets to cover current liabilities. The working capital which is defined as Total Current Assets – Total Current Liabilities, has improved from $1,869,700 in 2000 to $2,614,000 in 2001. This speaks well of the company’s short term liquidity and solvency. However, we would have to compare it to Industry Averages for the manufacturing sector to be more accurate in our perceptions (Meigs & Meigs, 943). Moving on to the Debt-Equity Ratios, the ratio of Total Debt to Total Assets can be calculated by Total Liabilities / Total Assets. For Year 2000 it is $2,296,107/ $5,615,807 or 0.41: 1 and for Year 2001 it works out to $2,466,700/$5,697,700 or 0.43:1. This means that debt was 41 cents to the dollar for each $1 of assets owned by Apex Corporation in 2000, and this increased slightly to 43 cents to the dollar in 2001. In other words we can say that each $1 of assets of Apex Corporation was financed 41percent by debt in 2000 and 59 percent by equity; this changed to 43 percent debt and 57 percent equity in 2001. Coming now to the Gross Profit Margin, this is given by: Gross Profit/ Sales x 100. For

Organizational Behavior Essay Example | Topics and Well Written Essays - 1250 words - 2

Organizational Behavior - Essay Example Before these theories one important concept to be understood is from the Maslow's Hierarchy of needs and the Mclleland's need theory. These theories do set the steps for other theories, as organizations tend to fulfill their employee needs so as to prosper. Coming to the theories we have Douglas McGregor's Theory X and Theory Y. This has been a quite a study as it focuses on the employee behavior and how to handle such type of employees. Theory X states that employees are lazy and dislike work. It said that it's a human psychology to dislike work and put less effort. It demanded that people be coerced to work and some do not work until they are threatened for punishment or so. The theory also suggested that as they are de-motivated to work, employees require close supervision and direction to complete the task involved otherwise there would be an organizational loss. It also emphasized on the fact that most people want to delineate authority and avoid responsibilities therefore they prefer to be directed and moreover have no or less self control. People lying in this category mostly feel un-secure and have little ambition to go beyond. On the other hand Theory Y states that work is natural activity. People inducted in this theory are said to have self-control and ability to self-direct. They want to have authority and ambition to go beyond. They put in their best to achieve a task involved. The flow of rewards makes them more committed to the organizational objectives. As stated they seek responsibility and want to create something that can fascinate or at least that can be well regarded within the organizational framework. This theory has helped managers to bring out the most from their employees and have made it possible to design ways of improving productivity. Fredrick Wilson Taylor Moving forth we have the Scientific Management Theory by F.W. Taylor which also tends to focus on employees. This theory made it possible for the employers to make betted use of their resources and achieve the organizational objectives in a better fashion. There are 4 pointers in this theory which are the core. The core elements of this theory are: 1. The development of a discipline for each constituent of a man's work to substitute the old 'rule-of-thumb' techniques. 2. The scientific development, selection and training of workers instead of giving them choice of selecting their own task which they think they can best do. 3. There should be a good relationship among the employees and the management in order to carry out the designed procedures. 4. The distribution of work between workers and the management in about equal allocation, such that each group takes authority of what it can better do instead of relying more on workers only. Taylor's observation of the motivations of workers has had a deep influence throughout the century. According to Taylor we all have to make choices and thus are rational and this belief led him to formulate payment systems that very much related the kind of effort he wanted with the level of reward offered. As a fact, there was strong criticism of this premise that treats humans like machines and presupposes that workers

The Effects Of Infrastructural Facilities

The Effects Of Infrastructural Facilities Infrastructure are the basic facilities, services, and installations needed for the functioning of a community or society, such as transportation and communications systems, water and power lines, and public institutions including schools, post offices, and prisons. Large infrastructure projects generally stimulate demand for nearby real estate .these infrastructural projects usually create abundance of jobs as well as follow on demand for goods and services. They also provide a more effective use and connectivity of the available economic resources and the resulting increase in economy activity from new and more disposable income will in turn typically boost. Economic growth, thats why people will want to purchase or rent residential estate in location within close proximity to major works, Major infrastructure project can take many forms and often include transport, infrastructure improvement such as link roads, railway line extension, new bridges and major freeways. Other projects could be new shopping malls and commercial precincts, new power stations, improve communication facilities industrial areas and business parks, new hospital, school and universities. These can all have an impact property values and demand for residential properties. It is also worthy to note that the quality and quantity of infrastructure available in a given place societies is the yardstick for measuring the general level of development of that area and a major determinants of property development and their respective value trends. The provision or not of these facilities can positively development affect the rate of property development in a given area and this in turn can improve the property value due to the corresponding boost on economics activities achieved through the better accessibility (road) or the higher degree of convenience from the use of these infrastructural facilities. 1.2 Statement of Problem The infrastructure of a city is a major determinant on the demand of houses. One of the major problems affecting housing demand in Lokoja. The poor infrastructure provision in the study area affects the rate of housing Demand in the area, this is because people will only buy or rent houses in areas were the infrastructure provision is sustainably available,this will help to enhance the livability in the community. The poor infrastructure provision in Adankolo is a major determinant on the decrease in the rate of housing demands in the study area. Those who are living in the study area have no choice because they cannot afford the rent in other livable towns . Housing is an enclosed component or structure that has services which support the comfort and existence of human living. These services or facilities are numerous some of which include; kitchen, toilet, refuse disposals, good road networks, electricity, telecommunication and others. Ogedengbe and Oyedele, (2006) carried a research on effects of waste disposal on property values, similarly Robet in his work The Effects of Road Infrastructure on Property Values emphasized more on just road as a facility affecting demandvalues, Whereas many other facilities affect values of residential properties. This now poses a gap between these previous empirical studies hence there is need to reconsider many other facilities as they affect housing demand and housing demand of residential properties. 1.3 Aim and Objectives The aim of this study is to ascertain the effects of infrastructural facilities on housing demand in Lokoja metropolis. OBJECTIVES To identify the various infrastructure available in the study area. To examine the adequacy of infrastructural facilities provision on the residential properties in the study area To recommend possible solution to the problems of housing in the study area. 1.4 Scope of the study This research work intends to determine the effects of infrastructural facilities on housing demand in Lokoja. It is limited to Lokoja metropolis alone with particular emphasis on two areas namely; peace community ganaja village and Adankolo for comparative analysis. 1.5 Justification Although challenges surrounding life and human wants are limited and endless, however these study focuses on the effects of infrastructural facilities on housing demand in Lokoja. And this particular studywill serve as a guide to the following. Urban and regional planners and other allied professionals such as builders, architect, engineers, and others in their various field of activities .for example, these study would give the city managers the ideas of important of infrastructural facilities in there different areas. It serves as a tool to all researchers in the field particularly in the study area.(Lokoja) 1.6 The Study Area Lokoja, Nigeria is located at 7.80236 [latitude in decimal degrees], 6.743 [longitude in decimal degrees] at an elevation/altitude of meters. The average elevation of Lokoja, Nigeria is 55 meters.Lokoja is also a Local Government Area of Kogi State with an area of 3180 km ² and a population of 195,261 at the 2006 census. It is bounded by the Niger in the north and east upstream from the capital until the border with Kwara State, and includes the city of Lokoja. The postal code of the area is 260.The original site of Lokoja, is a 1,349-foot- (411-metre-) high mass of oolitic iron ore. The town has a hydroelectric power generating plant. It is situated on the local highway between Kabba and Ayangbe and has ferry service across the Niger River. Formerly the capital of Kabba province, Lokoja was part of Kwara from 1967 to 1991, when it became the capital of the newly formed state of Kogi. CLIMATE Climate: The site has a tropical climate that comprises of two season namely dry and wet seasons. The wet seasons starts from the month of April and ends in October, while the dry season starts from November and continues till March. The two seasons are affected by the south-westerly winds coming from the Atlantic Ocean and north-easterly winds which come from the Sahara Desert. Another weather phenomenon (micro climate) is associated with the presence of inselbergs. This feature exerts an influence on local weather greater than their size. Rainfall: Rainfall data obtained from the Department of Meteorological Services Lokoja for 25 years (1989- 2005) reveals that the maximum daily rainfall figures of Lokoja town are as follows: Humidity and Temperature: The highest temperatures in the study area always tend to occur at the end of the dry season close to the spring equinox. Thus March has the highest temperature of about 34.5 c, while the lowest temperature occur in the middle of the dry season in December/January, when outgoing radiation is encouraged by low humidity, clear skies and longer nights. The temperature at this time falls as low as 22.8 c. In the dry season there is a decrease in relative humidity from south to north in the study area caused by the higher elevation in the north. In the rainy season, this variation disappears and associated with the high relative humidity is an extensive cloud cover over the region. ECONOMY Agriculture is main stay in Lokoja area economy, various crops are widely grown in the area which includes; coffee, cocoa, palm oil, cashews, groundnuts, maize, cassava, yam, rice and melon.The state is home to the largest iron and steel industry in Nigeria known as Ajaokuta Steel Company Limited. One of the largest cement factories in Africa, the Obajana Cement Factory . MAP OF NIGERIA DEPICTING STUDY AREA Limitation of the Study The major problem in the field of study is language barrier and through these, the researcher that did not understand their language (respondents) will find it difficult to express his mind freely to those that did not understand English language which is the general language in Nigeria, among the respondents. Another problem is illiteracy among the respondents; because some of the respondent finds it difficult to fill questionnaire which is the main information needed from them for the completion of the project. Lastly regardless of these limitations, data collected are sufficient enough to reach the research objectives. 1.8 Definition of Terms Infrastructures It can be generally defined as the set of interconnected structural elements that provide framework supporting an entire structure of development The term typically refers to the technical structures that support a society, such as roads, bridges, water supply, sewers, electrical grids, telecommunications, and so forth, and can be defined as the physical components of interrelated systems providing commodities and services essential to enable, sustain, or enhance societal living conditions The terms housing demand and housing needs are often confused. There are Some key differences between housing demand and housing needs that must beclarified. The meaning assigned to both terms is erroneously similar in manydocuments. The following statement is extracted from the study of housing- Demand models published by the Housing Branch in Hong Kong which asserts that: Housing needs Housing needs is defined as the number of existing ornew households requiring adequate housing. Anadequately housed household is one that lives in selfcontained living quarters made of permanent material.(Liu, Wu, et al. 1996) They also proffer a workable definition of housing demand, viz: Housing demand Housing demand is defined as the number of householdsactually seeking accommodation. In the public sector,demand is assumed to be equal to housing needs. In theprivate sector, demand is constrained by affordability. Facility may refer to: An installation, contrivance, or other things which facilitates something; a place for doing something: Literature Review Infrastructure has been variously defined, according to William Merish and Catherine Brown described infrastructure as the systematic framework which underpins a communitys ability to fulfill its mission of providing a basis of its citizen to productive and to nurture social equity.Omuojine(1997) described it as the stock of fixed capital assets in a country for example Road, railways, Airports, Hospitals, Waterway, power stations, water works, and telecommunication network. It serves as slender threads that weaves together human want and value with those of the environment.Literally, it refers to fixed facilities or installation traditionally provided by public sector. Omuojine (1997) classified it as followed. Transportation including road, railway, airports, seaports and water way. Water supply including water works and Dams Electricity including power stations Telecommunication including postal, telephone, telex, fax, mile services. Health including Hospital, maternity home, and health centers. Sanitation and solid waste disposal. Drainage and Embankments. Infrastructures have certain characteristics viz. Requires large lump sum investment. Entails considerable economic of scale which results in monopolies. Has a high level of externalities both positives and negatives. Intermediate input characteristics. Possess important networks effects. Posses difficulties in cost recovery. While these characteristics have generally remained true, the exact character trait will depends on whether it is urban, rural or inter rural. Infrastructure or trunk and feeder type of fixed/ moving facilities, or the operator of the facility i.e. Whether public or private, central/ state, local Government agencies. Infrastructures include the aggregate of all facilities that enables a society to function effectively, by providing the physical facilities, which moves people, goods, commodities, water, waste, Electricity, road, sewerage and information infrastructure provides an enabling environment for growth and enhanced quality of life.PojuOnibokun (1985) infrastructure is therefore; universally regarded as the engine that drives the city. The linkage between the economy activities and infrastructure continue to grow stronger and more critical as an economic activity becomes increasingly more complicated and global in scope. Lawal (1997). Through the provision of urban infrastruct ure is tradition all the presence of government, the growing difficulties and limitation of public finance and the reality of the wide gap between the demand and supply of infrastructures services with all its pervasive effect inevitably compel urban authorities to look to the private sector and community. Based organization (cbos) for partnership. Babawale (2004) infrastructure is generally poor in developing countries. Although it differs widely among countries and sectors. In Nigeria for instance most households and private companies get electricity form private generating sets because of power holding of Nigeria unreliability. This imposed extra cost on companies and environmental effects on neighbors. There is no water supply in most cities and therefore no waste disposal system. HOUSING DEMAND Housing demand is defined as the housing need people backed up with the purchasing power or the ability and willingness to pay. According to You (1993). As quoted in Olufemi(1993), housing demand could be expressed in term of purchasing power, a function of income, family size, location and tradition etc. Housing demand is different from need. It is only when the need (desire) is backed up with price or rent that we talk of effective demand.According to Robinson (1979), there are three main component of housing demand and these are. From new households, demand from movers between tenure group and demand from existing household within a particular tenure groups. The author also noted that renting is an important feature of demand. This is because the majority of household who could not build or purchase their own home often result to renting. Demand for housing differs from place to place across the socio- economic groups. For instant demand in the city differs from that of the rural areas. Demand also differs among high, medium, and low income groups. Housing demand also changes with time and with social and economic situations. In Nigeria for instance there is a noticeable change in the demand for different type of units. As income and building technology changes. There has been gradually change from the demand for row housing or face to face tenement to more modern housing types such as self contain and flats apartment as well as duplexes. Generally,housing market or sub market of the low income group demonstrates a great diversity of demand, which result from two major factors (UNCHS, 1996) first is there disposal income and the second is how much they are prepared to spend on housing. The amount of money they are willing to spend on housing is in turn determined by the type of accommodation available, the location, s ize, and quality of the houses in terms of infrastructure and services available, and the level of security offered. The demand for housing is a reflection of the ability of household to pay for them. Thus, an examination of households, income and prices of housing unit provides a basis for accessing housing demand, an assessment of the housing demand situation in Nigeria by the UNCHS (1993) reveals that the different income groups are confined to different options. Generally, the poor economic situation in Nigeria during and in the post. Structure adjustment program (SAP) period has affected the purchasing power of the majority. Although household income have risen, in numerical terms, by a factor of about five since 1987, the purchasing power has declined by a factor of about eight(UNCHS,1993). It is therefore observed that the household income of the lowest income group are too low to allow them to exercise any effective demand for formal housing in the open market consequently, majority of the low income household cannot afford any form of formal housing without subsidy. Thus they resort to sur vival outside the formal housing market. For this group the UNCHS (1993) observed that. the present 20% of the household do not earn enough to participate in formal housing market in the urban area. They resort to various informal housing arrangements for themselves. This arrangement includes the setting -up of shanty dwellings of their own on land belonging to them(squatting), renting shanty dwelling, colonization of uncompleted multiples storey buildings, occupation of vacant spaces in public buildings at night,etc. BASIC CONCEPT OF HOUSING. Housing is an empirical word as Salau (1990) has written The confusion of given an exact meaning of definition to housing is perhaps due to the multi-dimensional nature of housing itself Agboola (1998) stated that Housing involves series of processes by which resources such as land, labour, finance and building materials are combine to produce new housing. It involves also the upgrading of existing housing to the demanders .He explained further that housing particular delivery system encompasses the process that allocates housing unit to households in particular country and that housing delivery is stimulated and sustained by the demand and supply mechanism this of course,means that in a free market economy like Nigeria, the forces of demand and supply for housing stock, may determine what stocks come into the housing delivery market and who among the demander get what from the market?. According to Baurue (1981), Housing is the provision of all forms of infrastructures for a conducive living environment whereas habitable and standard houses bythe residential or commercial or any other forms of building properly arranged in a statutorily planned area meeting all the forms of planning rules and ordinances in housings.World health Organization (WHO). Defined housing as a residential environment which includes in addition to the physical structures. The main uses for shelter, all necessary services, facilities, equipment and devices needed or desire for physical or social wellbeing of the family and individuals. Ayeni(1984) defines housing as not only referring to the shelter provided by the structure but also the lot on which the shelter stands and the services provided to the lots such as waterand energy supply, waste disposal, drainage, fire and police protection and kick lighter (1986)defined the term housing in its entire ramification to refer to more than just a dwelling but also included all that is within and surrounds thedwelling. Salau(1990) transcends the physical dimensions of shelter and include the general environment within which the structure is located and the availability of essentialsocial services and infrastructural facilities, which ultimately ensure the satisfaction of the population. National housing policy (1991), housing forms an important part of peoples life and it is rather inseparable from them as it provides the users of occupiers shelters, security, privacy, prestige and a means of self-expression. It is a basic need as everyone requires a shelter, which for most people means a home that, is a permanent base in which the greater part of time is spent. Ozo (1987), asserted that a house must be a home;that is , a resting place in which to try to fulfill the fundamental purpose of human society,namely a secure , rewarding, happy or atleast a reliable life.to the individual family,a house as both a shelter and symbols of physical protection and psychological identity of economic valueand a foundation for security and self respect.Olotuali (1997) stated that housing provides the framework of meeting mans need for shelterand it is all encompassing phenomenon of the creation of the environment, in which man grows and lives and grows.Bourne (1981)summed housing up as a physical entity, a good artifact, an economic good, a capital stockand a statue symbol all at once.Madge(1968) assorted that housing is an important element in all capital formation and the largest single component in total building of any nation. According to Omole(2001), housing is more than a mere shelter in its proper definition , housing can be defined as a residential environment which man uses for shelter and the environment of the structure needed or design for his physical and mental health as well as the social being. Ozo (1987), a house is certainly the bulkiest, the most difficult to move and most durable consumer good. In view of the enormous resources requiredin acquiring housing (since it can hardly be purchase out of ones income in less developed countries). It is true measure of the social- economic statues of a society. Looking at the definitions above .therefore a good housing or shelter development of a group of people and a nation at large. A well determined settlement equally determined the productivity and consumption ration as well as economic, moral and welfare terms of the people or nation. THE NIGERIAN HOUSING MARKET The Nigerian housing market is highly untapped and undeveloped despite lot of opportunities that abound in the sector (Akeju 2007). This is basically due to many reasons amongst which includes. Lack of finance Government policy Lack of infrastructural development High level of poverty. There is continuous increase in the average price of house due to increase in cost of building materials and inflation in the economy. This has highly contributed to the upward trend in the house trend in the house price which has significantly affected the number of unit of houses constructed annually. The Government efforts at addressing the problem have not been successful due to its unsustainable approach of providing houses to the people, the houses are grossly inadequate and unaffordable by the larger proportion of the masses for which they are meant for. There are efforts by the private individuals to help in alleviating these housing problems. The bulk of the housing problems is prevalent in urban cities, but there are lot of un occupied and dilapidated houses in the rural areas to urban centers for greener pastures. Most individual that are involved in property development build for their own uses or are home owners, while the few ones involves in building for commercial purposes, build shops and space to let for offices because if the high rental income accruing from such commercial properties. The residential developments in most cases are illegal, informal and untitled. This is due to long, undue delay to title registration and laxity in enforcing development control regulations by the official of the urban and regional planning department (Fasakin and Ogunmakin 2006). Private sectors contribution toward alleviating this housing problems has been I the form of individual efforts, cooperative societies or association, corporate bodies, estate agents, nongovernmental organization / charity organization and foreign investors, their contributions toward alleviating housing problems in Nigeria are briefly discussed below. INDIVIDUALS This represent the greatest source of contribution from the private sector in most urban centers where the housing problem is very prevalent , a greater proportion of the population dwells in residential houses built by private individuals. These individual financed the project through their personal savings, borrowing from family, friends and lenders or cooperative movements. It can be categorically stated that number of housing unit built by individual have been very substantial when compared with other source of constructing houses. (2) COOPERATIVE BODIES The idea of cooperatives housing have started long time ago when individual planning to own a house seek help from relative, in town, neighbors and friends (Wahab 1988). This concept has been successfully tested and certified in countries like Italy, United Kingdom, Zambia, Sweden and Philippines (Daramola, 2006). It is suited to meet the need of low income earner who constitutes the vast majority of Nigerians. The member of the cooperative are able to enjoy housing loan for the construction of their own housing unit. (3) CORPORATE BODIES. The federal government of Nigeria has realized that they cannot solve the housing problem alone. Has involved the cooperate bodies to contributes their own goals towards the achieving the objectives of housing for all. It was evident that most of the companies have totally neglect for housing needs of their workers. These consequently made the Government come to the rescue of the workers. These consequently made the Government come to the rescue of the workers through the promulgation of employee housing scheme (special provision). Decree 54 of 1979, thus compelling any employer of 500 employees to provide minimum housing of 50 units of which 75% should available for non-executive staff. (4) ESTATE DEVELOPER / AGENTS The private developer or estate agents activities were concentrated in Lagos in 1990 and they play significant roles in the development of the Nigeria housing market (Efin. A and Finmark trust,2010), they ensure adequate shelter is provided to meet the demand of the increasing number of people having housing need. They often employ various finance techniques such as turnkey, pre-letting and joint finance to construct housing unit for the people (Nubi 2000). (5) NON GOVERNMENTAL ORGANISATION AND VOLUNTARY ORGANISATION. In recent year there is increasing trends by non-governmental organization and voluntary organization such as religion bodies to contribute their own effort at addressing the housing problems faced by the people in both rural and urban cities. They assist resetting displaced people having housing problem as a result of natural disaster like war, flood, famine, earthquakes, and etc. (6) FOREIGN PARTNERS / INVESTORS. The government through its various development policies has attempted to encourage foreign investors in the housing market. This is usually in the form of foreign partnership with the local estate developers.These provided more capital base for the estate company, thus making them to be involved in large capital based project. The company are usually handling Government housing project which are capital intensive and required more technical expertise and knowledge. THE ECONOMICS OF HOUSING Housing as a product is regarded as a commodity with an exchange value, according to Angel et.al (1992), housing is viewed as a commodity with an exchange value rather than as goods to be produced and allocated outside the market place. Hence the housing sector is composed as a vast set of exchange relations, driven by supply and demand forces which permit all part of the sector despite the existence of apparently distinctive sub markets. (Agunbiade 1993). The units in the standing stock to be traded in the market have a contribution of attributes and qualities, which determines their selling prices. Such attributes include age and durability of structures, total floor space, structural design and internal layout, location accessibility, ancillary services present, security, aesthetics and the general environmental condition. These attributes distinguish one unit from the other. Thus the structural condition of units and the flow of services they yield determine the value of housing unit in the market. According to Robinson (1979) there are two measure of value in the housing market, these are rent and price. Rent is the payment made for a flow of housing services received over a specific period of time while price is the capital value associated with a particular unit of stockin the ordinary sense, we could argue that the value of housing unit (V) is equalto its price (P) i.e. V = P . However in some cases, the different between the exchange value and the actual value is refers to as subsidy, which is often, paid by Government or corporate bodies to their employees. Thus, subsidy could be regarded as a distortion to the actual market determined price or rent of a housing unit. Housing need, supply and housing price in an economy involved complex processes that are influenced by social and economic force. The understanding of the nature and attributes of the demand and supply of housing is therefore important in any housing study. However, before we address the issue of need, demand, supply and price. It is ideal to consider the characteristics of housing as a product 2.5 ROLE OF INFRASTRUCTURAL FACILITIES ON DEVELOPMENT Ratchiffe (1995) classical rent theory conceptualizes that general improvement in access routes (Roads) have positive effect on the areas land values; Boyce and Allen (1974) in Denver studied the impact of accessibility and amenities on property values. They selected several study areas then applied six (6) criteria encompassing accessibility, amenities and property characteristics and used regression analysis to investigate 24,082 property transactions. They identified a positive impact of infrastructural facilities on property values. Stopper and Meybury (1971) claimed that the relevance of transportations facilities in influencing urban growth and development is reflected in most North. American and Europeans town which shows a growth pattern derived largely from transactional routes. Abouchar (1977) investigated the impact of a subway on property value on Toronto, he studies the metropolitan Toronto subway system through on analysis of the operations of welfare criteria with the basic objective of distinguishing the impact of the subway on property value (demand and price) by looking at year to year relative percentage changes in property values in and out of the subway corridor. However, his analysis concluded that the subway had no effect on the property value in the subway area. The validity of findings and conclusion are questionable as the study did not fulfill the requirement of a before and after approach because the analysis of the property market was concluded in 1992 the date the subway began its operation. Abdulateef (1997) observed a positive impact of road transportation and communication on land use development and property values, the provision of infrastructural facilities in any socio economic unit whether a nation, region or community could have either a positive or negative impact on property value. For instance, the provision of an incinerator in a residential district will have a negative effect on the value of the properties in that area while the provision of infrastructural facilities like good roads network, water and electricity supply, drainage system, good refuse collection treatment and disposal system etc enhances values to unpre cedented level just as the inadequacy or lack or these facilities adversely affect value as a paradox. 2.6 IDENTIFICATION OF PUBLIC UTILITIES MANAGEMENT AGENCIES IN NIGERIA The prominent public agencies for the provision and management of the infrastructural facilities in Nigeria are: Power holding company of Nigeria Plc. In charge of electricity generation, distribution and supply to consumers (PHCN) Nigeria telecommunications limited (NITEL) State water corporation State waste management boards Federal road maintenance agencies (FEMA) Nigerian communications commission (NCC) Federal air