Mas-Cadel Specialty Bicycle

Cadel Specialty Bicycle Management Accounting Systems ACCT2195 Name: Nguyen Thai Son ID: S3296794 Lecturer: Keshav Dayalani Table of Contents Executive Summary3 Introduction4 I. Cadel Specialty Bicycles’ (CSB)5 A. Business mission5 B. Mean of competitive advantage6 C. Key Success Factors (KSFs)8 II. Management Accounting System of CSB9 ?Personnel9 ?Scare resources10 ?Activities11 III. Performance measurement & Reward System (PMRS) and its roles11 1. The factors to be measured12 2. A specific performance target12 . A reward attached to the performance target12 IV. Limitations of current PMRS14 A. Limitation14 B. Dysfunctional behavior15 V. Recommendation for new PMRS16 Conclusion17 References18 Appendix20 Executive Summary Cadel Specialty Bicycle (CSB) is a successful business of which nature is made-to-order bicycles. In other words, each bicycle of CSB is assembled in accordance with customer’s specification. The business aims to target on the niche market in which alm ost people are committed cycling enthusiast.Due the success of the first store located in Doncaster, Victoria, Australia, CSB has recently expand its business by opening two new stores located in Geelong & Black Rock and each store has different potential in the track of development . However, CSB has faced problems of personnel & resources management because the business had not applied the suitable strategies within the expansion. Although, the company plans to implement a new management accounting system (MAS) to deal with these problems, there still are weaknesses contained in the new MAS.Hence, the purposes of this report are analyzing the current system and suggesting new suitable MAS for the business. The first demonstration of the report is Background & Current position of CSB, which is used as a foundation for developing suitable MAS. The business mission of CSB, classified as â€Å"Question mark†, is building as well as increasing the market share. CSB creates its c ompetitive advantage based on the differentiation of product/service and the niche market. However, CSB has not reached the Cost-cum-Differentiation advantage yet.CSB may focus on the five key success factors (KSFs) including Proper decentralization & measurement of manager’s performance, Good relationship with suppliers, Establishing appropriate costing system & minimizing cost, Maintaining the highest level of customer satisfaction and Product & Service Quality The second part of the report focus on evaluating the role as well as benefits of tools/techniques of current MAS in supporting the business in term of of personnel, scare resources and activities.Next, the role of Performance measurement & Reward system (PMRS) within the business is clearly analyzed in relation to directional & motivational influences on behavior. The report also states the limitations of the current PMRS which potentially leads to dysfunction behaviors. Finally, the report will suggest the suitable PMRS for the business which may effectively & efficiently support CSB in the track of its success. Introduction One of the most essential factors which guide organizations and businesses toward success is management accounting system (MAS).It is always a smart decision for business to apply integrated MAS which provides accurate analysis report by gathering financial data from operations (sales, inventory & cost). As a result of having MAS, business gains sufficient advantages in streamlining operations procedures, reducing costs and building capital for expansion. Refer to the case of Cadel Specialty Bicycle (CSB), the business mainly focus on selling made-to-order bicycles and guaranteeing the product/service quality.After the expansion (two new stores), the business seems to get into trouble with management as well as operation. This report will demonstrate the business analysis, evaluate the current MAS as well as suggest new potential/appropriate MAS. I. Cadel Specialty Bicycl es’ (CSB) A. Business mission Business mission, â€Å"which usually reveals purpose of operation, value and priorities of company† (John&Richard 2009), can be considered as a fundamental factor in conducting appropriate MAS for the business.The following criteria will clearly illustrate the current mission of CSB (build, hold, harvest, divest): * Importance of externalities One factor that significantly contributes to the potential development of CSB is the external environment. Recently, bike paths have become popular around Melbourne as people tend to reduce using cars. Therefore, there has been a significant growth in the market for bicycles. Utilizing the bike paths, CSB opened two new stores (Black Rock & Geelong) which seem to have great potential for development. * Market share expectationDue to the well establishment, Doncaster store (touring bikes) is highly demanded by customers that provide the store many opportunities to develop. Besides, Geelong store (mou ntain & touring bikes) also has great potential thanks to its advantageous location although the demand is not yet as high as at the Doncaster store. As a result of having great potential, the Market share expectations of the two stores seem to be high. Although CSB does not own a large part of the bicycle market at the moment, the business has a substantial growth rate.Base on facts of the case, â€Å"CSB aim to capture a significant proportion of this growth in the future†. Boston Consulting Group Model Relative Market Share (cash source) Mission = Hold Mission = Harvest Mission = Build â€Å"Dog† Mission = Divest High High Low Low â€Å"Star† â€Å"Question mark† â€Å"Cash cow† Market growth rate (cash user) Overall, CSB has high Market growth rate while owning low market share. Hence, the business can be classified in to â€Å"Question mark† and the business mission of CSB is building as well as increasing the market share. B. Mean of c ompetitive advantageCompetitive advantage is a special characteristic that a business has over its competitors, enabling the business to gain greater sales or profit within the competition. The two common competitive advantage options, which have been applied by CSB, are Differentiation & Niche market. * Differentiation: CSB differentiates its products & services based on certain criteria which are Function & Customer service. * Function Unlike normal bicycle business, CSB primarily applies the made-to-order function for all three stores which assemble customized bicycles based on customer specifications.In order to ensure the timing & success of this approach, a large inventory of different bicycle parts is held by each CSB stores. * Customer service CSB puts much effort on the operating customer service as well as interacting with customers. Cadel- CSB owner spends significant time in taking care of store’s day-to-day operations and often engages directly with customers to make sure that customers can purchase desirable bikes. CSB also sets a limit for the waiting time (time for customized bicycles to be available) which are less than two days of the initial consultation.The applied post-sale service is calling the customer after a week of taking possession of CSB’s products to ensure the customer’s satisfaction, and offering free-of-charge changes if necessary. Additionally, free lifetime after-sales service is also offered in which customers only have to pay for parts required. * Niche Market CSB targets on specific segment of market which is cycling enthusiast through the offer of customized bicycles. This customer group willing to spend more for qualified & desirable product Business competitive advantage Relative Cost Position Cost-cum-Differentiation Advantage Stuck-in-the -middle† Differentiation Advantage Low-cost-Advantage Superior Inferior Inferior Superior Relative Differentiation Position Although CSB gains moderate dif ferentiation advantage, the business did not consider much about the costing system (estimating price without real cost data). Therefore, CSB has not reached the Cost-cum-Differentiation advantage yet. C. Key Success Factors (KSFs) In order to construct appropriate & efficient MAS, business may consider the essence of critical KSFs which determine its success (cost and efficiency, quality, time, innovation).Gaining sufficient knowledge of KSFs will support the business to define the necessity of promoting strengths and competencies that match those factors in order to gain competitive advantage and achieve the business success (Jorge&Donald 1989). Refer to CSB- a growing business with great potential, certain KSFs would be as the following: * Product & Service Quality Cadel spends considerable time in training the store manager and often personally assembles & checks the customized bicycles to ensure the Service & Product quality.As a result, CSB is currently well known as a busines s providing high quality, customized bicycle. * Maintaining the highest level of customer satisfaction Giving customers more than they expect is the basic concept of this issue. As Cadel believe that specialized customer service is a KSF of CSB, he put many efforts in maintaining the customer satisfaction such as calling the customer after a week of possession, offering free lifetime after-sales service & limiting the waiting time (2days). Establishing appropriate costing system & minimizing cost A weakness of CSB is that the business operates without real cost data. Hence, establishing suitable costing system has become a fundamental mission in the track of reaching success. Besides, CSB has to consider cost minimization to achieve Cost-cum-Differentiation advantage. * Good relationship with suppliers Since the expansion, the demand for supplies of CSB has increased due to the requirement of more inventories for the two new stores. Therefore, finding and maintaining good relationsh ip with suppliers is also essential. Proper decentralization & measurement of managers performance It is essential that Cadel distributes the authority to store managers properly because the business structure has become more complicated since the expansion and Cadel cannot play all roles of the business. II. Management Accounting System of CSB In order to solve the problems arisen from the expansion, Cadel’s brother has suggested Cadel to develop a MAS which significantly supports the business management in term of personnel, scare resources and activities. The following analysis will demonstrate the roles & benefits of each tool included in the MAS: Personnel * Supplier performance measures (SPM) SPM is a critical initiative for business dealing with multiple suppliers. The main role of SPM is integrating supplier quality which helps the business have accurate visibility toward supplier delivery and avoid hidden cost drivers from poor quality. As a result, SPM directly decr eases business risks and revenue losses Besides, SPM is a vital tool for motivating improvement and ensuring that products meet the required standards. SPM also supports in determining good suppliers so that CSB can maintain relationship with those suppliers.Related KSFs: Product quality; Good relation with supplier * Responsibility accounting system (RAS) RAS is used as an internal system which improves cost control and business’s performance. Its main role is ensuring the responsibility of individual managers toward elements of business performance in which they gain control. In RA, each store/department will be assigned certain stated goals and relevant managers will be judged on how well they meet the goals. As a result, CSB is able to detect the weak areas within the business and make correction properly Related KSF: Proper decentralization & measurement of managers performance Scare resources * Net Present Value (NPV) analyses NPV is an efficient method used in determin ing capital investment decisions. A potential project should be proceeded if its NPV value is positive unless there is a superior investment option offered. NPV allows CSB to make proper investment decision and invest in worthwhile projects because NPV does not only calculate the net cash flow from the project but also considers various associated factors like time value of money, opportunity cost & risk of prospective cash. Related KSFs: Minimizing cost Costing system The main role Costing system within MAs is collecting, analyzing & reporting the cost data that enables the owner and managers to monitor cost for reducing wastage and misuse of resources. Within the operation of business, it is easy to identify direct costs which associate with particular activities. However, indirect costs are those incurred in common or joint objectives so it cannot be clearly identified with particular activities. In order to assign indirect cost to projects accurately, Activity base costing syste m (ABCS) should be applied.ABCS is an efficient method which calculates and reduces operating the cost by finding key activities and its cost drivers. Consequently, the cost can be assigned accurately and the costing system can operate smoothly. Overall, costing system enables CSB to view all expenditures and manage its cost effectively Related KSFs: Establishing appropriate costing system & minimizing cost * Budget preparation The core role of Budget within CSB is tracking all of the money coming into the business along with all of the money going out.The budget can be designed to be detailed enough to cover numerous streams of income & expense. Establishing proper budget can significantly support the business in planning the use of resources, motivating individuals to achieve performance & supporting forecast. * Activities * Inventory management system – Economic Order Quantity (EOQ) The main role EOQ model is providing the most economical quantity of items which CSB should order to maximize value & minimize costs when re-stocking inventory.Applying EOQ does not only help the business to reduce Storage & Holding cost but also support in maintaining sufficient inventory levels to meet customer demand. It seems that customer service can be improved as inventory is available when needed. Related KSFs: Establishing appropriate costing system & minimizing cost; Maintaining the highest level of customer satisfaction * Profit and loss statements (P&L) P&L is one of the major financial statements which clearly demonstrate the profitability (revenue, expenses and profit) of the CSB during a specified time interval.Hence, the basic role of P&L is indicating whether the business is profitable or not. Conducting a proper P&L can enable CSB to notice the areas needing improvement and provide an overall idea of how much the business owes compared to how much it owns. Besides, a truthful P&L report can also support CSB in planning ahead to the next financial period. III. Performance measurement & Reward System (PMRS) and its roles Performance measurement is a process of gathering & reporting nformation regarding the performance of the business & individuals. To be effective, Performance measurement must be combined with Reward system and the rewards provided are based on performance. The overall role of PMRS is to periodically monitor performance to judge how well the business is running and motivate the personnel’s performance by Reward system. Both performance measure and rewards provide directional and motivational influence on behavior. However, each element of PMRS has its own roles which complement the system.PMRS contains three elements: 1. The factors to be measured| The first element clearly demonstrates the factors which will be measured in order to communicate important aspects of the business toward employees. Thanks to that, employees are able to concentrate their work into informed aspects/areas| * â€Å"Directional influ ence on behaviour† is mainly fulfilled by the roles of the first 2 elements (Measured factors & Performance target). Within this method, employees are directed to achieve the desired behaviours. | 2.A specific performance target| The main mission of the second element is narrowing the targeted aspects into specific tasks/activities so that employees can focus, put effort and accomplish these tasks. Besides, the provided criteria in the system is also a base for owner/manager to provide feedback to improve future performances| | 3. A reward attached to the performance target| The Reward system is based on the concept of attracting, retaining and motivating people. As employees can be motivated by intrinsic (e. g. elf esteem) and extrinsic rewards (e. g. bonus), monetary reward is not the only important component of the Reward system. There are other factors which also efficiently encourage employees in improving performance. Based on Theoretical Framework (Khan KU, Farooq SU & Ullah MI, 2010), there are generally four main independent variables of reward which are payment, promotion, recognition and benefits. Promotion seems to be the most efficient motivation as almost people tend to have ambitiousness of getting better positions in the business/company.Moreover, different reward strategies would have a different motivational impact on diverse people. By providing attractive incentives, Reward system encourages individuals to actually undertake the tasks with intensive willing. According to Khan KU, Farooq SU & Ullah MI, 2010, â€Å"there is a statistical significant relationship between all of the independent variables of reward with dependent variable employee work motivation, all the independent variables of reward have a positive influence on employee work motivation†.Overall, Reward system plays role as a way of having people work harder. | * â€Å"Motivational influence on behaviour†, meaning individuals are motivated to intentionally acquire the desired behaviours, is mainly achieved by the role of the third element which is Reward system. | In this case, CSB applies reward strategy in term of â€Å"bonus† providing to each store manager up to 20% of their quarterly income * Meeting sales budget * Bonus of 2% of manager’s quarterly income if they meet the sales budget for each quarter. * Meeting profit budget Bonus of 10% of manager’s quarterly income if they meet the profit budget, prepared at the start of each quarter * Achieving favourable cost variances: * Bonus of 4% of manager’s quarterly income if all favourable variances are less than 10% of the initial budgeted cost; * Bonus of 8% of manager’s quarterly income if all favourable variances are 10% or more of the initial budgeted cost. * Directional influence supports individuals in focusing on the targeted areas and tasks. Besides, Motivational influence helps employees to do the work voluntarily and put much effort to successfully accomplish it.Moreover, Motivational influence is almost always less intrusive than Directional influence. As a result, the business’s personnel cannot be well managed without the combine of Directional influence & Motivational influence. IV. Limitations of current PMRS A. Limitation B. Dysfunctional behavior * Dysfunctional behavior means that individuals within the organization/business do not function properly in accordance with the organization’s direction. Dysfunctional employee behaviors often occur due to the rapaciousness of individuals or conflict between employee’s interest and the organization’s interest.The general purpose of Dysfunctional employee behaviors is gaining benefits (either for personal or department) from organization’s gaps. * In this case, as a result of lack of measurement in input and process stage, managers have opportunities to engage in Dysfunctional behavior. It can be explained by the following situati on: * If there is no mechanism for monitoring the consistency between input and output, managers may provide â€Å"unreliable report† which shows that they have reached the performance target and deserve rewards. Lack of input measurement also leads to the problem that managers purchase low quality material to reduce operation’s costs in order to reach the defined cost target. Consequently, it’s very difficult to discover such Dysfunctional behaviors without proper measurement. V. Recommendation for new PMRS Besides the Performance measure, several common Reward strategies are also suggested below: Conclusion As MAS is essential for business’s operation, CSB cannot successfully expand its business without proper MAS. However, the new MAS, which CSB has planned to implement, still has several weaknesses.Therefore, the main purposes of this report are evaluating the current position (Business mission, Competitive advantage & KSFs) and current MAS (including PMRS). The report also suggests the potential PMRS for the business. References ‘Competitive Advantage’, 2012, Investopedia US, viewed 28 July 2012, . Daniel, H, 2011, ‘Benefits of NPV’, BenefitOf, 27 July, viewed 28 July 2012, .John, AP II & Richard, BR 2009, ‘Strategic management: Formulation, Implementation, and Control’, 11thedn. , McGraw Hill, Singapore. Jorge, AS & Donald, CH 1989, ‘Key success factors: Test of a general theory in the mature industrial –product sector’, Strategic Management Journal, vol. 10, no. 4, pp. 367-382. Khan, KU, Farooq, SU & Ullah, MI, 2010, ‘The Relationship between Rewards and Employee’, Research Journal of Internat? onal Stud? es, May, Issue 14, pp. 37-42. Kumar, V, 2011, ‘Costing System', Accounting Education, 14 February, viewed 27 July 2012, ;http://www. vtuition. org/2011/02/costing-system. html;. Meer, NVD, 2010, ‘The Importance of Competitive Advantageâ€℠¢, Market views, 12 September, viewed 28 July 2012, ;http://www. sharenet. co. za/marketviews/mv_view_article. php? id=1650;. Morris, K, 2012, ‘What is A Management Accounting System’, eHow Money, viewed 28 July 2012, ;http://www. ehow. com/facts_5460765_management-accounting-system. html;. ‘Motivational Influences on Attendance in Your Organization’, 2011, HR BLR, 1 January, viewed 27 July 2012, ;http://hr. blr. om/HR-news/Performance-Termination/Attendance/Motivational-Influences-on-Attendance-in-Your-Orga/;. Piasecki, D, 2012, ‘Optimizing economic order quantity (EOQ)’, Inventoryops, viewed 27 July 2012, ;http://www. inventoryops. com/economic_order_quantity. htm;. Reyna, SM, 2012, ‘Key Success Factors of Your Small Business’, Power Home Biz, viewed 27 July 2012, ;http://www. powerhomebiz. com/vol95/key. htm;. ‘Supplier Performance Management’, 2012, Metric Stream, viewed 28 July 2012, ;http://www. metricstream. com /solutions/supplier_performance. tm;. The university of Texas, 2012, ‘Performance Reward’, tmc. edu, viewed 27 July 2012, ;http://hr. uth. tmc. edu/Training_Development/perplan/reward. html;. ‘Value Measurement’, 2004, Performance measurement, viewed 27 July 2012, ;http://www. performance-measurement. net/news-detail. asp? nID=28;. ‘What is a Costing System’, 2012, Wise Geek, viewed 28 July 2012, ;http://www. wisegeek. com/what-is-a-costing-system. htm;. ‘What Is Responsibility Accounting’, 2012, Wise Geek, viewed 28 July 2012, ;http://www. wisegeek. om/what-is-responsibility-accounting. htm;. Appendix * Porter’s Five Forces model for supporting an analysis of external environment Threats of New Entrants Bargaining Power of Suppliers Bargaining Power of Customers Rivalry among Industry Competitors * Porter’s value chain analysis for supporting an analysis of internal environment Design Production Marketing Distributio n Support Activities: Finance, HR, Legal, IT Motivational influences A number of important motivational influences playing a strong role in encouraging employee include: * Job scope.Improving or enriching the nature of a job substantially reduces absenteeism. * Stress and conflict. Levels of absenteeism are higher in situations of job stress, anxiety, tension, and lack of role clarity. * Leadership style. Your leadership style affects attitudes that affect absenteeism. * Co-worker relations. Mutual tolerance and the absence of tensions among co-workers have a positive effect on attendance. * Pressures to attend. The economy and job shortages will influence a person to be more conscientious about job attendance. * Work group norms.When members of a highly cohesive group view coming to work to help co-workers as a desirable work ethic, job attendance is attractive. * Personal work ethic. A high regard for work as a personal value positively affects job attendance. * Organizational com mitment. Compatibility with the mission, goals, and values of the organization has a positive impact on attendance. You can affect most of these motivational factors significantly by the way you manage your department and supervise your employees. By encouraging open communications, by making employees feel needed and appreciated, by making their jobs as

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Marketing management in pratice - Article Example Perfumes are a multibillion industry with many big and small players vying for the market space. Fragrance forms the critical component of perfumes. According to Williams and Curtis (2006) researchers have established a variety of roles for marketing people, which includes; As such there are other cosmetic items which have fragrance, but these items are supposed to cater to some other needs as well. Cosmetics have been around for many thousand years now. Use of cosmetics can be traced back to earlier times when people used to paint their body for religious ceremonies, war, and mating rituals (Kumar et al, 2006). Range of items like powders, soap, shampoo, toothpaste etc. also form part of the cosmetics industry, but the first thought that comes to mind on hearing the term 'cosmetics' is makeup and perfumes, especially for women. Though perfume as such doesn't come in the category of items required for living, but over the years it has certainly acquired a status of an item required to make a 'decent living'. It is this aspect that is required to be explored optimally, using marketing communication techniques. Traditional marketing mix concept, first proposed by McCarthy in 1960, consists of Product, Price, Place and Promotion (better known as the 4Ps). Each particular marketing mix adds up to a certain amount of effort the company is making for the purpose of generating sales. Any plan to develop a competitive advantage must be based on a sound analysis of the company's competitors. Communication forms a crucial part of managerial activities. Marketing communication in turn helps a company in building a brand, creating brand loyalties, increase in sales, cutting costs, etc. North American market is a very diverse market in general which caters to customers/ consumers from different walks of life, different cultures, ethnic groups and age groups. There is lot of diversity in the perfume market itself. With so many varieties of perfumes available in the market it'll require a committed and consistent effort on the part of Picasso perfume to attract the customers. One of the biggest markets for perfume is the youth segment and Thomas (2007) finds out that this segment is not very loyal to the brand, what they ask for is the fragrance. Studies (Datamonitor, 2007) have suggested that blended fragrance is the most preferred fragrances followed by musk, sandalwood and others. Therefore, Picasso will have to take note of the customer's preferences to establish itself as a quality product in the market. Thomas (2007) further adds that the celebrity endorsement of some particular brand also helps in attracting the youth segment towards the brand. Perfume companies have been extensively

Population Growth and Resources Essay Example | Topics and Well Written Essays - 1250 words

Population Growth and Resources - Essay Example There, death rates fell so quickly that society had little time or reason to change its desire for larger families. (1). Population has mostly exploded in African and Asian countries; to which contribution of China and India is greatest. Today China is most populous country in the world followed by India with soon India expected to top the list. There had been a lot of cry in the 80s and 90s that population explosion is going to create a lots of troubles for mankind; the resources will be lost and so on. Definitely there have been these negative effects, but interestingly these days we are seeing some positive effects also of the population, especially in both most populous countries China and India. Impact on Earth's natural resources: The resources of the earth considered here are petroleum, gas, minerals etc. The effect of population can clearly be seen by the every day increasing oil prices. It is said that these resources are going to be cause of the future wars. With the increase in population there is obviously the increase in number of vehicles. This is not only depleting the earth's resources but by exhaust emissions also destroying the environment of the earth. The scientists have been aware of these facts and new vehicles are now coming up with alternative fuels like Natural gases, which are still abundantly available on earth and cause lesser pollution. In a way the crisis leads to solutions; that is the survival capacity of the human being. Similarly coal and oil are still most widely used for power generation; but recently due population growth and industrialization the power requirements have increased tremendously. Again coal and oil cause lot of air pollution. The scientists have come up with newer methods of power generation like nuclear power generation, wind power, tidal power etc. which cause much lesser pollution and are abundantly available in nature. To note the point is that these new methods are easily available in the developed countries, but in the developing countries where there is the maximum population growth and are problematic area, the latest methods are hardly available. Reason there is lack of education and lack of funds. Also in these countries the corruption is rampant. If there is democracy the ministers are involved filling their pockets and if there is Army rule then only God can save them. Impact on Education: Higher population put heavy demands on the education system of the country. Education is considered to be one of the methods to reduce the population growth but unfortunately many developing countries are failing to provide basic education for all (The Impact of Population, 1). In many developing countries either the number of schools are very less or the number of teachers is very less. In many African and Asian countries the poverty doesn't allows the children to go to school; they are compelled to go to work. Schools in even the developed countries are facing the problems of population growth. As per the Population Growth and Education in US, "About 14 percent of schools exceed their capacity by six to 25 percent, and

Discuss the importance of the manuscript in Medieval art. Explain and Essay

Discuss the importance of the manuscript in Medieval art. Explain and explore issues of authorship, production, patronage, style, and technique - Essay Example echanical means ÃŽ ¿f reproduction.[23] Consistent with a long medieval tradition, contemporary sources praised the opulence ÃŽ ¿f the materials or the technical appropriateness ÃŽ ¿f the finished product in terms ÃŽ ¿f "good" images, something that pleased the eye ÃŽ ¿f the beholder as well as the Creator.[24] In his impressive two-part volume Lilian Randall (1997) describes eighty-four codices and eighty-two unbound items produced in the medieval southern Netherlands, approximately equivalent to modern-day Belgium. It follows her equally impressive coverage ÃŽ ¿f manuscripts from France (vol. I, 1989; vol. II, in 2 parts, 1992); between them they cover about two-thirds ÃŽ ¿f the Western manuscripts at the Walters. The first thing to say to anyone who does not know the previous catalogues is that the descriptions are extremely detailed: for example, the description ÃŽ ¿f the Beaupre Antiphonary (cat. nos 219A-D) fills more than thirty pages. Catalogues ÃŽ ¿f medieval manuscripts might be said to fall into two broad types: on the one hand there are those that aim to provide readers with just enough information to help them decide whether they ought to consult the original in person; and on the other hand, there are those that provide so much information that the reader either does not have to consult the original, or can be confident that it is indeed worth the cost and effort ÃŽ ¿f a visit to examine the original. Randalls catalogues lie squarely in the second camp. Like many collections ÃŽ ¿f manuscripts (as opposed to libraries) formed during the last century or so, the Walters manuscripts were acquired largely for their decoration, and it is therefore appropriate that Randall provides perhaps the most detailed descriptions ÃŽ ¿f decoration to be found in any catalogue. But her descriptions are not aimed only at the art historian: equal care is given to all the features that one would hope to find covered in a catalogue ÃŽ ¿f undecorated manuscripts, such as the identification ÃŽ ¿f

Why Was God so Important to Descartes Essay Example for Free

Why Was God so Important to Descartes Essay Why is God so important to Descartes’ philosophical project in the Meditations? Answer with reference to Descartes’ attempts to prove the existence of God in Meditation 3. The existence of God has an extreme influence on the majority of philosophical debate and questioning and no more so than with Descartes and his meditations. His meditations and his method of approaching philosophical questioning all derive from a rationalist ideology. Therefore he argues that all humans are thinking beings and have ideas prior to experience due to their intellectual existence and not of a sensual one. His meditations are primarily to dismiss Empiricism and to reveal that doubt is necessary to our life. Perhaps even to warn us of the dangers of our own deceitfulness and not to trust anything forced upon us by our perceptions. That is why God is so important to his meditations; as Descartes believes God is perfect and cannot be deceived and cannot fail us therefore in his trust we do not need to doubt. Descartes believes the starting point of anything is in the thinkers mind. In his third meditation he uses the thinker’s first starting point of idea to suggest the existence of God. If they have the idea of God, then the features and attributes we have of him, he must have and therefore exist. His line of thought is evidently anti- empiricism, proven further by his statement: â€Å"The existence of God would be obvious if we weren’t distracted by life in the sensory world. And the knowledge of God saves us from doubt about other things we are certain of. † This gives an insight into why Descartes relies so heavily on the God in his meditations. It seems he uses God to support his meditations and uses God as a solution to his philosophy of doubt. God is vital as he is the answer to Descartes’ most complex ideas on doubt and enables him to preach God’s ability to relieve us of doubt but further more he want to reveal to us that God is the reason for all matter , for our existence and he cannot do this by suggesting God is simply a product of our own imagination, he has to prove that he is real. It could be suggested the reason that Descartes is so determined to prove God is not simply a device created in his mind, is to give some sort of insight into how we were brought into existence. He is certain that there must be a creator to something as complex as the human race and that we simply couldn’t come from nothing. He uses an ancient Greek philosophy to reinforce his argument that nothing can create nothing and there is most definitely a cause and that cause is God. God is the reason we have the idea of God and therefore he is he reason to our entirety of our own ideologies. This gives further insight into why God is so important to Descartes; it provides the first starting point to his philosophy of the human thought and comforts his doubts surrounding the deceptiveness of our own mind. With the perfection that God bestows and being the creator of our own mind then it surely can help us -with the truth and perfection of God- overcome the falsities of our senses. It also reassures us that our inherited knowledge cannot lead us to falseness as it has been gifted to us by God and therefore this helps Descartes claim that his philosophical debate is truthful as it came from his knowledge via God who never deceives. However in meditation 4, Descartes insists that we posses independent perceptions that potentially and theoretically always hold truth but only depending on our own free will and if we abide by it properly can we use our perception correctly. We can use a criteria to distinguish what is true or false in our perceptions and this is ability and its validity is insured by God but only in accordance with ourselves and our will to choose correctly. So, he is saying that we can still fall into error by misjudgement or even ignorance but if we are patient and summarise and judge all situation we should avoid any mistakes in life. Descartes uses God and his tolerance of error to further prophesise his anti epistemologist line of thought. He proposes that we make errors in our perceptions of representations, as we are easily deceived by false representations that are either non-existent or false. It is through misjudging these representations that we make errors. Yet this weakness in us is vital in testing our souls; we must have the choice to do bad and to make mistakes in order to measure our will power to fall into error as little as possible. By doing so we can prove ourselves to either be good or bad , worthy of reward or punishment. Descartes proposes that God enabled this free will to help us also make our own decisions and become righteous by our own means. This suggests why God is so vital to the meditations; he creates us with the many perfections of himself but does make us culpable of wrong doing and free of will to decide how we live our lives. So God’s existence is to help us and guide us in a rightful way but not carry us. Therefore the meditations have more importance than before as they now are not simply methods that we must accept as part of our way of living, we are not forced upon them. We can in fact choose to follow them or not, we may take the risk of ignoring them and facing the consequences but that according to Descartes is God’s will, therefore his meditations are God’s will and further heightening God’s importance on his meditations. God is clearly deeply important to Descartes as he provides his only proof of how we came to existence but also why and how we live our lives the way we do. Also God is integral in his whole argument regarding dismissing Empiricism and insisting that we have the means to live a meaningful and good life but despite the ability , we must also be righteous in our choices in life. Bibliography Search for a Method in Meditations Flage, Daniel E. (Routledge), 03/1999 A VIEW OF THE PHILOSOPHY OF DESCARTES, The Journal of Speculative Philosophy, Vol. 18, No. E. H. (Penn State University PressStable 3 July, 1884), Descartes Meditations, Francks, Richard ( Continuum International Publishing ), 07/2008 Rene Descartes, Meditations on First Philosophy, Trans. Donald A. Cress (Cambridge: Hackett), 1998 Starting with Descartes, Prado, C. G. (Continuum International Publishing,06/2009), [ 1 ]. A Search for a Method in Meditations Flage, Daniel E. (Routledge), 03/1999, p. g 252 [ 2 ]. A Search for a Method in Meditations Flage, Daniel E. (Routledge), 03/1999 p. g 181 [ 3 ]. Descartes Meditations, Francks, Richard ( Continuum International Publishing ), 07/2008, p. g 150 [ 4 ]. Rene Descartes, Meditations on First Philosophy, Trans. Donald A. Cress (Cambridge: Hackett), 1998, p. g 69 [ 5 ]. Starting with Descartes, Prado, C. G. (Continuum International Publishing,06/2009), p. g86 [ 6 ]. Starting with Descartes, Prado, C. G. (Continuum International Publishing,06/2009), p. g85 [ 7 ]. A VIEW OF THE PHILOSOPHY OF DESCARTES, The Journal of Speculative Philosophy, Vol. 18, No. E. H. (Penn State University PressStable 3 July, 1884),p. g 230 [ 8 ]. A VIEW OF THE PHILOSOPHY OF DESCARTES, The Journal of Speculative Philosophy, Vol. 18, No. E. H. (Penn State University PressStable 3 July, 1884),p. g 230 [ 9 ]. Starting with Descartes, Prado, C. G. (Continuum International Publishing,06/2009), p. g110.

Three Ethic Models Essay Example for Free

Three Ethic Models Essay This essay will explain the three ethic models, which are the utilitarian model, moral rights model and justice model (Waddell et al. 2007, 166), the application of these ethic models pertaining to the case study, and which ethic model would be best referred to in deciding the course of action to take to solve the problem that has arisen due to the circumstances that happened due to the employers forcing minimum wage exemption of their employees. (Roberts 2013) Waddell et al. (2007, 164) suggests that ethics as how people or groups perceive decisions as right or wrong differently. An ethical decision made according to the utilitarian model is defined by the most benefit for the most number of individuals. (Waddell et al. 2007, 166) Jardins and McCall (1985, 368) suggest that to further understand the meaning of employee rights, one would look at what both the managers and employees would goods both parties are aiming for in an employment agreement. Both parties will have differing aims and strategies to create changes or benefits from and for the company, resulting in a conflict of interest. Gill 2003, 308) For instance, managers would set a target to maximize the profits of the company and â€Å"maintain the firm’s long-term growth and stability (Jardins and McCall 1985, 368); while employees may aim to gain benefits and have a comfortable life, which is obtained by receiving at least minimum pay, or even â€Å"higher wages†. (Jardins and McCall 1985, 368) Managers have the responsibility to analyze the situation carefully, and make a decision that would benefits the highest number of stakeholders, i. . the employees. (Waddell et. Al 2007, 166) If wage rates were to be increased, the company would make lower profits. (Jardins and McCall 1985, 368) Wage increments would add to the production costs, so customers would not want to purchase the products if they become too expensive, therefore decreasing profits over time. Granting benefits could potentially â€Å"threaten long-term stability† in the long run. (Jardins and McCall 1985, 368) Suppose the manager decides to reject the employees’ requests and demand. In which case, the company’s profits and stability will be sustained, customers are kept happy with low product costs, but the employees will barely survive on low wages, even more so if they are receiving less than minimum wage. A ethical decision made according to the moral rights model is a decision made on a basis that it preserves and conserves the basic human rights and privileges of the individuals as best as possible. (Waddell et al. 2007, 166) People are morally responsible to ensure that each other are able to have a life that is minimally good. Jeurissen 2007, 3) Stakeholders make up the organization, so it is important to know and understand their interests in the company. (Jeurissen 2007, 3) Takemura (2009, 27) stated that the United States’ delegate support that people have to respect the rights of objectors, so ensuring minimum wage is the highest priority. Dealing under the Fair Trade standards means that companies must treat its stakeholders in a fair a nd just manner, with employers granting its employees their workers’ rights, such as minimum wages, good safety standards, and proper housing. Fair Trade International 2013) For the protection of their rights, every worker has the right to affiliation with trade unions. (Kallstrom and Eide 1999, 489) Trade unions exist for the purpose of maintaining or improving the conditions of their employment. (Webb and Webb 1920, 28) Under the moral rights model, managers should take the course of action that best maintains the rights and principles of the organization’s stakeholders. (Waddell et al. 2007, 166) For instance, any course of action taken that has a great negative impact on a stakeholder would be considered unethical. Waddell et al. 2007, 166) Hence, trade unions will strive to uphold the rights of the employees, while managers cannot implement the minimum wage exemption without the consent of the workers. (Roberts 2013) Since the workers did not give their consent, t hey have the right to receive nothing less minimum wages. (Roberts 2013) The justice model defines decisions made that distribute both negative and positive outcomes among stakeholders in a fair and impartial manner as an ethical decision. (Waddell et al. 2007, 166) A right is usually nothing more than a claim or demand, unless there is a tool that enables the implementation of the right or is built into the â€Å"institutional structure†. (Halstead and Pike 2006, 29) Rights have been constituted as the best way to maintaining the â€Å"just resolution of conflict and general human well-being†, and is recognized by the law. (Halstead and Pike 2006, 29) The right to minimum wages is a socio-economic right. (Jeurissen 2007, 3) Jeurissen (2007, 3) stated that rights are requisite when it comes to individuals cooperating within in a corporate organization. There are several examples of socio-economic rights, such as legislation and collective labour agreements, a category of rights in which the right to minimum wage is included. Every individual is able to exercise their rights, as resolution by the law. (Opsahl and Dimitrijevic 1999, 633) The resolution was made so that rights could be recognized and respected, in order for justice to be possible, should any of these rights be violated or disrespected by the relevant authorities. (Opsahl and Dimitrijevic 1999, 633) Rights should not be restricted in order to have social equilibrium within an organization. Opsahl and Dimitrijevic 1999, 634) Furthermore, â€Å"a justice approach to the minimum wage would enable us to consider our values†. (Levin-Waldman 2000, 43) A manager referring to the justice ethic model should consider that rights are recognized by the law, and therefore should abide by the law by respecting the employees’ rights; otherwise the governmental authoriti es would have to take action on the manager. Based on the analysis of all three ethic models, the best ethic model to apply to the case study is as per the thesis statement, which is the moral rights ethic model. The workers of the Nike factories in Indonesia should be allowed their minimum wage. As stated earlier, minimum wages are a fundamental right of an individual. The activist Jim Keady also stated that forcing minimum wage exemption on workers is a â€Å"clear violation of Nike’s code of conduct. † (Roberts 2013) Also, the workers should be able to enjoy at least minimum comfortable living conditions, as well as be protected from harsh treatment in the workplace. The manager of Nike should recognize and respect the rights of the workers and not force the exemption of minimum wage upon them. The management could perceive the company to lose some of its customers, and potentially be at a financial loss in the long-run. On the other hand, the trade unions and activists are satisfied that their principles and values are being upheld, and the workers’ rights are protected. Indeed, Employees should be treated fairly and their rights should be upheld. People are morally responsible to ensure that each other are able to have a life that is minimally good. (Jeurissen 2007, 3) Stakeholders make up the organization, so it is important to know and understand their interests in the company. Jeurissen 2007, 3) In which case, the workers can be considered important stakeholders in the organization, so it is unethical to enforce a minimum wage exemption against their will. Should the manager be proven guilty of forcing employees to sign a contract implementing the exemption of minimum wages, he or she should question their values as to whether or not their actions adhere to Nike ’s claims that they â€Å"care about the welfare of their workers† and â€Å"want to see them have decent lives†. In short, the manager should respect the employees’ right to minimum wage. Reference List Des Jardins, Joseph R. and John J. McCall. 1985. â€Å"A defense of employee rights. † Journal of Business Ethics 4(5): 367-376. doi: 10. 1007/BF02388589 Gill, Roger. 2003. â€Å"Change management or change leadership? † Journal of Change Management 3(4): 307-318. http://edocs. library. curtin. edu. au/eres_display. cgi? url=DC60118593. pdfamp;copyright=1 Jeurissen, Ronald, eds. 2007. Ethics amp; Business. Netherlands: Van Gorcum. Kallstrom, Kent and Asbjern Eide. 1999. â€Å"Article 23. † In The Universal Declaration of Human Rights, edited by Gudmundur Alfredsson and Asbjern Eide, 489-510. Netherlands: Martinus Nijhoff Publishers. Levin-Waldman, Oren M. 2000. Minimum Wage and Justice? Review of Social Economy 58(1): 43-62. doi: 10. 1080/003467600363101 Opsahl, Torkel and Vojin Dimitrijevic. 1999. â€Å"Article 29. † In The Universal Declaration of Human Rights: A Common Standard of Achievement, edited by Gudmundur Alfredsson and Asbjern Eide, 489-510. Netherlands: Martinus Nijhoff Publishers. Roberts, George. 2013. ABC News. Nike workers claim military paid to intimidate them. Accessed March 19, http://www. abc. et. au/news/2013-01-15/nike-accused-of-using-military-to-intimidate-factory-workers/4465058. Takemura, Hitomi. 2009. International Human Right to Conscientious Objection to Military Service and Individual Duties to Disobey Manifestly Illegal Orders. Berlin, Germany: Springer. Waddell, Dianne, Jennifer Devine, Gareth R. Jones, and Jennifer M. George. 2007. Contemporary Management. North Ryde, NSW: McGraw-Hill Australia Pty Limited. Webb, Sidney and Beatr ice Webb. 1920. History of Trade Unionism. London: Longmans and Co.

Comparative Study of the Banks in Nepal

Comparative Study of the Banks in Nepal A well-structured financial sector is of special importance for the economic growth in both developed and developing countries. The commercial banking sector should be well organized and efficient for the growth of an emerging economy. Commercial Banks which forms one of the backbones of the financial sector are the intermediary link in facilitating the flow of funds from the savers to investors. By providing a means of mobilizing domestic savings and proficiently channeling them into productive investments, they lower the cost of capital to investors and accelerate the economic growth of a nation. No underdeveloped country can well progress without setting up a sound system of commercial banking system.  [1]   Nepal is an agrarian based economy with a GDP of $ 33.26 billion  [5]  . Nepalese banking industry has considerable changes over past decades because of liberalization, deregulation, improving information technology and globalization. The financial sector liberalization resulted in the entry of new firms in the market, which also added more pressure on competitiveness of individual banks; deregulation widened the scope of activities and expanded the banking activities; advancement in technology resulted into new methods to perform banking activities. Furthermore, the banks, these days, are entering into non-banking markets while other financial institutions are entering into the banking markets that have conventionally been served by the banks. These changes have altered the structure and market behavior of Nepalese banking industry. Currently there are 26 commercial banks out of which 6 are joint venture banks, 63 development banks and 77 financial institutions in Nepal. At present there is only one international bank operating in Nepal which is Standard Chartered Bank Limited. It started operation in Nepal since 1987 as a joint-venture operation and today it is a part of Standard Chartered Group having an ownership of 75% in the company and 25% shares owned by the Nepalese public. Nepal after its commitment to the World Trade Organization (WTO) during its accession in 2004, has allowed foreign banks to make their foray in Nepal to do only wholesale banking  from Jan. 1, 2010. Initially before the agreement with WTO (GATS), the Central Bank regulation allowed foreign shareholders to acquire maximum of 51% shares. Later the regulation changed which allowed foreign ownership of 75% and the recent regulation of 2010 allows 100% foreign ownership (i.e. allows a local entity to be a branch of a foreign company) in the banking industry. Entering of foreign firms is likely to generate benefits to financial sector as well as the economy as a whole (Chau HB, 2003). The effects can be seen mainly through an increase in efficiency and technological advancements as mentioned above. Over the past decade, the Nepalese banking industry has been doing well and has a number of new firms entering into the market. However, there is only one foreign bank and 6 joint-venture banks in the banking sector, though the government has liberalized the financial sector and allowed foreign banks to have 100% foreign ownership. With limited number of foreign banks in Nepal, it is still unclear whether entering of foreign banks, including joint venture, helps to improve overall performance of banking sector as well as to spillover some benefit to domestic banks in Nepal. Objectives To answer the key question above, there are two objectives of the research paper: To measure and analyze the performance of three types of banks namely domestic bank, joint-venture bank, and foreign bank and to explain the variation in performances of these banks. To identify whether the entry of foreign banks, including joint venture, banks would be beneficial for domestic banks which still dominate the financial market in Nepal. 1.3. Scope and limitations of the Study This study will only focus on three types of banks, i.e. domestic bank, joint-venture bank, and foreign bank, and it will offer an insight on the advantages of foreign banks in Nepal. Furthermore it will provide the reasons pertaining to variations in performance of the banks. The main limitation in this study is that there is only one foreign bank in Nepal till date, so the interpretation of the performance of the foreign bank in Nepal could be restricted to some degree. 1.4. Research Methodology This section develops research methodology to reach the objectives of the study. The banking sector in Nepal will be divided into three groups, namely foreign owned banks; joint-venture banks, and domestic banks. For this research, foreign-owned banks will be classified as those which have started a branch or subsidiary in the host country where the share of foreign bank ranges from 51% to 100% while joint venture banks will be classified as those in which foreign investors own the total equity of 50% or less and domestics banks are those which are purely owned by the Nepalese. The foreign owned banks are separated from joint-venture banks in this study because these two types of banks tend to have different operational management, resulting in their different performance. The research methodology is composed of both quantitative and qualitative analysis. First, the qualitative approach is applied to examine the structure and development of financial sector in Nepal during 2000-2010. The financial policy, especially competition-restriction regulation in Nepalese banking sector is also reviewed, mainly through official documents from central bank and international organization. Then the quantitative approach is developed to measure the performance and efficiency of banking sectors in Nepal. This is done by conducting various financial indicators of three types of banks in Nepal namely foreign bank, joint venture banks and domestic banks. Comparison of the indicators among these three types of banks over the past decades will provide the clear analysis of different performance between foreign-owned and domestic banks. The indicators can be grouped into four aspects, namely profitability; operational costs; staff productivity; risk prevention. Profitability à ¯Ã¢â‚¬Å¡Ã‚ ·Profit Margin (Net Profit/Total Income) Profit margin is very useful when comparing  companies in similar industries. A higher profit margin indicates a more profitable company that  has better control over  its costs compared to  its competitors. Profit margin is  displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales. Profitability à ¯Ã¢â‚¬Å¡Ã‚ · Return on Asset (Net Profit/Total asset) ROA figure gives investors an idea  of how effectively the company is converting the money  it has  to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. For example, if one company has a net income of $1 million  and total  assets of $5 million, its ROA is 20%; however, if another company earns the same amount but has total assets of $10 million,  it has  an ROA of 10%. Based on this example, the first company  is better at converting its investment into profit. Profitability à ¯Ã¢â‚¬Å¡Ã‚ ·Ã‚  Return On Equity (Net Profit/Equity) The amount of net income  returned  as a percentage  of shareholders equity.  Return on equity  measures a corporations profitability  by revealing how much  profit a company generates  with the money shareholders have invested.  Ã‚  Higher The ROE better the company. Profitability à ¯Ã¢â‚¬Å¡Ã‚ · Interest Rate Spread (Interest Earning Ratio-Interest Expense Ratio) The difference between the average yields a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings. The greater the spread, the more profitable the financial institution is likely to be; the lower the spread, the less profitable the institution is likely to be. Risk prevention Risk Prevention à ¯Ã¢â‚¬Å¡Ã‚ ·Capital to Risk Weighted Assets (CRAR) Total Capital/ (RWAs) This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. à ¯Ã¢â‚¬Å¡Ã‚ ·Core CRAR = Tier I Capital / RWAs Tier one capital is that which can absorb losses without a bank being required to cease trading. This measures the capital standard of the bank à ¯Ã¢â‚¬Å¡Ã‚ ·Adjusted CRAR = (Total Capital Net NPAs)/(RWAs Net NPAs) This relates to the bankâ‚ ¬Ã¢â€ž ¢s ability to sustain the losses due to risk exposures is the bankâ‚ ¬Ã¢â€ž ¢s capital. The intermediation activity exposes the bank to a variety of risks. Staff productivity Staff Productivity à ¯Ã¢â‚¬Å¡Ã‚ ·Profit per employee (Net Profit/ No. of Employee) This helps to measure how productive the employees are in the bank by calculating profit generated by every employee. Higher the figure better for the company. à ¯Ã¢â‚¬Å¡Ã‚ ·Net Income per employee (Net Total Income/ Number of Employees) This also helps to measure income generated by every employee in the company Operational costs Overhead Expense à ¯Ã¢â‚¬Å¡Ã‚ · Overhead expense/total income The accurate accounting and allocation of over-head expenses are very important factors in calculating the true cost of the company Operating Expense Ratio à ¯Ã¢â‚¬Å¡Ã‚ · Operating Expense/ Net Income The Operating Expense Ratio is usually viewed as a measurement of management efficiency.   This is because management usually has greater control over operating expenses than they do over revenues. In addition to analyzing different performance between foreign-owned and domestic banks, this study further analyze whether entering of foreign banks helps to improve efficiency of domestic bank. This is done by (1) Structured interviews with managers of central bank and commercial banks. Specifically, the interview will provide detailed analysis on which factors do help to improve performance of domestic banking sector in Nepal; could foreign-owned banks influence performance of domestic banks; and which channels do foreign-owned banks influence domestic banks, and (2) by â‚ ¬Ã…“Granger causality testâ‚ ¬? between domestic bank performance and foreign bank performance. This will be done on profitability, staff productivity and operational costs. 1.5. Organization of the study There will be five chapters in the study. Chapter 1 provides introduction, objective, scope and limitation, and methodology of the study. Chapter 2 reviews relevant theoretical and empirical literature on foreign bank penetration and domestic bank performance in both developed and developing countries to lay the groundwork for developing analytical framework and methodology in examining the impacts of foreign bank penetration on domestic bank performance in Nepal. Chapter 3 examines the structure and development of financial sector in Nepal as well as financial policy over the past decades. The results of banking performance are shown in this chapter. Chapter 4 discusses the impacts of foreign banks to domestic banks, both qualitative and quantitative. Chapter 5 provides conclusion and policy inferences. Chapter 2 Literature Review This section reviews relevant theoretical and empirical literature on foreign bank penetration and domestic bank performance in both developed and developing countries. This is done in order to lay the groundwork for developing analytical framework and methodology in examining the impacts of foreign bank penetration on domestic bank performance in Nepal. Penetration of foreign bank can come in different forms, such as branch offices, subsidiaries, joint ventures, or strategic partnerships. Branch offices, for instance, are an integral part of the parent company, that is, they have no capital of their own. Subsidiaries, however, are their own corporate entities, which are fully owned by the parent company. Similarly, joint ventures are separate corporate entities owned jointly by more than one parent company. Finally, foreign banks may establish a strategic partnership by buying a majority stake of an already existing domestic bank. Weller Scher (1999) The main difference between the various operational forms of foreign banks is their regulatory treatment. The regulatory treatment of the banks differs amongst domestic banks, joint-venture banks and foreign owned banks. Although there are different forms of foreign bank penetration, foreign owned banks are defined as those in which foreign investors own more than 50% of the total equity. Okuda and Rungsomboon, (2004). Decree on Foreign Banks, Phillip Fox 2006, distinguished foreign banks as Foreign Bank Branches (FBB), Foreign Invested Banks (FIB) and Joint Venture Banks (JVB). FBB is a dependent subsidiary of a foreign bank, for which the foreign bank has provided written guarantee that it will be responsible for all obligations and undertakings under FBB. A 100% FIB is established as a separate legal entity with capital being contributed from only foreign entities. Amongst the foreign investors, there must be a â‚ ¬Ã…“parent bankâ‚ ¬? and it must hold more than 50% charter capital. A JVB is established as a separate legal entity, with capital being contributed from one or more foreign banks and domestic banks. Capital is not divided into shares. In JVBs, the capital contribution rate by the foreign bank(s) is capped at 50% of the capital of the bank. The regulations and supervision of financial sector in a host country are crucial in affecting the penetration of foreign banks. Over the past decade, most of the banks throughout the world have started standardizing their policies relating to financial sector according to Basel committee (Basel II Basel III)  [7]   Although Basel system has been introduced and regulations and supervision of banking sectors began to be standardized, regulations relating to competition within the banking sector, which influence the penetration of foreign bank and market structure of banking sector, vary significantly across countries and regions. According to Barth, Caprio and Levin (2001), there are three key aspects of the regulations relating to competition within the banking sector, namely 1) Limitations on Foreign Ownership of Domestic Banks determine (whether there are any limitations placed on the ownership of domestic banks by foreign banks); (2) Limitations on Foreign Bank Entry determine (whether there are any limitations placed on the ability of foreign banks to enter the domestic banking industry) and (3) Entry into Banking Requirement determine (whether there are specific legal submissions required to obtain a license to operate as a bank). The restrictions on overall bank activities and ownership vary from country to country. The research on Regulation and Supervision of Banks around the World by Barth, Caprio and Levine (2001) mentions that there are two measures of the size of a countryâ‚ ¬Ã¢â€ž ¢s banking industry. First measure is total bank assets as a percentage of GDP and the other is the number of banks per 100.000 people. . Both these measures show substantial variation across countries. Countries like Germany, Switzerland, Netherlands, and United Kingdom have very high total bank assets as a percentage of GDP whereas United States and Asian countries are much lower. However the number of banks per 100,000 people is not much different in the countries mentioned above. The table clearly shows that the countries in ASEAN region have higher restrictions on banking activities and ownership in comparison to countries like New Zealand and United States. The regulations are different in each country and do not match even if the countries are in the same region. But Professional supervision per bank is lower in developed countries like United States, New Zealand, United Kingdom whereas developing counties have higher no. of supervision per bank. According to the research the highest restrictions on overall bank activities and ownership are imposed by countries like Bhutan, Cambodia, China, Indonesia, Vietnam and lowest restrictions by New Zealand then Germany, Austria and United Kingdom. In countries like New Zealand and United states the government ownership of banks is zero percent whereas India, Bangladesh has very high percent of government-owned banks. Although the regulations on banking competition vary, over the last decades, restrictions on foreign bank penetration have been relaxed as part of financial reform and foreign bank penetration increased substantially in many countries. This could be because the host country expects the positive impacts of increased foreign bank penetration in the host countryâ‚ ¬Ã¢â€ž ¢s banking system. Trade agreements have also played a major role in liberalization of market entry for foreign banks as financial services are required for international trade, production and investments. Governments usually support flow of foreign investment and this has been evident especially after various financial crises. Many countries in Southeast Asia started liberalizing foreign investment after the Asian financial crisis. The Asian crisis appeared to have catalyzed the liberalization of FDI restrictions in the banking sector across several ASEAN countries. Chau H.B (2003) A number of empirical studies analyze the impacts of foreign bank entry on domestic financial sector in a host country. The impacts can be grouped into three aspects. Firstly, foreign banks promote efficiency (competition and new technology) in domestic financial sector. A larger foreign bank presence can improve the competitiveness of the banking sector. Greater competition is advantageous for many reasons: to enhance the efficiency of financial services; to stimulate innovation; and to contribute to stability. It can also widen access of qualified borrowers to financing, which may increase aggregate lending and so enhance growth. A competitive and well-organized banking system can also improve the effectiveness of monetary policy transmission by tightening the link between policy rates and deposit/lending rates. (BIS paper No. 23) Foreign banks also help in availability of funds and acquisition of consumer-marketing skills. Chau (2003) In addition, foreign bank entry introduces new technology; financial services and advanced management skills, which existing domestic banks lack. The new technology and skills introduced by foreign banks include new financial products, advanced IT technology, and sophisticated bank management techniques. These are expected to contribute to lower operational expenses, amplified profitability, and better bank risk management. Forced by market competition, domestic banks may emulate the new financial products and management skills. Okuda Rungsomboon (2004). The presence of foreign bank also improves the corporate governance structure of the domestic banks. This includes breaking down the family-controlled structure and improving the decision making process. Chau H.B (2003) Unite and Sullivan (2001) has found that increase in foreign bank entry narrows the interest rate spreads and also reduces operating expenses. Foreign banks induces domestic banks to be more efficient, the increased competition forces domestic banks to take in less creditworthy customers and foreign participation induces domestic banks to spend more on improving their operations. However, Okuda Rungsomboon (2004) found that the entry of foreign banks is expected to negatively affect the operations of domestic banks but overall performance is likely to progress in the long run. Secondly, the entry of foreign banks is associated with reallocation of loans. Findings suggest that foreign banks improves credit access for many credit-worthy firms but some firms with positive net present value without opaque information will have difficulty obtaining loans. More developed countries, such as the U.S., Japan, and those in the European community, argue that Less Developed countries should allow foreign banks to enter into their economies. By increasing competition, foreign bank entry may boost the supply of credit and improve efficiency. Gormley (2006) Foreign banks are comparatively less likely to lend to â‚ ¬Ã…“soft informationâ‚ ¬? firms, and more likely to lend to â‚ ¬Ã…“hard informationâ‚ ¬? firms. â‚ ¬Ã…“Soft informationâ‚ ¬? refers to information that cannot be easily publicly verified by a third party. â‚ ¬Ã…“Hard informationâ‚ ¬? on the other hand refers to credible and publicly verifiable information, such as a foreign firmâ‚ ¬Ã¢â€ž ¢s authentically audited balance sheets, or government guarantees. Mian(2003.) The loan portfolio of foreign banks consists of only credible clients which mean that the chances of default are very less. The domestic banks will be compelled to give loans to non-credible clients because the credible clients will be mostly handled by foreign banks. This will have greater chances of loan defaults for domestic banks. Thirdly, foreign banks are geographically spread relative to domestic banks; therefore they are less affected by adverse shocks in the domestic country. Both foreign and private domestic banks have similar low probabilities of being assisted by the government in times of difficulty but foreign banks are considerably more likely of being bailed out by their parent bank. For example, if the local subsidiary in a developing country of a foreign bank runs into trouble, it may get an injection of new capital from its parent bank to bail it out. This access to liquidity directs to a lesser deposit cost for foreign banks. Furthermore, foreign banks have access to advanced technology, outside resources and expertise which facilitates them in providing better service than the domestic banks. However, there might be some drawbacks that make the foreign banks perform worse than domestic banks in the host country. Firstly, a large foreign banking existence could mean that information available to host country supervisors can be reduced and the decision-making and risk management shifts to the parent bank. The delisting of the equity of local partner on the local exchange removes an important source of market intelligence for the foreign bank. In addition, if the integrated firmsâ‚ ¬Ã¢â€ž ¢ equities are delisted in the local market, host country controllers can also lose access to key foreign bank decision-makers. Secondly, a country might be more exposed to shocks due to foreign banks presence. External events which affect the parent bank will affect the branches or subsidiaries. The factors that determine exposure to such external shocks, whether it is greater with onshore foreign banking as compared to traditional cross-border bank lending, and the propositions for regulatory and supervisory policy also demand further investigation. Lastly Accounting Standards could also be a problem for foreign banks unlike the domestic banks which have clear set of accounting standards set within its organization. There is a need for transparent and reliable accounting and financial reporting but for foreign banks; usually parent banks and their foreign subsidiaries often have different accounting standards, which can lead to discrepant financial balances, even when they are based on the same financial information. This might lead to complexity in comparison between international financial statements which could raise doubt in the reliability of banks financial statements. Differences may occur in different tax treatment, deferred taxes, valuation and accounting of repos, amortization of goodwill, treatment of past due loans and from provision and inflationary accounting adjustments. Moreno and Villar (2005) Comparative Study of the Banks in Nepal Comparative Study of the Banks in Nepal A well-structured financial sector is of special importance for the economic growth in both developed and developing countries. The commercial banking sector should be well organized and efficient for the growth of an emerging economy. Commercial Banks which forms one of the backbones of the financial sector are the intermediary link in facilitating the flow of funds from the savers to investors. By providing a means of mobilizing domestic savings and proficiently channeling them into productive investments, they lower the cost of capital to investors and accelerate the economic growth of a nation. No underdeveloped country can well progress without setting up a sound system of commercial banking system.  [1]   Nepal is an agrarian based economy with a GDP of $ 33.26 billion  [5]  . Nepalese banking industry has considerable changes over past decades because of liberalization, deregulation, improving information technology and globalization. The financial sector liberalization resulted in the entry of new firms in the market, which also added more pressure on competitiveness of individual banks; deregulation widened the scope of activities and expanded the banking activities; advancement in technology resulted into new methods to perform banking activities. Furthermore, the banks, these days, are entering into non-banking markets while other financial institutions are entering into the banking markets that have conventionally been served by the banks. These changes have altered the structure and market behavior of Nepalese banking industry. Currently there are 26 commercial banks out of which 6 are joint venture banks, 63 development banks and 77 financial institutions in Nepal. At present there is only one international bank operating in Nepal which is Standard Chartered Bank Limited. It started operation in Nepal since 1987 as a joint-venture operation and today it is a part of Standard Chartered Group having an ownership of 75% in the company and 25% shares owned by the Nepalese public. Nepal after its commitment to the World Trade Organization (WTO) during its accession in 2004, has allowed foreign banks to make their foray in Nepal to do only wholesale banking  from Jan. 1, 2010. Initially before the agreement with WTO (GATS), the Central Bank regulation allowed foreign shareholders to acquire maximum of 51% shares. Later the regulation changed which allowed foreign ownership of 75% and the recent regulation of 2010 allows 100% foreign ownership (i.e. allows a local entity to be a branch of a foreign company) in the banking industry. Entering of foreign firms is likely to generate benefits to financial sector as well as the economy as a whole (Chau HB, 2003). The effects can be seen mainly through an increase in efficiency and technological advancements as mentioned above. Over the past decade, the Nepalese banking industry has been doing well and has a number of new firms entering into the market. However, there is only one foreign bank and 6 joint-venture banks in the banking sector, though the government has liberalized the financial sector and allowed foreign banks to have 100% foreign ownership. With limited number of foreign banks in Nepal, it is still unclear whether entering of foreign banks, including joint venture, helps to improve overall performance of banking sector as well as to spillover some benefit to domestic banks in Nepal. Objectives To answer the key question above, there are two objectives of the research paper: To measure and analyze the performance of three types of banks namely domestic bank, joint-venture bank, and foreign bank and to explain the variation in performances of these banks. To identify whether the entry of foreign banks, including joint venture, banks would be beneficial for domestic banks which still dominate the financial market in Nepal. 1.3. Scope and limitations of the Study This study will only focus on three types of banks, i.e. domestic bank, joint-venture bank, and foreign bank, and it will offer an insight on the advantages of foreign banks in Nepal. Furthermore it will provide the reasons pertaining to variations in performance of the banks. The main limitation in this study is that there is only one foreign bank in Nepal till date, so the interpretation of the performance of the foreign bank in Nepal could be restricted to some degree. 1.4. Research Methodology This section develops research methodology to reach the objectives of the study. The banking sector in Nepal will be divided into three groups, namely foreign owned banks; joint-venture banks, and domestic banks. For this research, foreign-owned banks will be classified as those which have started a branch or subsidiary in the host country where the share of foreign bank ranges from 51% to 100% while joint venture banks will be classified as those in which foreign investors own the total equity of 50% or less and domestics banks are those which are purely owned by the Nepalese. The foreign owned banks are separated from joint-venture banks in this study because these two types of banks tend to have different operational management, resulting in their different performance. The research methodology is composed of both quantitative and qualitative analysis. First, the qualitative approach is applied to examine the structure and development of financial sector in Nepal during 2000-2010. The financial policy, especially competition-restriction regulation in Nepalese banking sector is also reviewed, mainly through official documents from central bank and international organization. Then the quantitative approach is developed to measure the performance and efficiency of banking sectors in Nepal. This is done by conducting various financial indicators of three types of banks in Nepal namely foreign bank, joint venture banks and domestic banks. Comparison of the indicators among these three types of banks over the past decades will provide the clear analysis of different performance between foreign-owned and domestic banks. The indicators can be grouped into four aspects, namely profitability; operational costs; staff productivity; risk prevention. Profitability à ¯Ã¢â‚¬Å¡Ã‚ ·Profit Margin (Net Profit/Total Income) Profit margin is very useful when comparing  companies in similar industries. A higher profit margin indicates a more profitable company that  has better control over  its costs compared to  its competitors. Profit margin is  displayed as a percentage; a 20% profit margin, for example, means the company has a net income of $0.20 for each dollar of sales. Profitability à ¯Ã¢â‚¬Å¡Ã‚ · Return on Asset (Net Profit/Total asset) ROA figure gives investors an idea  of how effectively the company is converting the money  it has  to invest into net income. The higher the ROA number, the better, because the company is earning more money on less investment. For example, if one company has a net income of $1 million  and total  assets of $5 million, its ROA is 20%; however, if another company earns the same amount but has total assets of $10 million,  it has  an ROA of 10%. Based on this example, the first company  is better at converting its investment into profit. Profitability à ¯Ã¢â‚¬Å¡Ã‚ ·Ã‚  Return On Equity (Net Profit/Equity) The amount of net income  returned  as a percentage  of shareholders equity.  Return on equity  measures a corporations profitability  by revealing how much  profit a company generates  with the money shareholders have invested.  Ã‚  Higher The ROE better the company. Profitability à ¯Ã¢â‚¬Å¡Ã‚ · Interest Rate Spread (Interest Earning Ratio-Interest Expense Ratio) The difference between the average yields a financial institution receives from loans and other interest-accruing activities and the average rate it pays on deposits and borrowings. The greater the spread, the more profitable the financial institution is likely to be; the lower the spread, the less profitable the institution is likely to be. Risk prevention Risk Prevention à ¯Ã¢â‚¬Å¡Ã‚ ·Capital to Risk Weighted Assets (CRAR) Total Capital/ (RWAs) This ratio is used to protect depositors and promote the stability and efficiency of financial systems around the world. à ¯Ã¢â‚¬Å¡Ã‚ ·Core CRAR = Tier I Capital / RWAs Tier one capital is that which can absorb losses without a bank being required to cease trading. This measures the capital standard of the bank à ¯Ã¢â‚¬Å¡Ã‚ ·Adjusted CRAR = (Total Capital Net NPAs)/(RWAs Net NPAs) This relates to the bankâ‚ ¬Ã¢â€ž ¢s ability to sustain the losses due to risk exposures is the bankâ‚ ¬Ã¢â€ž ¢s capital. The intermediation activity exposes the bank to a variety of risks. Staff productivity Staff Productivity à ¯Ã¢â‚¬Å¡Ã‚ ·Profit per employee (Net Profit/ No. of Employee) This helps to measure how productive the employees are in the bank by calculating profit generated by every employee. Higher the figure better for the company. à ¯Ã¢â‚¬Å¡Ã‚ ·Net Income per employee (Net Total Income/ Number of Employees) This also helps to measure income generated by every employee in the company Operational costs Overhead Expense à ¯Ã¢â‚¬Å¡Ã‚ · Overhead expense/total income The accurate accounting and allocation of over-head expenses are very important factors in calculating the true cost of the company Operating Expense Ratio à ¯Ã¢â‚¬Å¡Ã‚ · Operating Expense/ Net Income The Operating Expense Ratio is usually viewed as a measurement of management efficiency.   This is because management usually has greater control over operating expenses than they do over revenues. In addition to analyzing different performance between foreign-owned and domestic banks, this study further analyze whether entering of foreign banks helps to improve efficiency of domestic bank. This is done by (1) Structured interviews with managers of central bank and commercial banks. Specifically, the interview will provide detailed analysis on which factors do help to improve performance of domestic banking sector in Nepal; could foreign-owned banks influence performance of domestic banks; and which channels do foreign-owned banks influence domestic banks, and (2) by â‚ ¬Ã…“Granger causality testâ‚ ¬? between domestic bank performance and foreign bank performance. This will be done on profitability, staff productivity and operational costs. 1.5. Organization of the study There will be five chapters in the study. Chapter 1 provides introduction, objective, scope and limitation, and methodology of the study. Chapter 2 reviews relevant theoretical and empirical literature on foreign bank penetration and domestic bank performance in both developed and developing countries to lay the groundwork for developing analytical framework and methodology in examining the impacts of foreign bank penetration on domestic bank performance in Nepal. Chapter 3 examines the structure and development of financial sector in Nepal as well as financial policy over the past decades. The results of banking performance are shown in this chapter. Chapter 4 discusses the impacts of foreign banks to domestic banks, both qualitative and quantitative. Chapter 5 provides conclusion and policy inferences. Chapter 2 Literature Review This section reviews relevant theoretical and empirical literature on foreign bank penetration and domestic bank performance in both developed and developing countries. This is done in order to lay the groundwork for developing analytical framework and methodology in examining the impacts of foreign bank penetration on domestic bank performance in Nepal. Penetration of foreign bank can come in different forms, such as branch offices, subsidiaries, joint ventures, or strategic partnerships. Branch offices, for instance, are an integral part of the parent company, that is, they have no capital of their own. Subsidiaries, however, are their own corporate entities, which are fully owned by the parent company. Similarly, joint ventures are separate corporate entities owned jointly by more than one parent company. Finally, foreign banks may establish a strategic partnership by buying a majority stake of an already existing domestic bank. Weller Scher (1999) The main difference between the various operational forms of foreign banks is their regulatory treatment. The regulatory treatment of the banks differs amongst domestic banks, joint-venture banks and foreign owned banks. Although there are different forms of foreign bank penetration, foreign owned banks are defined as those in which foreign investors own more than 50% of the total equity. Okuda and Rungsomboon, (2004). Decree on Foreign Banks, Phillip Fox 2006, distinguished foreign banks as Foreign Bank Branches (FBB), Foreign Invested Banks (FIB) and Joint Venture Banks (JVB). FBB is a dependent subsidiary of a foreign bank, for which the foreign bank has provided written guarantee that it will be responsible for all obligations and undertakings under FBB. A 100% FIB is established as a separate legal entity with capital being contributed from only foreign entities. Amongst the foreign investors, there must be a â‚ ¬Ã…“parent bankâ‚ ¬? and it must hold more than 50% charter capital. A JVB is established as a separate legal entity, with capital being contributed from one or more foreign banks and domestic banks. Capital is not divided into shares. In JVBs, the capital contribution rate by the foreign bank(s) is capped at 50% of the capital of the bank. The regulations and supervision of financial sector in a host country are crucial in affecting the penetration of foreign banks. Over the past decade, most of the banks throughout the world have started standardizing their policies relating to financial sector according to Basel committee (Basel II Basel III)  [7]   Although Basel system has been introduced and regulations and supervision of banking sectors began to be standardized, regulations relating to competition within the banking sector, which influence the penetration of foreign bank and market structure of banking sector, vary significantly across countries and regions. According to Barth, Caprio and Levin (2001), there are three key aspects of the regulations relating to competition within the banking sector, namely 1) Limitations on Foreign Ownership of Domestic Banks determine (whether there are any limitations placed on the ownership of domestic banks by foreign banks); (2) Limitations on Foreign Bank Entry determine (whether there are any limitations placed on the ability of foreign banks to enter the domestic banking industry) and (3) Entry into Banking Requirement determine (whether there are specific legal submissions required to obtain a license to operate as a bank). The restrictions on overall bank activities and ownership vary from country to country. The research on Regulation and Supervision of Banks around the World by Barth, Caprio and Levine (2001) mentions that there are two measures of the size of a countryâ‚ ¬Ã¢â€ž ¢s banking industry. First measure is total bank assets as a percentage of GDP and the other is the number of banks per 100.000 people. . Both these measures show substantial variation across countries. Countries like Germany, Switzerland, Netherlands, and United Kingdom have very high total bank assets as a percentage of GDP whereas United States and Asian countries are much lower. However the number of banks per 100,000 people is not much different in the countries mentioned above. The table clearly shows that the countries in ASEAN region have higher restrictions on banking activities and ownership in comparison to countries like New Zealand and United States. The regulations are different in each country and do not match even if the countries are in the same region. But Professional supervision per bank is lower in developed countries like United States, New Zealand, United Kingdom whereas developing counties have higher no. of supervision per bank. According to the research the highest restrictions on overall bank activities and ownership are imposed by countries like Bhutan, Cambodia, China, Indonesia, Vietnam and lowest restrictions by New Zealand then Germany, Austria and United Kingdom. In countries like New Zealand and United states the government ownership of banks is zero percent whereas India, Bangladesh has very high percent of government-owned banks. Although the regulations on banking competition vary, over the last decades, restrictions on foreign bank penetration have been relaxed as part of financial reform and foreign bank penetration increased substantially in many countries. This could be because the host country expects the positive impacts of increased foreign bank penetration in the host countryâ‚ ¬Ã¢â€ž ¢s banking system. Trade agreements have also played a major role in liberalization of market entry for foreign banks as financial services are required for international trade, production and investments. Governments usually support flow of foreign investment and this has been evident especially after various financial crises. Many countries in Southeast Asia started liberalizing foreign investment after the Asian financial crisis. The Asian crisis appeared to have catalyzed the liberalization of FDI restrictions in the banking sector across several ASEAN countries. Chau H.B (2003) A number of empirical studies analyze the impacts of foreign bank entry on domestic financial sector in a host country. The impacts can be grouped into three aspects. Firstly, foreign banks promote efficiency (competition and new technology) in domestic financial sector. A larger foreign bank presence can improve the competitiveness of the banking sector. Greater competition is advantageous for many reasons: to enhance the efficiency of financial services; to stimulate innovation; and to contribute to stability. It can also widen access of qualified borrowers to financing, which may increase aggregate lending and so enhance growth. A competitive and well-organized banking system can also improve the effectiveness of monetary policy transmission by tightening the link between policy rates and deposit/lending rates. (BIS paper No. 23) Foreign banks also help in availability of funds and acquisition of consumer-marketing skills. Chau (2003) In addition, foreign bank entry introduces new technology; financial services and advanced management skills, which existing domestic banks lack. The new technology and skills introduced by foreign banks include new financial products, advanced IT technology, and sophisticated bank management techniques. These are expected to contribute to lower operational expenses, amplified profitability, and better bank risk management. Forced by market competition, domestic banks may emulate the new financial products and management skills. Okuda Rungsomboon (2004). The presence of foreign bank also improves the corporate governance structure of the domestic banks. This includes breaking down the family-controlled structure and improving the decision making process. Chau H.B (2003) Unite and Sullivan (2001) has found that increase in foreign bank entry narrows the interest rate spreads and also reduces operating expenses. Foreign banks induces domestic banks to be more efficient, the increased competition forces domestic banks to take in less creditworthy customers and foreign participation induces domestic banks to spend more on improving their operations. However, Okuda Rungsomboon (2004) found that the entry of foreign banks is expected to negatively affect the operations of domestic banks but overall performance is likely to progress in the long run. Secondly, the entry of foreign banks is associated with reallocation of loans. Findings suggest that foreign banks improves credit access for many credit-worthy firms but some firms with positive net present value without opaque information will have difficulty obtaining loans. More developed countries, such as the U.S., Japan, and those in the European community, argue that Less Developed countries should allow foreign banks to enter into their economies. By increasing competition, foreign bank entry may boost the supply of credit and improve efficiency. Gormley (2006) Foreign banks are comparatively less likely to lend to â‚ ¬Ã…“soft informationâ‚ ¬? firms, and more likely to lend to â‚ ¬Ã…“hard informationâ‚ ¬? firms. â‚ ¬Ã…“Soft informationâ‚ ¬? refers to information that cannot be easily publicly verified by a third party. â‚ ¬Ã…“Hard informationâ‚ ¬? on the other hand refers to credible and publicly verifiable information, such as a foreign firmâ‚ ¬Ã¢â€ž ¢s authentically audited balance sheets, or government guarantees. Mian(2003.) The loan portfolio of foreign banks consists of only credible clients which mean that the chances of default are very less. The domestic banks will be compelled to give loans to non-credible clients because the credible clients will be mostly handled by foreign banks. This will have greater chances of loan defaults for domestic banks. Thirdly, foreign banks are geographically spread relative to domestic banks; therefore they are less affected by adverse shocks in the domestic country. Both foreign and private domestic banks have similar low probabilities of being assisted by the government in times of difficulty but foreign banks are considerably more likely of being bailed out by their parent bank. For example, if the local subsidiary in a developing country of a foreign bank runs into trouble, it may get an injection of new capital from its parent bank to bail it out. This access to liquidity directs to a lesser deposit cost for foreign banks. Furthermore, foreign banks have access to advanced technology, outside resources and expertise which facilitates them in providing better service than the domestic banks. However, there might be some drawbacks that make the foreign banks perform worse than domestic banks in the host country. Firstly, a large foreign banking existence could mean that information available to host country supervisors can be reduced and the decision-making and risk management shifts to the parent bank. The delisting of the equity of local partner on the local exchange removes an important source of market intelligence for the foreign bank. In addition, if the integrated firmsâ‚ ¬Ã¢â€ž ¢ equities are delisted in the local market, host country controllers can also lose access to key foreign bank decision-makers. Secondly, a country might be more exposed to shocks due to foreign banks presence. External events which affect the parent bank will affect the branches or subsidiaries. The factors that determine exposure to such external shocks, whether it is greater with onshore foreign banking as compared to traditional cross-border bank lending, and the propositions for regulatory and supervisory policy also demand further investigation. Lastly Accounting Standards could also be a problem for foreign banks unlike the domestic banks which have clear set of accounting standards set within its organization. There is a need for transparent and reliable accounting and financial reporting but for foreign banks; usually parent banks and their foreign subsidiaries often have different accounting standards, which can lead to discrepant financial balances, even when they are based on the same financial information. This might lead to complexity in comparison between international financial statements which could raise doubt in the reliability of banks financial statements. Differences may occur in different tax treatment, deferred taxes, valuation and accounting of repos, amortization of goodwill, treatment of past due loans and from provision and inflationary accounting adjustments. Moreno and Villar (2005)