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Learning outcomes

After studying this unit you should be able to:

  • understand private equity and the role of venture capital companies in providing this;

  • understand why and how public equity issues can be undertaken;

  • look at the reasons for cross-listing on stock exchanges;

  • examine why a company might de-list from an exchange and return to private ownership.


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Introduction

This unit looks at equity finance – the range of equity instruments and markets available to a company. First, we look at private equity and the role of venture capital companies that provide such finance. We look at the mechanics of an initial public offering (IPO) and at recent cases of companies ‘listing’ on a stock exchange for the first time. We go on to explore certain important strategic issues for a business when considering equity finance:

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2.6 Conclusion

In this section we have looked at the different ways in which expectations about corporate governance have grown. We have briefly reviewed the role of corporate scandals as a generator of regulatory responses, and in particular the significant problems that surfaced in 2002–3. We have also noted that research shows that evidence of a positive correlation between good investment returns and good corporate governance policies is not conclusive.

We have looked at the growth of shareholde
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2.3 Capital markets

In so far as better corporate governance has the objective of enhancing shareholder control, it should follow that companies with better corporate governance will attract investors and will reduce their cost of capital. A global investor opinion survey carried out by McKinsey & Company (2002) gives some evidence that good governance is linked to investment decisions. The survey found that:

  • investors state that they still put corporate governance on a
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2.2 Recent governance failures

As we have discussed before, the creation of corporate regulation is often linked to perceived failures of corporations and their management to behave in the way society expect them to. Corporate governance is not an exception to this trend, and, as with accounting, different countries may well experience difficulties at different times. For example, the development of British codes of best practice, which began with the Cadbury Committee, can be related to governance scandals such as Polly P
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6.3 The psychology of risk

Within the psychological paradigm there is a different starting point for understanding risk. In financial economic accounts, risk is generally regarded as a combination of the expected magnitude of loss or gain and the variability of that expected outcome. Human perception of risk works rather differently. There are two other important components of risk that influence our perceptions: the fear factor – how much we dread the potential outcome – and the control factor
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5.5.2 Mimetic pressures

Mimetic pressures come from the pressure to imitate what others do. The world is complicated and finding the optimal solution often difficult. One way of dealing with this complexity is to copy others. For example, in my own consulting work I carried out an assignment for British Petroleum (BP). Subsequently, other (smaller) clients would often ask me ‘So how does BP do this?’, usually with little regard for the different circumstances they faced. It is this mimetic pressure that
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5.5 Social pressures which affect our decision making

Broadly, there are three kinds of social pressure which affect how we make decisions:

  • coercive

  • mimetic

  • normative.

We look at these in more detail below.


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5.3 Social institutions

Of course, the extent of agreement about meaning can be highly variable: from the ephemeral (a certain style of clothing may come to stand for a shared attitude among a small group of teenagers for a short period) to the more profound (such as the idea of ‘a market’ or ‘marriage’). Sociologists refer to these more profound shared meanings as institutions. In this sense, an institution is a persistently reproduced social pattern that is relatively self-sustaining. However, to sa
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4.4 Using information

Our use of information is often biased in important regards. First, we pay more attention to information that is easily available (the availability heuristic). Second, we overweight memories which are more easily retrievable – usually because they are emotionally vivid or have personal relevance (the retrievability heuristic).

We pay selective attention to information, often in a self-serving way. We will often give greater weight to information which shows us in a favou
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2.2 Different approaches to decision making

Activity 2

Think of a major decision you have recently been involved in making at work. For each of the following statements about your decision-making process make a note of the number which shows your level of agreement with the stat
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1.4.3 Summary

  • The process toward European unification was initiated by top political elites in France, Italy, Germany and the Benelux countries after the Second World War.

  • New collective actors are progressively being engaged in European affairs, among them the Labour movement, regional movements and new social movements such as the environmentalism of groups like Greenpeace and Friends of the Earth.

  • European elites, although engaged in
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1.4.2 Unification and the EU

With the development of the EU an arena for collective action has appeared. But, as we shall see in SubSection 1.4.3, it is rather limited and it cannot be compared to the public sphere of the member states. Although collective actors have reacted to the emergence of new European-based institutions, due to internal constraints not all are in t
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1.4.1 Historical background

European unification was begun by the social democratic and Christian democratic leaders of the Western European states who had fought each other during the Second World War. The idea was to create a community of states that would guarantee peace and prosperity. The process turned out to be long and arduous, particularly after the federalist failures of the Congress of the Hague (1949) and the European Defence Community (1953). The main emphasis was on economic co-operation, and the project w
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Introduction

The material presented here focuses on the politics of racial violence in Britain. The material is an audio file, originally 30 minutes in length, and examines the issues around this subject. It was recorded in 1995.

This material is from our archive and is an adapted extract from Crime, order and social control (D315) which is no longer taught by The Open University. If you want to study formally with us, you may wish to explore other courses we offer in this Author(s): The Open University

Acknowledgements

This unit is subject to Creative Commons licence  (attribution, non commercial, non derivative). For copyright reasons any third party materials must not be used in isolation from the unit or for any other purpose. Acknowledgements must always accompany use of unit. Any adverts contained in this unit are for the purposes of academic analysis only and do not represen
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7.3 Summary

The idea of discourse alerts us to a number of issues about the social construction of social problems. It suggests that we need to look beyond competing theories or perspectives to look at how knowledge is organised around central themes that allow the different theories to compete. Discourses define what the problem is, and it is because theories share the definition of the problem that they can compete and argue. Perspectives that start somewhere else – or do not share the definition of
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6.1 Legitimating the powerful

The labelling perspective associated with Berger and Luckmann focuses on the processes by which some behaviours and types of people become marked out for social disapproval – targeted by the wider society as different and requiring some form of social response. Its virtue is that it challenges conventional assumptions that social problems exist ‘out there’ as obvious and commonly understood facts. Berger and Luckmann's perspective stresses the importance of language in shaping how we de
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5.1 Common sense revisited

It is worth taking a little time to reflect on what we have discovered so far. Starting from ‘what everybody knows’ about a social problem – or what are sometimes called the common-sense understandings – allows us to see a number of things if we apply the scepticism of being a stranger in our own society.

First, there is a question about whether particular issues are commonly understood to be social problems. As we have seen, there are views which say either that poverty
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4.3 Summary

In this section we have tried to sketch some of the main lines of division in social constructions of social issues. The distinction between the natural and the social in constructing the causes that underlie social issues is a profound and recurrent one. A ‘social’ orientation involves the construction of social causes and conditions as the explanations for social issues. However, it is also important to bear in mind that such an orientation will itself be complicated by differences of p
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