How to Lead a Long and Healthy Life Speech Essay

Good Health starts from the very infancy. It is here that protection and care is needed, so that each organ functions well, each organ develops naturally, and there are no deformities, disabilities and diseases but often the health of children remain neglected, with the result that they grow unhealthily and that affects their education as well. A healthy child develops into a healthy adult. In case the child does not grow properly, and he remains handicapped in some way, his ill-health spoils his adult life. He cannot join any active service; he cannot be a successful professional, nor can he live his life happily. Health is real wealth. A healthy person is an asset to himself, to his family and to his community. On the other hand an ailing person is a burden on all. He is a danger for coming generations because heredity plays an important part in this respect. Health is the pivot upon which a man’s whole personality and its well-being depend. An ailing and aching body saps the enthusiasm for pursuit. Unwholesome feelings and sensations retard the pace of functional activity, economic development and spiritual uplift. Health cannot be achieved merely by taking one or two pills everyday or by observing a few restrictions. It can be achieved only by understanding what health is, on what it depends and then applying this knowledge in every-day life. The care of the body regarding food, cleanliness, exercise, rest and protection against disease, are essential for the preservation of sound health. Life is for living. Without health, life is deprived of not only much of its usefulness but also its joys and pleasures. The stream of life will be rich and lasting in proportion to the sources which nourish it. These sources belong to every person. They are food, exercise, and proper posture, care of bodily functions, avoidance of alcohol and tobacco and wholesome mental and emotional attitudes.

Ownership Structure, Managerial Behavior and Corporate Value

Journal of Corporate Finance 11 (2005) 645 – 660 www. elsevier. com/locate/econbase Ownership structure, managerial behavior and corporate value J. R. Daviesa, David Hillierb,T, Patrick McColganc a University of Strathclyde, UK b University of Leeds, UK c University of Aberdeen, UK Received 21 November 2002; accepted 6 July 2004 Available online 20 April 2005 Abstract The nonlinear relationship between corporate value and managerial ownership is well documented. This has been attributed to the onset of managerial entrenchment, which results in a decrease of corporate value for increasing levels of managerial holdings. We propose a new structure for this relationship that accounts for the effect of conflicting managerial incentives, and external and internal disciplinary monitoring mechanisms. Using this specification as the basis for our analysis, we provide evidence that the managerial ownership–corporate value relationship is co-deterministic. This finding is at odds with recent work which reports that corporate value determines managerial ownership but not vice-versa. D 2005 Elsevier B. V. All rights reserved. JEL classification: G32 Keywords: Ownership structure; Capital expenditure; Corporate value; Tobin’s Q 1. Introduction In a market without agency problems, corporate managers will choose investments that maximise the wealth of shareholders. In practice, competing objectives which are incompatible with the shareholder wealth-maximising paradigm may also be pursued. T Corresponding author. Leeds University Business School, University of Leeds, Maurice Keyworth Building Leeds, LS2 9JT, UK. Tel. : +44 113 3434359; fax: +44 113 3434459. E-mail address: d. j. [email  protected] c. uk (D. Hillier). 0929-1199/$ – see front matter D 2005 Elsevier B. V. All rights reserved. doi:10. 1016/j. jcorpfin. 2004. 07. 001 646 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Following Jensen and Meckling (1976), a large literature has developed that examines how managerial behavior impacts upon firm performance. A vibrant strand of this literature concerns the relationship between managerial ownership levels, the direct investment decisions made by management and the inherent value of the firm, as proxied by Tobin’s Q ratio. Morck et al. 1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) provide evidence of a significant nonlinear relationship between corporate value and managerial ownership. Specifically, value increases with managerial holdings for low levels of ownership. At some level, managers become entrenched within the firm resulting in a decrease in firm value. However, whereas Morck et al. (1988) and Hermalin and Weisbach (1991) document further changes in the corporate value–managerial holdings relationship at high levels of equity ownership, McConnell and Servaes (1990) report no such change. Recent work has built upon the findings of Demsetz and Lehn (1985) who argue that levels of managerial ownership will be determined endogenously in equilibrium. Moreover, Cho (1998) and Himmelberg et al. (1999) have shed doubt upon the earlier findings of Morck et al. (1988) and McConnell and Servaes (1990) by controlling for the effects of endogeneity and unobservable (to the econometrician) firm characteristics in their analysis. After controlling for the effects of endogeneity in the corporate value– managerial holdings relationship, they showed that managerial ownership had little or no effect on corporate value and investment. Short and Keasey (1999) and Faccio and Lasfer (1999) utilize a cubic specification to model the corporate value–managerial holdings relationship and both report a significant nonlinear functional form, similar to Morck et al. (1988), for British companies. However, neither study fully examines the misspecifying impact of endogeneity on their results. In this paper, we propose a new structure to the managerial ownership–corporate value relationship which captures a more complex characterisation of the evolving behavior of managers. We argue that at high levels of managerial ownership when external market discipline becomes neffective, there will be a resurgence of entrenchment behavior. With equity holdings around 50%, managers will have implicit control of their company, but still do not have objectives completely aligned to external shareholders. Only at very high levels of managerial holdings are incentives akin to other shareholders. When this model is applied to a l arge sample of firms incorporated in the UK, managerial ownership is seen to have a significant impact on corporate value. This relationship is endogenous, and consistent with Cho (1998) and Himmelberg et al. (1999), corporate value has a corresponding effect on managerial holdings. We also find that although ownership levels are affected by firm level investment, there is no evidence of the reverse occurring. In the next section we outline our model of the managerial ownership–corporate value relationship. We present empirical results in Section 3 and conclude in Section 4. 2. The model In this section, we propose an alternative structure to the managerial holdings–corporate value relationship and argue that the cubic, or simpler representations, used in earlier J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 647 studies1 are unnecessarily restrictive and misspecified. The model that is presented here captures further nonlinearities in this relationship at high levels of managerial holdings and has a quintic specification. Management is faced with both negative and positive incentives to ensure that they follow objectives which maximise shareholder wealth. The effectiveness of these incentives is potentially a function of the level of managerial ownership in the firm. We view the propensity of management to maximise shareholder wealth to be a function of three unobserved factors: external market discipline, even if it is weak, internal controls and convergence of interests. Moreover, the strength of each factor can be viewed as a function of the level of managerial ownership in the firm. 2 2. 1. Low levels of managerial ownership For low levels of managerial ownership, external discipline and internal controls or incentives will dominate behavior (see Fama, 1980; Hart, 1983; Jensen and Ruback, 1983). Empirically, Morck et al. (1988), McConnell and Servaes (1990) and Hermalin and Weisbach (1991) report results consistent with this behavior for the relationship between managerial holdings and corporate value. However, there is also the possibility that lower levels of ownership within this range have endogenously arisen from performance related compensation packages, such as stock options and stock grants rather than increased ownership in itself leading to higher Q ratios. 2. 2. Intermediate levels of managerial ownership At intermediate levels of managerial ownership, management interests begin to converge with those of shareholders. However, with greater ownership comes greater power in the form of voting rights. Managers may, at this level of holdings, maximise their personal wealth through increasing perquisites and guaranteeing their employment at the expense of corporate value. In addition, while low managerial ownership levels may have arisen through the vesting of compensation plans, it is unlikely that such plans will provide management with a moderate ownership stake in the firm. Moreover, even though external market controls are still in place, these and the effect of convergence of interests are not strong enough to align the behavior of management to shareholders. Managerial labour markets operate on the principal that poorly performing 1 See Morck et al. (1988), McConnell and Servaes (1990), Hermalin and Weisbach (1991), Cho (1998) and Himmelberg et al. (1999) for US companies and Short and Keasey (1999) and Faccio and Lasfer (1999) for UK companies. 2 For example, since compensation packages such as stock options are a transfer of wealth from shareholders to management, their value will lessen as managerial ownership increases. External market discipline is also a function of managerial ownership. Large shareholdings by top management act as a deterrent for takeovers because of the greater ability to oppose a hostile bid or drive up premiums to the point where bidders no longer view the target company as a positive net present value investment Stulz (1988). Finally, internal controls in the form of monitoring from large shareholders and corporate boards should reduce the scope for managers to diverge greatly from the interests of shareholders. Again, however, such discipline is likely to be inversely related to managerial control Denis et al. (1997). 648 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 anagers can be removed and appropriately disciplined. Studies by Denis et al. (1997) in the US and Dahya et al. (2002) in the UK both find an inverse relation between topmanagement turnover and managerial ownership. This lack of discipline provides evidence of a deficiency in incentives for managers to maximise shareholder value at this level of owners hip. Franks and Mayer (1996) also report that hostile takeover targets in the UK are not poorly performing firms, which is in contrast to the findings of a disciplinary role for corporate takeovers in the US by Martin and McConnell (1991). In this context, Franks and Mayer (1996) provide significant evidence that takeovers in the UK may not act to remove a self-serving board even when they are performing poorly. This lack of disciplinary control over poorly performing management may strengthen management’s ability to pursue sub-optimal corporate policies at intermediate ownership levels. 2. 3. High levels of managerial ownership (less than 50%) As levels of managerial equity ownership grow, objectives converge further to those of shareholders. At ownership levels, below 50% management do not have total control of the firm and external discipline still exists. While perhaps no longer being subject to any major discipline from external takeover markets, it is likely that even at these levels of ownership, managers are still subject to discipline from external block shareholders. This is particularly true in the UK, where because of strong informal ties between institutions (Short and Keasey, 1999), a lax regulatory environment concerning the ownership of listed companies (Roe, 1990) and low monitoring costs (Faccio and Lasfer, 1999), institutional activism is stronger than in the US. This view is also consistent with Franks et al. (2001) contention of strong minority protection laws in the UK, whereby large shareholders cannot transact with related companies without the consent of the firm’s minority shareholders. The UK regulatory framework stands in contrast to US corporate law which limits minorities to seeking redress after the related party transaction has taken place. Combined with monitoring from UK institutions, this may allo w external shareholders to impose some form of control on management even at elatively large levels of managerial ownership. 2. 4. High levels of managerial ownership (greater than 50%) At levels above 50% ownership, management has complete control of the company. Although atomistic shareholders are unlikely to have been able to in influence managers at far lower levels of ownership than this, there is always a possibility that a cartel of blockholders, allied with minority shareholder’s rights under UK company law, may be able to mount a challenge to management if they fail to make decisions in shareholders’ best interests. For a more in-depth discussion of the institutional differences and similarities between the United Kingdom and United States, see Short and Keasey (1999) and Faccio and Lasfer (1999). 3 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 649 At greater than 50% managerial ownership, this is no longer likely to be a serious issue to management. Furthermore, with majority ownership, the probability of a hostile takeover effectively becomes zero. The failure of external discipline combined with a lack of blockholder incentives above 50% may result in a decrease in corporate value for a small window of managerial holdings above this level. This fall in corporate value is consistent with the theoretical predictions of Stulz (1988). 2. 5. Very high levels of managerial ownership Finally, as managerial shareholdings rise to very high levels, management effectively become sole owners of the company. This would lead to value-maximising behavior as predicted by Jensen and Meckling (1976). Consistent with Morck et al. 1988), Short and Keasey (1999) and Faccio and Lasfer (1999) at above a certain level of ownership, corporate managers are faced with such severe financial penalties for failing to maximise the value of their companies that they are forced to make decisions which will maximise firm value, regardless of how this affects their private benefits of control. 2. 6. Summary Our characterisation of a highly nonlinear relationshi p between managerial equity holdings and corporate value is in contrast to earlier studies (Morck et al. , 1988; McConnell and Servaes, 1990; Hermalin and Weisbach, 1991; Cho, 1998; Himmelberg et al. 1999)4, which posit fewer turning points in their analysis. There is little theoretical basis on which the individual turning points can be determined, and the findings of Kole (1995) suggest that these will be in influenced by the size of the firms in the sample. However, it is expected that the second local maximum will be in the region of 50% managerial ownership reflecting the stage at which management gain total control of the company. In the next section, the main tests of our hypotheses will be carried out. 3. Empirical results 3. 1. Description of the data We use data on managerial and external block ownership for 1995 from the MacMillan London Stock Exchange Yearbook for 1996 and 1997. The Yearbook provides summary accounting data including a consolidated balance sheet, information on company directors, legal information on the company’s lawyers, auditors and stockbrokers, principle activities, company history, capital and dividend payments, and industrial sector for the McConnell and Servaes (1990) modelled the corporate value–managerial ownership relationship as a quadratic function, which by construction has only one turning point. 650 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 vast majority of all quoted companies and securities. 5 We restrict our attention to nonfinancial companies only and require that each firm has complete managerial and external ownership data for 1995, which leaves 802 industrial companies in our sample. 6 Data on capital expenditures, to tal assets employed, after tax profits, depreciation, leverage, equity market values, and research and development costs are collected from Datastream. We estimate Tobin’s Q ratio (our proxy for corporate value) using the formula below: Q? MVEQ ? PREF ? DEBT BV ASSETS ? 1? where: MVEQ=the year-end market value of the firm’s common stock; PREF=the yearend book value of the firmTs preference shares (preferred stock); DEBT=the year-end book value of the firmTs total debt; and BV ASSETS=the total assets employed by the firm, which is measured as total assets minus current liabilities. Our measure is consistent with the modified version of the formula as used by Chung and Pruitt (1994) who find that 96. 6% of the variability in the popular Lindenberg and Ross (1981) algorithm of Tobin’s Q is explained by their approximation. Our method also avoids the data availability problems which arise from using the more rigorous algorithms proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997) in order to estimate the replacement cost of assets. We use book values of preferred stock and long-term debt, rather than the market values proposed by Lindenberg and Ross (1981) and Lewellen and Badrinath (1997). In the UK, there is a far less active market for the trading of corporate debt than that which exists in the US, forcing us to rely on book values for these variables. In a final stratification of our sample, we mitigate the problem of potential outliers and trim 25 firms with the largest and smallest Tobin’s Q measure, leaving a final sample of 752 firms. 7 Table 1 presents descriptive statistics for our sample data. The mean managerial ownership stake of all board members is 13. 02%, which is similar to comparable US studies, but slightly lower than Faccio and Lasfer (1999) who report mean ownership of 16. 7%. Tobin’s Q is slightly higher than that reported for related US work with a mean value of 1. 96. The standard deviation of Tobin’s Q is 1. 21, which is also greater than other studies. However, it is substantially less than the mean of 2. 47 reported by Doukas et al. (2002) and is relatively similar to the mean value of 1. 86 that Short and Keasey (1999) report for their market valuation ratio. 8 The mean blockholder ownership is 37. 34% and is on a par with that reported for US firms by McConnell and Servaes (1990) (32. 4%) and 34. 57% reported by Faccio and Lasfer (1999) for UK firms. The full range of firm sizes is included in the sample with the 5 To establish the reliability of the summary ownership data, we carried out a correlation analysis of a subsample of 422 firms from he original data set of 802 companies (52. 62%) for which we were able to obtain company annual reports. The yearbook data and company accounts data exhibited a correlation of 0. 90, with a pvalue of 0. 00. We also establish the robustness of our data by re-estimating the model using data for 1997. This result is discussed later in this section. 6 Recently listed, merged or acquired firms are not included. 7 This is a larger sample than that used by Morck et al. (1988)—371 firms, Cho (1998)—326 firms and Himmelberg et al. (1999)—maximum 427 firms in any 1 year. Measured as the market value of equity divided by the book value of equity, minus any intangibles. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 1 Descriptive statistics Variable Management ownership Blockholder ownership Largest stakeholder Capital expenditures Total assets employed After tax profits less depreciation/assets employed Debt/assets employed Market value of equity Research and development Tobin’s Q Mean 13. 02% 37. 34% 18. 82% 21,221 255,642 0. 1425 0. 1411 335 2918 1. 9647 S. D. 18. 06% 23. 57% 21. 64% 75,317 1,583,274 0. 4763 0. 252 1399 44,108 1. 2092 Minimum 0. 00% 0. 00% 0. 00% 7 268 A10. 977 0. 0000 0. 68 0 0. 4502 651 Maximum 79. 90% 100. 00% 100. 00% 1,024,200 37,774,000 3. 4207 4. 8358 26,224 1,198,988 7. 0997 Managerial own ership data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Capital expenditures (thousands), total assets employed (thousands), after tax profits, depreciation, leverage, equity market values (millions) and research and development costs (thousands) are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. mallest company having an equity market capitalization of o680,000 and the largest company’s equity valued at approximately o26 billion. The mean market capitalization of firms in the sample is o335 million. Table 2 provides the distribution of sample statistics grouped by managerial ownership. A very large proportion of the sample (62%) have managerial ownership levels less than or equal to 10%. However, a larg e fraction of companies (11%) also in the sample had boards Table 2 Breakdown of sample by managerial ownership Manager level Ownership Number of firms 464 87 75 41 34 26 21 4 Blockholder ownership, % 43. 34. 5 34. 4 24. 0 22. 7 13. 0 12. 7 5. 8 Tobin’s Q 1. 952 2. 033 1. 736 2. 109 2. 113 2. 257 1. 933 1. 808 Total assets employed 393,861 44,093 26,186 34,322 35,864 28,190 14,234 10,127 Capital expenditures/ assets employed 0. 106 0. 161 0. 124 0. 117 0. 114 0. 100 0. 099 0. 114 Liquidity 0. 130 0. 129 0. 157 0. 194 0. 194 0. 177 0. 169 0. 239 0VMOb10% 10VMOb20% 20VMOb30% 30VMOb40% 40VMOb50% 50VMOb60% 60VMOb70% 70VMOb100% Managerial ownership (MO) data measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder ownership measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Capital expenditure (thousands), total assets employed (thousands), after tax profits and equity market values (millions) are collected from Datastream. Liquidity is measured as cashflow divided by total assets employed. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. 652 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 3 Regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 85 28. 14 0. 017 MO 0. 12 3. 23 MO2 A0. 013 A3. 08 F MO3 4. 63A10 2. 82 2. 651 A4 MO4 A6. 73A10 A2. 53 A6 MO5 3. 36A10A8 2. 24 The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e where Q is Tobin’s Q and MO is managerial ownership. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. which owned at least 40% of all outstanding equity. As would be expected, outside blockholder ownership decreases with managerial ownership. At managerial ownership levels of 30%, blockholder ownership is slightly less at 24%. It is probable that external discipline, as provided by blockholders, would still be strong at these levels of managerial holdings, particularly where informal coalitions among blockholders are more prominent (Short and Keasey, 1999). At higher levels of managerial holdings, blockholder ownership decreases sharply leading to a collapse in the power of blockholders. Managerial ownership is a decreasing function of company size, which is consistent with Demsetz and Lehn (1985). Although firm sizes in the UK are considerably smaller than US firms, the ratios in Table 2 are similar to summary statistics provided in Morck et al. (1988), McConnell and Servaes (1990), Cho (1998) and Himmelberg et al. (1999). Table 2 also illustrates the nonlinear relationship between Tobin’s Q and managerial holdings. Visual inspection indicates two maximum points in the region of 10% to 20% and 50% to 60%, respectively. The convergence of managerial interests to those of shareholders at very high levels of ownership is not apparent at this stage because of the small number of companies with managerial holdings above 70%. However, the statistics for all other groupings are consistent with our theoretical motivation. 3. 2. Estimation of ownership breakpoints In order to model the Tobin’s Q–managerial ownership (MO) function as having two maximum and two minimum turning points, we specify a quintic function, as follows: Q ? 0 ? a1 MO ? a2 MO2 ? a3 MO3 ? a4 MO4 ? a5 MO5 ? e ? 2? For the nonlinear relationship discussed in Section 2 to be valid, the coefficients in Eq. (2) must have the following signs: a 0N0; a 1N0; a 2b0; a 3N0; a 4b0; a 5N0. The estimated values of the coefficients in Eq. (2) are given in Table 3. 9 The intercept coefficient, which is an estimate of Tobin’s Q i n firms with no managerial holdings, is 1. 85. Each slope coefficient is of the correct sign and statistically significant at the 5% level. Although the It is clear that Tobin’s Q will be in influenced by more than just managerial ownership. However, the objective of this paper is to investigate whether the standard quadratic and cubic specifications used in previous studies are too simplistic. To maintain parsimony, we therefore omit other factors from this specific model. Other relevant factors are incorporated into the analysis in a later table. 9 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 653 Estimated Relationship between Tobin's Q and Managerial Ownership 2. 40 2. 20 2. 00 1. 80 1. 60 1. 40 1. 20 0 0. 1 0. 2 0. 3 0. 4 0. 5 0. 6 0. 7 0. 8 0. 9 Tobin's Q Insider Ownership Fig. 1. Estimated relationship between Tobin’s Q and Managerial Ownership. Tobin’s Q was modelled as a quintic function of insider ownership using ordinary least squares regression. The estimated regression line is: Q=1. 85+0. 12IOA0. 013OI2+4. 63A10A4IO3A6. 73A10A6IO4+3. 36A10A8IO5. adjusted R 2 is low, it is similar to that found in comparable US studies. The use of this model as a basis to estimate managerial ownership turning points leads to four critical values: 7. 01%, 26. 0%, 51. 4%, 75. 7% and is illustrated in Fig. 1. To establish the robustness of our regression model, the spline approach as applied by Morck et al. (1988), Cho (1998) and Himmelberg et al. (1999) to estimate breakpoints was carried out using our generated turning points. Table 4 presents the coefficients resulting from the piecewise linear regression. Similar to Table 3, each coefficient has the expected sign and all but one variable is statistically significant at the 5% level. The only variable that is not significant, MOover 76% , has the correct sign. The probable cause for the lack of significance is the small number of firms in this managerial ownership grouping. An examination of these results suggests that Tobin’s Q increases in firms for managerial ownership levels up to 7% and then declines to ownership levels of 26%. This is almost identical to the turning points in Morck et al. (1988) and Himmelberg et al. (1999) (5% and 25%, respectively) and is comparable to Cho (1998), who uses breakpoints of 7% and 38%. However, it differs from the UK studies of Short and Keasey (1999) and Faccio and Lasfer (1999) who each reports two turning points of 12. 99% and 41. 99%, and 19. 68% and 54. 12%, respectively. Earlier studies limited the turning points to two but in our extension, it is clear that there are another two turning points at much higher levels of managerial ownership. It also appears that market discipline has an influence on managerial objectives up to the point where the board takes complete control (51%). Tobin’s Q then decreases until ownership levels reach 76%, after which Q increases. Denis and Sarin (1999) argue that cross-sectional studies may be subject to bias, whereby they fail to account for events with potentially large valuation consequences. 10 10 Examples of such events may include receiving a takeover bid, top management turnover, etc. 654 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 4 Spline regression results for Tobin’s Q on managerial ownership Variable Coefficient t-Statistic Adj. R 2 Intercept 1. 854 28. 38 0. 012 MOup 0. 056 2. 93 to 7% MO7% to 26% MO26% 0. 0187 2. 57 2. 769 to 51% MO51% A0. 053 A1. 99 to 76% MOover 0. 624 1. 12 76% A0. 020 A2. 62 F The following equation was estimated using data for 752 firms listed on the London Stock Exchange during 1995. Q ? a0 ? a1 MOup to 7% ? a2 MO7% to 26% a3 MO26% to 51% ? a4 MO51%to 76% ? a5 MOover 76% ?e where Q is Tobin’s Q and MOup to 7%=managerial ownership if managerial ownership b7%, =7% if managerial ownershipN7%. MO7% to 26%=0 if managerial ownership b7%, =managerial ownership minus 7% if 7%bmanagerial ownershipb26%, =26% if managerial ownershipN26%. MO26% to 51%=0 if managerial ownershipb26%, =managerial ownership m inus 26% if 26%bmanagerial ownershipb51%, =51% if managerial ownershipN51%. MO51% to 76%=0 if managerial ownership b51%, =managerial ownership minus 51% if 51%bmanagerial ownershipb76%, =76% if managerial ownership N26%. MOover 76%=0 if managerial ownershipb76%, =managerial ownership minus 76% if managerial ownershipN76%. Ownership data is taken from the London Stock Exchange Yearbook and Tobin’s Q is calculated from Datastream. As a further test of robustness, we carried out the quintic analysis for managerial ownership and Tobin’s Q for the same sample of available firms in 1997. 11 Again, each coefficient was significant with the correct signs and the turning points from the estimated model were relatively stable at 7. 9%, 26. 5%, 55. 2% and 86. 2%. . 3. Endogeneity of managerial equity ownership, investment and corporate value To analyse the effects of endogeneity in the managerial ownership, investment and corporate value relationship, we follow Cho (1998) and carry out a simultaneous equations analysis using two-stage least squares. Cho (1998) and Himmelberg et al. (1999) showed that once endogeneity was controlled, the perceived impact of managerial ownership on corporate value d isappeared. Moreover, corporate value was found to positively affect levels of managerial ownership. It is possible that if the model specification employed by these studies is wrong, what appears to be a lack of statistical significance in the endogenous variables in the simultaneous equations analysis may actually be due to errors in variables arising from the intermediate regressions. We re-run the two-stage least squares analysis of Cho (1998) using our more complex specification. 12 The control variables in our regression are the same as in Cho (1998). Namely, managerial ownership, investment and corporate value are Some firms fell out of the sample because of mergers, delisting, and being taken over. Cho (1998) also attempts to control for specification error by re-estimating his simultaneous regression analysis using managerial ownership as a linear variable and again finds no relationship between managerial ownership and corporate value. However, if indeed there is a nonlinear relationship between ownership and corporate value, such an approach would fail to capture this. 12 11 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 655 defined to be endogenously determined by each other as well as some additional relevant exogenous variables. That is: Managerial Ownership ? ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? Corporate Value ? g? managerial ownership; investment; leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial ownership; corporate value; volatility of earnings; liquidity; industry? For comparability, we define each of the above vari ables as in Cho (1998). For each company, industry dummy variables are set equal to one for each Financial Times Industry Classification (FTIC) grouping that sample firms lie within, and zero otherwise. In addition to the variables used by Cho (1998), we include blockholder ownership and largest stakeholder in the corporate value regressions to reflect the potential impact of blockholder discipline in the UK and the role of a founding or dominant individual on corporate value. All accounting and market variables are taken at the financial year-end from Datastream. In Table 5, we report results from the simultaneous equations analysis. Taking the managerial ownership regression first, all variables with the exception of investment have coefficients with the expected sign. Managerial ownership is negatively related to the market value of equity, which reflects the fact that wealth constraints and risk-aversion will prevent managers from holding substantial stakes in large firms. Firm level liquidity is shown to be positively related to managerial ownership, which is a stronger result than Cho (1998) who reported no significance for this variable. Importantly, Tobin’s Q is found to be significant and positively related to the level of managerial ownership. This is consistent with Cho (1998) but is opposed to Demsetz and Villalonga (2001), who find the opposite effect. This result suggests that managers tend to hold larger stakes in firms that are successful or have higher corporate value. This may also be indicative of successful managers benefiting from equity-related compensation policies. The investment variable, which has a negative impact on managerial ownership is surprising as theory predicts that firm level investment will be positively related to managerial ownership. Himmelberg et al. (1999) contend that firms with high investment spending will have high managerial ownership to alleviate the monitoring problem caused by discretionary managerial spending. However, Jensen (1986) argued that firms may overinvest as a result of an earnings retention conflict, rather than underinvest as Jensen and Meckling’s (1976) moral hazard theory would predict. When a firm is in this situation, managers may be able to maximise their size-related compensation by overinvesting, but are aware that this may ultimately reduce the value of their shareholdings. Although tentative, this could in part explain the negative relation between investment and ownership. Cho (1998) also finds a negative (but insignificant) coefficient on the investment variable using both capital and research and development expenditures. 56 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Table 5 Simultaneous equations analysis of managerial ownership, corporate value and investment Variable MVEQ Tobin’s Q Volatility Liquidity Investment Leverage Asset size Largest stakeholder Blockholder ownership MO MO2 MO3 MO4 MO5 Industry dummies Adj. R 2 F Managerial ownership A1. 8A10 (A3. 74) 0. 127 (4. 63) A1. 0A10A6 (A0. 74) 0. 035 (2. 24) A1. 314 (A2. 67) A5 Corporate value Investment 0. 073 (2. 35) 3. 89A10A6 (A2. 86) 0. 013 (1. 01) Yes 0. 045 8. 014 5. 136 (2. 23) 1. 088 (4. 36) 3. 33A10A8 (1. 17) A0. 20 (A0. 06) A0. 837 (A2. 60) 1. 588 (3. 07) A0. 395 (A2. 22) 0. 037 (1. 64) A0. 001 (A1. 14) 1. 9A10A5 (0. 76) Yes 0. 033 3. 497 A0. 035 (A0. 46) 0. 018 (0. 72) A0. 003 (A0. 92) 1. 72A10A4 (1. 03) A3. 12A10A7 (A1. 07) Yes 0. 009 2. 497 Results from a simultaneous equations analysis of managerial ownership, corporate value and investment for 752 firms, using the two-stage least squares method to estimate the following equations: Managerial Ownership ? f ? market value of firm0s common equity; corporate value; investment; volatility of earnings; liquidity; industry? CorporateValue ? g? anagerial ownership; investment; financial leverage; asset size; industry; block ownership; largest stakeholder? Investment ? h? managerial owner ship; corporate value; volatility of earnings; liquidity; industry? In the above equations, managerial ownership measures the total level of holdings held by company management that are greater than 0. 5% of a company’s equity. Blockholder data measures the total level of holdings by outside blockholders that are greater than 3% of a company’s equity. Largest stakeholder is the largest single outside blockholder that holds at least 3% of company’s outstanding equity. Investment is defined as capital expenditure divided by total assets employed, leverage is the ratio of total debt to total assets employed and liquidity is measured as cashflow divided by total assets employed. Capital expenditure, total assets employed, after tax profits, depreciation, leverage, equity market values and profit volatilities are collected from Datastream. Tobin’s Q is measured as the ratio of the market value of equity and book values of debt and preferred equity to the book value of assets in the firm minus current liabilities. Shareholdings data is taken from the London Stock Exchange Yearbook for 1996 and 1997. All data are for industrial companies quoted on the London Stock Exchange in 1995. t-Statistics are in parenthesis. The estimated coefficients from the corporate value regression are given in the second column of Table 5. Corporate value is shown to be positively related to investment and leverage. While the investment coefficient is as expected, the sign of the leverage variable requires more discussion. Morck et al. 1988) find that leverage has a negative but insignificant impact on corporate value and attribute this to the possibility of managers in highly levered firms holding a higher than average level of ownership. However consistent with our results, McConnell and Servaes (1990) report a positive significant coefficient for leverage. Leverage can have various effects on firm value. The notion that high debt levels lead to greater corporate value has been argued by Modigliani and Miller (196 3) with respect J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 57 to valuable tax shields, Ross (1977) and Myers (1977) with respect to a signalling hypothesis and Jensen’s (1986) free cashflow hypothesis. Ultimately, leverage is one way of imposing external discipline on management and if it is effective, will lead to increased corporate value. Alternatively, Demsetz and Villalonga (2001) interpret a negative association between leverage and firm value as being due to relative inflation between the current time period and the earlier time period where companies had issued much of their debt. We view the most important result from the corporate value regression as being the significance of the managerial ownership variables. Our results indicate that although managerial ownership levels are determined by corporate value, corporate value itself is determined in part by managerial ownership. This finding is at odds with Cho (1998) and Himmelberg et al. (1999) but consistent with the classical view of Jensen and Meckling (1976) and empirical work by Morck et al. (1988) and McConnell and Servaes (1990). An interesting result is that blockholder ownership is shown to negatively impact Tobin’s Q. This result is consistent with Faccio and Lasfer (1999, 2000). McConnell and Servaes (1990) suggest that this could be due to a conflict of interests, which results from blockholders being forced into aligning themselves with managers so as not to jeopardize their other dealings with the firm. Alternatively, the negative coefficient may be explained by the strategic alignment hypothesis, which argues that blockholders and managers find it mutually beneficial to cooperate with each other. Finally, such findings may be consistent with the arguments of Burkart et al. 1997) in that too much block ownership will overly constrain management and reduce their ability to take value-maximising investment decisions. The investment regression coefficients presented in column three of Table 5 show a significant positive effect of corporate value on investment and a negative effect of profit volatility on investment. The finding that corporate value has a positive effect on investment is consisten t with the arguments of Cho (1998) that highly valued firms will have large investment opportunities. Also, firms with variable earnings will be reluctant to invest if future income is uncertain. Managerial ownership is found to have no impact on firm level investment. However, this may reflect optimality in that investment policy may be one way in which managers affect value, but not the only means. Ultimately we view our findings of a causal relation between ownership and firm value as being of greater significance than the lack of a relation between ownership and investment. These results are consistent with Cho (1998) but slightly stronger, in that volatility of earnings is significant in our regressions but insignificant in Cho (1998). . Conclusions Debate as to the relationship between corporate value and managerial ownership in the US is still unresolved. Studies such as Morck et al. (1988), McConnell and Servaes (1990), and Hermalin and Weisbach (1991) document a nonlinear relation between these two variables. More recent work by Cho (1998), Himmelberg et al. (1999), and Demsetz and Villalonga (2001) shows that when controlling for endogeneity, managerial ownership is determined by corporate value but not vice-versa. 658 J. R. Davies et al. Journal of Corporate Finance 11 (2005) 645–660 We argue that even accepting that corporate value and managerial ownership are endogenously related to each other, misspecification of the managerial holding–corporate value relationship may lead to spurious conclusions concerning the direction of causality. Applying a quintic structure, we present results which suggest that the correct form of this relationship is a double humped curve. This is in contrast to other studies that have assumed a cubic or quadratic specification and by construction only one hump. The second hump or local maximum is attributed to a collapse in external market discipline at or around the point where managers take overall control of their firm. At this point, which is around 50% ownership, the management is not sufficiently akin to owners but have sufficient power to disregard any form of external monitoring or discipline. This has a detrimental affect on corporate value for a short window of managerial holdings. At high levels of managerial ownership, managers are effectively majority owners of their firm leading to a convergence of interests with other outside shareholders. Utilizing the quintic specification for managerial ownership, we show that even when controlling for endogeneity, not only is corporate value a determinant of managerial ownership but managerial ownership is also a determinant of corporate value. This finding is consistent with the classical work of Jensen and Meckling (1976), as well as the early empirical work of Morck et al. (1988) and McConnell and Servaes (1990) who do not control for endogeneity in their analysis of corporate value and managerial ownership. We believe our analysis to have several important contributions to the literature on the relationship between managerial ownership and corporate value. First, our quintic specification extends previous work in this area and successfully captures the complex nonlinear relationship between corporate value and managerial ownership. Second, by analysing a completely different market which is similar in structure to the United States, we strengthen the power and insights gained from earlier comparable US studies. Third, we provide evidence that corporate value, firm level investment and managerial holdings are interdependent with each other. This has implications for the debate on the effectiveness of compensation policies involving stock options for top managers. Moreover, our findings suggest that some levels of managerial ownership may not be beneficial to outside shareholders even when these levels are high. At the very least, this paper has served to add to the debate concerning the importance of managerial ownership on corporate value by providing evidence that even controlling for endogenous effects, managerial ownership and stock compensation schemes do have a significant influence on corporate value. Our research has provided an initial step towards a more accurate characterisation of the corporate value–managerial ownership relationship. While we do not posit that our specification can be applied to every given data set, we argue that previous research may be misspecified where it has failed to fully explore alternative specifications of the managerial ownership–corporate value relationship. Future work in this area may focus on other structural forms, which more effectively reflect the interdependence of managerial ownership and corporate prospects. The nonlinear endogenous impact of blockholders on corporate value and managerial ownership would also provide interesting insights on the external discipline that is faced by firm managers and the impact this has on corporate value. J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 659 Acknowledgements The authors would like to thank John Capstaff, Scott Linn, Andrew Marshall, James Wansley and seminar participants at the Financial Management Association International (2001), European Financial Management Association (2002), Dublin Economics Workshop, the University of Strathclyde and an anonymous referee for their valuable comments on earlier versions of the paper. The normal caveat applies. References Burkart, M. , Gromb, D. , Panunzi, F. , 1997. Large shareholders, monitoring, and the value of the firm. Quarterly Journal of Economics 112, 693 – 728. Cho, M. H. , 1998. Ownership structure, investment, and the corporate value: an empirical analysis. Journal of Financial Economics 47, 103 – 121. Chung, K. H. , Pruitt, S. W. , 1994. A simple approximation of Tobin’s Q. Financial Management 23, 70 – 74. Dahya, J. , McConnell, J. J. , Travlos, N. G. , 2002. The Cadbury committee, corporate performance and top management turnover. Journal of Finance 57, 461 – 483. Demsetz, H. , Lehn, K. , 1985. The structure of corporate ownership: causes and consequences. Journal of Political Economy 93, 1155 – 1177. Demsetz, H. , Villalonga, B. , 2001. Ownership structure and corporate performance. Journal of Corporate Finance 7, 209 – 233. Denis, D. J. , Sarin, A. , 1999. Ownership and board structures in publicly traded corporations. Journal of Financial Economics 52, 187 – 223. Denis, D. J. , Denis, D. K. , Sarin, A. , 1997. Ownership structure and top executive turnover. Journal of Financial Economics 45, 193 – 221. Doukas, J. A. , McKnight, P. J. , Pantzalis, C. , 2002. Security analysis, agency costs and UK firm characteristics. Working Paper. Faccio, M. , Lasfer, M. A. , 1999. Managerial ownership, board structure and firm value: the UK evidence. Working Paper. Faccio, M. , Lasfer, M. A. , 2000. Do occupational pension funds monitor firms in which they hold large stakes? Journal of Corporate Finance 6, 71 – 110. Fama, E. F. , 1980. Agency problems and the theory of the firm. Journal of Political Economy 88, 288 – 307. Franks, J. , Mayer, C. , 1996. Hostile takeovers and the correction of management failure. Journal of Financial Economics 40, 163 – 181. Franks, J. , Mayer, C. , Renneboog, L. , 2001. Who disciplines management in poorly performing companies? Journal of Financial Intermediation 10, 209 – 248. Hart, O. D. , 1983. The market mechanism as an incentive scheme. Bell Journal of Economics 14, 366 – 382. Hermalin, B. Weisbach, M. , 1991. The effects of board composition and direct incentives on firm performance. Financial Management 20, 101 – 112. Himmelberg, C. P. , Hubbard, R. G. , Palia, D. , 1999. Understanding the determinants of managerial ownership and the link between ownership and performance. Journal of Financial Econ omics 53, 353 – 384. Jensen, M. C. , 1986. Agency costs of free cashflow, corporate finance and takeovers. American Economic Review 76, 323 – 329. Jensen, M. C. , Meckling, W. H. , 1976. Theory of the firm: managerial behavior, agency costs and ownership structure. Journal of Financial Economics 3, 305 – 360. Jensen, M. C. , Ruback, R. S. , 1983. The market for corporate control: the scientific evidence. Journal of Financial Economics 11, 5 – 50. Kole, S. , 1995. Measuring managerial equity ownership: a comparison of sources of ownership data. Journal of Corporate Finance 1, 413 – 435. Lewellen, W. G. , Badrinath, S. G. , 1997. On the measurement of Tobin’s Q. Journal of Financial Economics 44, 77 – 122. 660 J. R. Davies et al. / Journal of Corporate Finance 11 (2005) 645–660 Lindenberg, E. , Ross, S. , 1981. Tobin’s Q ratio and the industrial organization. Journal of Business 54, 1 – 33. Martin, K. J. , McConnell, J. J. , 1991. Corporate performance, corporate takeovers, and management turnover. Journal of Finance 46, 671 – 687. McConnell, J. J. , Servaes, H. , 1990. Additional evidence on equity ownership and corporate value. Journal of Financial Economics 27, 595 – 612. Modigliani, F. , Miller, M. H. , 1963. Corporate income taxes and the cost of capital: a correction. American Economic Review 53, 433 – 443. Morck, R. , Shleifer, A. , Vishny, R. W. , 1988. Management ownership and market valuation: an empirical analysis. Journal of Financial Economics 20, 293 – 315. Myers, S. C. , 1977. Determinants of corporate borrowing. Journal of Financial Economics 5, 147 – 175. Roe, M. J. , 1990. Political and legal restraints on ownership and control of public companies. Journal of Financial Economics 27, 7 – 42. Ross, S. A. , 1977. The determination of financial structure: the incentive-signalling approach. Bell Journal of Economics 8, 23 – 40. Short, H. , Keasey, K. , 1999. Managerial ownership and the performance of firms: evidence from the UK. Journal of Corporate Finance 5, 79 – 101. Stulz, R. E. , 1988. Managerial control of voting rights: financing policies and the market for corporate control. Journal of Financial Economics 20, 25 – 54.

Notes: Something Wicked This Way Comes Essay

Main characters: 1. William Halloway – One of the main protagonists of the novel. Will is thirteen years old and has white-blonde hair and eyes â€Å"as clear as summer rain.† Although very obedient, Will is also sweet, sensitive, and does not want to grow up because he thoroughly enjoys being young. He always finds the right thing to do, even in the most trivial of situations. Will has an active role in fighting against the carnival’s evil powers. 2. James â€Å"Jim† Nightshade – Best friend of Will Halloway. A rash boy, who acts a foil to Will’s character, in that he thinks less and acts quickly in his actions. He has wild, tangled chestnut brown hair and grass-colored eyes. Jim yearns to become older, making him vulnerable to the carnival’s many temptations, but is ultimately saved by Will’s friendship. 3. Charles Halloway – Father of William. He is the dynamic character of the novel, as in the beginning he is kind, yet does not care to relate to his son for fear that age shall always get in the way. However, after gaining courage from fighting off the carnival’s evils, he gains admiration, love and friendship from his son. 4. Mr. Dark – Major protagonist. A sinister man who bears tattoos all over his body, one for each person successfully tempted into joining the carnival. Mr. Dark initially holds sway over the other main characters, but his power weakens when Charles uses positive emotions against him, something he cannot comprehend or withstand. Dark’s background is a mystery, although he refers to being raised in a strict religious upbringing. Minor Characters: 1. J. C. Cooger – Dark’s partner in running the carnival, Mr. Cooger is a fierce, red-headed man who is first seen repairing the carousel. He catches and terrifies Will and Jim until Mr. Dark intervenes. Like Mr. Dark, his origins are unknown. 2. The Dust Witch – A blind soothsayer with a sixth sense and the ability to perform many feats of magic, the Witch is portrayed as one of the carnival’s most dangerous members. However, her increased sensitivity to the presence and emotions of other people makes her vulnerable to positive feelings. 3. Miss Foley – A fifty-year-old schoolteacher of Will and Jim. Much like the other victims of the carnival, Miss Foley wished to become young and beautiful again. However, when she got her wish, she became frightened because she went blind. 4. The Skeleton – An extremely thin, skeleton-like creature who is one of the more frequently appearing freaks. Like all of the other freaks, he once desired to be younger and was eventually tricked into joining the carnival. The Skeleton appears to be one of the more loyal freaks as, near the book’s end, he takes the time to carry the recently deceased and youth Mr. Dark with him after all the other freaks ran away. 5. Tom Fury/Dwarf – A lightning rod salesman who is turned into an insane dwarf by the carnival and is recruited into it, with no memories of his former life. Main Setting: The novel is set in Green Town, Illinois during October 23 – October 25. The year is not listed, but it seems probable that it takes place in the 1950’s era. Several things might lead a reader to conclude this fact, including the simple freedoms the boys enjoy, the respect the boys offer to adults, and the small town atmosphere that, for the most part, represents an atmosphere that is not largely present in American society today. The fact that text is set in the fall season allows readers to feel the enhanced suspenseful mood Bradbury pens into the entire story with Halloween being involved in the storyline. The characters birth dates are significant in that they are before or after Halloween. Plot Outline: Two boys named Will and James encounter a strange lightning rod salesman, while they’re just on the verge of their fourteenth birthdays, who says a storm is coming their way. Later, the townsfolk also begin to notice a certain shift of the atmosphere, as if there’s something very different in the air. The boys learn about the carnival coming to town and get excited, while Will’s father has a bad feeling about it. When the ominous Dark Man arrives, the boys are both terrified yet thrilled. It seems to be just another carnival at first, but it’s not before long that the forces of darkness themselves are manifesting from the haunting melodies of the carousel-which can change your age depending on which way you ride it-and the glaring Mirror Maze. With his collection of freaks and oddities, such as the Fat Man, Mr. Electro, and the blind Dust Witch, Dark intends to take control of the town and seize more innocent souls to damn. It’s up to Will and James to save their family, friends and themselves because â€Å"something wicked this way comes.† Symbols: * Boys – Young boys run where they will and act upon passing fancies. Things occur unexpectedly and pop up out of nowhere, just like the young boys who run everywhere and can be anywhere at any given moment. The unpredictability of young boys is matched only by that of life. Part of the reason that Jim and Will may have been the ones to figure out the carnival is that, while they did not anticipate it, they move with it. They see it arrive and witness it end, because they move fast enough and far enough to see many things. The other people in the town are a step behind, and they are no match for the carnival. Will’s father, on the other hand, gets in touch with his youthful side just in time to put an end to the carnival. The three run together at the end of the book, just as life in Green Town turns a new page. * The Evil Carnival – Throughout the book the carnival is associated with nothing but bad deeds and awful events. It is a place of evil run by evil people. The carnival is not a part of the town, so its evil is something beyond the normal evil in man. In fact, its evil may be viewed as the evil that threatens to destroy towns. The carnival is the evil that drives people apart and unites them through fear and manipulation, rather than through freedom and caring. The carnival is the evil that threatens to make all people selfish and greedy, and it must be combated in order to ensure that there will always be communities of people living together in harmony. Sentences on dominate themes: 1. â€Å"You’ll live and get hurt,† she said, in the dark. â€Å"But when it’s time, tell me. Say goodbye. Otherwise, I might not let you go. Wouldn’t that be terrible, to just grab ahold?† 2. â€Å"For the thing it most wanted were hidden in the dark.† – Chapter 34, page 121 Important Quotes: 1. â€Å"Not words, old man,† said Mr. Dark. â€Å"Not words in books or words you say but real thoughts, real actions, quick thought, quick action, win the day.† 2. † . . .If you’re a miserable sinner in one shape, you’re a miserable sinner in another.† 3. â€Å"Too late, I found out you can’t wait to become perfect, you’ve got to go out, fall down, and get up with everyone else.† 4. â€Å"Sometimes the man who looks happiest in town, with the biggest smile, is the one carrying the biggest load of sin. There are smiles and smiles; learn to tell the dark variety from the light. The seal-barker, the laugh-shouter, half the time he’s covering up. He’s had his fun and he’s guilty. And men do love sin, Will, oh how they love it, never doubt, in all shapes, sizes, colors, and smells.†

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Thomas Kuhn`s Pradigm theory - Essay Example The failure of foundationalism was the development of Weltanschauung views of Thomas Kuhn and some philosophers. His book, The Structure of Scientific Revolution, published in 1962, is the most cited book in the twentieth century. Thomas Kuhn introduced incommensurability, normal science and paradigm changes to the philosophy of science in this book. Incommensurability is used to describe conditions when one is not able to judge and compare the same standards, or have no common standard of measurement. This word originated in the 16th century, from the Latin word ‘incommensurabilis’, in a mathematical sense. According to Brown, both Thomas Kuhn and Paul Feyerabend, introduced incommensurability in the context of mathematics. For instance, in the Pythagoreans theory, the diagonal of a square with magnitude 1 is √2. However, this meaning of the irrational number cannot be expressed exactly, which holds true. Incommensurability, thus, describes the inability to compare unrelated concepts. Paradigm is defined as a typical example, pattern, or model of something, which can also be expressed as a global view of a theory and methodology of a particular scientific topic. This phrase originated in the late 15th century via the Greek word ‘paradeigma’. Thomas Kuhn claimed that science undergoes a paradigm shift, which is discontinuous. The paradigm shift describes a change in basic assumption in science. Paradigm shift has lead scientists to new approaches in understanding something that was never thought before, and therefore, must not be fully, but to account for subjective perspectives. Thomas Kuhn demonstrated that there are three stages in science, viz. prescience, followed by normal science, and then revolutionary science. This progression of stages occurs when â€Å"normal scientists† who are practising â€Å"normal science† will develop a particular paradigm through experimentation and study, and this paradigm will be challenged by new obse rvations obtained through further experimentations that falsify the current paradigm. When an overwhelming amount of evidence against the existing paradigm accumulates, a state of crisis begins. Therefore, a new paradigm will have to be developed that overrides the problems and limitations of the pre-existing paradigm in order to solve the state of crisis. This â€Å"crisis is resolved when an entirely new paradigm emerges and attracts the allegiance of more and more scientists until eventually the original, problem-ridden paradigm is abandoned†

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We Can But Should We - Research Paper Example ) The company has already announced that about 280 people from New Jersey have consented to having chips implanted under their skin that contain health records for the trial use of the technology. (p. 65) The most important use of the human implantable chip, hence, is quick and reliable access to communication, including its communication and processing, without the need for another device. For instance, people could use a laptop, a flash disk or a cellular phone to store and transmit data, which could be lost, including the information they have, in the process. This will not be the case with the chip because it has to be implanted in the human body. According to Edwards (2005), chip implants are beneficial because it, in effect, would simplify life by making it possible to do away with driver’s licenses, passports, and other identification necessary in order to avail services such healthcare. (p. 164) The chip mentioned earlier, as manufactured by Applied Digital Solutions, contains a 16-digit number that communicates with a scanner. The process links the chip, including the identification and information stored therein, to the medical facility’s electronic database. This is seen as most beneficial to those patients entered into the emergency rooms after an accident or severe trauma. If the patient is unconscious or unable identify himself as well as his medical history, the chip could prove extremely useful. The information on the chip would allow the hospital to determine â€Å"family contact information, recent lab results, pharmacy prescription information and medical information.† (Hunt, Puglia and Puglia, p. 65) So far, the body of literature on the subject is silent in regards to the health risk of the healthcare chip. It is supposedly as small as a grain of rice and seems to pose no real danger to its bearer. What this means is that the most significant drawback to chip implantation is the ethical question. The groups raising opposition to the chip

Should College Athletes Get Paid Term Paper Example | Topics and Well Written Essays - 1000 words

Should College Athletes Get Paid - Term Paper Example Setting aside for the now that college athletes who participate in the more popular sports such as football and basketball earn millions of dollars for their respective college and that non-athletic students gain from these financial benefits as well, athletes, by virtue of their demanding schedule, are deprived of the ability to earn while they learn and because of this reason alone should be compensated somewhat. The amount of a stipend is debatable but a reasonable amount of, for example, $200 per month is hardly exorbitant. This discussion will examine the reasons why college athletes receive pay. Both the universities and the NCAA make millions of dollars each winter from the bowl games following the regular football season, a sum that doesn’t include the share individual conferences enjoy. Now add up concession and ticket proceeds, merchandise sales and money gained from corporate sponsorships that without the existence of sports would not be available to a university ev ery year. Those millions come from one month’s revenue from one sport. The college athletes understand that their efforts produce many millions of dollars for their schools but they are not allowed to make even pocket change while giving their all for their team. Athletes are subjected to the most meager of a life under current NCAA rules. Meanwhile, they observe other students with enough spending money at least for an occasional burger and their coach making a multi-million dollar income but know that it is them who are the ones that making the biggest sacrifice. When a college athlete or their family is experiencing financial difficulties as is the instance in many situations, the pressure to leave school to try a professional career is enormous. What would inspire a student-athlete in this predicament to remain in school if they were presented with a chance to earn what even a minor league salary or a backup role at the top league level may offer? Moreover, college athlet es face the perpetual threat of a career ending injury. This has ended the dreams of many for a professional career but, more tragically, also ends their academic career too. (Chaisson, 2001). There undoubtedly is a disparity between athletes and non-athlete students which is not in favor of the athlete. For example, college students who are engaged in extracurricular pursuits other than athletics, musicians for instance collect scholarships and can perform for their college’s symphony whether they or not they are academically eligible. They are also able to perform and make money in a professional band or orchestra while enrolled at school. By contrast, if athletes did this, they would lose their scholarship, be kicked out of school and most likely end any chance of playing professional sports. Furthermore, a music student is able to earn a music degree and even for a specific instrument. â€Å"A football or basketball major is unheard of, much less a major in playing quart erback or strong forward. Athletes are scrutinized for getting any type of job while on scholarship for their school. Getting paid to play or work in football would be sacrilege† (Chaisson, 2001). Student athletes represent of a unique sector of the school’s population. Much more is required of them. Athletes spend much more time and effort than general population students and are relentlessly challenged with balancing academics, athletics and social

Medecine Personal Statement Example | Topics and Well Written Essays - 750 words

Medecine - Personal Statement Example I exuberantly thought I would be showing my companions a wonderful sight of fireworks and they will be thankful they were with me. Nevertheless, my enthusiasm turned into a nightmare when our eyes started to burn. We bawled our eyes out because of the dreadful event and as a result of the tear gas fired by the army. I quickly turned back, pulling my brother and cousin who were already shrieking. As the older person among us, I strove to have my wits intact. I took my brother and cousin home. I went out again with a purpose in mind. On my way out, I saw several women, children and elderly people crying and screaming by the roadside as policemen scoured the area, striking civilians who fought. There were fear and cries of anguish all around and the sight was just unbearable. Covering my eyes with a cloth, I went to the nearest vegetable shack. I once read that onion bulbs can be used as protection against tear gas and so I bought as many as I can carry. I cut the onions in half and handed them to my family and some people who were suffering, crying for help outside our home. I instructed them to squeeze the onion s near their eyes so that the gas released from the onions will irritate their eyes and help get rid of the tear gas. When I was sure that my family members were safe in our house, I went out to see how things were going outside. There was chaos everywhere. Policemen were checking every person’s belongings as they tried to go home safely, vehicles were stopped for hours for the policemen to complete their inspections and those who fought against them were hurt. Masked, uniformed men were scattered around the area. They had shields to protect themselves from people who protested against such inhumane actions. Behind them were tanks where tear gases were expelled from. The army was in stark contrast with the unarmed civilians who wanted nothing but to stop the bloodshed and live peacefully. Bloody victims, destroyed cars, suffering and angry people, women

Color Symbolism in Great Gatsby Essay Example for Free

Color Symbolism in Great Gatsby Essay White: related to Jordon and Daisy, usually represents purity, ironically it represents the false purity and corruption of Daisy and Jordon. White is also related to dreams and fantasy, which ties into Gatsby and Nick because to them the girls were like fairies that seemed to float around. Daisy can be related to a white flower with a golden center because as you see in the novel she appears pure on the outside, but is corrupted by the golden money on the inside. Blue: related to Gatsby and his dream, numerous times Gatsby’s party is described as having a romantic blue aura around them. When Gatsby is with Daisy it’s a perfect blend of blue and white that blissfully make the area feel like a dream. Blue seems to represent success in this novel too because when Gatsby starts his new life with Dan Cody the first thing he buys is â€Å"a blue coat†. However, like most good things in this novel, once the party is over or Daisy leaves Gatsby; that’s when the mysterious yellow haze takes over the blue. Red: related to Gatsby and Nick, with Gatsby it symbolizes strongly the ugliness of reality and the masquerade of success. With Nick, it illustrated the dazzling world of the rich and the enchantment of material riches. However as the novel progresses red becomes grotesque and is related to violence and death. Yellow: related to money and wealth. This is the most widely used color in the novel; it’s usually used in conjunction with a demotion of something being gold to just plain yellow. A great example of this is Gatsby’s car, before it kills Myrtle it’s a â€Å"pristine cream colored car† however, after the murder it loses its luster and become a yellow car. Green: related to Daisy and encouragement of Gatsby, beckoned Gatsby to make Nick invite Daisy over so they could meet. However, Gatsby seeking the blue and green hue disregards the yellow that creeps in and ultimately leads to his tragic downfall.

Phenomenon Of Grandparent Becoming Parent Essay Example for Free

Phenomenon Of Grandparent Becoming Parent Essay FIGURE FOR GRANDCHILDREN   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Since 1980, there have been dramatic increases in children living with and being cared for by their grandparents. In 1980, 2.3 million children were living in with their grandparents. By 1997, there were 3.9 million children living in that situation. The 2000 U. S. Census has reported 4.5 million children living in grandparent-headed homes. The 2000 Census also counted, for the first time, 2.4 million grandparents who are responsible for the basic needs of their grandchildren who are living with them. REASONS WHY GRANDPARENTS ARE RAISING THEIR GRANDCHILDREN   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Given the statistics above, it can be assumed that more and more grandparents have to play parenting roles for their grandchildren. There are a number of reasons why the statistics continue to rise: The American Association of Retired Persons’ (AARP) Grandparent Information Center states that the most common reason is substance abuse. Drug and alcohol problems are causing parents to be unable to raise their children. Teenage pregnancy is also one reason why grandparents come to raise their grandchildren. Parents who marry and give child at a very young age are often not yet emotionally prepared to take care of their children Illnesses – parents have mental illness or have contacted some other diseases like HIV/Aids. Incarceration-parents are imprisoned or are under detention Child abuse or neglect-the child have been physically abused or are totally neglected by their parents Domestic violence-the parents are often hurling verbal or physical abuse against each other and the child suffers from trauma Death of one or both parents Military deployment- grandparents are called to step in when one or both parents are deployed in military service and are unable to care for their kids Poverty or joblessness   Ã‚  Ã‚   EMOTIONAL BENEFITS   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   A majority of grandparents who raise their grandchildren report experiencing a great purpose for living. Providing care for grandchildren helped them to feel young and inactive. Other rewards include A chance to raise a child differently A chance to nurture family relationships. Family ties and values are preserved. They are able to receive love, affection, and companionship from their grandchildren. Children raised by grandparents tend to be less rebellious and are more understanding and appreciative. To many of the grandparents raising their grandchildren, their sacrifices are more than worth it. It is clear that despite the problems, most grandparents derive satisfaction from acting as parents to their grandchildren. Caring for their grandchildren can be positive and rewarding. Grandparent bring the benefit of experiences and perspective. They can also provide important stability, predictability.   And they can be a healthy role model for their grandchildren. OTHER PROBABLE BENEFITS   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   Grandparents can ask for legal arrangements so that they can have full custody, temporary custody, or they can obtain the status of being a foster parent. When custody is established by the law, they will have a measure of legal security and can gain rights and benefits for them and their grandchildren. The Children’s Health Insurance Program (CHIP). Each state has a CHIP which pays for doctor visits, hospital stays, shots, and medicine. Financial Aids A child may be legible to get money from the state’s Temporary Assistance for Needy Families (TANF) Program. These families may qualify for food stamps. The child may qualify for Child Tax Credit and the grandparent may qualify for the Earned Income Tax Credit. Both programs can give them extra cash at tax time. Grandparents can ask the school guidance about applying for free hot meals for their grandchildren. REFERENCES Bryson, K. Casper, L.M. (1998). â€Å"Co-resident \Grandparents and their Grandchildren. Census Bureau Current Population Reports.† P23-198.   http://www.census.gov Accessed 6 February 2008 Doucette-Pudman, D. Lacerre, J.R. (1996). Raising Our Children’s Children. Minneapolis, MN.: Fairview Press. Mullen, F. (1995). A tangled web: Public benefits, grandparents and grandchildren. Washington D.C.: American Association of Retired Persons.

What Is The Ultimate Basis Of Religious Belief Philosophy Essay

What Is The Ultimate Basis Of Religious Belief Philosophy Essay In the article, Are Men ever directly aware of God, James considered mystical states of consciousness as the centre and root of personal religious experiences which encompasses spectrum of experiences, from the unspiritual to the most devotedly profound.  One of his arguments is that, we, humans, are in control of what we believe. This can be cross-referenced from his humanistic perspective in psychology. Moreover, he started his piece by defining the expression, mystical states of consciousness. He built his paper by creating a valid topic of investigation and study by defining mystical states of consciousness as real experiences, which is available to most people. And to prevent verbal disputation and recrimination of the loosely-defined words mysticism and mystical, he proposed four marks that an experience must have to be considered one. He started with ineffability which stresses the defiance of expression in order for the experience not to be mistaken as a state of feeling. Moreover, it must be directly experienced; cannot be transferred to others and the no words can be used to describe it. Noetic quality, on the other hand, which is also so similar to states of feeling, says that mystics experience a state of knowledge, not just an intellectual aha moment. It is all encompassing knowledge which is the knowledge of the Unity that fuses even contradictory thoughts to a whole which penetrates the mystics backbone. Subject claims that they have experience revelations and insights into virtual truths. Transiency and passivity are less sharply marked, but are also usually found in mystical religious experiences. Transiency is a state that cannot be sustained for long; it fades rapidly, and remains out of reach. However, some memory content always remains, and this can be used to modify the interior life of the subject between the instant of their recurrence. When in a mystical experience, individuals do not seem to keenly process the data. It is a passive experience; the subject feels a loss of control, and of being in the grasp of superior command James fourth mark. These four qualities mark is what he called, the mystical group. These four marks of mystics and mysticism state forms a distinct region of consciousness. Later, James goes on to suggest that these experiences occur as our field of consciousness increases. James offers variety of experiences that he wants to categorize as mystical, extending from the most trivial to the most important. And he cited examples of their lower grades. He relates this to the power of poetry and music. He also mentioned dà ©jà   vu, a sudden feeling which sometimes sweeps over us of having  been there before. He sees this sort of experience as making us imprecisely conscious of the likelihood of things beyond our normal perceptions. There are degrees of what James calls  mystical consciousness. For these, the writer merely quotes from people who have experienced them. One of the subjects describes being visited by trance states in which awareness of the world was annihilated, leaving a sharp awareness of the self. This brings him to the contemplation of what we to-day call drug-induced states, the consciousness produced by intoxicants and anaesthetics, especially by alcohol. The writer states that his own experience of  nitrous oxide intoxication  has led him to the conclusion that our normal waking consciousness is but one especial type of consciousness. Continuing his survey, James now reaches  religious mysticism pure and simple. This is where the experience is of the presence of God. As one of the writers quoted says, I was aware that I was immersed in the infinite ocean of God. He completes his survey of the range of mystical experiences by looking at  its methodical cultivation as a component of the religious life. He starts with yoga, the experimental union of the individual with the divine  and the various levels of contemplation in Buddhism. Then he goes on to quote at considerable length an account that offers insight into Sufism. Finally, the writer comes to the mystical theology of Catholicism as exemplified in three Iberian mystics, St John of the Cross, St Ignatius Loyola and St Teresa of Avila. Two concerns that the writer dwells on are sense of revelation and tonic effects of mystical states Illumination and Ecstasy. Thus St Teresa reports on the one hand on receiving privileged insights, and on the other hand on experiencing rapture of the mind and senses. Moreover, five negatives have been described; however, the main benefit that James seems to see in all this is an  overcoming of all the usual barriers between the individual and the Absolute. There is oneness and both parties are aware of it. Before concluding, he characterized the general traits of the mystic range of consciousness as whole pantheistic, optimistic, anti-naturalistic and harmonizes best with twice-borness and the so-called worldly states of mind. In conclusion, the writer made three points. First, the subjects of mystical experiences are themselves totally convinced by them. Second, there is no reason why other people should share that conviction for different subjects experiences generate different messages. James suggests that mystical experiences, viewed overall, are non-specific in doctrinal content. Third, mystical experiences prevent us from rejecting out of hand the possibility of a world beyond our senses. The supernaturalism to which they persuade us may, interpreted in one way or another. The significance of keeping the meaning of mystical states of consciousness value-neutral was pointed out by James. Furthermore, he explains that all mystical experience, whether positive or negative, deserves recognition as available states of consciousness. He does not debate whether they are a superior or inferior form of consciousness; instead he points out that mystical states include truth and deceit, gratification and pain. His approach is subjective rather than objective and I think he makes some valid points concerning how we judge the faith claim by other people. It was right to respect the personal belief of serious spiritual believers; likewise it is right that what they believe to be true should not be imposed on anyone for them to believe. We all have spiritual needs that somehow, someway when put together build our fragmenting self. Furthermore, he didnt investigate developed patterns of various religions rather he was interested on the experiences that formed the basis of the formal expressions. He has no time for time-honored religion, or theology, rather, he focuses on the mystical, individual life-changing experiences people have in sensing the presence of a higher power. He gave a humane analysis which cleared the empiricists. Indeed, he sets it as his task to evaluate whether religion is good as a social force, and concludes that it is, though with some important caveats. This leaves us with an essential account of what religion truly means and the way in which it is or can be intertwined with social, political and other factors. It lets us unravel such threads in an effective way, and shows us that religion in its essence is not the cause behind all the worlds evil and or good. Rather, religion is a fundamental dimension of consciousness. He concludes that there are other types of truth that we are not usually conscious of and that mystical states give us some hint. Moreover, it interesting that he appears to rebuff and demonstrate flaws in every proof of Gods existence but at the same time believes God is real because He has genuine effects. In his paper, religion was examined from a purely pragmatic perspective. It focused on the individual connection of one individual to the heavenly. Moreover, it was remarkable that the characteristics of religious experience were connected to a range of other phenomena such as drunkenness, ghostly visions, optimism and diseases without any anti-religious schema. It offers less in terms of experimental results since it is impossible to agree on an epistemological point of reference for spiritual matters. So, he provides a virtual catalog of anecdotal references from which to deduce his observations. His answer, of course, is an assorted bag, a cognitive dissonance that is tentatively positive, but not definitively so. This article is not just an assessment but a search for the legitimacy of religion, the reality, and the unity. It is neither an endorsement nor a tearing-down; it does not walk with a particular faith. It is a scientific and philosophic look at religion and one that does not simply dismiss faith as foolish primitive garbage. A foremost flaw in the work is that he dispatches entirely with the historical, institutional, and intellectual mechanisms of religious praxis. While it could be said that these components were anterior to his psychological concern, the manner in which they are done demonstrates a narrow purview of what religion is. Despite this admirable aspiration for reconciliation, he leaves the reader uncertain of what road to take. No matter what his convictions, systematic theology will never voluntarily submit itself to the methodological considerations of empirical science, nor vice versa. Perhaps only in the past decades has the passion for disproving religion subsided enough to allow researchers to make meaningful steps in dialogue between the disciplines. Additionally, his breakdown of four common attributes of the mystical experience primarily the noetic quality, have really been a useful in assessing ones mystical experience. On the other hand, the article A skeptical View of Mysticism by Bertrand Russell started with a presentation of another possible source of knowledge in religion aside from science, which may be properly described as revelation. According to him, we accept the results of studies as truths which we have never conducted or had firsthand experience, and so, mystics might also claim that their source of knowledge is also unquestionable. He admitted that this point is difficult to argue because, people who have mystical experiences would justify that their claim as unquestionable as so with scientific findings of people. Furthermore, he compared the verifiability of science over religion and says that it is useless to attempt an argument that will appeal to the man who has himself enjoyed mystic illumination. He emphasized the importance of the scientific ways of acquiring knowledge as opposed to mystical experiences which cannot be tested. He also stressed the point that mystical experiences are not transferable, so, science should have no expectation as to the result. Moreover, he raised the point on our acceptance of truth, that we, as critical thinkers should not recognize things/events as true without sufficient evidence and has not passed the intra- and inter- subjectivity tests. However, this can also be contradicted by mystics by saying that science should be neutral and should view theirs on their procedures. Furthermore, he stated that the chief argument in favor of the mystics is their agreement with each other. However, mystics vary in the way they give verbal expressions to their experiences, and so he enumerated three things that successful mystics maintain. First, all division and separateness is unreal, and that the universe is a highly indivisible unity. Second, the evil is illusionary, and the illusion arises through falsely regarding a part of self-subsident. And lastly, the time is unreal, and that reality is eternal, not in the sense of being everlasting, but in the sense of being wholly outside time. These traits, however, according to him are just representative sample of the whole. Russell built further arguments by instructing the readers to image that they are in a law-court, seeking to decide on the credibility of the witnesses who claims to assert these three assertions. He demonstrates an argument, makes the possible reaction of both sides, then critics it. He started with the differences of the belief of mystics wherein he cited examples such as the Virgin of the Christians which would be disagreed by Protestants, the Archangel Gabriel and such. Indeed, Christians, Muslims, Buddhist, etc. would discredit and brand each other as untrustworthy. However, he said that mystics would argue that everyone should respect each others belief and wouldnt focus in their differences but instead look unto their similarities to strengthen their claim concentrating on the above mention things they tend to uphold. Then he asks what test can be applied to their unanimous evidence. Russell said that first hand information is vital in order to make someone believe your claim and this is promised by scientific investigations. Nonetheless, this questions yields to various answers such as a receptive frame of the mind, humility, fasting religious mediation, and breathing exercise. And so, if we succeeded, according to Russell, to feel in a certain time that time is unreal and experienced a state of mind that they describe, how then, shall we assess its reliability when we reverse to our normal states? Furthermore, mystics agree about the unreality of time. Russell said that if time is unreal, there would be no sequence of events and the cause and effect relationship of what we do would be nonsense. Our time markers for time such as before, after, tomorrow would become just mere utterances. Therefore, there would be no events; were just lost in the vastness of the cosmos, embracing what is said to be real in the temporal world. And if so, there would be neither improvement nor deterioration, no distinction between sorrow and happiness. And such views, according to Russell exterminate not only science but prudence, hope and effort which does not go along with what is important to religion morality and worldly wisdom. Mystics, however, would not accept this conclusion but urge doctrines which teach such. Russell cited Dean Inges disagreement with the region that focuses on evolution that stresses temporal process. Russell found himself in harmony with Inge, however, sought more than that, more inferences. It is imperative not to distort the doctrine of mysticism, in which the author thinks, there is a core of wisdom. Let us see how it seeks to avoid the extreme consequences which seem to follow from the denial of time, said Russell. The philosophy from Parmenides to Hegel is an example wherein the distinction between what he calls, reality and appearance, the way of truth and opinion. Difficulties could arise, however, at this point because if the relationship between them would become so intimate, all things whether pleasant or not would have their counterparts in reality, and if the relation is too limited, inferences cannot be made about the character of appearance to reality and reality would be vague Unknowable. On the other hand, he said that pantheism would be very difficult to avoid for Christians because if the world is only apparent, God created nothing, and the reality corresponding to the world is a part of God; but if the world is in any degree real and distinct from God, we abandon the wholeness of everything, which is an essential doctrine of mysticism, and we are compelled to suppose that, in so far as the world is real, the evil which it contains is also real. The Bishop of Birminghan also rejected all sorts of pantheism because if a man is actually a part of god, the evil in man is also God. Russell then moves to another argument which is the mystics denial of the world of sense. Assuming that the world reality is used in the context of law-courts, there would be no doubts in rejecting their claims because of the inconsistency of their testimonies and mundane moments. This resulted to the scrutiny of another sense which is emotion. And what Russell claims is that mysticism is an emotion and not a fact which does not assert anything and cannot be confirmed nor contradicted with science. Furthermore, he reiterated that science only demands a person on normal eyesight, normal consciousness, and normal behavior as opposed to religion which demands physical, psychological and mental alteration. He therefore concluded that mystical states which demands abnormal physical condition are just abnormal perceptions while normal perception, which is proved to aid in our life have correspondence with fact. He said that mystical experiences as emotions may have been the one responsible for providing breath, calmness and profundity wherein self-centered desires are dead, and the mind serves as a mirror of the infiniteness of the cosmos. And the assertions from these feelings are inessential for he cannot accept any method of arriving at the truth except of science. And that evil and good may have rooted from false beliefs. This article remains too rigid makes it sure that science is the only way of knowing things. Russell, till the very end of his article asserted that he cant accept other ways to verify the truth of a claim. This I disagree. As much as philosophy is concerned, I am deeply inclined of why David Hume included emotions and ideas as source of truth and or knowledge. No one, till now have solved this misery, I guess. Indeed, we are aware of the development of the pragmatic theory of truth which however, failed because of the relativity of human behavior. As the famous quotation goes, Experience is the best teacher. And I believe that there are things which we cannot share or make other people to believe because of the individual differences and experiences we have. We are unique individuals not just in our thoughts but in the biological foundation DNA. We even dont know ourselves much thats why we still use Freuds unconscious mind. Freuds theories were never proven correct; however, it is still used because nothing was used to verify its credibility. Same goes with religion, the metaphysical concepts that they have introduced has affected our lives and thats why we believe in it. It is faith, and we dont question it. Moreover, the contemporary issues that have arisen were about the dispute between evolution and creationism. It is a common misconception that they are contradictory to each other. That one must believe and choose between the two. We must take into account that evolution answers the question HOW and creationism answers the question WHO. Furthermore, I believe on both yet I am more convinced on creationism. Just like mysticism which miracles comes on unexpected times, felt the power and the good feeling it brings, the innate satisfaction and joy which is beyond comprehension is a manifestation that there divine intervention. This I believe on religion that there is divine being who makes all things possible which also depends on the persons beliefs and acts. It is the core of wisdom and knowledge that is applied to do the right thing or the other way around. It is the application of what we learn and experienced that leads us to what we believe and wanted to happen. What we act, do is nothing unless we can discern if it is right or wrong. This is what keeps us moving, changing, and progressing. This, however, when not carefully considered also cause adverse effects. I would like to connect this with Julian Rotters Locus of Control which tests whether individuals are governed by themselves or by faith or destiny. Because of my assertions in this paper, you may say that I have low locus of control, that my philosophies in life are dependent upon external situations.. Actually not, I am in the middle. I believe that I am responsible for my life; I am in control of what happens in my life. However, we cannot deny the fact that we are cultured affected by social interactions. As Plato has said, we are social animals. Furthermore, everything happens for a reason, everything in life is so interconnected. I have met people whom I wasnt connected to for 6 years and now weve become best of friends. Though, I believe that I am the one in control of my life, my beliefs however, are affected by outside forces, I have learned much from Russells argument; however, I am firm with my stand that we are free to choose about our basis of religious belief. He should not be enmeshed in determining if religious experiences might or might not be true, but should determine whether anything practical results from them. Finally, both of the essays have classified religious belief as emotion, and it is. The only difference is that the first accepted it in a humanistic way and the other has done it otherwise. Now, what is my ultimate basis of religious belief? It is subjective spiritual rather than existential. We have our own beliefs but its how we act that matters, how it affect ourselves and the people around us. Its the truth of life that matters. Science itself does not claim that they are the ultimate truth; they only claim that they are presenting the best interpretation of things so far. So does with religion, it is the best way we have interpreted our faith so far.