Medical Marijuana Essays - Herbalism, Medicinal Plants,

Medical Marijuana On November 5, 1996, Californians voiced their honest opinion. Californians voted yes on a very controversial proposition - proposition 215. This law allows doctors to prescribe marijuana to patients with diseases that have severe symptoms. For example, cancer patients that undergo chemo-therapy and suffer from severe nausea and aching can benefit from smoking marijuana. Marijuana helps these patients get through these very painful symptoms by numbing the body and soothing the stomach. It also improves the appetites of AIDS patients and increases their weight and chance of survival. Marijuana also helps MS patients with bladder control and tremors. The use of marijuana for medical purposes is not a new issue. The Marijuana Tax Act made the cultivation or possession of marijuana illegal in 1937, but it only has been a heated issue since the 1960's. In 1970, Congress passed the Controlled Substance Act, which placed all illicit drugs into 5 categories. Marijuana was placed under the category of "Schedule 1," because Congress decided that it has no medical use and a high potential for abuse of the "drug." But in 1970, Congress hardly new the potential benefits of marijuana for medical purposes because chemo-therapy wasn't even an issue back then, just as NORML pointed out in their petition to change the scheduling in 1972. NORML (National Organization for Reform of Marijuana Laws) insisted that Congress had made their decision without accurate information about the plant. In 1975, the IND began a program that would allow patients to receive marijuana from the government. This program lasted until 1992, when Congress discontinued it. Not more than a year ago, the same request for the rescheduling of marijuana was presented to Congress and it was once again, denied. In 1990, the Drug Advisory Board stated that "personal use and cultivation should be legalized." The Drug Advisory Board wanted to legalize marijuana for all purposes, not just for medical use because it would benefit our economy by being a taxable good and it would decrease crime over obtaining the "drug." Opponents to the legalization of marijuana are those who consider marijuana a "gateway" drug, which lead users to more harmful drugs. These assumptions have no real facts supporting them because in 1995, a survey was taken by the National Survey on Drug Abuse. The Survey found that 20% of illicit drug users smoke marijuana and that 57% of illicit drug users smoke only marijuana. Proposition 215 would legalize the cultivation, possession, and smoking of marijuana legal for persons with prescriptions for it. Even though the people of California voted yes of proposition 215, the United States Supreme Court denied it because it went against federal drug initiative prohibiting the possession and cultivation of marijuana. This is ridiculous. Whose to say that the government can let a cancer patient suffer when there is a medicine that can sooth his or her pain. People who are terminally ill do not deserve to be put in jail because they are only trying to feel better and relieve some of the nasty side effects of medicines for their sickness. Bibliography Gooding, Robert. "Healthy Marijuana," July 1996, http://trailerpark.com/phase1/hempman.html

Prejudice and Discrimination in South Africa

Prejudice and Discrimination in South Africa Free Online Research Papers If you have ever thought of visiting South Africa, you are in for a treat! South Africa is rich in history, not to mention culture and diverse racial groups. From the Afrikaners to the Indians, South Africa’s diverse population is enough reason in itself to visit this famous nation. You can stroll along Gerhard Moerdyk Street in the region of Tshwane and sample many different ethnic restaurants, listen to jazz in one of the many clubs, and get a real feel of the cultural diversity that South Africa has to offer. However, most everyone is aware of the racial struggles that the people of South Africa have endured; for those that haven’t, this article can help you in understanding the people you are likely to encounter if you’re planning a trip to South Africa. It wasn’t until the 1600’s that settlers began coming to the South African Plateau. Before that, the region was primarily inhabited by the Khoi Khoi. When the Khoi Khoi realized that the people coming there were there to stay they began fighting the Dutch for control of their land. This was the beginning of the dispossession of the indigenous people of South Africa, which really didn’t end until 1994 (Britannica, 2008). The Dutch took control of the land and of the people of South Africa. They made the Khoi Khoi farm laborers destroying their political economy. The arrival of other settlers from France brought slaves from Asia and slaves from eastern and western Africa. These slaves and their descendants became the core of the Coloured Community. The Kaffir Wars was the struggle of the indigenous people of South Africa against the European rule. It lasted more than three centuries ending in 1994 with the end of Apartheid. The Kaffir wars gave the Europeans the upper hand in the situation. Once diamonds were found in 1967, although the native South Africans fought bitterly against the British, the British and the Dutch became the dominant rule in South Africa (Britannica, 2008). To protest European domination, indigenous Africans established the South African Native Conference in 1912. The South African Native Conference later became the African National Congress and it was the first pan tribal organization on the continent that resolved to gain political control back of their country. However, the British and the Dutch, or Boers firmly established control of the country by forming the National party in 1933. By then, most of the European immigrants were calling themselves Afrikaners and their language Afrikans. The Afrikaners’ National Party came in to power politically in 1948 under the promise of Apartheid. Apartheid called for the complete separation between all Europeans and other races living in South Africa. This began the most intensive period of anti-African legislation in South Africa’s history. Supported by the United States, Apartheid called for a system of different â€Å"homelands† that was used to separate different ethnic groups to separate parts of the country. A pass system was set up that was strictly enforced to maintain official segregation. However over the next several decades the government witnessed its own segregation from other Nations, including expulsion from the United Nations because of South Africa’s unrelenting segregation and abuse of the majority of its citizen’s human rights (Stalker ,2008). Because of segregation, several groups were formed to end apartheid. Although the ANC, had been around for some time, the Pan African Congress, or the PAC was formed as a splinter group. The PAC petitioned the South African government to relieve the oppression and exploitative conditions that Indigenous people were living under, but their pleas fell on deaf ears and eventually led to the outlawing of the ANC and the PAC in 1960. In the late 1960’s on segregated college campuses became hotbeds of revolution. The Black Africans were tired of the oppression their people were enduring. A call for â€Å"Black Consciousness† rose with the emergence of the South African Students Organization in 1968. This group was a harbinger of a new revolutionary spirit among the oppressed and eventually would bring an end to Apartheid. The refusal of the students at many universities and secondary school refused to accept Apartheid and became the most potent challenge to white domination in South Africa. Although the South African Government tried to do away with these groups by outlawing them, the strategy to undermine the South African resistance failed. Resistance to the White rule in South Africa increased as international support increased and economic sanctions were levied against the South African government. Although the white government of South Africa felt that the oppression and segregation protected their interests in South Africa by keeping the indigenous people under their control, in the end they failed. In 1990 South Africa’s last non-indigenous president lifted the ban on the ANC and the PAC and released all political prisoners including Nelson Mandela. (ANC.ORG ,2008) The Homelands system was abolished with the end of Apartheid and the election of Mandela as president. The Truth and Reconciliation Commission was founded in South Africa to help repair the extensive damage done not only to the physical integrity of South Africans and their country’s social infrastructure but also on mending the South African soul. The TRC sought to help heal the trauma caused by years of torture, murder and abuse at the hands of a racist state that previously would not permit individuals of different races to marry. Today in South Africa, although apartheid has ended, conditions for Black Africans have not changed much. Economically many black Africans live way below the poverty level, and more Afrikaners live above it, creating a division among them. The pandemic of HIV in the country has given rise to a new form of discrimination against those who struggle with the disease. The scale of infection and deaths from HIV/AIDS exceeds that in most other countries. Government inaction and certain dangerously mistaken beliefs and abusive practices concerning the protection from the disease are largely responsible for this line of discrimination. The Khoi San were the true original indigenous people of South Africa. They were stripped of their right to call themselves Africans and were labeled coloured. They were robbed of their land, culture, language, and identity. The indigenous people were eager and excited at first when Apartheid was destroyed but little has changed for them. They are still labeled as Coloured and not Africans. There is still a sharp color line drawn between the Black Africans and the Afrikaners. Although many are working to change this to liberate the people from the thinking that Black Africans don’t have their own history and identity. Education and awareness are the only ways to end the struggles of the black Africans of South Africa. Although they have progressed much as a people, they still have a long way to go. As time passes their plight is sure to become better, just as African Americans lives have become better in this country since segregation ended. The Black Africans are a strong people and they will accomplish their goals in time as they unite and become stronger as a people. References ANC. (n.d.). Nelson Mandela. Retrieved February 23, 2008, from anc.org: anc.org.za/people/mandela.html Britannica, O. E. (2008). South Africa. Retrieved Februrary 20, 2008, from Encyclopedia Britannica Online: search.eb.com.ezproxy.apollolibrary.com/eb/article-9109715 Stalker, P. (n.d.). South Africa Oxford Guide to the Countries of the World. Retrieved February 22, 2008, from Oxford Reference Online: oxfordreference.com/views/ENTRY.html?subview=Mainentry=t42.e195 Research Papers on Prejudice and Discrimination in South AfricaBringing Democracy to Africa19 Century Society: A Deeply Divided EraNever Been Kicked Out of a Place This NiceAssess the importance of Nationalism 1815-1850 EuropeQuebec and CanadaComparison: Letter from Birmingham and CritoRelationship between Media Coverage and Social andAppeasement Policy Towards the Outbreak of World War 2PETSTEL analysis of IndiaThe Effects of Illegal Immigration

Virtual lab #3 Assignment Example | Topics and Well Written Essays - 250 words

Virtual lab #3 - Assignment Example The three slides were observed severally and the number of species counted and recorded. Paramecium caudatum reached the carrying capacity of the environment on the 10th day when grown alone. To support the claim, the species attained its highest count on that day. The species attained a maximum number of 60. After the 10th day, the species did not grow any further due to the limited resources in its environment. Infact, the species population started to diminish the following days. However, the species died off after mixing with Paramecium caudatum to share the same ecological niche. On the other hand, Paramecium aurelia reached its population capacity of the enviroment on the 8th day. On the 8th day, the species attained a maximum number of 98 organisms. When grown alone, the species recorded its highest count on this specific day. It maintained the same number count for the next days. On the other hand, it had a slightly lesser count when mixed with Paramecium caudatum. In this case, it had a muximum number on the 12th day. The differences in population growth patterns between the two species results from the way each individual species utilizes its available resources. In this case, Paramecium caudatum utilizes more resources hence resulting to a lower population count. However, Paramecium aurelia has a high population count because each individual organism utilizes lesser available resources when gown alone. According to the principle of competitive exclusion, thwo or more species competing for the same available resources cannot co-exist in the same environment keeping other factors constant. When mixed in the same test tube, Paramecium aurelia survived while Paramecium caudatum died off. In this scenaio, Paramecium aurelia had the advantage of survival and high population growth rate. As demonstrated in this experiment, no two species can occupy the same ecological niche keeping other factors constant. As a result, one species will have an

New Zealand Film History Essay Example | Topics and Well Written Essays - 2000 words

New Zealand Film History - Essay Example New Zealand is a cultural melting-pot. Its national identity didn't come ready-made to be served in a silver platter but it is a fusion of many cultures that are varied and oftentimes contradictory to each other. All of this hodge-podge of cultures that was the outcome of intermingling and sometimes violent embroilment of diverse heritages for hundreds of years produced a unique national cultural identity that is one of its kind and which is so "quite unlike anywhere else in the world" (New Zealand Facts). This can never be truly understood and Ruth Harley's claim that "our culture is the well from which filmmakers draw their inspiration" will never be fathomed if we do not dissect the various cultures that make up this multi-cultural nation that is called New Zealand. And this has to start by tracing New Zealand's history and describing the cultures that these various people possess. Oral tradition of the Maoris claimed that a dark-skinned people called Morioris or moa hunters were the original inhabitants of New Zealand. Legend has it that these pre-Maori Polynesians (Australia, New Zealand Encyclopedia 1975, p.1013) came to the eastern North Island to hunt for moas, which were extinct wingless birds standing about 12 feet tall. Various literature failed to give us their kind of culture but only that they were assimilated into the Maori society. A Maori navigator named Kupe was the known discoverer of the land he called Aotearoa or Long White Cloud at about 950AD. Thereafter the Maoris came to settle the land National Identity 2 at about 1350 AD. They came in 8 outrigger canoes from either Society Islands or Tahiti and with their advent, they brought with them their own distinct culture. Although described as cannibalistic warriors, these tough, resourceful and handsome people were and are closely-knit who are "bound in families and subtribal communities" and have a deep "sense of closeness and homeyness" (Schafer 1998, p.11). The Maori society was already highly evolved at that time and was characterised by division of social classes i.e. chieftains, commoners and slaves. Yet despite this, they had remained family-oriented rather than individualistic (MacInnes 1964, p.109). They are also highly eloquent and witty with a predilection for debating. Maoris are also gifted with the talent for wood carving which is distinguished by intricate convolutions and feature pseudo-Oriental masks that are probably the finest in the world. What makes Maori culture so unique is that they always strive to achieve physical perfection through dancing and their

The different influences which impact on the reform of unlawful Essay

The different influences which impact on the reform of unlawful conduct - Essay Example By definition, unlawful conduct refers to any action that can be identified as contrary to, or forbidden by the law (The W100 team, 2011). This definition covers both criminal and civil unlawful behavior. In criminal law, the litigation is always brought forward by a specific prosecutor -the state (in the name of the Crown). However, in civil cases, the circumstances are a different in that, the lawsuit can be initiated by any legal private party who is normally referred to as the claimant. The task of bringing collecting and presenting proof against the defendant rests squarely on the shoulders of the claimant (Samaha, 2012). The W100 team (2011) posits that in order to determine unlawful conduct, it is paramount that sufficient proof is produced placing the particular party at fault so that relevant action may be taken. Without doing this, no legal action can be taken against either party. It is very important to analyze in depth the factors which influence why any conduct should b e considered unlawful. Technological development plays a very significant role in this. Issues to do with copyright infringement and intellectual property are constantly changing and so reforms need to be carried out from time to time regarding the same. Social climate also determines a lot in influencing reform. Changing times affect what laws are made and implemented. A perfect example is cited whereby during the Shakespearean period, it would be perfectly legal for a girl of 13 and a boy of 18 to get married. However under the current laws of Wales and England, this would be unlawful conduct because 16 is the minimum age for marriage (The W100 team, (2011). Worth noting here is that not all rules of social morality are considered unlawful. Differences in social values in different countries may to some level dictate the differences in laws. Protecting individuals and society from harm is a very important factor that influences reform. The activities classified as unlawful for thi s reason are usually seen to cause direct harm to those engaging in them or to the society at large. For example, the possession of cannabis is considered unlawful. However, the legality of this situation may change in the circumstance whereby the cannabis is prescribed by a physician to be used for medicinal purposes. It is inevitable that social morality will sometimes influence the lawful or unlawful nature of an act. Economic reasons also come into play in matters of legislation. Borrowing items without someone’s consent may be considered unlawful in some societies whereas it is perfectly legal to do so in others, provided the items are returned. These are societies where ownership of property is more communal as opposed to where private ownership is prioritized. In some cases, the economic effect of a person’s action is actual ground for determining whether an action is unlawful or not. The array of factors mentioned above clearly indicates the complexity of defin ing conduct as unlawful or otherwise. Some activities that are considered to be out rightly immoral and antisocial do not necessarily warrant them to be earmarked as unlawful. Parliament plays a big role in reform and determining unlawful conduct. It represents the democratic will of the people. Pressure from the public and the media has been seen to work on many occasions in contentious issues regarding legislation, therefore making parliament one of the most direct ways of reform on unlawful conduct. Despite the judiciary not being primarily concerned with law reforms, it is involved in identifying anomalies in the law and calling for relevant amendments to be made on the same (The W100 team, 2011). The truth of the matter is that the judiciary has a

Cash Flow and Profitability of Dividend Payout

Cash Flow and Profitability of Dividend Payout CHAPTER 1: INTRODUCTION Overview The issue of dividend has been studied comprehensively in last few decades. Still it remained as one of the most debatable issue in the field of Finance. The contradictory nature and massive importance 0f dividend in finance had made it one of the most discussable topics for researchers. Researchers in the past enclosed many aspects of dividend; few among them are views about dividend, dividend payment effects on firm value, dynamics and determinants of dividend policy, and dividend movement of different markets. Lintner (1956) study the allocation of income of corporations among dividends, retained earnings and taxes by taking data from the years 1918 to 1941 as a training period and data from the years 1942 to 1951 as the testing period. Researchconcluded that the basic origin of dividend changes werenet earning and preceding year dividends. In addition, firms attempt to continue a constant stream of dividend and influence to make a regularly partial adjustment to a target payout ratio relatively hysterically changing their payout when a change in income occurs. In the short run, dividends are consistent to avoid frequent changes. This dispute is rooted back to the significant effort of Miller and Modigliani (1961), in which it was challenged in a perfect market condition dividend policy did not affect the value of firm. In contrast, Lintner (1962) and Gordon (1963) based à ¢Ã¢â€š ¬Ã…“Bird-in-handà ¢Ã¢â€š ¬? theory and argued that in the world of ambiguity and imperfect information, hig h dividend payment is linked with high firm value. In addition, Black (1976) called dividend as great puzzle which need extensive researched. Furthermore, the Brealey and Myers (2005) listed dividend as one of the top ten significantvague topic in advance corporate finance. According to Anil and Sujjata(2008) emerging consensus was that no individual factor alone can describe dividend behavior. The existing corporate theories supported that cash flow and profitability have significant impact on dividend. The aim of this study was to know the impact of cash flow and profitability on dividend payout of non financial firms in Pakistan market. This study considered free cash flow and profitability was most important for non financial firm in Pakistan market. Talat and Mirza(2010) conducted research related to ownership structure and cash flow as predictor of dividend payout policy. According to that personal ownership, cash flow delicacy, size, and leverage were negatively associated with dividend payout policy. In contrast, profitability and operating cash flow was found as determinants of cash dividend. In addition, Researcher concluded that executive ownership, personal ownership, operating cash flow, and size were important determinants of dividend while, leverage and cash flow delicacy did not contribute considerably in determining the level of corporate dividend payment. DeAngelo and DeAngelo (1990) found significant relation between cash flow and dividend changes. Problem Statement In the field of corporate finance, the dividend was considered as one of the most noteworthy issues. The main purpose to study the impact of cash flow and profitability on dividend payout of non financial firm in Pakistani market was to analyze the cash dividend behavior of developing countries firm. In addition, study was conducted to find out how strongly these two variables free cash flow and profitability have impact on the dividend payout because, profitability was most likely used as determinants of dividend payout in most of the previous researches but free cash flow was not taken too much in previous research. Furthermore, how these two variables serve as an indicator for dividend payout. Hypothesis This research study has tested the following hypothesis to fulfill the objective of the research. H1: There is significant impact of free cash flow on dividend payout. H2: There is significant impact of return on assets on dividend payout. H3: There is significant impact of return on equity on dividend payout. H4: There is significant impact of earning per share on dividend payout. H5: There is significant impact of net profit margin on dividend payout. Outline of the Study The research structured follows. Chapter one was consist on the introduction of the thesis, it is essential to review the views and theoretical background of dividend, the statement o problem, scope and objective, hypothesis. Chapter two consisted of literature review given by various authors, theories on dividend and impact of cash flow and profitability on dividend payout. Chapter three explained methodology, it consisted of explanation of the selection of the variables, the sampling and research design, the data technique and hypothesis. Chapter four represents the analysis of results after processing the data. Chapter five composed of final result, conclusion and recommendation. Chapter six consisted of references. CHAPTER 2: LITERATURE REVIEW Since 1956, dividend has always considered one of the most interested and investigated topic in world of finance.Lintner (1956) analyzed the allocation of earning of corporation among dividends, retained earnings, and taxes by taken data into consideration for years 1918 to 1941. It was found the basic determinants of dividend change are net earning and preceding year dividends. In addition, firms tried to continue a stable flow of dividend and likely made a regularly limited adjustment to a target payout ratio instead radically changing payout when earning changed. Jensen and Meckling (1976) paid attention toward agency cost hypothesis and described that dividend restricted the funds under management control, as a result putting them under strict capital market examination. Owner responsibility was reduced to deal with the quality of investment and to handle the expenditure on manager prerequisites. Marke, Langrehr, and Hexter(1998) conducted research on dividend policy determinants. Researchers had taken focus of firm, natural log of sales of firm, inside ownership for firm, no of common shareholder for firm, free cash flow for firm, sales growth of firm, and standard deviation of returns o f firm as determinants of dividend policy. Authors concluded that corporate focus has negative impact on dividend payout. While inside ownership had also negative impact, according to researcher the firms have greater inside ownership have small dividend payout. In addition, the firms with higher free cash flow have higher dividend payout and lower payout ratio of firms with higher standard deviation of returns. William and Nanda (1994) conducted research on free cash flow, shareholder value, and the unallocated profits after tax of 1936 and 1937. In this study researcher tried to explore the investor reaction toward the anticipated decrease in free cash flow presented to corporate managers. In addition, researchers suggested agency costs as partial determinants of dividend policy. To avoid the agency problem corporate have to pay higher dividend and imposed higher tax on undistributed profit so the problem of agency cost handled efficiently. The study conducted on determinants of dividend payout ratio in GhannabyAmidu and Abor (2006). In this study 20 listed firms of Ghana Stock Exchange were used as a sample which shows 76% of the total listed firm in Ghana Stock Exchange. Researchers have taken the Payout Ratio as controlled variable and explanatory variables includes risk, profitability, cash flow, corporate tax, institutional holding, sales growth, and market to book value. It was foundthat more profitable firms paid more dividends and profitability is positively related to dividend payout. In addition, cash flow and taxes are also positively related to dividend payout. Further, they also concluded there is a positive relationship between increase in liquidity and dividend payout. Results suggested negative relationship of dividend payout with growth, market to book value, risk, and institutional holding. The firms with the earning instability found hard to pay low and no dividends. Al-Malkawi (2007) worked on determinants of corporate dividend payout policy in Jordan. Researcher used a firm level panel data of all publicly traded firms on the Amman Stock Exchange for the year 1989-2000. Researcher used dividend payout as a depended variable and agency cost, Ownership, annual share turnover, market to book ratio, market capitalization of common equity, financial leverage ratio, profitability ratio, and taxes as independent variables. By using Tobit specification researcher concluded that positive relationship between size, age, and profitability with dividend payout and negative relationship between signaling device, ownership, and taxes in Jordan. Fairchild (2010) worked on Dividend policy, signaling and free cash flow: an integrated approach. Researcher has tried to examine the dividend policy by taking only two hypothesis signaling and free cash flow. In order to understand the composite environment of dividend policy, signaling game is developed in which most of the information possesses by managers than investors about the quality of the firms. The signaling hypothesis shows that asymmetric information between managers and investor, dividend work as signal regarding current performance and future prospect. The study found that high dividend has positive effect on the firm performance, in term of providing a positive signal for current performance and as will as future scenario. In addition, dividend payout reduces the free cash flow problem, which may attract the manager to invest in negative NPV project for personal interest. But if the project shows positive NPV so investment opportunities are available which lead toward the higher dividend in future. Gill, Nahum, and Rajendra (2010) worked on determinants of dividend payout ratio in United States. In this study researcher extend the Amidu and Joshua, and Anil and Kapoor finding for the American service and manufacturing firms. Researcher took same variables into account such as profitability, tax, market to book value, cash flow, and sale growth. The sample size was 266 out of 500 financial reports. According to the researcher dividend payout ratio of manufacturing firms is the function of profit margin, tax, and market to book value ratio. It was also found that result differ when the dividend payout ratio was defined as the ratio between after tax cash flow and cash dividend, not considering after tax earning of the companies. Reddy (2006), studied the dividend behavior of Indian companies, movement, and determinants and struggled to decide the behavior of the companies listed at Bombay Stock Exchange with theassist of trade off theory and signaling theory hypothesis. According to researcher analysis of dividend trend depicted that stock traded on New York Stock Exchange and Bombay Stock Exchange indicated that percentage of companies paying dividend has declined from 60.5% in 1990 to 32.1% in 2001 and there is only few companies paying dividend constantly. Beside that firms paying dividend are more profitable, large in size, and having enough growth. Indian context did not represent corporate tax and ax preference theory. Lastly the dividend change indicated signal to current and lagged earning performance rather than future earning performance. Baker, Farrelly and Edelman (1986) studied New York Stock Exchange 318 firms. According to the researchers main determinants of dividend payments were expected future earning and picture of past dividend. Gitman and Pruitt (1991) asked 1000 largest US firms financial managers and concluded present and precedent year earning were significant determinants effect dividend payment. According to Baker and Powell (2000) survey companies listed on New York Stock Exchange were industry explicit and predicted level of future income was the main factor of dividend payout Anil and Kapoor (2008) studies Indian information technology sector for determinants of dividend payout ratio. The phase for study 2000-2006 encompass both recessionary and booming phase of Indian information technology sector. Researcher concluded that beta and liquidity was discovered a notable determinant of dividend payout ratio. In addition, authors concluded that due to recession from 2003 onwards IT sector observed exponential growth, and it was anticipated linear growth in IT sector after 2006. Recently in Pakistani perspective, Ahmed and Attiya (2009) investigated sample of 320 non-financial firms listed on Karachi Stock Exchange from 2001 to2006.Researchers concluded Pakistani companies dependent more on current earning than past dividend. In addition, authors highlighted few predictors that may affect payout policies. Firstly, the finding demonstrated companies containing high profit with consistent earning can manage larger amount of free cash flow as a result to payout larger dividend. The firms having larger investment chance can easily affect and have a significant role in determinants of dividend payout policy in Pakistan. The companies paid more dividends to shareholders where inside ownership exist. Ownership structure has considered major factor in determining dividend policy in Pakistan. Beside that dividend payout was not affected pay growth of the firms and market liquidity has a significant impact on dividend payout. Furthermore, size was significant determin ants for dividend payout that means companies invest in assets relatively paying dividends to its stockholders. 2.1 Dividend irrelevance theory: Miller and Modigliani (1961) proposed that dividend policy is irrelevant to the shareholder and stockholder wealth was constant in the world of perfect market condition and any growth in the current payout is financed by literally priced stock sales. The basic assumption was that management paid 100 percent payout in every period. Other assumptions were as follow. First, market is perfect capital market that means there were no taxes on transaction cost, single buyer and seller not influenced price and everyone have free access to information. Second, investors are rational and value of securities was based on the discounted future cash flow to investor. Third, manager act as a agent of shareholders, and there was no uncertainty about the investment policy of the firm. 2.2 Bird-in-hand theory: Al-Malkawi (2007) emphasized that dividend valued differently from retained earnings (capital gains) in world of ambiguity and irregularity information. à ¢Ã¢â€š ¬Ã…“A bird in hand (dividend) is valued more than two in the bush (capital gain)à ¢Ã¢â€š ¬?. Investors always preferred dividends to retained earnings due to uncertainty of future cash flow. Although, this controversy has been extensively condemned and has not get strong empirical base, but, it was supported by Gordon and Shapiro (1956), Lintner (1962), and Walter (1963). The basic assumptions were as followed Firstly, investors have inadequate information regarding the profitability of a firm. Secondly, cash dividend was taxed at a higher rate when capital gain was realized on the sale of share. Thirdly, dividend serves as a signal of expected cash flow. 2.3 Agency cost and free cash flow theory: Ross (2008) define agency cost is the cost of the conflict of interest that exists among shareholders and management. It was happened when management act for own interest rather than shareholders interest who own the firm. This could be direct and indirect. It was in contrast to assumption of Millar and Modigliani (1961) that mangers act as an agent of shareholders. This is somewhat dubious, as the owners of the firm are different from the management. Managers are bound to carry out some activities, which could be costly to shareholders, such as undertaking unprofitable investments that would yield excessive returns to them, and unnecessarily high management compensation (Al-Malkawi, 2007). These costs are borne by shareholders; therefore, shareholders of firms with excess free cash flow would require high dividend payments instead. Agency cost may also arise between shareholders and bondholders: while shareholders require more dividends, bondholders require fewer dividends than shar eholders by putting in place a debt covenant to ensure availability of cash for their debt repayment. Easterbrook (1984) also identified two agency costs: the cost of monitoring managers and the cost of risk reluctance on the part of managers. Jensens free cash flow/overinvestment hypothesis (1988) provides a surrogate description for the positive association between the direction of the dividend change and the stock price reaction. Jensen argues that managers tend to hold cash to invest in negative NPV projects for their own utility maximization. The agency costs that result from this overinvestment decrease the value of the firm. Like the signaling hypothesis, the FCF argument suggests there should be a positive relationship is the direction of the dividend policy change and the stock price reaction. However, the FCF argument differentiates itself with respect to the level of growth opportunities faced by the firm. If a firm initiated a cash dividend, FCF arguments postulate there are fewer funds available for costly overinvestment. Likewise, if company didnt pay dividend, the strongest form of a decrease would reduce the value of the firm because there are more funds available to invest in less present value projects. The FCF hypothesis assumes larger stock price volatility for the firms who have few growth opportunities as compared to the firms with many growth opportunities. There is disagreement between different researchers on dividend policy. Allen and Rachim (1996) in Australia found no significant association between stock price volatility and divided policy. According to Gordon (1963) the stock price volatility is influenced by dividend payout. The firms who pay large dividend have minimum risks in terms of stock price value. Some of hypothetical mechanism also suggests the universal relationship of dividend yield and dividend payout ratio with stock price volatility. Jensens and Meckling (1976) developed Agency cost argument which proposed that dividend payout lower the cost of funds and increase the cash flows for the company. The company after paying cash dividends to stock holders would have less cash in hands of the managers to invest at below the cost of capital. According to Asquith and Mullin (1983), Born, Moser, and Officer (1984) and Miller and Rock (1985) dividend declaration provide information to the share holders to forecast the financial position of the company and the present firms earnings. This also depends on the source of information that either it is doubtful or not to respond on announcement of dividend. Hence, there remains disagreement till yet, the relation of dividend yield and stock price volatility and it is still unexplained and is considered as debatable in corporate CHAPTER 3: RESEARCH METHODS 3.1 Method of Data Collection Required data was collected from Karachi Stock Exchange as given by State Bank of Pakistan in publication of Balance Sheet Analysis of Joint Stock Companies Listed on the KSE (2005-2009). The period of study covered five years, 2005-09. The sample size of 100 non-financial firms was taken from all non financial firm listed at KSE. The required sample was chosen on the basis of cash dividend paid by firms at-least for two years. The sample represents major industry. 3.2 Sample Size Sample of 100 non-financial firms was collected from KSE. Sample consisted of firms which paid cash dividend for at least two years. Firms that was selected for study represented all major industries functioning in Pakistan and listed at KSE from 2005-2009. The impact of the cash flow and profitability on dividend payout was examined on selected sample of 100 non-financial firms. 3.3 Research Model Developed There were various financial factors of the non-financial firms which affected the Dividend payout of the firms. This research study investigated the impact of free cash flow and profitability on the dividend payout. 3.3.1 Dividend payout Dividend payout and dividend amount are taken as the dependent variables. Since dividend payout is the generally used alternative for dividend policy, almost every financial researcher has used payout as a proxy for corporate dividend policy (See for example Gugler, 2003; Reddy and Rath, 2005; Papadopoulos, 2007; Al-Malkawi, 2007; Ahmed Attiya, 2009). In order to calculate dividend payout was calculated as cash dividend per share divided by earning per share. 3.3.2 Earning per share According to Hafeez and Attiya (2009) high profitability with constant earnings can manage to pay for larger free cash flows as a result to pay out larger dividends. The earnings per share after tax were used as independent variable. Earning per share after tax was used because dividend has been paid after interest, taxes and after depreciation and calculated as net earnings divided by number of shares. H1: There is significant impact of earning per share on dividend payout 3.3.3 Return on Equity This variable is used in different previous studies such as: Abor (2005), Miller (2007), Al-Ajmi et al. (2009), and Ebaid (2009) etc. Some authors measured profitability or performance by three measurements such Gross profit margin (GPM), Return on Equity (ROE), and Return on Assets (ROA) and same predictors Ebaid (2009). Likely results with this variable are same as revealed by Abor (2005) and Ebaid (2009) such as: Significance and positive relationship with dividend payout. Return on Equity is considered best measure of firm profitability. Return on Equity (ROE) is one measure of how efficiently a company uses its assets to produce earnings. ROE was calculated by dividing Net Income minus preferred dividend by Share holder equity H2: There is significant impact of Return on Equity on dividend payout. 3.3.4 Free Cash flow According to Jensens (1986) free cash flow hypothesis, companies choose to use their cash resources to invest in profitable projects first; dividend is paid out of residual. From a companys point of view, cash generated from operations plays an important role in deciding the level of payout, among all three sources of cash flows i.e. operating; investing and financing, cash generated from operations is considered as most desirable source of funds for the company for distribution of dividends. Anil and Sujjata (2008) also found cash flow from operations as the most significant determinant of dividend policy in Indian IT industry. A  measure of financial performance calculated as Net income minus depreciation minus change in working capital minus change in capital expenditure. Free cash flow (FCF) represents the cash that a company is able to generate after  placing out the money required to maintain or expand its asset base.  Free  cash flow is important be cause it  allows a company to  pursue opportunities that enhance shareholder value. H3: There is a significant impact of free cash flow on dividend payout. The model developed was a linear model and its specifications are provided below: Div payout = a0 a1EPS + a2ROE + a3FCF + ц Dividend payout = Dividend per share divided by earning per share EPS = Net income divided by number of share outstanding ROE =Net income minus preferred dividend divided by common shareholder equity FCF =Net income minus Depreciation minus change in working capital minus change in Capital expenditure à Ã¢â‚¬Å¾ = error term 3.4 Statistical Technique Multiple Linear Regression Analysis (MLR) technique was used for this research study to examine the impact of the distinctive financial characteristics of the non-financial firms on their dividend payout of the selected firms; Statistical Package for the Social Sciences (SPSS) was used for the examination of the secondary data. CHAPTER 4: RESULT The sample of 100 non-financial firms from Karachi Stock Exchange was taken into consideration. This research study used multiple regression analysis (MLR). Researcher examined the behavior of non-financial firms of KSE about dividend payout. The selected technique was used to study the impact of cash flow and profitability on dividend payout. 4.1 Finding and Interpretation of the results In the beginning, the regression technique was applied on collected data by using SPSS, and there was no single variable was significant. It was clear from the result that there was the high co-linearity among the independent variables of the dividend payout and this means there was strong interrelationship present among the predictors. Return on assets and net profit margin was omitted from the data, thus, the issue of co-linearity was resolved. Now, proceeding with the analysis of the results because issue of co-linearity was addressed. The interpretation and analysis is presented in the next sections of this research study. Table 4.1: Model Summary Mod R R Sq. Adj. R Sq. 1 .289 .084 .078 Tables 4.1 depict the summary about the regression model. The R square of 8.4% showed that all the predictors of dividend payout together explained 8.4% variation in the dependent variable and the remaining variation was unexplained or hidden predictor were not included in the model. TABLE 4.2:ANOVA Model Sum of Squares df Mean Square F Sig. 1 Regression 31503.936 3 10501.312 15.236 .000a Residual 345316.428 501 689.254 Total 376820.364 504 The table 4.2 checked the significance of the linear regression model in such a way that the reliability of the data file regarding the applicability of the regression technique can be understood from the above table; however, ANOVA table was reliable test of checking the linear regression models ability to explain any variation in the dependent variable of liquidity. This was perfectly obvious from the sig value of .000 that meant that the linear regression model was highly significant for the data collected for the research study conducted. In addition, ANOVA explained that all means are not equal. In table4.3 the final model of regression included only three independent variable that were free cash flow, earning per share, and return on equity These variables were included in the model due to highly significantly describing the relation with dependent variable dividend payout. Returns on equity and free cash flow have positive impact on dividend, while earning per share has negative impact on dividend payout. 4.2 Hypothesis Assessment Summary The hypothesis of research was unique financial factors had significant impact on the non-financial firms dividend payout decision. These financial characteristics were cash flow taken as free cash flow of firms and profitability taken as earning per share and return on Equity of firms. This research tasted individual financial characteristics and concluded the result as follow. TABLE 4.4: Hypothesis Assessment Summary S.No. Hypothesis ÃŽÂ ² SIG. RESULT H1 There is significant impact of free cash flow on dividend payout. .001 .005 Accepted H2 There is significant impact of Return on equity on dividend payout. .216 000 Accepted H3 There is significant impact of Earning per Share on dividend payout. -.123 .016 Accepted H4 There is significant impact of Return on Assets on dividend payout. .340 .170 Rejected H5 There is significant impact of Net profit margin on dividend payout. -.034 .530 Rejected CHAPTER 5: DISCUSSIONS, IMLICATION, FUTURE RESEARCH AND CONCLUSION 5.1Conclusion It was concluded with support of results of this research study return on equity, earning per share, and free cash flow were significant independent variables in Pakistani market. These result were matching with the study under taken by Hafeez and Attiya (2009) in Pakistani context, Researchers concluded firms with high profitability and with stable earning can afford larger free cash flow therefore pay out larger dividends to its shareholder. In addition, Talat and Hammad (2010) examined the ownership structure and cash flow as determinants of dividend policy. Researchers concluded that companies in which high proportion of share were occupied by managers and individual were more reluctant of pay high dividends. In contrast, companies in which managerial and individual ownership is low paid less dividends. It was also concluded that companies having high operating cash flow increase companies potential to pay high dividend and it was considered cash flow sensitivity reduce the compa nies payout but still it was not determined as potential determinants of corporate payout in Pakistan. 5.2 Discussions Profitability and free cash flow could lay significant impact on dividend payout in Pakistani context. Hafeez and Attiya(2009) was also considered profitability as significant determinant of dividend payout, But study conducted by Talat and Hammad (2010) concluded operating cash flow cannot consider significant determinant of dividend payout in Pakistani market.This research considered that free cash flow and profitability measured through earning per share and returns on equity have significant impact on dividend payout of the companies. 5.3 Implication and Recommendations This research was encompasses non-financial companies listed on Karachi Stock Exchange Pakistan. The required data collected from 100 non-financial firms listed at KES for the period of 2005 t0 2009. Only firms were included in samples which were paid cash dividend for atleast two years. It is recommended that such type of study should be carried out in other countries of Asia. Further, it also recommended that other determinants except one analyzed in this study should be researched in more extensive manner so the dividend payout policy and its dynamics became clearer. 5.4 Future Research This research addressed the problems of investor, management and other researcher conductor in examining and observing the behavior of firm regarding their payout decisions. Research students who want to work further on dividend payout could be benefited by this study. In addition, all non financial firms will get benefit from this study because this research study taken all major sectors into the consideration and study clarified the impact of free cash flow and profitability on dividend payout. Cash Flow and Profitability of Dividend Payout Cash Flow and Profitability of Dividend Payout CHAPTER 1: INTRODUCTION Overview The issue of dividend has been studied comprehensively in last few decades. Still it remained as one of the most debatable issue in the field of Finance. The contradictory nature and massive importance 0f dividend in finance had made it one of the most discussable topics for researchers. Researchers in the past enclosed many aspects of dividend; few among them are views about dividend, dividend payment effects on firm value, dynamics and determinants of dividend policy, and dividend movement of different markets. Lintner (1956) study the allocation of income of corporations among dividends, retained earnings and taxes by taking data from the years 1918 to 1941 as a training period and data from the years 1942 to 1951 as the testing period. Researchconcluded that the basic origin of dividend changes werenet earning and preceding year dividends. In addition, firms attempt to continue a constant stream of dividend and influence to make a regularly partial adjustment to a target payout ratio relatively hysterically changing their payout when a change in income occurs. In the short run, dividends are consistent to avoid frequent changes. This dispute is rooted back to the significant effort of Miller and Modigliani (1961), in which it was challenged in a perfect market condition dividend policy did not affect the value of firm. In contrast, Lintner (1962) and Gordon (1963) based à ¢Ã¢â€š ¬Ã…“Bird-in-handà ¢Ã¢â€š ¬? theory and argued that in the world of ambiguity and imperfect information, hig h dividend payment is linked with high firm value. In addition, Black (1976) called dividend as great puzzle which need extensive researched. Furthermore, the Brealey and Myers (2005) listed dividend as one of the top ten significantvague topic in advance corporate finance. According to Anil and Sujjata(2008) emerging consensus was that no individual factor alone can describe dividend behavior. The existing corporate theories supported that cash flow and profitability have significant impact on dividend. The aim of this study was to know the impact of cash flow and profitability on dividend payout of non financial firms in Pakistan market. This study considered free cash flow and profitability was most important for non financial firm in Pakistan market. Talat and Mirza(2010) conducted research related to ownership structure and cash flow as predictor of dividend payout policy. According to that personal ownership, cash flow delicacy, size, and leverage were negatively associated with dividend payout policy. In contrast, profitability and operating cash flow was found as determinants of cash dividend. In addition, Researcher concluded that executive ownership, personal ownership, operating cash flow, and size were important determinants of dividend while, leverage and cash flow delicacy did not contribute considerably in determining the level of corporate dividend payment. DeAngelo and DeAngelo (1990) found significant relation between cash flow and dividend changes. Problem Statement In the field of corporate finance, the dividend was considered as one of the most noteworthy issues. The main purpose to study the impact of cash flow and profitability on dividend payout of non financial firm in Pakistani market was to analyze the cash dividend behavior of developing countries firm. In addition, study was conducted to find out how strongly these two variables free cash flow and profitability have impact on the dividend payout because, profitability was most likely used as determinants of dividend payout in most of the previous researches but free cash flow was not taken too much in previous research. Furthermore, how these two variables serve as an indicator for dividend payout. Hypothesis This research study has tested the following hypothesis to fulfill the objective of the research. H1: There is significant impact of free cash flow on dividend payout. H2: There is significant impact of return on assets on dividend payout. H3: There is significant impact of return on equity on dividend payout. H4: There is significant impact of earning per share on dividend payout. H5: There is significant impact of net profit margin on dividend payout. Outline of the Study The research structured follows. Chapter one was consist on the introduction of the thesis, it is essential to review the views and theoretical background of dividend, the statement o problem, scope and objective, hypothesis. Chapter two consisted of literature review given by various authors, theories on dividend and impact of cash flow and profitability on dividend payout. Chapter three explained methodology, it consisted of explanation of the selection of the variables, the sampling and research design, the data technique and hypothesis. Chapter four represents the analysis of results after processing the data. Chapter five composed of final result, conclusion and recommendation. Chapter six consisted of references. CHAPTER 2: LITERATURE REVIEW Since 1956, dividend has always considered one of the most interested and investigated topic in world of finance.Lintner (1956) analyzed the allocation of earning of corporation among dividends, retained earnings, and taxes by taken data into consideration for years 1918 to 1941. It was found the basic determinants of dividend change are net earning and preceding year dividends. In addition, firms tried to continue a stable flow of dividend and likely made a regularly limited adjustment to a target payout ratio instead radically changing payout when earning changed. Jensen and Meckling (1976) paid attention toward agency cost hypothesis and described that dividend restricted the funds under management control, as a result putting them under strict capital market examination. Owner responsibility was reduced to deal with the quality of investment and to handle the expenditure on manager prerequisites. Marke, Langrehr, and Hexter(1998) conducted research on dividend policy determinants. Researchers had taken focus of firm, natural log of sales of firm, inside ownership for firm, no of common shareholder for firm, free cash flow for firm, sales growth of firm, and standard deviation of returns o f firm as determinants of dividend policy. Authors concluded that corporate focus has negative impact on dividend payout. While inside ownership had also negative impact, according to researcher the firms have greater inside ownership have small dividend payout. In addition, the firms with higher free cash flow have higher dividend payout and lower payout ratio of firms with higher standard deviation of returns. William and Nanda (1994) conducted research on free cash flow, shareholder value, and the unallocated profits after tax of 1936 and 1937. In this study researcher tried to explore the investor reaction toward the anticipated decrease in free cash flow presented to corporate managers. In addition, researchers suggested agency costs as partial determinants of dividend policy. To avoid the agency problem corporate have to pay higher dividend and imposed higher tax on undistributed profit so the problem of agency cost handled efficiently. The study conducted on determinants of dividend payout ratio in GhannabyAmidu and Abor (2006). In this study 20 listed firms of Ghana Stock Exchange were used as a sample which shows 76% of the total listed firm in Ghana Stock Exchange. Researchers have taken the Payout Ratio as controlled variable and explanatory variables includes risk, profitability, cash flow, corporate tax, institutional holding, sales growth, and market to book value. It was foundthat more profitable firms paid more dividends and profitability is positively related to dividend payout. In addition, cash flow and taxes are also positively related to dividend payout. Further, they also concluded there is a positive relationship between increase in liquidity and dividend payout. Results suggested negative relationship of dividend payout with growth, market to book value, risk, and institutional holding. The firms with the earning instability found hard to pay low and no dividends. Al-Malkawi (2007) worked on determinants of corporate dividend payout policy in Jordan. Researcher used a firm level panel data of all publicly traded firms on the Amman Stock Exchange for the year 1989-2000. Researcher used dividend payout as a depended variable and agency cost, Ownership, annual share turnover, market to book ratio, market capitalization of common equity, financial leverage ratio, profitability ratio, and taxes as independent variables. By using Tobit specification researcher concluded that positive relationship between size, age, and profitability with dividend payout and negative relationship between signaling device, ownership, and taxes in Jordan. Fairchild (2010) worked on Dividend policy, signaling and free cash flow: an integrated approach. Researcher has tried to examine the dividend policy by taking only two hypothesis signaling and free cash flow. In order to understand the composite environment of dividend policy, signaling game is developed in which most of the information possesses by managers than investors about the quality of the firms. The signaling hypothesis shows that asymmetric information between managers and investor, dividend work as signal regarding current performance and future prospect. The study found that high dividend has positive effect on the firm performance, in term of providing a positive signal for current performance and as will as future scenario. In addition, dividend payout reduces the free cash flow problem, which may attract the manager to invest in negative NPV project for personal interest. But if the project shows positive NPV so investment opportunities are available which lead toward the higher dividend in future. Gill, Nahum, and Rajendra (2010) worked on determinants of dividend payout ratio in United States. In this study researcher extend the Amidu and Joshua, and Anil and Kapoor finding for the American service and manufacturing firms. Researcher took same variables into account such as profitability, tax, market to book value, cash flow, and sale growth. The sample size was 266 out of 500 financial reports. According to the researcher dividend payout ratio of manufacturing firms is the function of profit margin, tax, and market to book value ratio. It was also found that result differ when the dividend payout ratio was defined as the ratio between after tax cash flow and cash dividend, not considering after tax earning of the companies. Reddy (2006), studied the dividend behavior of Indian companies, movement, and determinants and struggled to decide the behavior of the companies listed at Bombay Stock Exchange with theassist of trade off theory and signaling theory hypothesis. According to researcher analysis of dividend trend depicted that stock traded on New York Stock Exchange and Bombay Stock Exchange indicated that percentage of companies paying dividend has declined from 60.5% in 1990 to 32.1% in 2001 and there is only few companies paying dividend constantly. Beside that firms paying dividend are more profitable, large in size, and having enough growth. Indian context did not represent corporate tax and ax preference theory. Lastly the dividend change indicated signal to current and lagged earning performance rather than future earning performance. Baker, Farrelly and Edelman (1986) studied New York Stock Exchange 318 firms. According to the researchers main determinants of dividend payments were expected future earning and picture of past dividend. Gitman and Pruitt (1991) asked 1000 largest US firms financial managers and concluded present and precedent year earning were significant determinants effect dividend payment. According to Baker and Powell (2000) survey companies listed on New York Stock Exchange were industry explicit and predicted level of future income was the main factor of dividend payout Anil and Kapoor (2008) studies Indian information technology sector for determinants of dividend payout ratio. The phase for study 2000-2006 encompass both recessionary and booming phase of Indian information technology sector. Researcher concluded that beta and liquidity was discovered a notable determinant of dividend payout ratio. In addition, authors concluded that due to recession from 2003 onwards IT sector observed exponential growth, and it was anticipated linear growth in IT sector after 2006. Recently in Pakistani perspective, Ahmed and Attiya (2009) investigated sample of 320 non-financial firms listed on Karachi Stock Exchange from 2001 to2006.Researchers concluded Pakistani companies dependent more on current earning than past dividend. In addition, authors highlighted few predictors that may affect payout policies. Firstly, the finding demonstrated companies containing high profit with consistent earning can manage larger amount of free cash flow as a result to payout larger dividend. The firms having larger investment chance can easily affect and have a significant role in determinants of dividend payout policy in Pakistan. The companies paid more dividends to shareholders where inside ownership exist. Ownership structure has considered major factor in determining dividend policy in Pakistan. Beside that dividend payout was not affected pay growth of the firms and market liquidity has a significant impact on dividend payout. Furthermore, size was significant determin ants for dividend payout that means companies invest in assets relatively paying dividends to its stockholders. 2.1 Dividend irrelevance theory: Miller and Modigliani (1961) proposed that dividend policy is irrelevant to the shareholder and stockholder wealth was constant in the world of perfect market condition and any growth in the current payout is financed by literally priced stock sales. The basic assumption was that management paid 100 percent payout in every period. Other assumptions were as follow. First, market is perfect capital market that means there were no taxes on transaction cost, single buyer and seller not influenced price and everyone have free access to information. Second, investors are rational and value of securities was based on the discounted future cash flow to investor. Third, manager act as a agent of shareholders, and there was no uncertainty about the investment policy of the firm. 2.2 Bird-in-hand theory: Al-Malkawi (2007) emphasized that dividend valued differently from retained earnings (capital gains) in world of ambiguity and irregularity information. à ¢Ã¢â€š ¬Ã…“A bird in hand (dividend) is valued more than two in the bush (capital gain)à ¢Ã¢â€š ¬?. Investors always preferred dividends to retained earnings due to uncertainty of future cash flow. Although, this controversy has been extensively condemned and has not get strong empirical base, but, it was supported by Gordon and Shapiro (1956), Lintner (1962), and Walter (1963). The basic assumptions were as followed Firstly, investors have inadequate information regarding the profitability of a firm. Secondly, cash dividend was taxed at a higher rate when capital gain was realized on the sale of share. Thirdly, dividend serves as a signal of expected cash flow. 2.3 Agency cost and free cash flow theory: Ross (2008) define agency cost is the cost of the conflict of interest that exists among shareholders and management. It was happened when management act for own interest rather than shareholders interest who own the firm. This could be direct and indirect. It was in contrast to assumption of Millar and Modigliani (1961) that mangers act as an agent of shareholders. This is somewhat dubious, as the owners of the firm are different from the management. Managers are bound to carry out some activities, which could be costly to shareholders, such as undertaking unprofitable investments that would yield excessive returns to them, and unnecessarily high management compensation (Al-Malkawi, 2007). These costs are borne by shareholders; therefore, shareholders of firms with excess free cash flow would require high dividend payments instead. Agency cost may also arise between shareholders and bondholders: while shareholders require more dividends, bondholders require fewer dividends than shar eholders by putting in place a debt covenant to ensure availability of cash for their debt repayment. Easterbrook (1984) also identified two agency costs: the cost of monitoring managers and the cost of risk reluctance on the part of managers. Jensens free cash flow/overinvestment hypothesis (1988) provides a surrogate description for the positive association between the direction of the dividend change and the stock price reaction. Jensen argues that managers tend to hold cash to invest in negative NPV projects for their own utility maximization. The agency costs that result from this overinvestment decrease the value of the firm. Like the signaling hypothesis, the FCF argument suggests there should be a positive relationship is the direction of the dividend policy change and the stock price reaction. However, the FCF argument differentiates itself with respect to the level of growth opportunities faced by the firm. If a firm initiated a cash dividend, FCF arguments postulate there are fewer funds available for costly overinvestment. Likewise, if company didnt pay dividend, the strongest form of a decrease would reduce the value of the firm because there are more funds available to invest in less present value projects. The FCF hypothesis assumes larger stock price volatility for the firms who have few growth opportunities as compared to the firms with many growth opportunities. There is disagreement between different researchers on dividend policy. Allen and Rachim (1996) in Australia found no significant association between stock price volatility and divided policy. According to Gordon (1963) the stock price volatility is influenced by dividend payout. The firms who pay large dividend have minimum risks in terms of stock price value. Some of hypothetical mechanism also suggests the universal relationship of dividend yield and dividend payout ratio with stock price volatility. Jensens and Meckling (1976) developed Agency cost argument which proposed that dividend payout lower the cost of funds and increase the cash flows for the company. The company after paying cash dividends to stock holders would have less cash in hands of the managers to invest at below the cost of capital. According to Asquith and Mullin (1983), Born, Moser, and Officer (1984) and Miller and Rock (1985) dividend declaration provide information to the share holders to forecast the financial position of the company and the present firms earnings. This also depends on the source of information that either it is doubtful or not to respond on announcement of dividend. Hence, there remains disagreement till yet, the relation of dividend yield and stock price volatility and it is still unexplained and is considered as debatable in corporate CHAPTER 3: RESEARCH METHODS 3.1 Method of Data Collection Required data was collected from Karachi Stock Exchange as given by State Bank of Pakistan in publication of Balance Sheet Analysis of Joint Stock Companies Listed on the KSE (2005-2009). The period of study covered five years, 2005-09. The sample size of 100 non-financial firms was taken from all non financial firm listed at KSE. The required sample was chosen on the basis of cash dividend paid by firms at-least for two years. The sample represents major industry. 3.2 Sample Size Sample of 100 non-financial firms was collected from KSE. Sample consisted of firms which paid cash dividend for at least two years. Firms that was selected for study represented all major industries functioning in Pakistan and listed at KSE from 2005-2009. The impact of the cash flow and profitability on dividend payout was examined on selected sample of 100 non-financial firms. 3.3 Research Model Developed There were various financial factors of the non-financial firms which affected the Dividend payout of the firms. This research study investigated the impact of free cash flow and profitability on the dividend payout. 3.3.1 Dividend payout Dividend payout and dividend amount are taken as the dependent variables. Since dividend payout is the generally used alternative for dividend policy, almost every financial researcher has used payout as a proxy for corporate dividend policy (See for example Gugler, 2003; Reddy and Rath, 2005; Papadopoulos, 2007; Al-Malkawi, 2007; Ahmed Attiya, 2009). In order to calculate dividend payout was calculated as cash dividend per share divided by earning per share. 3.3.2 Earning per share According to Hafeez and Attiya (2009) high profitability with constant earnings can manage to pay for larger free cash flows as a result to pay out larger dividends. The earnings per share after tax were used as independent variable. Earning per share after tax was used because dividend has been paid after interest, taxes and after depreciation and calculated as net earnings divided by number of shares. H1: There is significant impact of earning per share on dividend payout 3.3.3 Return on Equity This variable is used in different previous studies such as: Abor (2005), Miller (2007), Al-Ajmi et al. (2009), and Ebaid (2009) etc. Some authors measured profitability or performance by three measurements such Gross profit margin (GPM), Return on Equity (ROE), and Return on Assets (ROA) and same predictors Ebaid (2009). Likely results with this variable are same as revealed by Abor (2005) and Ebaid (2009) such as: Significance and positive relationship with dividend payout. Return on Equity is considered best measure of firm profitability. Return on Equity (ROE) is one measure of how efficiently a company uses its assets to produce earnings. ROE was calculated by dividing Net Income minus preferred dividend by Share holder equity H2: There is significant impact of Return on Equity on dividend payout. 3.3.4 Free Cash flow According to Jensens (1986) free cash flow hypothesis, companies choose to use their cash resources to invest in profitable projects first; dividend is paid out of residual. From a companys point of view, cash generated from operations plays an important role in deciding the level of payout, among all three sources of cash flows i.e. operating; investing and financing, cash generated from operations is considered as most desirable source of funds for the company for distribution of dividends. Anil and Sujjata (2008) also found cash flow from operations as the most significant determinant of dividend policy in Indian IT industry. A  measure of financial performance calculated as Net income minus depreciation minus change in working capital minus change in capital expenditure. Free cash flow (FCF) represents the cash that a company is able to generate after  placing out the money required to maintain or expand its asset base.  Free  cash flow is important be cause it  allows a company to  pursue opportunities that enhance shareholder value. H3: There is a significant impact of free cash flow on dividend payout. The model developed was a linear model and its specifications are provided below: Div payout = a0 a1EPS + a2ROE + a3FCF + ц Dividend payout = Dividend per share divided by earning per share EPS = Net income divided by number of share outstanding ROE =Net income minus preferred dividend divided by common shareholder equity FCF =Net income minus Depreciation minus change in working capital minus change in Capital expenditure à Ã¢â‚¬Å¾ = error term 3.4 Statistical Technique Multiple Linear Regression Analysis (MLR) technique was used for this research study to examine the impact of the distinctive financial characteristics of the non-financial firms on their dividend payout of the selected firms; Statistical Package for the Social Sciences (SPSS) was used for the examination of the secondary data. CHAPTER 4: RESULT The sample of 100 non-financial firms from Karachi Stock Exchange was taken into consideration. This research study used multiple regression analysis (MLR). Researcher examined the behavior of non-financial firms of KSE about dividend payout. The selected technique was used to study the impact of cash flow and profitability on dividend payout. 4.1 Finding and Interpretation of the results In the beginning, the regression technique was applied on collected data by using SPSS, and there was no single variable was significant. It was clear from the result that there was the high co-linearity among the independent variables of the dividend payout and this means there was strong interrelationship present among the predictors. Return on assets and net profit margin was omitted from the data, thus, the issue of co-linearity was resolved. Now, proceeding with the analysis of the results because issue of co-linearity was addressed. The interpretation and analysis is presented in the next sections of this research study. Table 4.1: Model Summary Mod R R Sq. Adj. R Sq. 1 .289 .084 .078 Tables 4.1 depict the summary about the regression model. The R square of 8.4% showed that all the predictors of dividend payout together explained 8.4% variation in the dependent variable and the remaining variation was unexplained or hidden predictor were not included in the model. TABLE 4.2:ANOVA Model Sum of Squares df Mean Square F Sig. 1 Regression 31503.936 3 10501.312 15.236 .000a Residual 345316.428 501 689.254 Total 376820.364 504 The table 4.2 checked the significance of the linear regression model in such a way that the reliability of the data file regarding the applicability of the regression technique can be understood from the above table; however, ANOVA table was reliable test of checking the linear regression models ability to explain any variation in the dependent variable of liquidity. This was perfectly obvious from the sig value of .000 that meant that the linear regression model was highly significant for the data collected for the research study conducted. In addition, ANOVA explained that all means are not equal. In table4.3 the final model of regression included only three independent variable that were free cash flow, earning per share, and return on equity These variables were included in the model due to highly significantly describing the relation with dependent variable dividend payout. Returns on equity and free cash flow have positive impact on dividend, while earning per share has negative impact on dividend payout. 4.2 Hypothesis Assessment Summary The hypothesis of research was unique financial factors had significant impact on the non-financial firms dividend payout decision. These financial characteristics were cash flow taken as free cash flow of firms and profitability taken as earning per share and return on Equity of firms. This research tasted individual financial characteristics and concluded the result as follow. TABLE 4.4: Hypothesis Assessment Summary S.No. Hypothesis ÃŽÂ ² SIG. RESULT H1 There is significant impact of free cash flow on dividend payout. .001 .005 Accepted H2 There is significant impact of Return on equity on dividend payout. .216 000 Accepted H3 There is significant impact of Earning per Share on dividend payout. -.123 .016 Accepted H4 There is significant impact of Return on Assets on dividend payout. .340 .170 Rejected H5 There is significant impact of Net profit margin on dividend payout. -.034 .530 Rejected CHAPTER 5: DISCUSSIONS, IMLICATION, FUTURE RESEARCH AND CONCLUSION 5.1Conclusion It was concluded with support of results of this research study return on equity, earning per share, and free cash flow were significant independent variables in Pakistani market. These result were matching with the study under taken by Hafeez and Attiya (2009) in Pakistani context, Researchers concluded firms with high profitability and with stable earning can afford larger free cash flow therefore pay out larger dividends to its shareholder. In addition, Talat and Hammad (2010) examined the ownership structure and cash flow as determinants of dividend policy. Researchers concluded that companies in which high proportion of share were occupied by managers and individual were more reluctant of pay high dividends. In contrast, companies in which managerial and individual ownership is low paid less dividends. It was also concluded that companies having high operating cash flow increase companies potential to pay high dividend and it was considered cash flow sensitivity reduce the compa nies payout but still it was not determined as potential determinants of corporate payout in Pakistan. 5.2 Discussions Profitability and free cash flow could lay significant impact on dividend payout in Pakistani context. Hafeez and Attiya(2009) was also considered profitability as significant determinant of dividend payout, But study conducted by Talat and Hammad (2010) concluded operating cash flow cannot consider significant determinant of dividend payout in Pakistani market.This research considered that free cash flow and profitability measured through earning per share and returns on equity have significant impact on dividend payout of the companies. 5.3 Implication and Recommendations This research was encompasses non-financial companies listed on Karachi Stock Exchange Pakistan. The required data collected from 100 non-financial firms listed at KES for the period of 2005 t0 2009. Only firms were included in samples which were paid cash dividend for atleast two years. It is recommended that such type of study should be carried out in other countries of Asia. Further, it also recommended that other determinants except one analyzed in this study should be researched in more extensive manner so the dividend payout policy and its dynamics became clearer. 5.4 Future Research This research addressed the problems of investor, management and other researcher conductor in examining and observing the behavior of firm regarding their payout decisions. Research students who want to work further on dividend payout could be benefited by this study. In addition, all non financial firms will get benefit from this study because this research study taken all major sectors into the consideration and study clarified the impact of free cash flow and profitability on dividend payout.

Code-switching as a Resource in Content and Language Integrated Learnin

Introduction Currently, teaching content in foreign language and second language, for example, content and language integrated learning (CLIL) or bilingual teaching approach has become a trend in education world. Some countries such as Malaysia, Africa, and European countries have adopted this model of learning in their education system. There are some reasons behind adopting CLIL or bilingual teaching approach in their education system, for example, to improve cross countries (cross language) traffic, and as a respond to the important of English language as a dominant language in the world (Samala, 2009). Cummins stated that there is a minimal level of language proficiency (treshold), that students should reach in order to be able to learn the task effectively (1981, cited in Lim & Presmeg, 2010). As students in bilingual or CLIL classroom do not learn the content of the lesson in their mother tongue, code-switching is often occurred in their classroom. The teacher in the classroom would switch classroom discourse from the target language to students first language when he find that the students difficult to understand the concept of the lesson in the target language. Code-switching in the classroom should not be considered as a failure to teach in the target language, but it should be considered as a resource in the classroom. In this essay, I will discuss both advantages and disadvantages of code-switching in classroom. Definition of Code-switching According to Baker, code-switching is a situation where an individual switched from one to another language in one utterance, and the switching is done deliberately (1993, cited in Lim & Presmeg, 2010). In general, Setati (1998) defined that code-switching is â€Å"the ... ...might feel neglected by the application of code-switching in their classroom (Cook, 2002, Sert 2005, both cited in Stephen-Kalong, 2008). Therefore, she suggested that, code-switching only can be applied effectively in the classroom where all students have the same main language. According to Sert, Code-switching in teacher instruction might lead students to feel bored and lost their attention to the previous instruction in the target language (2005, cited in Stephen-Kalong, 2008). It happen because, the teachers often repeat their instructions in students main language. Conclusion Overall, considering a lot of benefits that teachers and students might obtain from applying code-switching in the classroom, we should consider it as a resource in the classroom. However, Code-switching only can be fully understood in the actual context in which it takes place.

Piracy in Somalia and Its International Implications

PIRACY IN SOMALIA AND ITS INTERNATIONAL IMPLICATIONS In the past few years, pirate attacks off the coast of Somalia have received a great deal of public attention. According to the London-based International Maritime Bureau, there has been an â€Å"unprecedented increase† in Somali pirate activity in the first 9 months of 2009. Until September this year 147 incidents were reported off the Somali coast and in the Gulf of Aden (separating Somalia and Yemen), compared with 63 for the same period last year. A total of 533 crew members have been taken hostage in 2009, out of which about 200 hostages are still being held by Somali pirates. I have chosen the topic of piracy for my essay as I think that in the context of the present world economy crisis it is a current problem which might affect all the participants of the global economy and it needs an urgent solution. In the first part of my essay I am going to present some data to demonstrate the importance of the problem, then I will focus on the background of the issue and present the different factors which have led to the appearance of piracy. After a detailed description of the pirates and their way of operation I will move on to presenting of the interests of the international community and the policies, strategies and instruments they have used to deal with the issue. At the end of my paper I will draw some conclusions and make a few suggestions for the future. Piracy has been a problem in Somali waters for at least ten years. However, the number of attempted and successful attacks has risen over the last three years. As the hijackings have increased in number, they have also become more sophisticated. The pirates are now able to capture larger targets as well. On September 25 2008, Somali pirates captured the MV Faina, a Ukrainian ship transporting weapons to Kenya. This was followed one month later by the hijacking of the MV Sirius Star, the largest ship ever captured by pirates. The Saudi-owned supertanker was carrying about 2 billion barrels of crude oil, worth about $100 million. The ship was finally released on January 9 for a $3 million ransom. The series of hijackings has continued in 2009 too. It seems that this year the pirates have shifted from the Gulf of Aden, where dozens of ships were attacked in 2008 but which is now heavily patrolled, to the ocean between the African mainland and the Seychelles islands. In October 2009 Somali pirates captured a Chinese bulk carrier, carrying 25 Chinese crew members. In November they have seized a US tanker carrying $20 million of crude oil, which is considered the second-largest ship ever hijacked by pirates. The tankers 30-member crew was also kidnapped. In the same month, 9 pirates hijacked the Greek-owned tanker Maran Centaurus carrying 275,000 metric tons of Saudi Arabian crude oil and have taken it to a pirate port along the coast, where they typically hold the boats for ransom. The 300,000-tonne ship was hijacked about 1,300 km from the coast of Somalia and there were 28 crew members on board which are all held hostages. According to the IBM, in October and November alone, 38 ships have been attacked and 10 hijacked. There are several factors which have made Somalia the perfect environment for piracy, which I am going to present below. First of all, if we want understand why piracy works in Somalia, we have to know something about the geography and history of the country. Officially called the Republic of Somalia, Somalia is a country situated in the Horn of Africa, bordered by  Djibouti  to the northwest,  Kenya  to the southwest, the  Gulf of Aden  with  Yemen  to the north, the  Indian Ocean  to the east, and Ethiopia  to the west. Due to its strategic location, in the past the country was an important centre of commerce. Even today, about 16,000 ships pass through the Gulf of Aden each year, carrying oil from the Middle East and goods from Asia to Europe and North America, so we can say that one of the most important trade routes of the world can be found in this area. In addition, the long, isolated, sandy beaches of the country are also advantageous for pirates to operate. Another factor which helps piracy to flourish is the political anarchy which still rules in Somalia. For almost 20 years, the country has endured political chaos and bloodshed. The  Somali Civil, which began in 1991 as a revolution against the repressive regime of Siad Barre, has caused instability throughout the country. The northern parts of the country declared their independence, although it was neither recognized by the central government, nor by the United Nations. Subsequent fighting among rival warlords resulted in the killing, dislocation, and starvation of thousands of Somalis. Since 1991, 350,000-1,000,000 Somalis have died because of the conflict. Hatred and lack of trust among the landlords and their clans has prevented the organisation of a functioning central government. From  2006-2009 Ethiopia  was also involved in the conflict. In January 2009, Ethiopian soldiers withdrew from Somalia, leaving behind an  African Union  contingent of peacekeepers to help the fragile coalition government and its troops enforce their authority. Following Ethiopia's withdrawal from Somalia, the southern half of the country fell into the hands of radical Islamist   rebels, who still control a big part of the country. The political situation is still chaotic in Somalia. The present government, led by Sheikh Sharif Sheikh Ahmed is the 16th administration to „govern† the country since the collapse of the Barre regime. Order still hasn’t been restored, Somalia is governed by anarchy. Because of the lack of an effective central government and national economy, Somalia is still one of the world’s poorest countries, where the estimated GDP is around $600 per year. According to the World Bank, in 2008 73% of the country’s population lived on a daily income below $2. The country’s 10 million people are starving, and they would hardly survive without the food aid provided by the developed countries. In a country where survival is at stake, it is no surprise that piracy has become a fast and easy way to make money and it could develop into a frightening business. To sum up, we can say that Somalia’s chaotic political situation, the lack of an effective central government, the poor state of the economy and poverty have all created an environment which was perfect for piracy to appear. But who are these â€Å"heroes† and how do they operate? In most people’s minds, the image of piracy is associated with characters like Jack Sparrow or Captain Cook. Pirates are often seen as rebellious young men who are victims of the society, but have the courage to stand up for themselves and create a different way of working on the seas. Actually, there is some truth in this kind of perception. According to Eric Hobsbawm, a British historian, â€Å"social bandits† are â€Å"outlaws, drawing on community support, using criminal methods to challenge the present hierarchy of power and wealth. † Most of the Somali pirates are 20-35 years old and come from the region of Puntland, a semi-autonomous region in northeastern Somalia. It is estimated that there are at least five pirate gangs and more thousands armed men. A BBC report divided them into three main categories: local Somali fishermen (the â€Å"brains† of the operations because of their skills and knowledge of the sea); ex-militiamen (used as the â€Å"muscle†) and technical experts who are able to use electrical equipment, such as GPS devices at a professional level. It is a fact that since the country’s collapse in 1991, there has been a great amount of illegal fishing practised by a lot of countries along the Somali coast. During the regime of Siad Barre (1986-1992) Somalia received aid from several countries to develop its fishing industry. Local fishermen had fixed prices for their catch and the fish was exported because of low demand for seafood in Somalia. However, after the fall of the Barre regime, due to the Somali Civil War the income from fishing decreased. Traditional coastal fishing became difficult, because foreign trawlers started fishing illegally along the Somali coast and depleted the fish stocks. Local fishermen became desperate. They started to band together and were determined to protect their resources. They started attacking foreign trawlers, the crew of which soon fought back with heavy weapons. As a result, fishermen turned to other types of commercial ships and soon discovered that piracy was an easy way to make money. At the moment, piracy is Somalia’s most â€Å"lucrative business†: ship owners are willing to pay huge amounts of money for the release of their hijacked vessels. In addition to this, starting with the early 1990s, Somalia’s long, remote coastline has been used as a dump site for dangerous toxic waste from a lot of European and Asian companies. The European Green party presented before the press and the European Parliament copies of contracts signed by two European companies – an Italian-Swiss and an Italian firm – and representatives of warlords, to accept 10 million tones of toxic waste in exchange for $80 million. For European companies this is a very cheap way of getting rid of their waste: while waste disposal costs in Europe are about $1,000 a tonne, this way it only costs them $2,50 a tonne. The effects of this dumping are already visible in Somalia. According to a report by the UN Environment Programme, there is an extremely high number of cases of respiratory infections, mouth ulcers and bleeding and unusual skin infections among the inhabitants of the area – diseases related to radiation sickness. It is clear that this situation represents a very serious environmental risk not only to Somalia, but to the whole eastern Africa region. Many of the pirates call themselves the Somali â€Å"coast guard†, claiming that their aim is to defend their communities from overfishing and to protect the coastline from toxic dumping of nuclear waste by foreign ships. In an interview one of the pirate leaders explained: â€Å"We don’t consider ourselves sea bandits. We consider sea bandits those who illegally fish and dump in our seas†. The problem of overfishing is still a very serious problem is Somalia. It is estimated that Europeans and Asians poach around $300 million worth fish from Somali waters. On the other hand, Somali pirates collect about $100 million yearly from ransoms. This, according to Peter Lehr, a Somalia piracy expert, can be seen as a â€Å"resource swap†. Of course, a great number of pirates are only taking part in these operations for the money, and their families which they can feed this way. As one of them, nicknamed Milk Sucker says: â€Å"Sometimes doing a bad thing is the only way to improve the situation for yourself and the people you love†. Some of the pirates can’t even swim, their only task is to shoot straight. A lot of young Somalis take part only in a couple of operations, hoping to make enough money to move to the West or maybe to persuade an ethnic Somali woman with a EU passport to marry them and move to the UK. As for the techniques used by the pirates, we can notice that they are getting more sophisticated and more effective. They are using the latest high-tech equipment, like GPS, MANPADS (Man Portable Air Defence Systems), RPGs and satellite phones and they are well-armed with rocket-propelled grenades and AK-47s. They usually operate using small skiffs with powerful outboard engines, but now they regularly use â€Å"mother ships† to increase their range. These â€Å"mother ships† take them into the shipping lanes, several hundred miles offshore. Then they launch small speedboats to haul themselves up onto the deck of a ship. They can often seize a ship without firing a shot. After capturing it, they sail the hijacked ship to the Somali pirate hub town, Eyl and take the hostages ashore where they are well-looked after until ransom is paid. It is reported that the pirates never harm their prisoners; they behave like â€Å"perfect gentlemen† with them. They even hire caterers on the Somali coast to cook pasta, grilled fish and roasted meat, which western hostages might like. Once ransom is paid, they release ships good humour. According to the Kenyan foreign minister, in 2008 pirates have received about $150 million in ransom, which is used to fund future operations. In a recent startling Reuters report we can read that the pirates have started to make the money to work for them, setting up a stock exchange â€Å"that has drawn financiers from the Somali Diaspora and other nations. † The bandits' bourse is a small building in the once-small fishing village of Haradheere, about 250 miles northeast of Mogadishu, which has developed into a luxury town by now. As a former pirate named Mohammed puts it, â€Å"The shares are open to all and everybody can take part, whether personally at sea or on land by providing cash, weapons or useful materials †¦ we've made piracy a community activity. â€Å" Unfortunately, it has become clear that the activity of pirates is linked to warlords on shore. After seeing the profitability of the business, these leaders started to facilitate pirate activities, sharing the profit with the pirates. These â€Å"Godfathers† and clan leaders are closely related to Somalia’s president in Mogadishu, Abdullahi Yusuf, who also originates from Puntland. Estimates are that at least six ministers in the Puntland government are involved with the pirates. The only group which is publicly against piracy is the militant Al-Shabaab, a Salafist group founded this decade as a militia attached to the Islamic Court. They say that such crimes are forbidden under the Islamic law. However, according some reports, militant Islamist groups also get their share of the profit. The pirates involvement with these organisations is making the situation even more alarming, because all the financial help given by the West to the Somali authorities to put an end to piracy might just help it to flourish. All in all, it is clear that piracy is not a problem that the fragile Somali government can solve alone and international help is needed. How does all this affect the international community? Besides enforcing international law, there are several other reasons to stop pirate activities. The first is Somalia itself. The country needs about 200 tonnes of food aid a year which is mostly delivered by sea. Without the naval escorts and the regular delivery of aid, Somalia’s food stocks are seriously threatened, so ensuring the safe delivery of food aid should be a number one priority for the international community. Stopping piracy may also reduce the money available for weapons, so indirectly it can lead to the end of the internal war. Piracy has a very distressing effect on international trade as well. In addition to the growing ransom, companies whose cargos do not reach their destinations, lose money. As a result, there is a growth of insurance for all ships which need to pass through the Gulf of Aden. The constant danger of pirate attacks has already made some shipping companies to choose a longer, but safer route, around the Cape of Good Hope, as it happened in the case of AP Moller-Maersk, one of Europe’s largest shipping companies after the hijacking of Sirius Star. The extra weeks of travel and fuel can lead to the cost of transporting goods, which is a really serious concern now, at the time of a global economic crisis. Another reason is related to the environment. Pirate attacks can cause major oil spills in a very sensitive ecosystem. As pirates become bolder and use more powerful weapons, tankers could be set on fire or sunk, which can result in an environmental catastrophe, destroying marine and bird life for many years to come. Last, but not least, there is a risk that the pirates themselves can become agents of terrorism. There are assumptions according to which pirates are connected to the Al-Shabaab movement, which is believed to have links to Al-Qa’eda. According to some reports, Al-Qa’eda militants from Iraq have chosen Somalia as a new base from which to launch attacks. Terrorism at sea can take many forms, for example direct attacks on ships, hostage dramas, but also hijacked ships used as potential weapons. Terrorist networks can use the financial funds from piracy to fund their operations worldwide. It is obvious, that even if there is little chance for the worst scenario, it is best to prevent it while we can. The international community has recognized that enhanced international efforts are necessary in order to reduce the number of attacks. The growing cases of piracy have focused the world's attention on Somalia and have shown that the crisis going on in a fragmented state is spilling out of its borders. The military response to piracy has shown that countries which haven’t been able to cooperate with each other can unite their forces for a common cause. A maritime conference was also held in Mombassa, where they discussed the problem of piracy and tried to give regional and world governments recommendations to deal with the danger. In January 2009, an important regional agreement was adopted in Djibouti by States in the region, at a meeting organised by IMO. The Code of Conduct concerning the Repression of Piracy and Armed Robbery against Ships in the Western Indian Ocean and the Gulf of Aden recognized the extent of the problem of piracy and armed robbery against ships in the region and the states signing it declared their intention to co-operate, in a way consistent with international law, in the repression of piracy and armed robbery against ships. Most countries have preferred prevention: various navies have sent war-ships into the area to escort commercial vessels. At the beginning, this way of defense was more individual than collective, but the persistence of the attacks has led to the development of a collective security system. NATO got the task of escorting convoys transporting the humanitarian aid of the World Food Programme towards Somalia. Once they were in the Gulf of Aden, they also protected other merchants ships, by their presence. Later NATO handed the job to Operation Atlanta, the first common maritime mission by the European Union. Military counter-piracy operations are performed by vessels from the Combined Task Force 150, a multinational coalition  naval  task force   in charge of monitoring and inspecting a range of security issues, such as drug smuggling and weapons trafficking, as well as piracy. Several countries, including India, Russia, China, Norway, Australia, France, Greece, Turkey, Portugal, Denmark, the Netherlands, South Korea, Malaysia and even Japan chose to join the coalition and send warships to the Gulf of Aden. In January 2009 the US navy established a new multi-national naval force to confront piracy off the Somali coast. The new unit was called Combined Task Force 151and it was a spinoff of the existing Task Force 150 in the region. This section of the coalition forces was aimed at focusing exclusively on pirate groups (leaving Combined Task Force 150 to focus on other destabilizing activities, such as drug smuggling and weapons trafficking). It was hoped that by designating a new unit to combating piracy in Somalia, anti-piracy efforts would be more successful. Unfortunately, this effort is having only a limited impact. Although some pirates are scared off by the sight of military ships and helicopters, coalition warships are often in the wrong place at the wrong time. In addition, pirates are flexible and change their tactics easily: data from the Maritime Bureau shows that at present they are conducting their operations further out in the Indian Ocean. Besides, this is a very costly solution which is difficult to support in the long term. After the hijacking of an Egyptian ship and a huge Saudi supertanker, the Arab League organized a summit for countries overlooking the Red Sea, with the participation of Egypt, Saudi Arabia, Sudan, Somalia, Jordan, Djibouti and Yemen. At the summit the participant states discussed several solutions for the problem of piracy, suggesting different routes and looking for a safer passageway for ships. They might also assist the current NATO anti-piracy efforts together with other nations. However, we shouldn’t forget that the Arab League has long tried to draw Somalia more closely to the Arab world. It has made a financial support for the Transitional Federal Government, conditional on its entering negotiations with Al-Shabaab, intending to spread Islamist influence in the area. In June 2008 the United Nations Security Council passed a declaration authorizing nations that have the agreement of the Transitional Federal Government to enter Somali territorial waters to hunt pirates. In 2008 the Security Council adopted two resolutions, 1846 and 1851 allowing for the first time international land and sea occupations of Somali territories in the pursuit of pirates. These resolutions extended the power of the states and lead to greater coordination of their efforts. After the Council resolution 1851, the Contact Group on Piracy off the Coast of Somalia was established on 14 January 2009 to facilitate and coordinate actions among states and organizations to deal with piracy. At the moment 46 States and seven international organizations take part in the Contact Group. Through its four working groups, the Contact Group addresses specific issues related to military and operational coordination, legal issues, shipping industry awareness and public and diplomatic information. UNODC (the United Nations Office on Drugs and Crime) participates in the Contact Group and its Working Group on Military and Operational Coordination, Information Sharing and Capability-Building. UNODC acts as secretariat to Working Group on Judicial Issues, to which it has provided various forms of support. UNODC has prepared an analysis of the legal and practical challenges involved in prosecuting suspected pirates and is gathering nformation on relevant national legal systems, including those of coastal States. In spite of the fact that laws to combat piracy at sea exist, a lot of states do not seem to use them in practice. Only France has chosen to combat piracy directly. The first case was the seizing of a yacht in April 2008, which started with negotiations for the release of 30 hostages and followed by the capture of six pirates in Somali territory. The second case took place in September 2008 to free a couple taken hostages. This action also led to the arrest of six pirates, who are awaiting trial before a French court. Britain and some other countries have found a superficial and convenient way of treating the pirates: they have negotiated a treaty with Kenya, according to which all those suspected of piracy are handed over to that country. A few months later other countries followed Britain’s example, negotiating similar agreements. These agreements are a useful step, but they do not solve the problem. The Kenyan prison system is in terrible condition, corruption is high, there are strong delays in the call of trials and legal aid is very limited. It is a paradox indeed that states which are entitled to prosecute the arrested pirates delegate this right to a country which is unable to assure a fair trial to these criminals. In spite of the united efforts of different nations, it has become clear that the piracy problem cannot be solved at sea, because it is rooted on the shore, in the ongoing conflict and political instability of the country. As Ban Ki-Moon, the Secretary General of the United Nations expressed at an international donors’ conference: â€Å"Piracy is a symptom of anarchy and insecurity on the ground. (†¦) More security on the ground will make less piracy on the seas† Any lasting solution to the problem has to involve ensuring stability, development and an effective criminal justice system in Somalia. If the states had invested the time and resources they now spend to stop piracy in reconstructing the Somali society and economy, they probably wouldn’t have to cope with these problems. However, there are always new opportunities that shouldn’t be wasted. Martin Murphy in his article â€Å"Somali Piracy: not just a Naval Problem† claims that the highest costs of piracy to Somalia and the international community are not economic, but political. As I mentioned earlier, it seems that almost all layers of political life in Somalia are involved in piracy, including the Islamist groups. Islamism is getting stronger and stronger in Somalia and it can soon get hold of the entire country. The Al-Shabaab movement has a clear intention to use Somalia as a base for spreading Islamist influence in the region. If this tendency continues, a worst possible outcome would be an Islamist government, which is strong enough to control piracy, but also strong enough to make Somalia safe for violent Islamist groups. So, what can be done to stop, or at least to decrease piracy in the Horn of Africa? Somalia is a clan-based society. Therefore, a possible solution would be to deal with the sub-state entities in order to create a unitary state in the future. In these negotiations the coalition should clearly commit itself to repress piracy in return for allied political and economic support. This way it would be possible to cut off all the political players in Somalia from their external sources of weapons and thus pirates would be trapped between more effective land-base policy by the Somalis and maritime policy by coalition member navies and soon they would have no place to hide. Recent efforts have shown that there is a will to act together. We can only hope that the states will find a way to deal effectively with the problem before it is too late. Links, references: Roger Middleton: Piracy in Somalia. Africa Programme, October 2008 http://www. chathamhouse. org. uk/files/12203_1008piracysomalia. df Marina Chiarugi  and  Daniele Archibugi: Piracy challenges global governance. Open Democracy,  9 April 2009 http://www. opendemocracy. net/article/piracy-challenges-global-governance George Grant: Somali pirates can't be beaten at sea. The Guardian, 18 November 2009 http://www. guardian. co. uk/commentisfree/2009/nov/18/somali-pirates-ransom-puntland Galrahn: Somalia Piracy – A Backgrounder April 8, 2009 http://www. informationdissemination. net/2009/04/somalia-piracy-backgrounder. html Rubrick Biegon: Somali Piracy and the International Response. FPIF (Foreign Policy in Focus) January 29, 2009 http://www. pif. org/fpiftxt/5827 Georg-Sebastian Holzer: Somalia: piracy and politics. Open Democracy, 24 November 2008 http://www. opendemocracy. net/article/somalia-piracy-and-politics Johann Hari: You Are Being Lied to About Pirates. The Huffington Post, December 2009 http://www. huffingtonpost. com/johann-hari/you-are-being-lied-to-abo_b_155147. html Can Somali pirates be defeated? BBC News, 20 November 2009 http://news. bbc. co. uk/2/hi/8371139. stm Sam Gustin: Bandit Bourse? Somali pirates hijack oil tanker, organize ‘stock market' Daily Finance, December 1 2009 http://www. dailyfinance. om/2009/12/01/bandit-bourse-somali-pirates-hijack-oil-tanker-organize-stock/ Martin Murphy: Somali Piracy : not just a naval problem . Centre for Str ategic and Bugetary Assessments, April 16, 2009 http://www. csbaonline. org/4Publications/PubLibrary/B. 20090417. Somali_Piracy/B. 20090417. Somali_Piracy. pdf Piracy in Somalia: Wikipedia, the Free Encyclopedia http://en. wikipedia. org/wiki/Piracy_in_Somalia Aiden Hartley: What I learned from the  Somali pirates. The Spectator, 6 December 2008 http://www. spectator. co. uk/essays/all/3061246/what-i-learned-from-the-somali-pirates. thtml