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PROJECT PROPOSAL
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Introduction and Nature of the Project
This proposal is intended to carry out a breakdown and analysis of capital structure and cost of capital for 3 publicly own companies in similar industry all through a span of five years. The chosen companies are in Finance industry and they include 1347 Property Insurance Holdings, Inc., 180 Degree Capital Corporation, and 1st Constitution Bancorp (NJ), all located in the United States. Specifically, the project will research on the subsequent components of each company; capital structure, use and effect of leverage, dividend policy, long-term financing policy, working capital management practices, and mergers and acquisitions (possibility of, past history of, and outcomes/effects).
Proposed Objectives
The general or key objective that will guide this study is “to perform a breakdown and assessment of capital structure and cost of capital of 3 publicly-held companies in similar industry all through a period of five years.
The specific or sub-objectives include:
1. To compare the capital structures of the three companies
2. To compare the use and effect of leverage of the three companies
3. To analyze their dividend policies
4. To compare their long-standing financing policies
5. To analyze their working capital management practices
6. To analyze their mergers and acquisitions (likelihood of, previous history, and effects or outcomes
Background of the Problem
There has been lack of adequate information regarding the capital structure of the selected three companies. The majority of previous researches have only centered on analyzing their industry and internal and external environment (van 2017; Kohler, Guschanski & Stockhammer 2018; Egan, Hortaçsu & Matvos 2017; Merkley, Michaely & Pacelli 2017). As a result, this study has identified a gap in information or information regarding the capital structure and cost of capital of the three companies. Thus, this study will be the first in history to provide research work regarding the capital structure and cost of capital of the three companies. We will fill this research gap by providing an all inclusive analysis and comparison of the three companies using the most essential techniques and concepts that include; Capital structure, Use and effect of leverage, Dividend policy, Long-term financing policy, Working capital management practices, and Mergers and acquisitions.
Proposed Methodology
The study will use quantitative method, specifically use of secondary sources to obtain data from the websites of the three companies. Then, the data will be processed using excel database and the results presented using tables, charts, and diagrams. The data will then get compared and provide inferences form the results.
Suggested Literature Review
The literature review will be based on the capital structure and cost of capital of companies and how they affect their success and profitability. Mainly, the sources used will be journal articles and also scholarly articles, which range from 2012 to 2018. This is to ensure that the information we use is up-to-date and accurate. The articles will be searched from various online libraries such as Google Scholar, Smithsonian Libraries, Open Library, Harvard Library, among others. The key search terms will include “Capital Structure,” “Cost of Capital,” “Leveraging Ratio,” “Dividend Policies,” “Mergers and Acquisitions,” “Working Capital Management,” and “Financial Policies.”
Expectations and Issues
The main expectation is that this project will turn out to be successful and we hope that we will get relevant resources that are in line with our study. However, one issue is that there may be none or limited resources that cover the topic in question, and this may be an obstacle to achieving our objective.
Limitations
There are numerous limitations that the research team expects to encounter. The first constraint is financial issues as the entire exercise requires monetary resources and this may be hard for us because we are not currently working. However, we will conquer this by seeking grants from the government and through fundraising. The second obstacle is getting enough time for fieldwork as we also have to concentrate on class work. We will conquer this through making an excellent schedule and adhere on it. Finally, there is a constraint of scanty resources that have limited or biased information and this may affect the reliability and legitimacy of our studies. However, this will be conquered through doing a thorough research and verifying the adequacy, legitimacy, and reliability of all the articles and materials we will use in our project.
Bibliography
Egan, M., Hortaçsu, A., & Matvos, G. (2017). Deposit competition and financial fragility: Evidence from the us banking sector. American Economic Review, 107(1), 169-216.
Kohler, K., Guschanski, A., & Stockhammer, E. (2018). The impact of financialisation on the wage share: a theoretical clarification and empirical test (No. PKWP1802).
Merkley, K., Michaely, R., & Pacelli, J. (2017). Does the scope of the sell‐side analyst industry matter? An examination of bias, accuracy, and information content of analyst reports. The Journal of Finance, 72(3), 1285-1334.
van Hoorn, A. (2017). Organizational culture in the financial sector: Evidence from a cross-industry analysis of employee personal values and career success. Journal of Business Ethics, 146(2), 451-467.
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