The Effect of Corporate Governance Mechanism on the Quality of Earnings Among Nigeria Money Banks in Nigeria free essay sample

This paper examines whether corporate governance mechanism variable – Board Size, Board Composition, Ownership Concentration, Institutional Shareholders, Dividend Payment, Firm Size have significant impact on the quality of earnings of Nigerian deposit money banks as measured by modified (McNicols and Wilson, 1998), (Gred and Clarke, 2004) and (Chang, 2008) model of specific industry discretionary accruals as against (Dichow and Dichev, 2002), though widely accepted but is hardly industry specific. Secondary data are extracted from the annual reports of 15 banks that form the sample of the study within the period between 2006-2011. Multiple regression was used as a tool for analysis. The result reveals that corporate governance mechanisms affects earnings quality of Nigerian money deposits banks. All the corporate governance examined are positive except for the control variable firm size signifying that none of the explanatory variables is inversely related to quality of earnings amongst Nigerian money deposits banks. It is therefore recommended that amongst others that shareholders of Nigerian DMBs to ensure the inclusion of about 50% outside directors in the board and ensuring a good quantum of both institutional and block holders in the equity holdings of the banks. We will write a custom essay sample on The Effect of Corporate Governance Mechanism on the Quality of Earnings Among Nigeria Money Banks in Nigeria or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Keywords: Earnings, Discretionary, accruals, manipulation, monitoring, quality. Introduction The rising number of corporate failures, scandals and crises such as Enron, WorldCom, Global Crossing, HIH Insurance, Ansett, Pan Pharmaceuticals, Lever Brothers, Cadbury, and Afri bank has precipitated the growing interest on the governance structures of firms by academics, practitioners, the investment community, regulatory agencies, policy makers, national and multilateral government bodies and host of other stakeholders (Tsegba, 2011). Corporate governance is about building credibility, ensuring transparency and accountability as well as maintaining an effective channel of information disclosure that would foster good corporate performance (Matama, 2008). Income smoothing and earnings quality popularly called earnings management can be regarded as two of the attractive and challenging issues in studies related to accounting because investors pay attention to amount of income as an important factor in decision making. It has long been recognized that financial statements play an important role in assessing managers’ performance by the board of directors outside investors and external regulators. It is therefore, not unlikely that managers will manipulate financial reports in order to produce a good image of themselves and the firms that they manage (Shehu and Abubakar, 2012). There are a lot of qualitative empirical studies exist on the relationship between corporate governance mechanisms and earnings quality. However, quantitative studies supporting the existence of a link between corporate governance mechanisms and earnings quality are relatively scanty and inconclusive. Besides the scanty nature of quantitative literature, most of the existing ones are more concerned about the overall quality of corporate governance mechanisms rather than particular features or practices of such governance. In addition, most of the studies are cross-sectional in nature. There is none of these studies that examine either the overall or particular features of corporate governance mechanisms and earnings quality of the banking industry in isolation. The peculiar and sensitive nature of the banking industry as well as the reforms it has continued to undergo indicates the need for special attention. This study attempts to address that omission by examining the effect of corporate governance mechanisms on the earnings quality of Nigerian money deposit banks. The relationship between corporate governance mechanisms and earnings quality is important to the extent that good corporate governance builds confidence in the minds of existing and potential investors as well as other stakeholders of a bank. This in turn creates confidence in the banking industry. The implications of these on the economy as a whole are also obvious. Economic growth will be more sustainable, capital market will be boosted and become more developed and an egalitarian and corrupt-free society will be built. All these are essential for sustained economic growth and development. This study also contributes to the growing body of quantitative research on corporate governance and earnings management. The spate of well publicized corporate failures around the world call for high-quality financial reporting, which gives a proper record of stewardship, provides details of real costs of services and in which the informed individual can have confidence. Moreover, the recent number game amongst banks in Nigeria raises additional concern on the need for financial reports that meet today’s requirements (Bello, 2005). Earnings management involves the manipulation of earnings by companies using financial statement elements that are largely at the discretion of the managers to achieve divergent personal goals. These elements are peculiar to industries depending on their nature of operations and external regulatory framework. Researchers such as (Dockery and Herbert, 2000); (La Porta, Lopez-de-Silanes, (Yakasai, 2001); (Detomasi, 2002); (Fort and Schipani, 2003); (Bai, Liu, Lu, Song and Zhang, 2005); (Barako and Tower, 2006); (Achua, 2007); (Okike, 2007) and (Shehu and Abubakar, 2012) have identified that accruals arising from depreciation are used to manipulate earnings in manufacturing companies, claim loss reserve in insurance and loan loss provision in banking. Loan losses has been identified as one of the most important factors that lead to bank failures and its provision has a direct impact on reported earnings (Grey and Clarke, 2004). The issue of earnings quality arises because financial reports may incorporate adverse information about future cash flows in a more or less timely fashion (Francis et al, 2003). According to (Ball and Shivakumar, 2002), earnings quality is about timely loss recognition that requires estimates of future cash flows from assets or outflows for liabilities. In (Basu’s, 1997) view, accountants have tendency to require a higher degree of verification to recognize good news as gains than to recognize bad news as losses. He consequently relates earnings quality to the accounting concept of conservatism, which supposes that earnings reflect ‘bad news’ more quickly than ‘good news’. In theory, one measure of earnings quality is the relation between current accruals and cash flow (Jindrichovska and Kuo, 2000). Thus, prior researches document an association between earnings pattern and earnings quality (Hunt et al, 2000; Francis et al, 2003). Relating this measure to banking, earnings quality becomes a function of DLLP and earnings pattern. Accordingly, banks with abnormal DLLP are considered as having low quality earnings while banks with normal DLLP are deemed to have high earnings quality. Incidentally, there also, exists an inverse relation between smooth and increasing earning pattern and earnings quality: the higher the smooth earning pattern the lower the earnings quality (Francis et al, 2003). Shehu and Abubakar, 2011) opined that loan loss provision is an expense on the income statement which signifies managers’ assessment of expected future losses. This means that an increase in loan loss provision reduces net income, while a fall in loan losses increase net income. Since it is the result of managers’ assessment of the likely loss that the company would incure should the borrower fail to repay his obligations as at when due, the provision for it is considered to have two (2) p ortions: non-discretionary and discretionary portions. Non-discretionary is a function of specific quality determinants in the loan portfolio- non-accrual loans, renegotiated loans, loans past due over 90 days, specific analyses on troubled large credits, usually implying internal grading system. This means that the non-discretionary portion is the provision that is based on fair and objective analyses of the firm’s economic conditions. While the discretionary portion are those accruals that largely depend on the outcome of the managers’ future expectations of uncertain events. The components of it are both quantitative and qualitative. Grey and Clarke (2004) pointed that the qualitative components include political, economic, geographical and political factors, while the quantitative are statistical analyses of loans not individually analyzed for special reserve and therefore are largely at the discretion of managers. The reasons why banks manipulate earnings are supported by three arguments of signaling argument, income smoothing or earnings quality argument and capital management argument (Zhou and Chen, 2004). The signaling argument suggests that banks use discretionary loan loss provision to insinuate that earnings will be high in subsequent periods (Wahlen, 1994: Liu and Ryan, 1995: Beaver and Engel, 1996). Contrary to the signaling argument, earnings quality argument holds that managers increase the provision for loan losses in periods when earnings are high, under the assumption of income smoothing (Beatty, Chamberlain amp; Moglio, 1995: Collins, Shacklford amp; Wahlen, 1995: Rivard, Bland amp; Morris, 2003). This implies that earnings quality in this area improves bank’s cash flows, capital adequacy, market value and overall performance. While the capital management argument suggests that since increase in loan loss provision increases regulatory capital, management exercises discretion over its provision (Ahmed, Takeda amp; Thomas 1999, Beatty et al. , 1995). Regardless of the industry and the strings attached, managers’ discretionary behavior to achieve personal gains undermines the shareholders’ wealth maximization objective of the firm. Consequently, therefore, this paper examines the influence of corporate governance mechanisms on the quality of earnings among Nigerian Deposit Money Banks (DMBs). In order to achieve this, it is posited that corporate governance mechanisms- board size, board composition, ownership concentration; audit committee, institutional shareholding and dividend have no significant impact on quality of earnings among Nigerian DMBs. It is the constant fear in the banking industry in spite of introduction of new code of corporate governance to enhance the efficiency of the industry practices, and the recognition of the use of discretion by bank managers as well as earnings manipulation that make this work apt and imperative. This study contributes to the sparse of literature that studied the relationship between corporate governance and earnings quality. It also extended to the financial firms by raising and discussing issues on corporate governance mechanism and earnings quality of banks using discretionary loans loss provision in the circumstance of emerging economies like Nigeria. The paper is structured as follows. Section two reviews related literature on corporate governance mechanisms and earnings quality and theoretical framework. Section three is methodology and model specification. In section four, the results and findings of the study are presented and discussed. Finally, section five deals with conclusion and recommendations. 2. 1 Literature Review and Theoretical Framework Literature on corporate governance and quality of earnings is reviewed. Specifically the study concentrates on governance mechanisms of dividend, audit committee, board size, board composition, ownership concentration and institutional shareholding. The theoretical framework that underpins the study is then presented and supported. Earnings quality as the altering of financial statements through the use of judgment in structuring transactions to either mislead the firm’s stakeholders about the true economic picture of the firm or to achieve some contractual benefit that is based on accounting numbers (Healy and Wahlen, 1999). (Schipper, 1989), opined that earnings quality is the deliberate intervention in financial reporting process to achieve personal goals. Earnings quality is the manipulation of financial statement by managers, using accounting choices, estimates and methods, to achieve some objectives that are largely in conflict with the underlying economic status of the firm. Different incentives to manage earnings are widely discussed in the literature, (Bhat, 1996), linked it to the attempt to enhance shareholders’ value and to maximize executive compensation through income smoothing and earnings quality respectively. Income smoothing, occasional big bath, living for today and maximization of variability are identified by (Koch amp; Wall, 2000). (Chang et al. 008) note three incentives to manage earnings: capital market motivation, which includes initial public offerings, seasoned equity offerings, management buoyant plans and plans for mergers to meet earnings forecast, to smooth earnings, management compensation motivation, debt agreement or job security and laws and regulations such as import regulation, antitrust laws, also can serve as incentives. Managers use discretionary accruals for opportunistic earnings quality (Cornet et al. 2009) by attaining some level of performance and affecting stock prices to enhance managers’ wealth through restricted stock returns. . 1. 1 Board Size and Earning Management There are a lot of empirical researches that have documented that board size is related to earning management. The evidence on the role of board size is inconclusive. Yermack (1996) and Eisenberg, Sundgren, and Wells (1998) demonstrate that smaller boards are associated with manipulative accounting. In the analysis of 131 different study-samples with a combined sample size of 20,620 observations (Dalton, Daily, Johnson and Ellstrand (1999) documented a positive and significant relation between board size and income smoothing. These conflicting results provide no conclusive relationship between earnings management and board size. A smaller board may be less encumbered with bureaucratic problems and may be more functional. Smaller boards may provide better financial reporting oversight. Alternately, a larger board may be able to draw from a broader range of experience. In the case of earnings management, a larger board may be more likely to have independent directors with corporate in financial experience. If so, a larger board might be better at preventing earnings management. Small boards are less effective monitors and are easier for CEOs to influence (Jensen, 1993) and (Lipton and Lorsch, 1992). 2. 1. 2 Board Composition and Earnings Quality Board independence simply refers to non-executive external directors, who do not represent any particular shareholder interest and hold no special business interest with the bank, relative to total number of directors on the board (Shehu and Abubakar, 2011). Studies on impact of board composition on earnings quality have produce varied results. Cornet et al. 2007), examine the impact of corporate governance and pay-for-performance on earnings quality. By means of 100 largest firms in the U. S. as ranked by Samp;P between 1994-2003, they find that the presence of independent outside directors reduce earnings quality. Aggregate accruals were used to proxy for earnings quality. (Cornet et al. , 2009), investigate how corporate governance mechanism affects earnings quality at large publicly traded U. S. companies for th e period between 1994 2002. Large independent boards constraint earning quality was found by the study. Roodposhti and Chashmi, 2010) find that for the period between 2004-2008 in Iran, using 196 firms listed on Tehran Stock Exchange, revealed a negative association between board independence and earnings quality. On the contrary, (Hashim and Devi, 2008) examine the relationship between board independence, CEO duality and accrual management in Malaysia. Using 200 top non-financial companies listed on Malaysian Stock Exchange, they find that large percentage of independent executive directors is associated with higher income-increasing earnings quality. Also, (Shah, Zafar and Durrani, 2009), study the relationship between board composition and earnings quality in Pakistani listed companies for the period between 2003 and 2007. They find no significant relationship between board composition and earnings quality. Yet, all studies exclude financial firms, the inclusion of which might have yielded different result. (Macey and O’Hara, 2003) opined that governance structure is industry specific and there is a systematic difference between the governance of different industries 2. 1. 3 Ownership Concentration and Earnings Quality Ownership concentration, which is also referred to as blockholders. It is the proportion of shares (usually more than 5%) owned by a certain percentage of shareholders. There are arguments that the higher the number of shares owned by the blockholders, the more the pressure on managers to act in conformity with shareholders interest (Sanda et al. , 2005). (Ramsy and Blair, 1993) opined that large ownership concentration has more incentives to manage earnings because the expected benefit from equity holding in the firm outweighs the cost associated with monitoring managers If this is true, then we expect ownership concentration to be inversely related to earnings quality. Some researchers observe that high ownership concentration beyond a certain level may lead to abuse of power, which could be detrimental to the value maximization goal of the firm (Sanda et al. , 2005). Inconsistent results were yielded on the relationship between ownership concentration and earnings quality. (Roodposhti and Chashmi, 2010) find a negative relationship between ownership concentration and earnings quality, while they used 196 firms listed on Tehran Stock Exchange as their sample for the period between 2004-2008, to examine the effect of board composition and ownership concentration on earnings quality. In the same vain, (Klai and Omri, 2011), investigate the impact of corporate governance on financial reporting quality in Tunisia. The study used 22 listed firms for the period between 1997-2007. They find that ownership concentration is negatively associated with earnings quality. Conversely, Using top 200 listed non-financial companies, (Hashim and Devi, 2008), examine the association between board independence, CEO duality and accruals management. They find that ownership concentration is associated with high income-increasing earnings quality. Besides the exclusion of financial firms from all the studies mentioned above, economic differences of nations calls for an investigation in of similar problems in an economy like ours. 2. 1. 4 Institutional Shareholding and Earnings Quality Institutional shareholders have both the incentive and power to compel managers to act in consonant with value maximization objective of the firm. (Shehu, 2011) note that institutional ownership has emerged particularly in the banking sector as a tool for protecting minority interest. We, therefore, expect that institutional shareholding and earnings quality will be inversely related. (Cornet et al. , 2007), investigate how governance structure and incentive based compensation influence firm performance when measured performance is adjusted for earnings quality. The study used top 100 firms rated by Samp;P in U. S. , they find that earnings quality is significantly reduced by institutional shareholders whether institutional shareholders is measured based on the proportion of shares owned by all institutional shareholders or by institutional involvement in the firm. This finding is an extension of (Klein, 2002). The study might have revealed different result if carried out in the Nigerian context. (Shehu, 2011) examine the interaction between corporate governance and financial reporting quality in deposit money banks. Using all 21 banks quoted on NSE for the period between 2007-2009, the study reveals a positive and significant relationship between institutional shareholding and earnings quality. The major drawback of this research is that it uses (Dichow and Dichev, 2002) model, which though is widely accepted but is hardly industry specific. The presence of institutional investors with substantial shareholdings restrain managers from engaging in income increasing discretionary accruals when companies have high free cash flow, however, when there is no free cash flow agency problems. 2. 1. 5 Dividend Payment and Earnings Quality While many studies ignore this variable as corporate governance mechanisms, this study consider dividend payment as a n important parameter that measures the overall efficiency of the board. A board that has high frequency of dividend declaration may force earnings managers to have less discretion in manipulating earnings. This is because higher earnings will attract high dividends leading to free cash flow. Larger free cash flow payout reduces managers’ ability to make bad investment (Jensen, 1986). Likewise, high payment obliges managers to raise additional capital via stock market there by being exposed to specialist, financial analyst, investment bankers, regulatory authorities and the press (Goergen, 2007). From these views, apart from the fact that high dividend is a signal to management effectiveness; it serves as a disciplinary mechanism in limiting management discretion over cash flow. In absence of priority we hypothesized that firms with high level of dividend history will have less level of unethical accounting practice that has to do with earnings misrepresentations (Bello, 2013). 2. 2 Theoretical Framework and Model Development In order to link corporate governance with earnings quality, the study first looks at the theories that induced earnings manipulations. Two prominent are opportunistic and desirous. The first theory which embedded the philosophy of this paper is opportunistic tendency of managers to engage in unethical in absence of good governance structure. Secondly, from corporate legal point of view board are to act as trustees of shareholders. Infact they are like operating shareholders directly overseeing the affairs of management. Agency theory, postulates an inevitable conflicts. Whereas, managers will be targeting better performance for short term gains, the interest of shareholders would be that of long term benefit of capital appreciation and return (dividend). Within the agency framework, it is both logical and inescapable that management behavior will be self serving (Amat, 1996). The end result will be that of managers manipulating earnings. These two theories; agency theory and opportunisms theory provide a complete framework for understanding corporate governance and earnings quality. 3. 1 Methodology The research design is inclined to use ex-post financial data because of its empiricism as well as practicality. The period of the study is six (6) years (2006 to 2011) both years inclusive. The period is considered more appealing because all DMBs for which relevant financial data from 2006 to 2011 is obtained would have survived the distress syndrome of the early 1990s and 2005 consolidation saga in Nigeria. We believe also that the six-year period would provide an adequate time series of data (observations) to realistically identify Nigerian DMBs that have been managing earnings over a number of years. This is consistent with Michelson et al (2000) idea that adequate time series studies captures incidence of smoothing, whereas one period studies reflect attempts to smooth. The data is extracted from the consolidated annual reports of the sampled banks sourced in the Nigerian Stock Exchange fact book 2010/2011. The population of the study is all the 25 DMBs that survive consolidation exercise as at 31st December 2006. The ample is drawn using criteria of complete data availability in which 15 banks automatically formed the sample of the study. Two steps Panel regression is used as tool of analysis because it satisfies our purpose of predicting and explaining relations between variables and also providing residuals of the LLP model to represent the explained variable in the second regress ion model. A pre-requisite for the use of any variant of earnings quality detection models is computation of the smoothing instrument. Theoretically and in practice, the smoothing instrument relevant to earnings quality studies in the banking industry is the LLP. Previous studies have investigated earnings quality instruments such as dividend income, changes in accounting policies, pension costs, extraordinary items, investment tax credit, depreciation and fixed charges, and many others (Kamarudin et al, 2001). However, (Kanagaretnam et al, 2001), specifically conclude that banks use LLP and charge-offs to smooth income. 3. 1. 1 Estimation of Discretionary Loan Loss Provision and Variables Measurement Now, in order that we use LLP in detecting earnings quality, we need to estimate the LLP made by sample banks in the industry. Nonetheless, we begin by making distinction between regulatory LLP as per the requirements of the PGs and discretionary loan loss provisions (DLLP) that is used for earnings quality. The distinction is useful because, where banks provide only in compliance with the PGs (non-discretionary LLP), it would be wrong to conclude that it uses LLP for earnings quality. The DLLP therefore contains an element of provision in excess of PGs requirements. It follows that to conclude that banks smooth their reported earnings; there must be evidence of DLLP in the financial reports. Stated differently, the presence of DLLP is a prima facie pointer to the possibility of earnings quality behaviour among the banks. (McNichols and Wilson, 1998), (Grey and Clarke, 2004) and (Chang, 2008) adapted measuring earning management in banks with discretionary loan loss provision. Consistent with prior studies (e. g. , Kim and Kross, 1998; and Kanagaretnam et al, 2001), the beginning balance of nonperforming loans, change in non-performing loans and change in total loans to estimate the non-discretionary component of LLP is used. Because the beginning balance of nonperforming loans (NPL) is usually positively related to LLP, therefore, with a higher level of beginning nonperforming loans, banks will have to make a higher LLP. In addition, change in nonperforming loans (CHNPL) in the current period to have a positive effect on LLP is expected. The sign of the coefficient of change in the value of loan deflated by beginning loans (CHLOAN) is also positive. An increase in loan portfolio will most likely result in an increase in LLP. Equation (1) provides an estimate of the non-discretionary LLP: LLPit = 0 + 1NPLit + 2CHNPLit + 3CHLOANit + it[1] Where, LLPit = provision for loan losses deflated by beginning loans; NPLit-1 = beginning of period nonperforming loans deflated by beginning loans; CHNPLit = change in the value of nonperforming loans deflated by beginning loans; and CHLOANit = change in value of loans deflated by beginning loans. In equation (1) above, the independent variables account for the non-discretionary component of LLP, and consequently, the DLLP is given by the residual term. In order to explain the cross-sectional differences in the level of DLLP, it requires a two-stage analysis where the first stage explicitly models the non-discretionary portion of LLP using a model as per equation (1). In the second stage, the residual from the first stage regression, representing the discretionary portion, is subsequently used as the dependent variable. A drawback of this stepwise estimation procedure is that, it systematically underestimates the absolute value of the regression coefficients in the second stage (Kanagaretnam et al, 2001). Hence, to alleviate this potential problem, analysis using a single regression model is conducted including the three variables used in equation (1) to explicitly account for the non-discretionary component of the LLP. The empirical model is given thus: LLPit = 0 + 1EBTPit + 2L/DEPit + 3 WELLit + 4 LASSETit +5 CHNPLit + 6 NPLit-1 + 7 CHLOANit + it †¦Ã¢â‚¬ ¦ [2] Where, EBTPit = earnings before tax and provisions deflated by beginning assets; LLPit = provision for loan losses deflated by beginning loans; L/DEPit = ratio of loans to deposits; WELLit = a dummy variable which equals 1 when industry capital ratio is well above the legal requirement (i. e. , when the total risk-based capital ratio exceeds 10% and the tier 1 risk-based capital ratio exceeds 8%), and equals 0 otherwise; LASSETit = the natural logarithm of total loan assets; CHNPLit = change in the value of nonperforming loans deflated by beginning loans; NPLit-1 = beginning of period nonperforming loans deflated by beginning loans; and CHLOANit= change in value of loans deflated by beginning loans. The first three variables (EBTP, L/DEP, and WELL) explain cross-sectional differences in DLLP; the third variable (LASSET) is a control variable and the last three variables (CHNPL, NPL, and CHLOAN) account for the non-discretionary component of LLP. The corporate governance variables of the study- board size, board composition, ownership concentration, dividend and institution shareholding are measured below: Board size (BS) is the total number of directors in the board Board composition (BC) is the ratio of independent or outside directors to total board size. Ownership concentration (OC) is the percentage of shares owned by blockholders (more than 5%). Institutional shareholding (IS) is the ratio of equity share owned by institutional investors to total number of shares issued. Dividend payment (DP) is the total amount of dividend paid. Firm size (FS) is the control variable which is the natural log (1n) of total assets. Such control is necessary because the bigger the bank, the larger the expected agency problem it will experience. Grey and Clark, 2004) note that large banks likely to avoid using discretionary loan loss provisions to manipulate earnings. A lot of researchers controlled for firm size in corporate governance studies including (Sanda et al. 2005), (Dabo and Adeyemi, 2007) and (Roodposhti and Chasmi, 2011). The regression model for testing the hypothesis of this study is presented below: LLPit = ? it + ? 1BSit + ? 2BCit + ? 3OCit + ? 4ISit + ? 5DPit + ? FSit + eit LLP= Loan Loss Provision BS=Board Size BC = Board Composition OC = Ownership Concentration IS = Institutional Shareholding DP = Dividend Payment FS = Firm Size 4. 1 Result and Discussion The analysis begins with a range of descriptive statistics on dependent variable and independent variables with mean, standard deviation, minimum and maximum presented below: Table 1: Summary of Descriptive Statistics | BS| BC| OC| IS| DP| FS| Mean| 14. 5444| 0. 2644| 0. 3177| 0. 5608| 2. 6556| 11. 2100| Std. Dev. | 2. 65703| 0. 11349| 0. 10243| 0. 5267| 0. 33000| 0. 11000| Minimum| 9. 00| 0. 0| 0. 12| 0. 43| 10. 37| 68. 97| Maximum| 20. 00| 0. 50| 0. 60| 0. 68| 4. 15| 83. 20| Observation| 90| 90| 90| 90| 90| 90| Source: Output of data analysis using E-view The table 1 shows the average independent directors in the board composition of the Nigerian banks is 26%, board size accounted for about 14 directors, block holders and institutional shareholding averaging 56% and 32% respectively of the shares issued and N2. 66k is the average dividend paid by Nigerian banks. The control variable is a veraging 11. 1 billion naira worth of assets by the banks. The standard deviations of most of the variables are not far away from their respective means values. This indicates a favourable level of dispersion that the data is not skewed and good to produce a reliable result which is confirmed by the values of skewness and kurtosis though not reported but attached. The minimum and maximum number of both executives and non-executives directors are 9 and 20 and that of independent directors of the banks are 10% and 50% respectively. In addition, the block holders and institutional shareholders of Nigerian banks range from 12% to 60% and 43% to 68% respectively. The total assets of the banks range from 68. 97 to 83. 20 billion naira during the period of the study. Table 2: Correlation Matrix | FIQ| BS| BC| OC| IS| DP FS| FIQ| 1| | | | | | BS| 0. 25| 1| | | | | BC| 0. 21| -0. 025| 1| | | | OC| 0. 29| 0. 090| 0. 024| 1| | | IS| 0. 42| 0. 035| -0. 034| 0. 34| 1| | DPFS | 0. 170. 31| -0. 146 0. 70| -0. 015-0. 034| 0. 158-0. 071| 0. 4890. 415| 10. 74 1| Source: Output of data analysis using E-view The correlation results presented in table 2 shows that all the explanatory variables are positively and strongly associated with explained variable except institutional shareholders and dividend paid. Thus, there is a strong relationship between corporate governance mechanisms and loan loss provision of the Nigerian money deposit banks. On the other hand, most of the independent variables are negatively and not significantl y associated between them. This indicates an absence of multicolinearity between the explanatory variables of the study. The correlation matrix reveals the relationship between all pairs of explanatory variables involved in the regression model. High correlation among the independent variables point the possibility of multicollinearity (excessive correlation), a situation which distorts the standard errors of estimates and the validity of the result became questionable. The correlation coefficients showed that multicollinearity does not exist among the variables. Additionally, this study adopts further test for excessive correlation using the variance inflation factor (VIF) and tolerance values. The purpose of additional investigation is to provide adequate assurance that the research findings are robust to the model specification. Table 4:Multicollinearity Test Variable| VIF| Tolerance| BS| 1. 081| 0. 925| BC| 1. 003| 0. 997| OC| 1. 080| 0. 926| IS| 1. 407| 0. 711| DP| 1. 657| 0. 603| FS| 1. 440| 0. 694| | | | Source: Output of data analysis using E-view To formally substantiate the lack of multicollinearity between the independent variables, colinearity diagnostics are observed and that the variance inflation factors (VIF) and tolerance values indicate no multicollinearity in the data. The values for tolerance and VIF are shown in Table 4. The tolerance value and the variance inflation factor (VIF) are two advanced measures of assessing multicollinearity between the independent valuables. The variance inflation factors and tolerance values are computed and found to be consistently smaller than ten and one respectively indicating absence of multicollinearity (Neter, Kutner, Nachtsheim, and Wasserman, 1996 and Casey and Anderson 1999). In addition, the tolerance values are consistently smaller than 1. 0 thus further substantiates the fact that there is no multicollinearity between independent variables (Tobachnick, and Fidell, 1996). The following regression result of the study is presented and discussed. Table 3: Regression Results Variable| Coefficient| T-Statistic| Sig. | | BS| 0. 355| 4. 123| 0. 000*| | BC| 0. 196| 2. 360| 0. 021**| | OC| 0. 144| 3. 673| 0. 008*| | IS| 0. 186| 4. 890| 0. 002*| | DP| 0. 520| 4. 873| 0. 000*| | FS| -0. 488| -4. 908| 0. 000*| | R-sq uared| 0. 43| Adjusted R-squared| 0. 40| F-statistic| 10. 46| F-Sig| 0. 000*| Durbin-Watson stat| 1. 99| | | Source: Output of data analysis using E-view The results show that the estimated model of the study is fit because all the explanatory variables are significant in determining the dependent variable. It can also be observed that the coefficients of all the explanatory variables are positive except for the control variable firm size signifying that none of the explanatory variables is inversely related with quality of earnings among Nigerian deposit money banks. The cumulative influence of all the explanatory variables put together is able to explain the dependent variable to 40% as indicated by the adjusted R2 and the remaining 60% is controlled by other factors. Again, the value of the F- statistic 10. 46 and significant at 1% confirms that the model is well fitted. This provides evidence of rejecting the null hypothesis that corporate governance mechanisms have no significant impact on the quality of earnings among Nigerian deposit money banks. The Durbin- Watson of 1. 99 reveals that serial correlation will not pose a problem to the statistical result of the study. The result in respect of board size and board composition shows that both of them positively and statistically significant at 1% and 5% respectively. This implies that the more their numbers the better the quality of earnings among Nigerian DMBs. For board size, the result reveals that Nigerian banks should have a minimum of 9 and maximum of 20 executive and non-executive directors for their reported earnings to be of quality. The finding supported that of Jensen (1993) and Lipton and Lorsch (1992) who suggest that small boards are less effective monitors and are easier for CEOs to influence and contradicts those of Yermack (1996), Eisenberg et al. (1998) and Loderer and Peyer (2002). The findings related to board composition or independence is line with (Hashim and Devi, 2008; Cornet et al. , 2009), and contrary to (Cornet et al. 2007; Roodposhti and Chashmi, 2010; Shah, Zafar and Durrani, 2009). Therefore, the policy implication is for Nigerian banks to have atleast 10% and not more than 50% independent directors out of the total maximum number of directors of 20. Moreover, for institutional share holders the result reveals that institutional shareholding is positively significant in influencing the quality of earnings among the Nigerian DMBs. This implies that banks with high number of institutional holders, their managers are easily restrained to manipulate accounting numbers. Looking at the level of association between institutional ownership and loan loss provision, a positive relation emerged and supported statistically. This significant association indicates that institutional investors are a major consideration in managers aggressive earnings management strategy. This result is not surprising as it shows institutional investors in Nigerian banks are effective in constraining managerial behaviour of earnings management. Consistent with the argument that institutional investors in Nigeria create incentives for managers of their portfolio firms to manage earnings aggressively, these institutional investors focus excessively on current earnings performance (Koh, 2003). Interestingly, this study extends the findings of Shehu (2011) who used a sample of 63 firm-year observations to document a positive relationship between institutional investors and financial reporting quality in the Nigerian banking industry. It also supports Cornett et al. (2008) who used 24,005 sample of U. S. industrial firms to document a postive and robust relationship between institutional investors and firm performance even when performance is stripped of the discretionery accruals. However, it contradicts that of Dabo and Adeyemi (2009) who fail to establish a statistically significant association between institutional shareholding and managers’ opportunistic behaviour using 20 most active quoted firms on the Nigerian Stock Exchange. Moreso, it conflicts with the finding of Al-Fayoum (2010) in their sample of Jordanian industrial firms. It can therefore be concluded that large institutional shareholding in the Nigerian manufacturing firms helps to allay the agency problem and leads to the protection of minority shareholders’ interest. In addition, the result in respect of ownership concentration and earnings quality reveals that ownership concentration is positively and strongly impacting on earnings quality at 1% level of significance among Nigerian deposit money banks. This is in line with our expectation, because given the fact that in most cases the institutions are the blockhoders of the company, therefore the results of the two variables would go in the same direction. The result contradicts the findings of Roodposhti and Chashmi (2010), Klai and Omri (2011) and supports the findings of Hashmi and Devi (2008). The implication of this finding is that the concentration of equity ownership in the hands of few individuals should be encouraged by the bank regulatory authorities. An equity ownership ceiling that should be raise. The result regarding dividend payment and earning management shows that managers will decline from managing earnings to enable them pay dividend to share holders. Statistically, dividend payment influences earning quality at 1% level of significance. This finding is in line with Bello (2013), Goergen,(2007) and Jensen (1986). Finally, the control variables banks’ size significantly and inversely affected the quality of earnings of DMBs in Nigeria. Size appears to affect earnings management inversely indicating that banks with larger assets have low earnings quality since they engage more in earnings management. This may be as result of the availability of much asset may motivate the managers to discretionary take selfish decisions to benefit their personal interest. 5. Conclusion and Recommendation Boards of directors, institutional and block holdings are responsible for monitoring, evaluating, and disciplining banks’ management. Perhaps one of the most important responsibilities of the board from a creditor’s perspective is oversight of earnings quality. Consistent with this idea, it is found that board size, board composition, ownership concentration, institutional shareholdings and dividend paid are all st rongly playing a prominent role in restraining management toward earning management.

Drawing on the Right Side of the Brain Essays - Drawing, Free Essays

Drawing on the Right Side of the Brain Essays - Drawing, Free Essays Drawing on the Right Side of the Brain SART*2090 Drawing 0852269 Drawing on the Right Side of the Brain Betty Edwards firstly identifies two sides of the brain and explains their functions. The left hemisphere controls the right side of the body and the right side of the brain controls the left side of the body. She explains that each side controls different aspects of human capabilities which are connected by the corpus callosum. In split-brain experiments, scientists have been able to distinguish which half of the brain primarily controls things such as language or spacial reasoning. Edwards makes that point that each side of the brain has a different consciousness showed in split-brain patients, and both process information differently. She also examines historical biases in favoring right-handedness and negative connotations held with being left-handed. Betty Edwards points out that when it comes to drawing, the process of learning can become a conflict. She then continues to identify methods for learning to draw which help stop the left side of the brain from dominating and causing problems like drawing something by the characteristics we know the object has rather than what it actually looks like. One method is paying closer attention to negative space. She uses the example of a chair that at a certain angle, will not make visual sense if we for example make all the legs the same length (as we know they are). Another method Betty Edwards recommends is having a basic unit measure in the object that can help make the rest of it proportionate. This can also help in improving composition and avoid starting a drawing that is too big or too small for the sheet of paper. The Natural Way to Draw Kimon Nicolaides starts by proposing that in order to understand something, we need to be aware of how our senses interact with it. He states that we see through our eyes, not with them. He also believes that it is with touch that we largely base our understanding of an object. He then continues to present three different drawing exercises: contour drawing, gesture drawing, and cross contours. The first is contour drawing, in which you draw the contours of a figure or object without looking at the paper. You start by placing your pencil on the paper, fixing your eyes on a point on the object, then slowly move both along the contours. Nicolaides explains that it is important for the eye and pencil to follow the same pace. He also notes that if the contour comes to an end, simply begin at a new starting point and continue. He emphasizes that the drawing does not have to be proportionate because it is not a finished piece, but rather, it is an experience. The second drawing exercise is gesture drawing. For a gesture drawing, the artist must draw quickly without lifting the pencil off the paper while a model is in an action pose for a minute or less. Kimon Nicolaides stresses that you should be drawing what the figure or object is doing rather than what is looks like. He suggests not to follow the edges of the subject. The gesture drawing should be a response to the gesture, and often looks like scribbling. The final exercise is called cross contours, where by contours are created not by the outside edge of the figure but by the line made by one side of the body to the other. Similar in the rules for contour drawing, one can fix their eyes on one point on the outside edge, then move the contour into the body and even back out. A cross contour can begin or end anywhere on the body. Nicolaides also mentions that it is helpful to draw in horizontal and vertical contours.

In the film V for Vendetta V says that violence can be used for the Essay

In the film V for Vendetta V says that violence can be used for the good in the context of social justice. Do you agree Why or why not Use specific historical examples to support your argument - Essay Example According to the movie, V has tried to depict a different side to the aspect of violence altogether, by stating that it can be used for the good of social justice and this paper helps to provide an insight into the very aspect of the film through V’s actions and how they may be used for the good of society. V tries to make use of strategy rather that muscle power in order to come up with the best possible way to tear down the tyrannical rule that the society was bound by. The only emotion that motivates him is revenge and he is often seen being overshadowed by the demarcation between revenge and justice. He has a common goal to unite the people of dystopian Britain to overthrow the dictatorship that had been established by the use of force however he soon realises that his own will to seek vengeance gets caught up in the bigger picture. (Huck) He says, â€Å"Anarchy wears two faces, both creator and destroyer. Thus destroyers topple empires; make a canvas of clean rubble where creators can then build a better world.† In the quest for attaining freedom, V decides that he must overthrow the tyranny that existed in the form of the oppression that the people were facing. He was justified in bombing and attacking the place because the people that he ended up killing, namely, Adam J, Susan, Delia and Surridge were people who had committed heinous crimes in the past and had led to the destruction that persisted in the scenario at the time. In this case thus, violence has been justified to be done for a moral cause because someone had to make an attempt to overthrow the people who had been causing social chaos. Violence sometimes does allow for social change to enter because it is the only efficient tool that can be used to stop other forms of violence from happening. As seen in the past however, leaders in modern day reality, like Martin Luther King Jr and Mahatma Gandhi, preached the use of non violence to resist

Supply Chain Class--Company analysis Case Study

Supply Chain Class--Company analysis - Case Study Example For the last 25 years, many companies have been negatively affected by the failure of their supply chain an aspect that has caused some of these companies to be acquired by their competitors at very low prices. Other failed companies have resulted to loss of a lot of investor’s funds thus resulting to their closure and court litigation as the investors seek for compensation. This paper will discuss common mistakes that are done by the company leading to supply chain disasters. One of the key mistakes that companies make is failure to do an extensive research on the suitability of the technology in improving their supply chains. For example, in its effort to improve production, Foxmeyer failed to research on how effective the new ERP system and the highly automated DC would be. Despite the efforts by the consultant to notify the company management that some areas of the new technology were not properly functioning, no step was taken. That ignorance has also greatly contributed to the supply chain disasters. Lack of undertaking feasibility studies that involves the evaluation of the benefits and costs associated with the supply chains is also a mistake that led to their failure. It is vital to note that before any company invests in new technology or a supply chain, it is essential to calculate the returns that are expected. For example, despite being an experienced manager, Robert Smith, the General Motors CEO failed to evaluate the performance of the robot technology leading to a supply chain problem that entailed loss of billion dollars in the investment (Supply Chain Digest, 2009). Lack of adequate market research is also another mistake that companies have made. Market research is crucial since it allows a company to initiate system that will provide products that will meet ready market. However, some companies such as Webvan, an online grocer invested in automated warehouses that reduced the company capital to a great extent yet the market demand for its products was very low. The same case applied to Cisco. On its part, Cisco, failed to initiate an inventory visibility study as well as adoption of poor market research leading to piles of products that were not demanded in the market. As a result, Cisco wrote down its inventory while the stock decreased by 50%. The company has yet to recover. During the planning stages of the management, most of the companies that faced the supply chain disasters did not skilled man power to undertake the task. As result, the managements were not aware of the repercussion of either adopting new system or even entering new markets. For instance, in its effort to move its production facility from Manila to low costs countries in 1994, Aris Isotoner resulted to reduction of costs by 50% while the Isotoner unit was sold to Totes. A mistake of poor estimation of the number of products and the delivery time is also a major cause of the supply chain disasters. For example, in 1999 Toys R Us.com compan y failed to realize that its system was not able to produce and deliver thousands of orders to its customers. This created a negative public image even though the company outsourced the supply to the Amazon.com. One of the companies that experienced a notable supply chain disaster was Apple Incorporation. Despite being a market leader in the production and selling of personal computers in 1990s, the company was faced with an issue that made it lose huge market share. In 1995,

US Foreign Policy during the Cold War Essay Example | Topics and Well Written Essays - 1500 words

US Foreign Policy during the Cold War - Essay Example The foreign policies followed during the Cold War have always been a subject of debate and many books have been written on them. One such book is the Ugly American, authored by William J. Lederer and Eugene Burdick and set in the 1950s. The book exposes the incompetence of those who shape foreign policy. The novel struck a chord in many Americans who felt that the US was not following the right kind of foreign policies and that the Soviet Union might just get an upper hand in the Cold War. Several foreign policies were formulated and launched during the Cold War. One such policy was the European Recovery Program, known as the Marshall Plan. This plan, the details of which were announced by George Marshall, was meant to restore prosperity and thereby help in the growth of the European Union. George Kennan was the chief architect of the "Containment" policy wherein he called for the "containment of Russian expansive tendencies". He also believed that the poor economy of a country put p ressure on that country to adopt communism. According to Kennan, politics and economics were directly related. Healthy economies would cause the death of communism.

Free College Admissions Essays: We Must All Be Part of the Solution! :: College Admissions Essays

We Must All Be Part of the Solution! Â   Sara had always been my best friend. It didn't matter that she was different. We had fun together. Then we started middle school and our whole world was flipped upside down. Â   Sara and I were thrown into a larger school with more people than we had ever seen at one school at the same time. After a few fear-filled weeks, I became comfortable in my new surroundings and was doing well. I wish I could say the same for Sara. I didn't understand why she was having so much trouble. All the work we did was no harder than the things we had done in grammar school. The only real difference was how the material was presented to us, and I didn't see how that could affect her learning. Â   I was worried about Sara; she was getting teased a lot and always appeared so sad. She told me that she had a problem that she was working on with her guidance counselor. Sara asked if I would go with her to the guidance counselor. I went to see Mrs. Vance with Sara. Mrs. Vance told us that Sara's evaluation revealed a language disorder. Â   Sara had an impairment in the ability to use words. Mrs. Vance said that when Sara read, she understood what the words meant. When speaking or writing, however, her words didn't always come out the way she meant them to. That explained why Sara got the answers wrong to questions she knew. Â   I found out that 1 out of every 10 children in America have language disorders. These problems may mildly, moderately, or severely impair the learning process. Students with these kinds of learning disabilities may exhibit a wide range of traits, including problems with reading comprehension, spoken language and writing. These problems are not the result of a lack of intelligence, rather they are resultant from an obstacle to communication of ideas. Â   After our meeting, I sat down to talk with Sara. At first she was embarrassed, but after a few minutes I got her to talk. We spoke about her disability, study solutions, and ways to help her do better in school. I offered to help her in any way that I could. We started studying together. I read aloud to her and wrote in large, dark print.

Alkaloids Case Study Essay

Alkaloids are the most diverse group of secondary metabolites and over 5000 compounds are known. They are most commonly encountered in the plant kingdom, but representatives have been isolated from most other orders of organisms ranging from fungi to mammals. For years, there has been interest in their pharmacological activities, and for a long time selected plant products (containing alkaloids) have been used as poisons for hunting, murder, euthanasia, a euphoriants, psychedelics, and stimulants (e.g. morphine and cocaine) or as medicines (e.g. ephedrine). Many of our modern drugs now contain the same compound or synthetic analogues, and the pharmacological and toxicological properties of these compounds are thus of immense interest and importance. Almost two centuries have elapsed since Serturner isolated the first organic base clearly recognised as such, a crystalline substance that he obtained from the opium poppy, Papaver somniferum, and called morphine. The name alkaloid is applied to the members of a class of natural products of basic nature, and is derived from the name â€Å"vegetable alkali† first applied to these substances. They all owe their basic nature to an amino nitrogen. It is more difficult than at first might be supposed to define the term alkaloid. The work was coined in 1818 by Meissner and implies a compound similar to an alkali, referring to the basic properties of this class of substance. Meyer’s Konversations- Lexikon of 1896 states, â€Å"Alkaloids (plant bases) occur characteristically in plants and are frequently distinguished by their remarkable physiological activity. They contain carbon, hydrogen and nitrogen and in most cases oxygen as well; in many cases they resemble the alkalisà ¢â‚¬ . Modern dictionary definitions only differ in minor details from those of the older nontechnical literature. A definition due to Pelletier in 1982 includes cyclic nitrogen- containing molecules which are true secondary metabolites (i.e. of limited occurrence and produced by living organisms. Simple acyclic derivatives of ammonia and simple amines are thus excluded, and the additional requirement, that the nitrogen atom must have a negative oxidation state, excludes nitro and nitroso compounds. As for other natural products, no uniform system of nomenclature has so far been devised for alkaloids. In most cases the name of the alkaloid has been derived from the plant name. Thus, papaverine was called after the Papaver species from which it was isolated. The names cocaine (from Erythoxylum coca) and atropine (from Atropa belladonna) are other examples. Frequently several alkaloids are obtained from the same plant, and the names devised for them will depend on the inspiration of the natural products chemist who isolated them. Alkaloids as a class have interested organic chemists partly on account of their physiological action on the animal organism, and partly on account of the complex structural and synthetical puzzles that they pose. The chemistry of the alkaloids is but a branch of the wide chemistry of nitrogenous heterocyclic compounds, but the methods by which the structures of individual bases are deduced from degradative evidence and confirmed by total synthesis are typical of the methods applied for these purposes whole field the chemistry of natural products are illustrative of the general fundamental principles of organic chemistry. Structural types Alkaloids are usually classified according to the amino acids (or their derivatives) from which they arise. Thus, the most important classes are derived from the following Amino acids: * Ornithine and Lysine * Aromatic amino acid phenylalanine and tyrosine * Tryptophan and a moiety of mevalonoid origin Also a number of compounds are also derived from: * Anthranilic acid * Nicotinic acid This classification however, fails to include the alkaloids derived from a polyketide or a terpenoid, with the incorporation of a nitrogen atom, ultimately from ammonia. Examples are Conine and batrachotoxin which are often known as ‘pseudoalkaloids’. Other compounds covered by Pelletier’s definition also exist. Examples are the antibiotic cycloserine, mitomycin C, mushroom toxin muscimol and the purine alkaloids such as caffeine. There is another classification of the alkaloids according to the location of the nitrogen atom in certain structural features: 1. Heterocyclic alkaloids 2. Alkaloids with exocyclic nitrogen and aliphatic amines 3. Putrescine, spermidine and spermine alkaloids 4. Peptide alkaloids 5. Terpene and steroidal alkaloids Classifying the whole range of alkaloids according to this system result in them being dividing them up unequally as the great majority fall into the heterocyclis group and the smallest group is the putrescine, spermidine and spermine alkaloids. Occurrence Of the more than 5000 alkaloids known, most occur in flowering plants, although the distribution is far from uniform. Thus, although 40% of all plant families have at least one species containing alkaloids, when the 10000 plant genera are considered, only about 9% of these have been shown to produce alkaloids. Increasing numbers of alkaloids have been isolated from animals, insects, and microorganisms. Although mammalian alkaloids are rare, two examples are (-)-castoramine (a) from the Canadian beaver; and muscopyridine (b) from the musk deer. Both compound have a role in communication as territorial marker substances. Insects produce a variety of structural types which include the 2,6- dialkylpiperidines of the fire ant (c), the tricyclic N-oxides of the ladybird (d) and the quinazolines of the European milliped (e). Tese compounds are used for defence. During the last three decades Marine organisms have been investigated. Amongst the alkaloids are the exceedingly complex Saxitoxin (f) produced by a red coloured dinoflagellate. The ‘red tides’ contain mass aggregations of such organisms, and food poisoning when he toxic alkaloids are passed along the food chain to man. The Japanese puffer fish is highly valued as a culinary delicacy, but it is hazardous because its liver and ovaries contain the highly toxic tetrodotoxin. Fungi also produce alkaloids, and these too, present potential hazards as food contaminants. The ergot alkaloids, for example, Chanoclavine (g) produced by the fungus Claviceps purpurea, were a frequent soure of misery and death during the Middle Ages through the contamination of rye bread. Some of these were neurotoxic whilst others caused vasocontriction. During the last 40 years most of these non plant alkaloids have been isolated and their structures elucidated. The introduction of modern chromatographic and spectroscopic techniques facilitated this. Isolation Work on the constitution of alkaloids is often prefaced by the problem of their isolation from plant material or from residues after commercially important constituents have been removed. The isolation of each alkaloid is an individual problem there are a variety of procedures which may be entitled to generic rank. There are few plants which produce a single alkaloid so the main problem is the separation of mixtures. Many alkaloids are basic and occur as salts of 2-hydroxybutane-1, 4-dioic acid (malic acid), or of 1,3,4,5-tetrahydroxycyclohexane (quinic acid). They can thus be extracted into acid solution using aqueous hydrochloric, tartaric, or citric acids. Neutral alkaloids such as colchicines or piperine, which are in fact amides, remain in the organic phase, whilst most other alkaloids are isolated after basification and extraction into ethyl acetate. Steam distillation can be used also be used with low molecular weight alkaloids; but almost invariably sudsequent purification of the crude alkaloid mixtures is effected by chromatography using silica or alumina, and then recrystallisation of the partially purified compounds from solvent systems like aqueous ethanol, methanol/chloroform, or methanol/acetone. Structure elucidation Classical era: The classical era for structural studies on alkaloids was the 19th Century, though this could be extended to the 1930’s (advent of x-ray crystallography) or even to the 1970’s (advent of high resolution NMR facilities and modern methods of mass spectroscopy. Two case histories will be discussed, those of morphine and atropine. Opium has been used by man for thousands of years, so it is not suprising that the major active ingedient, morphine, was the first alkaloid to be isolated in pure state (by Serturner in 1805). It was not until 1923 that Sir Robert Robinson established the stucture of morphine. Chemical evidence for the structure is as follows: Standard showed that the nitrogen atom was fully substituted, and that the phenolic hydroxyl was present as it gave a positive FeCl3 test. Two hydoxyls were present as a diacetate and dibenzoate could be formed. Both compounds contained one olefinic double bond as codeine absorbed one. It was found that a reduced phenanthrene with a two-carbon bridge containing a tertiary nitrogen atom (with methyl as on substituent) was present, and the structure of morphine and codeine were first proposed in 1923 and 1925 respectively by Robinson and Gulland. Synthesis of morphine was carried out in 1956 by Gates. Atropine on the other hand, is not generally a natural product but arises through racemisation of (-)-hyoscyamine (see (a) below) and purification, and is thus ( )-hyoscyamine. (-)-hyoscyamine is the most common tropane alkaloid. In 1833 atropine was isolated from Atropa belladonna. Hydrolysis with warm barium hydroxide solution produced racemic tropic acid and tropine. Degradative studies and then through synthesis found the structure of tropic acid: Exhaustive degradation of tropine, carried out by Willstlter between 1985 and 1901, provided evidence for the bicyclic structure of tropine. The most widely used process in degradative studies of alaloids is exhaustive methylation, known as Hofmann degradeation. . This involves the pyrolysis of a quaternary ammonium hydroxide to form and olefin an a tertiary base: To ensure the complete removal of the nitrogen atom when it constitutes part of a ring, two degrdations must be carried out. When exhaustive methylation of of cyclic compounds might be expected to give 1,4-dienes, the alkaline conditions of the reaction may result in the migration of one of the double bonds to give a 1,3-diene. For example, the exhaustive methylation of N-methylpiperidine gives 1,3-pentadiene (piperylene) and not 1,4-pentadiene. The diene is then easily hydrogenated to form a saturated hydrocarbon. If Hofmann degradation fails to bring about ring fission of cyclic amines, Emde degradation, invoving catalytic reduction of a quaternary salt by sodium amalgam or sodium in liquid ammonia, may be applied. For example, attempted Hofmann degradation of N-methyltetrahydroquinoline methoxide results in regeneration of the parent base, while Emde reduction with sodium amalgam affords the ring-opened amine. Alkaloids containing diphenyl ether linkages, for example, bis-benzylisoquinoline, are cleaved into two fragments by reduction with sodium in liquid ammonia. For example, the structure of the alkaloid dauricine was established by reductive cleavage of O-methyl-dauricine. Modern era: During the last 30 years, structure elucidation has benn facilitated by the use of mass spectroscopy, and 1H and 13C NMR techniques. It is now possible to determine the structure in days with a few milligrams or less of pure compound. It took 118 years to determine the structure of morphine. The mass spectrum data for morphine is highly informative and is shown below and would have helped enormously years ago. Once the structure of an alkaloid is known, partial or total synthesis can be attempted. Biosynthesis It is possible to determine the amino acid from which an alkaloid is derived just by looking at the structure. Before availability of radio-isotopes 14C and tritium, and more recently the stable isotopes 13C and 15N it was only possible to speculate about the likely biosynthetic pathways. This was sometimes successful as for example, the suggested pathway to the isoquinoline alkaloid is as follows: It is possible to divide the biosynthesis of the alkaloids into two categories according to whether products are obtained from the amino acids ornithine and lysine, or the aromatic amino acids phenylalanine, tyrosine, tryptophan. Alkaloids derived from ornithine and lysine: Pyrrolidine alkaloids – hygrine, cocaine, tropinone, hyoscyamine etc Piperidine alkaoids – piperine, (-)-lobeline etc Quinolizidine alkaloids – sparteine, cytosine, (-)-lupinine etc Pyridine alkaloids – nicotine, anabasine, anatabine etc Alkaloids derived from phenylalanine and tyrosine: Monocyclic compounds – hordenine etc Tetrahydroisoquinoline alkaloids – morphine, codeine, thebaine, noscapine (narcotine), papaverine, heroin etc Alkaloids derived from tryptophan: Simple indole derivatives: psilocybin, dimethyltryptamine, physostigmine etc Complex indole derivatives : harmaline, echinulin, ergonovine etc No class of naturally occurring organic substances shows such an enormous range of structures as the alkaloids with over 5000 known. It would be impossible to discuss each one of these within the time limit. Therefore, this project is concerned with the following alkaloids: Morphine ( including codeine and heroin), Cocaine, Nicotine and Caffeine (including theophylline). These alkaloids are present in enormous quantities in the world and seem appropriate to be discussed due to the current interest in their effects particularly when used illegally. They are some of the most well known alkaloids. Morphine (Codeine and Heroin) When the unripe seed capsules of the opium poppy, Papaver somniferum, is cut or pricked, a viscous liquid is exuded. After the exudates dries and darkens with exposure to air, a hard but still partly sticky mass is obtained. This is opium, which has been used for many centuries by some for medicinal purposes. Opium is important as a painkilling drug in its own right, but is also the source of other analgesic drugs such as morphine and heroin. Mankind had discovered the use of opium by the time of the earliest written records. In fact, the first recorded use of opium as a painkiller was around 6000 years ago by the Sumerians, and the Babylonian and Egyptian writings contain many references to the value of opium preparations for the relief of pain. Thomas Sydenham, the 17th Century pioneer of English medicine wrote, â€Å"Among the remedies which it has pleased Almighty God to give to man to relieve its sufferings, none is so universal and so efficacious as opium†. Nowadays, alt hough opium is no longer regareded as a universal analgesic, it is still a very important source of morphine. The pharmacologically active constituents of opium have been employed in medicine for many thousand of years. During the 19th century these constituents were isolated as pure chemical entities. Morphine is a naturally occurring substance and is the major constituent of opium, constituting about 10% (sometimes up to 20%) of its weight. Morphine was first isolated in 1805 by Friedrich Sertrner. However, its basic structure was not correctly determined until 120 years later. Morphine provides symptomatic relief of moderately severe to severe pain. Morphine acts as an anesthetic without decreasing consciousness, and it is one of the most powerful analgesics known. However, it also suppresses the repiratory system, and high doses can cause death by respiratory failure. Its analgesic properties are related to the ability of the molecule to fit into and block a specific sit on a nerve cell. This eliminates the action of the pain receptor Cocaine Cocaine is obtained from coca leaves (Erythryloxum coca) and has the formula C17H23O4N and a molecular weight of 303.39. The anaesthetic properties of cocaine were first recognised by Koller in 1882, but it has now been largely replaced in the clinic by synthetic analogues due to its widespread abuse as a narcotic. It is, however, still much used as a stimulant by Andean Indians. After chewing the leaves, they are easily fatigued and can go on for long periods without food. Cocaine is shipped and sold in the form of the water-soluble hydrochloride salt, which may be ingested through the nasal passages by ‘snorting’ orally and intravenously. There are severe physical and psychological side effects of the drug, such as brain seizures, respiratory collapse, heart attack, paranoia, and depression. Cocaine may be hydrolysed by acids or alkalis to methyl alcohol, benzoic acid, and (-)-ecgonine, C9H15O3 N; only partial hydrolysis, to benzoyl- (-)-ecgonine, C16 H19O4 N, and methyl alcohol when the alkaloid is boiled with water. Cocaine can be regarded as being derived from ornithine. Willsttter worked on a tortuous synthesis (of about 20 steps) of tropinone between 1900 and 1903, but in 1917 Robinson reported his ‘one-pot’ synthesis and also provided what was probably the first example of a formal retrosynthetic analysis. He stated: ‘By imaginary hydrolysis at the points indicated by the dotted lines, the substance may be resolved into succinaldehyde, methylamine and acetone’. The yield of this reaction was poor but Schpf and Lehmann reported optimised conditions (buffered solution at pH5 and 25C) which allowed 85% yield. A variety of mechanisms are possible and the one shown below envisages a reaction between the enol form of acetone dicarboxylate and the condensation product from succinaldehyde and methylamine. Willsttter made his own contributions based on this type of chemistry, and completed simple synthesis of tropinone in 1921 and a synthesis of cocaine in 1923. The synthesis of cocaine is as follows: A Robinson- type reaction yielded the expected azabicyclo structure but with a fortuitous axial stereochemistry for the carbomethoxyl group. Racemic cocaine was formed after separation of the diastereoisomeric products on the reduction of the ketone and benzoylation of the mixture of alcohols. An important aspect of Robinson’s route is that it represented the first biomimetic synthesis of an alkaloid. He provided inspiration for others to consider possible biosynthetic pathways, before planning their synthetic routes to alkaloids. Nicotine Nicotine, present in dried tobacco leaves of the plant nicotiana tabacum in 2-8% concentration, is the active ingredient in cigarettes and other tobacco products. The reason tobacco is used by so many people is because it contains this powerful drug nicotine. When tobacco is smoked, nicotine is absorbed by the lungs and quickly moves into the bloodstream, where it is circulated throughout the brain. All of this happens very rapidly. In fact, nicotine reaches the brain within 8 seconds after someone inhales tobacco smoke. Nicotine can also enter the blood stream through the mucous membranes that line the mouth or nose, or even through the skin. Smoking and chewing tobacco have been connected to heart and lung disease and cancer, mainly a result of the presence of carcinogens, carbon monoxide and other toxins. Nicotine affects the entire body. Nicotine acts directly on the heart to change heart rate and blood pressure. It also acts on the nerves that control respiration to change breathing patterns. In high concentration, nicotine is deadly. In fact, one drop of purified nicotine on the tongue will kill a person. It’s so lethal that it has been used as a pesticide for centuries. So why do people smoke? The mode of action of nicotine is complex. Ingestion of the molecule may stimulate or calm the user and it may affect his or her mood, appetite, and cognition. There appears to be little doubt that nicotine is an addictive drug, and the debate about how to regulate its availability is ongoing. Nicotine is part of the pyridine alkaloids and is the chief alkaloid of tobacco. It can therefore be classed as a tobacco alkaloid. Nicotine has the empirical formula C10 H14 N2, a molecular weight of 162.26 and was first observed by Vanquelin in 1809 and isolated 19 years later by Posselt and Reimann. Its structure is as follows: It is a colourless liquid with a boiling point of 246.1-246.2C and is miscible in all proportions with water below 60 and above 210. It is less soluble between these temperatures. When oxidised with chromic acid it yields an amino acid, C6H5O2N, which may be decarboxylated to pyridine–carboxylic acid. Nicotine is therefore a 3-substituted pyridine and that the substituent is a saturated group containing five carbon atoms and one nitrogen atom. The alkaloid forms a crystalline addition compound with zinc chloride, and when this is heated with lime pyridine, pyrrole and methylamine are obtained, suggesting that the structure be as above (1). This was supported by the degradation of the alkaloid to N-methylproline (1) to (5) (below), the oxidation of dibromocotinine (6) to nicotinc acid, malonic acid and methylamine (6) to (7). Also, by the reductive hydrolysis of bromocotinine to methylamine and the dihydroxy-acid (8). The structure of nicotine was finally confirmed by synthesis. Three syntheses of nicotine have been recorded. The first was based on the discovery that N-acetylpyrrole is transformed by heat to C-acetylpyrrole shown to be ?-acetylpyrrole. Pictet and Crepieux applied this reaction to N- pyridylpyrrole (3) (below) obtained by the reaction of -aminopyridine1 with mucic acid (2). The compound 31- pyridyl-2-pyrrole (4) was formed. An attempt to methylate the pyrrole nitrogen by heating the potassium derivative with yielded (5) (methiodide of 31- pyridyl-N-methyl-2-pyrrole). Distillation of this with calcium oxide gave nicotyrine (6). Selective hydrogenation of the pyrrole nucleus with a palladium-carbon catalyst converted nicotyrine (6) to nicotine with about a 25% yield. PICTET’S SYNTHESIS: Pictet’s classical synthesis involves two steps at high temperatures, one of which is a rearrangement. It cannot therefore be regarded as unambiguous. However, a second synthesis by Spth and Bretschneider involves no rearrangement at high temperature and are thus structurally specific. SPATH’S SYNTHESIS: (1) (Above) was converted into (2) via electrolytic reduction, which on treatment with potassium and methyl sulphate gave (3) (N-methylpyrrolidone). Ethyl nicotinate was then condensed with (3) in the presence of sodium ethanoate and the resulting -pyridyl-1- -(N1 – methyl-?1- pyrrolidonyl) – ketone (4) was hydrolysed with fuming hydrochloric acid at 130. The derived amino ketone (5) was reduced with zinc and sodium hydroxide to the corresponding alcohol (6), which was converted to nicotine on treatment with hydrogen iodide and potassium hydroxide. A third synthesis of nicotine by Craig was also carried out: CRAIG’S SYNTHESIS: Nicotinonitrile (1) (above) was reacted with ?- ethoxypropylmagnesium bromide. The product of the reaction (2) (3-pyridyl-?-ethoxypropylketone) formed an oxime (3), which was reduced to an amino derivative (4). On heating to 150-155 with 48% hydrobromic acid this was converted to nornicotine (5), which in turn was methylated to nicotine. The pyridine ring in nicotine is derived from nicotine acid, which itself is derived from aspartic acid and glyceraldehyde-3- phosphate: The remaining steps en route to nicotine are shown below: Caffeine The purine system occurs widely in nature. Two purines, adenine and guanine, are constituents of the nucleic acids; adenine is a component of coenzymes I and II, of flavin adenine dinucleotide and of adenosine with 3 distinguished compounds: caffeine, theophylline and theobromine. They are physiologically active constituents of coffee, cocoa, and tea. The compounds have different biochemical effects, and are present in different ratios in different plant sources. These compounds are very similar and differ only by the presence of methyl groups in two positions of chemical structure as shown below: They are easily oxidised to uric acid and other methyluric acids, which are also similar in chemical stucture. CAFFEINE – 1,3,7- trimethylxanthine SOURCES – Coffee, tea, cola nuts, mate, guarana EFFECTS – Stimulant of the central nervous system, cardiac muscle and respiratory system, diuretic, delays fatigue. THEOPHYLLINE – 1,3 – dimethylxanthine SOURCES – Tea EFFECTS – Cardiac stimulant, smooth muscle relaxant, diuretic, vasodilator. THEOBROMINE – 3,7- dimethylxanthine SOURCES – Principle alkaloid of the cocoa bean (1.5-3%), cola nuts and tea. EFFECTS – Diuretic, smooth muscle relaxant, cardiac stimulant, vasodilator. Theophylline has a stronger effect on heart and breathing than caffeine. For this reason it is the drug of choice in home remedies for treating asthma, bronchitis and emphysema. Theophylline found in medicine is made from extracts from coffee or tea. Theobromine is weaker than caffeine and theophylline – has one tenth of the stimulating effect. When isolated in pure form, caffeine is a white crystalline powder that tastes very bitter. Recreationally, it is used to provide a ‘boost in energy’ or a feeling of heightened alterness. It’s often used to stay awake longer. Caffeine inhibits the action of an enzyme, phosphodiesterase, whose job it is to inactive a molecule called cyclic adenosine monophosphate (AMP). Cyclic -AMP is involved in the formation of glucose in the bloodstream. Deactivation of phosphodiesterase by caffeine frees cyclic – AMP to do its job, more glucose appears, and we feel more energetic. Caffeine is an addictive drug. Among its many actions it operates using the same mechanisms that amphetamines, cocaine and heroin use to stimulate the brain. Caffeine’s effects are milder but it is manipulating the same channels and that it is one of the things that give caffeine its addictive qualities. It is one of the most widely used drugs. More than 90% of the population Britain consume it everyday and its long-term effects are of current interest. Purines are usually synthesised by Traube’s method in which a 4, 5 – diaminopyrimidine is treated with formic acid or, better, sodium dithioformate.4, 5- diaminopyrimidines are themselves obtained from 4- aminopyrimidines by nitrosation followed by reduction or via diazonium coupling of activated methylene compounds followed by cyclisation and reduction. Two examples are as follows: Uric acid (an 8-Hydroxypurine) are made using ethyl chloroformate in place of formic acid: Uric acid is then the starting material for other purines: Summary The term alkaloid refers to any Nitrogen containing compound extracted from plants, although the word is used loosely and some compounds of non-plant origin are also commonly known as alkaloids. The name is derived from their characteristic basic properties (alkali-like), which are induced by the lone-pair of electrons on nitrogen. The basic nature of the alkaloids, in conjunction with their particular three-dimensional architecture, gives rise to often-potent physiological activities, e.g. the narcotics morphine and heroin. The laboratory synthesis of an alkaloid can be a challenging problem. The goal nowadays is not only to synthesise the natural product, but also to do so from simple molecules by a short elegant pathway. Such syntheses have practical importance because many alkaloids are desirable drugs. Large amounts of these alkaloids are often difficult to obtain from natural sources. A simple synthesis can provide an alternative supply of such a drug. The 19th century was the heyday for structural studies on the alkaloids and the 20th century was notable for the large number of elegant syntheses that have been accomplished. Virtually all of the major alkaloids have now been synthesised.