Mizen & Yalcin (2006) conducted a study to find out the relationship between a company’s financial composition and its monetary rules and regulations. In particular, they suspected that these factors had a close relationship with the kind of responses employees have in their workplace. To achieve this, the authors sought data from manufacturing firms within the UK. Notably, this is because most small companies held short-term debts from banks. However, these numbers increased tremendously due to improved loan conditions (Mizen & Yalcin, 2006). In other words, the researchers find ways in which institutional characteristics relate to monetary policy. Institutional characteristics included age, risk, debts, and size. The policy was comprised that mainly interested the authors was that which was between tight and loose ends. The research was also conducted to show how institutional operational activities were affected by the difference in financial compositions. Operational activities that mainly interested the researchers include employment and inventory growth.
The authors found out that operational activities affected the institutional monetary policy. Particularly, growth rates and employment affected the loosening or tightening of this policy (Mizen & Yalcin, 2006). The primary focus was on inventory investment and employment growth as indicators of operational activity. Notably, they used these as the indicators of the study since it was difficult to measure the complications of an institution’s assessment of the plans. In addition, the authors’ results indicate that the violations of the Modigliani-Miller theory were substantial. The substantiality was due to the proportionality of the monetary policy to corporate finance rates. Companies faced tightened rates since the theory was considerable. In essence, this means that fundamental variables are affected by external corporate premiums due to their sizes. It is important to note that the effect of the monetary policy is asymmetric and noticeable (Sakawa & Watanabel, 2020). Such implications affect risky, small, and indebted institutions more than others. Monetary policies mainly affect companies that conduct their activities using credits in their procurement processes.
Further studies need to focus on the behavior trend of other nations. This study was exclusively conducted in the UK. Do these trends also apply in other countries? This is one of the many questions that can guide future researchers. For instance, America might have a comparable experience to this paper. However, these researchers need to be cautious about other economies with different financial structures, like Japan (Sakawa & Watanabel, 2020). The financial systems deal differently with asymmetric information problems, and institutions in more market-oriented nations like US and UK may be more likely to show a tremendous potential of changing the financial composition. In developed nations, financial markets are more accessible due to the wide range of institutional liabilities.
There are several strengths that this article portrays. One is the versatile nature of the information provided by the authors. This information can be used and adapted by many developed countries like America. Mainly, it provided general information about the monetary policy that any financial system can adopt. It’s also versatile because any reader relates to it and gets valuable information. The authors have also used reliable sources that are accessible from the library. Therefore, an individual can verify and even extend the authors’ information. Again, they are not biased in their publication sources.
The article’s weak point is in the preliminary conclusion. The authors mainly focus on what future researchers should do to improve other financial systems forgetting to give a well and detailed conclusion. The readers are left with hanging ideas since they are not returned to the introduction. In other words, they cannot connect the thesis statement and the anecdote that illustrates the conclusion at the end of the work.
References
Mizen, P., & Yalcin, C. (2006). Monetary policy, corporate financial composition and real activity. CESifo Economic Studies, 52(1), 177-213.
Sakawa, H., & Watanabel, N. (2020). Institutional ownership and firm performance under stakeholder-oriented corporate governance. Sustainability, 12(3), 1021.