Managerial Finance: The Interplay of Agency and Structure in UK Crisis

This report provides an in-depth analysis of the UK financial crisis, focusing on the interplay of agency and structure. It begins by outlining the impact of the crisis, including the decline in asset values and its effects on investment and government finances. The report then delves into the root causes of the crisis, such as the UK's involvement with US banks in the 1970s, issues with capital changes, and the inability of UK banks to provide sufficient credit. Key factors contributing to the crisis, including excessive leverage, tax and subsidy policies, conflicts of interest, and the 'too big to fail' phenomenon, are examined in detail. The report further explores the restructuring efforts undertaken after the recession, highlighting the use of cross-country data and market-based financial systems. The role of various agencies in supporting the UK government during the crisis is also discussed, including credit rating agencies and insurance agencies like AIG. The report concludes by analyzing the financial planning strategies employed during the crisis, such as the provision of loans and adjustments to interest rates.

MANAGERIAL FINANCE

THE INTERPLAY OF AGENCY AND STRUCTURE IN THE UK
FINANCIAL CRISIS
Financial crises of UK put a bad and down impact on the country. In financial crises all the
value of the assets goes down, so nobody invest money in market. By the effect of this UK financial
status goes down rapidly. Financial crises affected the country many times like in 2008 and then
2015. On 2015 UK government launch and collect fund for the new houses by the crises nobody
able to purchase all these things (Gomulya and Boeker, 2015). The funding from shareholder goes
down and these things affect the market. After all the government of UK raise the prices of each and
every product so it is hard for poor people to survive.
Reason behind financial crises in UK
UK wants to spread their business so they join US banks in 1970. In this they started the
business of selling models to third parties on their own risk. After some time the capital changes
make some issues, by this us government stop investing in UK government. This is the main reason
of financial crises (Ma, Anderson and Marshall, 2016). In the other hand the reason behind the
crises is UK bank is not able to provide too much money to their creditor. In financial market the
prices of houses and speculation goes high.
Causes of the financial crisis
Leverage- Excess leverage is one of the major reason behind the financial crisis. It means if
leverage of the organization goes beyond the balance sheet than it raise the probability of financial
crisis. Company does not have any transpiring account for leverages so anybody get information
from this. The only solution to reduce the rescission is get higher capital, improve accounting and
transparency.
Tax and subsides- Tax policy should be relevant for all the people. Government need to be
adding some taxes like financial transaction tax, speculation tax etc. Along with this, tax subsidies
encourages the long term financing which affects the financial position of the organization and
creates the situation of financial crisis. Encourage the level of debts by this the level of money
increase (Lusztig and Schwab, 2014).
Conflicts of interest- In this some agencies try to know about customers desires by his they
can change the rate of interest. In case, if clients have some desire related to banking system so they
can change it.
Too big to fail- Too big and complex organization cannot manage all operations in effective
manner. So, it leads negative impact on overall financial and investment position of the
organization. So, it is also considered as major reason behind the financial crisis of an organization.
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(Herbane, 2013).
Structure of financial crises
After the recession UK create a restructure with the help of agencies. In this they using cross
county data or the structure of finance. After using this, planners find that the corporate sector
moving rapidly fast compare to other sectors. On this time emerging market explain each and every
one why other market takes more time for recovery. So other country helps them by financial or
motivational (Alexakis and Vasila, 2013). For the better structure promoter follow market based
financial system. So by this the manufacturing companies help them in technology. For the better
structure improve the infrastructure, increase the expenditure on active labour and reduce the tax
burden from the low income persons.
Interplay of agencies in UK financial crises
After the crises so many agencies support the UK government for the development and re
structure all financial status. Agency relationship means different organizations hire third party
agency to perform some specific task and support them to manage financial crisis. It is called
agency relationship. After facing financial crisis UK organizations develop relations with Credit
rating agencies and AIG insurance agencies. These agencies provide investment from the
international market and provide to suffer country (Webb, Hawkey and Tingey, 2015). They also
provide customers, employees and design a portfolio for the company by this they can survive in
the crises time. Similarly, AIG insurance agencies provide insurance related to life fire etc. and also
invite other investor for the purchase of investment. By this they increase the profit and this profit
used by crises country.
After all these agencies UK is working with Africa world health centre. So during the crises
international agencies like World Bank, UN's central emergency respond fund provides flights
facilities to the person of UK. The financial crises agencies make a relevant planning in this they
follow many factors like:
An agency takes help from the bank to create extra money for the creditors by making loans.
After making the money approximately 31% money went to house hold property. By applying this,
a wage price goes down so the level of recession goes down (Ashby, Peters and Devlin, 2014). After
this, 20% of money gives to commercial sectors and 32% money use by financial sectors and the
rest of money used by bank for the credit card, personal loans. The chairman of UK’s financial
services makes a plan in this plan they low the prices of landing. By applying this, person who
borrowed so many properties for speculation during the rising time had to sell all properties.
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REFERENCES
Alexakis, P. and Vasila, A., 2013. On the integration of European capital markets. Managerial
Finance. 39(9). pp.825-836.
Ashby, S., Peters, L.D. and Devlin, J., 2014. When an irresistible force meets an immovable object:
The interplay of agency and structure in the UK financial crisis. Journal of Business Research.
67(1). pp.2671-2683.
Gomulya, D. and Boeker, W., 2015. Reassessing board member allegiance: CEO replacement
following financial misconduct. Strategic Management Journal. 15(3). pp.156-159.
Herbane, B., 2013. Exploring Crisis Management in UK Small‐and Medium‐Sized Enterprises.
Journal of Contingencies and Crisis Management. 21(2). pp.82-95.
Lusztig, P. and Schwab, B., 2014. Managerial finance in a Canadian setting. Butterworth-
Heinemann.
Ma, R., Anderson, H. and Marshall, B., 2016. International stock market liquidity: a review.
Managerial Finance. 42(2).
Webb, J., Hawkey, D. and Tingey, M., 2015. Governing cities for sustainable energy: The UK case.
Cities.
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