The Business Review, Cambridge
Vol. 13 * Number 1 * Summer. 2009
All submissions are subject to a double blind review process
ISSN 1553 - 5827 * The Library of Congress, Washington, DC
INFORMATION FOR CONTRIBUTORS
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Changing the Business Travel Market: The Innovation of the Very Light Jet
Dr. Dennis F. X. Mathaisel, Professor of Management Science, Babson College, Babson Park, MA
Dr. Clare L. Comm, Professor of Marketing, University of Massachusetts, Lowell, MA
Very Light Jets are new, advanced technology, small business jets that are the size of a sport utility vehicle, carrying 4-6 passengers, and costing less than $2 million. This technology has created a new product/service opportunity for the business traveler: a personal, direct, on-demand, air taxi service with a ticket price comparable to first class on a scheduled airline. The market is targeted toward the small business entrepreneur and mid-level executive. This paper will present: an approach on how to change the behavior of the business traveler to use this service; a method for marketing and promoting the service; and an innovative technique for optimally scheduling the service to minimize costs. During the 1990s, with the success of fractional ownership programs, private air travel became much more accessible by allowing people or businesses to buy partial aircraft ownership. The number of companies operating business aircraft in the U.S. nearly doubled, and fractional jet ownership grew 62% (Loyalka 2005). Specialized companies such as NetJets, Flight Options, and Marquis Jet further brought private air travel to larger audiences by selling blocks of flight time on private jets. However, travelling in private aircraft still remains far out of the economic reach for the vast majority of business people. Thanks to emerging aircraft technologies, a new era of private air travel is on the horizon. A new category of aircraft is being introduced, called Very Light Jets (VLJs), which would bring affordable private air travel to the business market (Figure 1). A very light jet (VLJ) is a small aircraft that is about the size of a SUV automobile, weighs less than 10,000 pounds (Anselmo 2006), seats four to eight passengers, uses small turbo-fan engines, is certified for single-pilot operation, and cruises at speeds of about 400 mph with a range of 1000 miles (Bremner 2006). The advent of this new type of aircraft lies in its technological innovations: composite materials, light engines, and advanced avionics (Bremner 2006).
New Conflicts of Interest in the Modern Corporation
Dr. Donald Margotta, Northeastern University, Boston, MA
This paper discusses new conflicts of interest in the modern corporation brought about by changes in corporate ownership by large institutional shareholders. While most discussions of conflicts of interest in the corporation focus on conflicts between managers and shareholders, this paper discusses conflicts between large diversified shareholders and the corporation. Much of the corporate governance literature focuses on conflicts of interest in the corporation and the usual conflict discussed is that between managers and shareholders. While such conflicts are well documented this paper suggests that not all conflicts within the widely held corporation can be categorized that way. In particular, this paper discusses potential conflicts of interest between large institutional shareholders and the corporation itself. It also provides a theory to explain those conflicts, provides examples of such conflicts, and discusses possible implications. Understanding these conflicts leads to suggestions on how they may be minimized. This is a timely issue as activist institutional investors in the U.S. have become increasingly vocal in calling for governance changes in their portfolio companies, and as institutional activism spreads to other countries as well. (1)
The Role of Income, Price, Substitute Price, and the Exchange Rate in Japanese Tourist Arrivals to Hawaii from 1980 to 1997
Dr. Larson Ng, University of Hawaii at Manoa, Honolulu, Hawaii
Hawaii has historically been known as one of the top tourist destinations in the world. However, beginning in 1998, Japanese tourist arrivals to Hawaii began a negative trend that has persisted into 2009 and whose soon-to-be-realized long-term effects will only add to the mounting economic troubles facing Hawaii given the global financial crises in 2008. In an effort to provide a macroeconomic perspective to assist with the state’s recovery attempts, this study researched the role of income, price, substitute price, and the exchange rate in Japanese tourist arrivals to Hawaii during its predominant period of growth from 1980 to 1997. Utilizing the Japanese Real GDP (i.e., income), the Honolulu CPI (i.e., price), and the Australian CPI (i.e., substitute price) as research variable proxies, along with the Japan-US exchange rate, a macroeconomic factor contribution analysis was conducted to discover the most positive, most negative, and least influential macroeconomic demand determinant during this period. Based on the study findings, Japanese Real GDP (i.e., income) was the most positive, the Japan-US exchange rate was the most negative, and the Australian CPI (i.e., substitute price) was the least influential macroeconomic demand determinant, respectively, that contributed to Japanese tourist arrivals to Hawaii from 1980 to 1997. According to Hawaii’s State Department of Business, Economic Development and Tourism, tourism is the one commerce activity that greatly contributes to Hawaii’s economic base (Hawaii Department of Business, n.d.a). One of the most important sources of travelers to Hawaii is Japan. From 1980 to 1997, Japanese tourist arrivals to Hawaii enjoyed a nearly uninterrupted trend of growth. Beginning in 1998, however, that trend of growth became a trend of unprecedented decline. In the wake of the global financial crises in 2008, this trend continues into 2009, and its specific long-term financial effects are poised to threaten Hawaii’s economic future.
Organizational Motivations for Going Green or Profitability versus Sustainability
Dr. Robert L. Johnson, University of Phoenix, AZ
Regardless of one’s stance on the open debate if we are in global warming period or not, there are still financial and other relevant motivations for going green and creating a more sustainable business model. I am not talking about hugging a tree or saving an iceberg. I am talking about sound business principles and reasoning for going green. These motivation are financial, legal, moral, legal, public relations and human resources which all positively impact corporate performance. In short, when done properly, going green is good business. Regardless of one’s stance on the open debate if we are in global warming period or not, there are still financial and other relevant motivations for going green and creating a more sustainable business model. I am not talking about hugging a tree or saving an iceberg. I am talking about sound business principles and reasoning for going green. These motivation are financial, legal, moral, legal, public relations and human resources which all positively impact corporate performance. In short, when done properly, going green is good business. Many corporate executives erroneously believe that the choice is either be green or be profitable. It appears not to have widely caught on that one can be both. However, many companies are now recognizing the bottom line and stock price benefits of having a green strategy and a reputation of being green. Accordingly, “sustainability, the triple bottom line of economic profitability, respect for the environment and social responsibility: these are the new buzzwords of many a corporate annual report” (Boyd, 2001, p. 35). There is nothing like capitalism to discover, perfect, and implement profitable ways of going green. For companies considered leaders in green activities, in both bull and bear markets “between 1 January 1999 and 30 June 2000, the Dow Jones Sustainability Group World Index - composed of sustainability-driven companies including Lafarge - outperformed the Dow Jones Global World Index by 127 basis point in US dollar terms” (Boyd, 2001, p. 36). The purpose of this paper is to demonstrate going green is good business.
Trust and Lending Management of Bank Branches in India
Dr. Shyam Bhati, Dr. Michael McCrae and Dr Anura DeZoysa
University of Wollongong, Wollongong, Australia
Branch Managers and Loan officers of Indian bank branches are two key players in lending management of Indian bank branches. Their relationship is crucial in determining how the loans will be assessed and evaluated. This relationship is one of the important relationships in lending risk that a branch may face. A social risk evaluation approach based on trust theory is used to understand this relationship. A theoretical framework of trust between branch manager and loan officer was developed in an earlier study by Bhati (2006). In the current study, case studies of Indian bank branches are completed to determine empirically the various factors of trust between branch manager and loan officer, the stages of trust development between branch manager and loan officer and the effect that trust between branch manager and loan officer might have on the lending performance of bank branches in India. The findings have significant applications for operations of bank branches in general and India in particular. Banks in India operate in a very different lending environment as compared to banks in developed western countries. There is a considerable amount of state intervention in bank lending in India. All banks including public sector banks must observe guidelines from Government of India in their lending activities. For example, all public sector banks in India are required to lend 40% of their total loans to specified priority sectors of economy. In addition, the Credit Guarantee Fund established to refund a part of defaulted loan to the banks, reduces the incentive for banks to assess and monitor loans properly but also motivates the borrowers to undertake risky business activities because the borrowers depend on the Credit Guarantee Fund to pay a part of their defaulted loan amount. Consequently banks in India, particularly public sector banks, have a large portfolio of non-performing assets. This large portfolio of non-performing assets arises because banks have followed the government requirements on lending, resulting in increase of non-performing loans.
A Survey of Small Business Debt Financing Practices
Dr. Hadley Leavell and Dr. Balasundram Maniam, Sam Houston State University, Huntsville, TX
Small businesses commonly have inadequate personal funds for start-up capital and require supplementary outside funding. A small business owner’s awareness of finance options may determine the long-range success or bankruptcy of the business. Financing alternatives vary from personal, family and friends’ funding, to the intricate institutional loans. Debt financing is the normally the principal part of a small business’ capital structure. By evaluating the critical factors or decision variables with respect to the debt structure of the new business, and comparing it to the debt funds which are crucial, decision criteria for the selection of the preferred debt financing option can be developed. This paper will summarize various financing sources and debt criteria used by small southeast Texas businesses. National policy makers have long touted small businesses as the backbone of economic development and job creation in the United States. Small business ownership is a considered the American dream for many. These small/medium business enterprise (SME’s) owners promptly find that securing start-up funding for a business can be hard. Insufficient personal start-up capital forces the SME to seek outside funding to acquire the essential capital to start the business. Thus, a critical element of the initial financing decision is an inclusive and precise business plan including initial capital needs, both personal funds and debt requirements. As most small businesses are privately owned, the start-up financing and credit history falls chiefly on the owner (Lagua, 2004). Since an abbreviated credit history lessens the small business’ ability to borrow from financial institutions, funds must frequently come from other sources. This paper will analyze survey results from southeast Texas SME’s with regard to initial and follow-up financing and some reasons the SME’s employed debt in the capital structure.
Linking Self-Perception and Emotional Intelligence
Karin Applegate, Aysegul Timur, Ph.D. and Karen Locklear, Ph.D., Hodges University, Naples, FL
Emotional intelligence (EI) refers to how well an individual handles herself/himself and others, rather than their technical skills. EI includes the attributes of self-awareness, self-control, social awareness, and social skill. It is extremely important for an individual to know, not only about EI, but specifically his or her own level. This knowledge facilitates objective assessment of self and other appropriate responses in interactions in all environments. As individual economies evolve into a global one, people must develop their EI in order to achieve success. This paper examines the relationship between self-perception of management skills and EI levels. Managers with self-perceived effective management skills possess higher EI levels, enabling them to achieve better outcomes and foster fertile work environments. Employers who recognize the importance and presence of high levels of EI in employees, especially management personnel, and individuals who develop a higher personal level of EI will result in a stronger more effective workforce. The hypothesis is thus formulated that self-awareness of EI status is the first critical step in managerial effectiveness and success and in developing and supporting EI in others. An analysis of this study’s current data substantiates a strong link between self-perception of management effectiveness and a relationship of high levels of EI across varied but unspecified management applications. Studies such as the following verify the positive consequences of increased understanding of psychological and emotional factors involved in management success, which can not be understated in the increasingly competitive and evolving global environment.
Leadership Development and Adaption-Innovation Theory
Stewart L. Tubbs, Ph.D., Eastern Michigan University
Kathryn Jablokow, Ph.D., Pennsylvania State University, Great Valley
There is a substantial body of research evidence regarding the importance of leadership development to organizational success Whetton and Cameron (2005). Recent scholars have emphasized the even more urgent need for leadership and leadership development, Berns (2008) Friedman (2008), Gladwell (2008), Huszczo (2008), Kouzes and Posner (2007), Patterson, et. al., (2008), Sisoda, Sheth and Wolfe (2007 and Tubbs, 2009A). There is no more important task with regard to leadership development than identifying the competencies and meta-competencies that comprise leadership. However, to date, there has not been agreement regarding just what are the Global Leadership Competencies that should be taught and learned. In this paper leadership is defined as, “Influencing others to accomplish organizational goals,” (Tubbs, 2009B).This paper describes the model and discusses how Adaption-Innovation Theory can be integrated into the model to strengthen it. Approximately $50 billion a year is spent on Leadership Development (Raelin (2004). Yet, two of the most frequently asked questions of leadership scholars are (1) what competencies and meta-competencies comprise leadership and (2) can leadership, in fact, be taught and learned. This paper attempts to answer both questions and demonstrates how Adaption-Innovation Theory can be integrated into the model. Some aspects of leadership are more likely to be learnable and others are less so. For the purposes of this paper, leadership is defined as, “Influencing others to accomplish organizational goals,” Tubbs, (2009 B). Leadership is often discussed in terms of competencies, (Bueno and Tubbs, (2004), Chin, Gu and Tubbs (2001), Goleman, Boyatsis and McKee (2002), Tubbs and Schulz (2005). Competency is a term that describes the characteristics that lead to success on a job or at a task. Competencies can be described by the acronym KSA (knowledge, skills and abilities).
A Comparison of Corporate Governance in China and India With the U.S.
Dr. Steven Mintz, California Polytechnic State University, San Luis Obispo, CA
Dr. Sudha Krishnan, California State University, Long Beach, CA
We examine corporate governance systems in China and India and compare them to provisions of the Sarbanes-Oxley Act and NYSE listing requirements in the U.S. In China, the influence of the State as the primary investor in state-owned enterprises restricts the degree to which the board of directors can be independent decision-makers and the board has overlapping responsibilities with the board of supervisors. China needs to convince foreign investors that state-owned enterprises and state interference will not impede the efforts of multinationals to operate in that country. In India, the influence of individual shareholders is muted because of the importance of family-owned businesses and government influence in key sectors. Unlike the U.S., in China and India the non-management directors are not required to meet separately with management and the audit committee does not have to meet separately with management or the external auditors. The requirement in China and India to “comply or explain” deviations from corporate governance provisions is stronger than in the U.S. which only has a compliance certification requirement. However, in both China and India the implementation and enforcement of corporate governance provisions has been restrained due to overlapping responsibilities of regulatory authorities and a lack of enforcement. Corporate governance plays an essential role in promoting confidence in international markets. The globalization of business and need for access to international markets create a demand for strong corporate governance systems.
The Performance of the European Stock Indices
Dr. Massoud Metghalchi and Dr. Vera Adamchik, University of Houston-Victoria, TX
This paper studies the benefits of diversifying into small and medium national stock indices in Europe. Using historical data on stock returns over 1998-2008, we estimate the stock market performance measures for the 15 developed European countries and compare them to the performance of the aggregate European index (the S&P Europe 350 Index). We then investigate whether it would be possible to improve the risk-return trade-off of the aggregate European index by mixing the European index with the individual country indices of the five top performers (Austria, Denmark, Spain, Sweden, and Switzerland). We assess the economic size of the diversification benefits on the basis of improvements in expected returns or Sharpe ratios. Our results show that by mixing the European index with each individual country index the risk-return picture can be improved. These results validate our assumption that international diversification into small and medium stock markets of developed countries are still present may be beneficial to investors. During the past few decades, numerous empirical studies in the international finance field have documented the benefits of international portfolio diversification. National stock markets have different characteristics; hence, the portfolio performance can be enhanced by diversifying across different countries. However, it has become a generally accepted view that increasing market integration significantly reduced the diversification benefits from a portfolio drawn from developed countries. Hence, the vast majority of studies, especially from the 1980s and 1990s, focus on diversifying into emerging markets.
The United States Health Care System in Crisis: Its Origins and Future Outlook
Sam Mirmirani, Ph.D., Bryant University, Smithfield, RI
This paper is an attempt to raise awareness of the significance of the current health care problems in the United States. In doing so, it discusses the current structure and status of the system. Furthermore, the study reviews the health care reform proposals that had been introduced with a particular attention to President Obama’s reform package. The future prospects of restructuring the health care system is discussed as concluding remarks. The financial crisis of 2008 and the ensuing recession resulted in a significant change in the focus of macro policies. Such a shift is even more pronounced in the United States than other countries. A major issue early into the in the presidential campaign was the health care crisis and later, as the signs of pending economic meltdown appeared, the campaign debate and policy decisions concentrated on varied rescue packages for the financial industry. Shortly thereafter, the financial industry rescue was followed by the bailout of the automotive industry. The enormity of the escalating costs of the bailout plan changes over time and varies by the source of the organization or the agency that attempts to assess the short term and long term consequences of the economic downturn. The result is Trillions of dollars for 2009 and beyond. The health care industry in the United States, however, has been in dire shape for a long time and remains neglected. The healthcare system in the United States is a confusing patchwork system from the different historical generations, each generation adding a new aspect. This industry is marred with cost over runs and inefficiencies. It is a complex system consisting of a hodgepodge of players—consumers; providers (hospitals, physicians); third-party payers (public and private); and special interest groups such as the American Medical Association (AMA), American Hospital Association (AHA), and other influential associations representing other constituencies in the industry.
Immigrants, Visible Minorities and Self-employment: Does Social Capital Make a Difference?
M. Reza Nakhaie, Ph.D., University of Windsor, Windsor, Ontario, Canada
Using data from the Ethnic Diversity Survey (EDS) conducted by Statistics Canada in 2002, this paper shows that immigrant and visible minorities are least likely to be self-employed when compared to those born in Canada or whites. To the extent that social capital is important for self-employment, its benefits vary by type of social capital and group. The evidence that the employment benefits derived from social capital varies across immigrant and racial groups challenges the view that social capital is a source of ethnic advantage for minorities. Canada’s immigration policies were dramatically changed in the mid-sixties. This development was a product of three forces, the first of which was a significant drop in the number of European immigrants to Canada, itself a consequence of the growth of the economy and the decline of working-age population in many European countries (Aydemir and Skuterud, 2004; Bloom, et al., 2003; Nakhaie, 2006). At the same time, the pressures and opportunities to migrate increased in the developing countries, as a result of a population explosion, lower travel costs, expansion of mass media, and consumerism. Finally, development of more rational and humanitarian world-views after WWII resulted in the 1968 Immigration Act where the point system was introduced, and the subsequent 1978 Immigration Act which stated explicitly a principle of non-discrimination towards immigrant selections (see Simmon, 1990; Driedger, 2003). These changes resulted in an influx of a large number of visible minority immigrants from Asia, Africa, Middle East and Latin America. This shift also resulted in faltering of the normal processes of integration of recent immigrants and visible minorities (Pendukar, 2000; Worswick, 2004).
Economic Growth, FII Flows and Financial Markets Integration in India
Dr. Sadananda Prusty, Institute of Management Technology, Raj Nagar, Ghaziabad, U.P., India
The paper explores the long-run relationship among real economic growth, net FII inflows and financial markets integration in India through time series tools during the period April 1996 (Q1: FY 1996) - March 2008 (Q4: FY 2007). The paper concludes that real economic growth depends on financial markets integration and net FII inflows, and net FII inflows depend on financial markets integration and real economic growth. The paper suggests that the ongoing financial sector reforms in India need to be accelerated for achieving a higher degree of financial markets integration in order to increase net FII inflows and real economic growth. The Indian financial system, till the early nineties, was characterized by an administered structure of interest rates, restrictions on various market participants – including banks, financial institutions and corporates – in terms of the nature and volume of transactions they could undertake in the money, forex and capital markets and the administrative limits on the transactions between residents and non-residents. As a result, markets remained highly segmented and regulated. However, with the initiation of financial sector reforms since mid-nineties, the emphasis was placed on the development and deepening of money, government securities and forex markets, and an effort was made to strengthen their integration in order to encourage capital inflows from foreign institutional investors (FIIs), enhance economic growth, and increase the effectiveness of monetary policy in the economy.
Short-Sales Constraints and Stock Price Behavior: Evidence from the Taiwan Stock Exchange
Dr. Yen-Sheng Huang, Ming Chi University of Technology, Taiwan, R.O.C.
Dr. Day-Yang Liu, National Taiwan University of Science and Technology, Taiwan, R.O.C.
Feng-Yu Lin, Chihlee Institute of Technology, Taiwan, R.O.C
This paper examines the impact of short-sales constraints on stock price behavior for the constituent stocks of the Taiwan 50 ETF following the lift of short-sales constraint starting on May 16, 2005. The results indicate significantly lower overnight abnormal returns and significantly higher abnormal returns in the pre-period relative to those in the post-period. The lower abnormal overnight abnormal returns in the pre-period are consistent with the hypothesis that short-sales constraints delay the price discovery upon the arrival of bad news. Since short sellers are forbidden to short the stock in the event of bad news, further price decline continues in the following overnight period. However, the higher abnormal returns in the subsequent trading-time period indicate a price reversal. This price reversal suggests that the lower abnormal overnight abnormal returns may reflect overreaction of noise traders rather than the overvaluation of price due to the imposition of short-sales constraints in the pre-period. Short sales refer to the situation where investors borrow securities and sell them in the stock market, and hope that they can buy back the borrowed securities at a lower price. If the securities prices go down as expected, short sellers reap a profit when they repay their borrowed securities. In a downward market, however, short sales are criticized for exacerbating the market decline as well as causing market panics. Short sellers are also blamed for manipulating securities prices especially for smaller and illiquid stocks. In response to these criticisms, regulators may restrict the practice of short sales only to a smaller subset of listed securities, typically larger and more liquid securities.
The Regulation of Takeovers in the Global Environment: The Australian Experience
Carlo Soliman, Solicitor, New South Wales
Wayne Guild, Charles Sturt University, Wagga Wagga
This research paper examines the Mandatory Bid Rule (‘MBR’) in relation to Section 602 of the Corporations Act 2001 (Cth) (‘the Act’) and assesses the utility of the rule in the regulation of takeovers in Australia. The MBR had its origin in the Corporate Law Economic Reform Program (‘CLERP’) Bill 1998 which heralded a fundamental review of key areas of corporate regulation and investment activity. The objective of CLERP was to facilitate and promote economic efficiency and assist business to adapt to change in takeovers law. Whilst the MBR has the potential to stimulate increased takeover activity which can benefit investors and shareholders alike the proposed rule was withdrawn from the CLERP Bill 1998 (Cth). This was because the protection and equal opportunity it purportedly offered shareholders was outweighed by the key disadvantage in the form of a reduction in the transparency and integrity of corporate control transactions. This would occur, according to the opponents of the MBR, through the rule’s encouragement of pre-bid private negotiation and its elimination of the system of public auction of shares. In effect, the opponents of the MBR assert that the rule, without modification, hinders the objectives of Section 602 of the Act. The United Kingdom (‘UK’) and New Zealand (‘NZ’) takeovers codes provide comparative examples of jurisdictions that operate with and without inclusion of a MBR respectively. The UK and NZ takeovers laws show that a modified MBR may better serve the interests of all stakeholders whilst maintaining the integrity of the objectives of Section 602 of the Act. The UK example serves best as a test of success based on use, while the NZ jurisdiction provides an understanding of the importance of upholding similar objectives as found in Section 602, the hindrance of which can negatively effect investor confidence.
Individual’s Taxation and Capital Gains Realization: Evidence from CRA’s Income Statistics
Tao Zeng, Ph.D., Wilfrid Laurier University
In this paper, an empirical work is designed to test whether individual’s capital gains realization decision is associated with his tax status. Based on the realization tax rule for capital gains and losses, taxes are incurred when taxpayers realize capital gains or losses, not when capital gains or losses are accrued. Constantinides (1983, 1984) argue that the realization tax rule provide a tax-timing option to investors to realize losses whenever they occurs but defer gains. However, tax rule and transactions costs prevent investors from exploiting this tax-timing option fully. Especially, we test whether taxpayers’ tax rates, current capital loss realization, and accumulated capital loss-carry-overs can affect taxpayers’ decision of realizing capital gains. Using Canada Revenue Agency’s (CRA’s) income statistics sample data, this study finds that an individual=s net capital gains realization is positively associated with the capital losses incurred in the current year, the capital loss-carry-overs accumulated from the previous years, and tax rates. It generally supports the argument that the taxpayers take into account their tax status when realizing capital gains. This paper also finds that the individuals’ capital gains are highly persistent over time. Tax rules on capital gains have changed over time in Canada. There was no tax for capital gains before 1972 in Canada. Since 1972, capital gains have been taxed based on the realization principle. From 1972 to 1987, one-half of capital gains were taxable, and one-half of capital losses were deductible against taxable capital gains. In 1988 and 1989, two-thirds of capital gains were taxable, and two-thirds of capital losses were deductible against taxable capital gains. From 1989 to February 2000, three-quarters of capital gains were taxable, and three-quarters of capital losses were deductible against taxable capital gains. From March 2000 to October 18, 2000, the inclusion rate for capital gains and the deduction rate for capital losses was reduced to two-third. Finally, this inclusion deduction rate was reduced to one-half.
Forecasting Brussels Airport Passengers: Comparison Between Sarima and Exponential Smoothing Forecasting Techniques
Dr. Paraschos Maniatis, Athens University of Economics and Business
In this study a comparison of the forecasting results obtained by a SARIMA model and the Holt-Winters’ technique for a 132 month time series, created by the airline passengers in the Brussels airport is attempted. The scope of the analysis is to investigate if a complicated stochastic model as the identified SARIMA gives better forecasts than a simple one such as the Holt-Winters’ model. The analysis of the specific time series- procedures and results- suggests that complicated methods are not always better than the simple ones. The scope of this study is to forecast the number of the airline passengers in the Brussels airport for a two-year time span. This time is a short time for an international airport and, hence, the forecasts are short-term forecasts. For this purpose we employ stochastic models of (S)ARIMA type and a competitor from the family of exponential smoothing models: the model Holt-Winters. Therefore, the analysis has a comparative character. Forecasting in time series is always a difficult and dangerous task. It is difficult because it employs too many sophisticated methods, requiring a strong mathematical armament, and software supporting, which does not always meet the specific requirements of the analyst; and it is dangerous because not reliable forecasts are misleading and it is better not to have any information at all than to have wrong information. Moreover, even in the most mathematically advanced forecasting techniques, the inextricable subjective element of the forecaster always emerges.
Evaluation of Private Pension Funds With Factor and Cluster Analysis
Dr. Bahadtin Ruzgar, Marmara University, Istanbul, Turkey
Dr. Fahri Unsal, Ithaca College, Ithaca, New York
The private pension system in Turkey was established in October 2003. At the present time, there are 11 companies operating in this field and 103 funds have been issued by them. It was hypothesized that the funds established by different companies were very similar by content and that they differed by name only. Thus, an attempt was made to investigate whether they can be classified under a few groups. For this analysis, the daily price data for the 103 private pension funds were collected for 1245 business days starting from the first transaction date for the fund until October 29, 2008. Factor and cluster analysis techniques were applied to group these funds. The main conclusion of the study was that many of these funds were very similar and duplicated each other and hence it was unnecessary to introduce additional funds of the same nature. In addition, trends of these funds were examined and it was determined that funds having the same trends were grouped with same factors. People are generally concerned about their financial security, especially after retirement. For this purpose, different investment tools, such as buying rental property, saving in bank accounts, making investments in the stock market, and starting a private pension account are used. Creating pension funds and making monthly payments after retirement were traditionally handled by the government in a lot of countries. However, given the changes in demographics, it would be difficult to say that publicly-managed social security systems are going to be sufficient for retirement in the future. Therefore, people need alternatives for their retirement, and that is where private pension plans come into the picture.
Marketing Challenges for Competition Policy: The perception of the Romanian Companies
Dr. Nicolae Al. Pop, Dr. Alina Mihaela Dima, and Diana Sandru
Bucharest University of Economic Studies
This paper is based on a quantitative research and aims at emphasising the interdependence of marketing tools and anti-competitive practices in decision-making process at the company. The proper enforcement of a competition legislation is an essential condition for ensuring the free market mecahnism, especially in case of former transition countries, as it is the case of Romania. The paper presents the results of a survey on 425 Romanian companies and has the objective to indentify and analyse the type of marketing strategy, the main instruments and tools used by the companies in the marketing area and their potential anti-trust implications on the market from the competition law perspective. The final conclusion is that in the new context it should be created new mechanisms for business enviornment to understand and interpret correctly the competition mechanism on the market, and to help them to design a business strategy in connection with the marketing strategy or other important long term objectives, but observing the competition policy provisions and to become more competitive on the European unique market. Strategy is always about to make choices (Porter, 1980). Competitive strategy refers to how a company competes in a particular business (overall strategy for diversified firms is referred to as corporate strategy) and it is mainly concerned with how a company can gain a competitive advantage through a distinctive way of competing.
A Proposed Addendum for Managerial Accounting Textbooks
Lee Tagliaferri, Pace University, New York
I discerned didactic omissions in the tutelage of cost postulates pertaining to the planning for operating income and evaluation of manufacturing cost management in the pedagogy of certain textbooks I adopted to teach the course Managerial Accounting. The purpose of my study is to ascertain if those omissions are universal in managerial accounting textbooks. The scope of my study investigates the forgoing tutelage in publications with a combined estimated eighty-five percent share of the market for managerial accounting textbooks. In the textbooks examined, I find that they leave out explanations of cost postulates which guide detailed procedures instructed to prepare budgets for income and performance reports for manufacturing costs. I suggest an addendum for the textbooks to incorporate the pedantic omissions. The objective of this integration is to augment didactic perception for the tutorial procedures omitted in the pedagogy of the aforementioned topics. I discerned in textbooks I adopted in the past to teach the course Managerial Accounting didactic omissions of cost postulates in pedagogy pertaining to the planning and control of business operations. This prompted my study to examine other managerial accounting textbooks with the purpose to ascertain if the omissions I came across are a universal anomaly. My study discloses that the omitted cost postulates are common in all of the textbooks examined. I suggest that those cost postulates be incorporated in managerial accounting textbooks. The objective of this integration is to augment in the tutelage of managerial accounting textbooks comprehension and didactic perception of two pedagogic topics which encompass the cost postulates. The cost postulates which I find omitted fall into the following two topics: planning for income and evaluating manufacturing cost management.
Strategic Direction, Competencies and Going Global on Global Performance and Development in Thai Firms: The Pilot Study
Sasiprapa Chaiprasit, Ph.D. Candidate, Asian Institute of Technology, Bangkok, Thailand
The purpose of this paper is to identify strategic direction, strategic management competencies and going global factors, and test the scale reliability for confirming a concept of the impacts that those factors, have on a firm's level of globalization and technology development in Thai firms. This study conducted a pilot survey by collecting data from 64 respondents who were studying in the EMBA program to develop a better understanding of the conceptual model, to test factors, and to assess the feasibility of the questionnaire. The factor analysis showed the key factors related to strategic direction, strategic management competencies and going global on level of globalization and technology development, and a comparison illustrated that each construct doesn’t show significant differences across Local and International program. To be able to identify the likelihood of being high level of globalization and technology development, global project and global performance should be considered. The pilot survey is limited in gathering the data with Executive MBA students from three institutions by the survey language is only in English. It is very useful for the executives in gaining a better understanding about strategic direction, strategic management competencies and global emphasizes, and their impacts in global marketplace, and determining appropriate strategies to better manage their firms. Global emphasizes in international business activities play a significant role in firm’s globalization level and technology development, and try to propose the effective strategies to help firms attain superior global business performance and improve competitiveness on a global level.
Economic Imperatives, Global Production System, and the Dynamics of Contract Manufacturing
Abdul Latif Salleh, Ph.D., Prince Sultan University, Riyadh, Saudi Arabia
The discourse on the new economy has emphasized the role of service and the inevitable attenuation of manufacturing. However, the exceptional performance of Asian economies driven by the intensification of manufacturing activities in the region in the past two decades attests to the relentless tenacity of manufacturing activities in economic development. Manufacturing activities have followed a trend that can only be understood in terms of the changing nature of economic production. Technological innovation and the increasing intensity of international competition led to the displacement of the vertically integrated system of production. Since the 1990s, the new system is characterized by the disintegration of value-creating activities and by cooperative networks. This paper traces the development of the new system and the rise of a new breed of firms – the contract manufacturers (CM) - and the dynamics of the contract manufacturing industry. In particular this traces the trends of changing business mix and diversification of activities, spatial distribution, and the roles and positions of East Asian contract manufacturers. This paper concludes by examining the implications of current economic downturn on the industry and its future. Does manufacturing still matter? The discourse on the new economy has emphasized the role of service and the inevitable attenuation of the role of manufacturing. However, the rise of Asian Tigers in the last two decades and, more recently, the ascendancy of China as the new economic power in the 2000s, attest to the important roles of manufacturing activities in economic development. Indeed the exceptional performance of Asian economies in the past two decades has been driven by the intensification of manufacturing activities in the region.
The Environmental Taxes in the European Union. The Greenhouse Gases Emissions Taxes
Dr. Maria Luisa Fernandez de Soto Blass, University CEU San Pablo, Madrid
The Kyoto Protocol tackles emissions of six greenhouse gases: carbon dioxide (CO2); methane (CH4); nitrous oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); sulphur hexafluoride (SF6). It represents an important step forward in the effort to tackle global warming as it includes binding, quantified objectives for limiting and reducing greenhouse gases. The Protocol suggests various means of attaining the objectives: stepping up or introducing national policies to reduce emissions as fiscal policies. This paper shows the trends in environmental taxes in the European Union and the descomposition of Environmental tax revenues in the Union 1995-2006, in % of GDP, the environmental tax revenues by Member State and type of tax. 2006, in % of GDP. It studies the principal green taxes for polluting the environment by members States of the European Union. It introduces a summary of the environmental tax elements such as legal base, beneficiary, tax payable, basis of assessment, rate and economic function. This paper is the result of four researches the author has undertaken at The Institute for Fiscal Studies, Ministry of Economy and Finance, Ministry of Education, the University CEU San Pablo, Madrid, Spain, the University of Leeds, United Kingdom, from 2004 to 2009.
The Influence of Emotional Intelligence on Effective Leadership Among Managers in Malaysian Business Organizations
Dr. Sarminah Samad, Universiti Teknologi MARA Malaysia
The purpose of this study was to examine the relationship between emotional intelligence (EI) and effective leadership. Consequently the study determined the influence of EI on effective leadership. Further the study is aimed at identifying which of the EI dimension most explain effective leadership. Finally the study examined the different level of EI between senior and middle level management staff. Sample of the study consisted of 500 senior and middle level management staff of the selected telecommunication companies in Malaysia. The study used self- administered questionnaires and the data obtained was then analyzed using descriptive and inferential statistics analysis. The results hypothesized that all of the EI dimensions were significantly related to effective leadership. Consequently the study found that the EI dimensions were able to influence effective leadership where 59 percent of variance in effective leadership was explained by EI. Further the results revealed that social skills appeared as the most influential factor for effective leadership. The findings of the study also revealed that there was a significant difference of EI at management level staff with the senior level of management indicating the higher score compared to the middle level management staff. Several suggestions are discussed based on the implications of the research finding. Globalization, rapid change in technology and the intense business competition require organizations to secure a sustainable competitive advantage over their competitors. The rapid change of technological age has created the new millennium with a competitive landscape which demands leaders to have more than just the required skills and intelligence quotient (IQ). Leaders should also have the right values, behaviors, personalities and emotions to face these challenges. According to Hay (2000), emotionally intelligent leaders help organizations realize the competitive advantage through improved motivation, enhanced innovation, increased performance, effective use of time and resources, restored trust and improved teamwork.
Cultural Influence in the Ethical Decision Making Process: The Perspective of Malaysian Managers
Norizah Mustamil and Dr. Mohammed Quaddus, Professor
Curtin University of Technology, Western Australia
This research explores the influence of culture, measured by the two dimensions of GLOBE’s study (In-Group Organization and Power Distance), in the ethical decision-making process. It also examines the relationship among components of the process. A sample of 236 managers from Malaysian large organizations was collected, and Partial Least Square based on Structural Equation Modeling technique was used to test the expected relationships. Results confirm the influence of in-group collectivism on the ethical decision-making process, but power distance was found to be insignificant. Findings also support that components of the ethical decision-making process follows a sequential process. From a theoretical perspective this study provides valuable insight to evaluate the validity of existing theory as proposed in the literature. From a practical perspective the study provides useful recommendations for organizations to develop policies and programs to encourage ethical behavior. Although this study focuses on Malaysian context, it helps global marketers to increase their knowledge of cultural differences and become more sensitive to them. Ethical Decision-Making (EDM) has received considerable attention from scholars seeking to understand ethical behavior. An increasing number of theoretical frameworks have been proposed to describe such behavior. Despite the notion that EDM is a very challenging area due to its multitude of complex factors, the influence of culture has been theorized as an important determinant of such behavior.
“The Influence of Culture in TV Advertising Behavior: An Exploratory Study in GCC Countries”
Dr. Muhannad Khanfar, AL Ghurair University, Dubai- UAE
With the growth of globalization, marketing activities are bound to become more complex, as they are significantly influenced by environmental factors that differ from one country to another. These factors, especially culture, create opportunities and threats to multinational companies' behavior in relation to TV advertising in different markets. This study investigates cultural diversity in Gulf countries and its influence on TV advertising behavior adopted by multinational companies operating in the region. A deductive approach to study was undertaken, supported by secondary and primary data, using e-mail questionnaires sent to 150 multinational companies operating in GCC countries. This study identified that the influence of culture on TV advertising effectiveness is very profound. Interestingly, among the cultural elements, language and religious differences seem to greatly affect the decision on the degree of adaptation and standardization of advertising in Gulf Cooperation Council (GCC) countries. The increasing globalization and internationalization has become of great importance recently. Managing business operations across international boundaries has become one of the largest challenges for international businesses today. Dubai, in particular, has attracted an enormous amount of foreign investment and international trade from a large number of foreign countries from all over the world. According to Kotler & Armstrong (2001), marketing is the satisfaction of wants and needs. Cultural knowledge and skill is integral to satisfying these wants and needs in a foreign market. This will affect the way marketing messages are formulated in advertising (Fletcher & Brown 2002).
Developing the e-Business Sector: An Exploratory Study of the Multimedia Super Corridor (MSC) e-Business Flagship.
Kamarulzaman Ab. Aziz and Mohammad Poorsartep, Multimedia University, Malaysia
The online revolution affected the individuals, organizations as well as businesses. The Internet not only create a new online world, it also led to the creation of new business models, models that enable sole entrepreneurs to reach the global markets, SMEs to breach their limitations, and large corporations to enhance their performance as well as diversify into areas which may not be open to them in the conventional ways. It had been highlighted in numerous literatures that the Internet (online business and commerce) increase domestic and international sales, reduce costs, improve customer relations, and build customer loyalty. To accelerate the realization of Vision 2020 (to transform Malaysia into knowledge based society) via the Multimedia Super Corridor, a path was defined through six innovative Flagship Applications. One of the path identified recognise the significance of the Internet and the e-business revolution. The MSC Malaysia e-Business Flagship was designed to create an environment for companies to leverage on leading-edge technologies to design, produce and deliver various products and services to their multicultural and multinational customers around the globe. This study aims to look at how the e-Business Flagship was implemented and highlight the challenges or issues faced. Wave of globalization is washing away geographical boundaries and sway resources which have made developing nations to experience demanding challenges to survive and thrive. Malaysia in its efforts to become a developed nation, focus on initiatives designed to increase its innovative capacity so that it can develop sustainable growth engines and a prosperous economy. Information and Communication Technology (ICT) was identified as the enabler to realize that vision. Hence, the Multimedia Super Corridor (MSC) Malaysia was conceptualized. It’s a policy-driven cluster-oriented initiative launched in 1996, aimed to help the country on its transition effort from an industrial society to a post industrial one.
Subsidiary Roles and Relationships: Contextual and Operational Determinants
Joao Pedro Almeida Couto, Maria Teresa Borges Tiago, Flavio Gomes Borges Tiago
Jose Antonio Cabral Vieira
University of the Azores
Considering the subsidiaries of multinational companies, a study of the conditions affecting the roles and relationships with the headquarters is conducted. Beginning whit an analysis of the taxonomies of subsidiaries, one model was selected to test three hypotheses: one, regarding the context variables that influence the relationships; a second, about the influence of organizational and strategic variables; a third, about the effect of subsidiary performance on the relationship. This study involved five European countries and concludes that nation based variables, together with age and technology capacity of the subsidiaries, have a bearing on the type of relationship established. It is important to verify the implications for management of the disappearing of borders in Europe and the world. The circulation of capital together with the increased mobility of persons and goods has lead many companies to internationalize their business in a way that no longer has to do with only the commercialization of products world wide, but also with development and production as well. In Europe the construction of the European Union constitutes a decisive force for integration, making historical, cultural and economic differences fade. The importance of world commerce and the activity of multinational companies made these issues one of the priorities for management research. Managing multinational companies represents a set of themes that have been in constant evolution in recent years and present new challenges for managers. Global economics determine the appearance of new approaches and contribute to enlarge the concept of management.
A Model of Risk Management in Globalizing Companies
Jukka Ojasalo, Ph.D., Professor, Laurea University of Applied Sciences, Espoo, Finland
The literature dealing with risk management includes surprisingly little knowledge of risks related to globalization of companies. The literature on globalization of firms, on the other hand, includes some knowledge of risks of globalization, however the systematic management of these risks has received very little attention. Clearly, there is a need to increase the knowledge and develop new approaches for risk management in globalizing companies. This article contributes by developing a model for systematic risk management in globalizing companies. The model integrates the essential elements of risk management process and risks of globalizing firms. The model attempts, both to contribute to the scientific literature, as well as respond to the needs of practitioners. The article is based on comprehensive literature analysis. First, it analyzes the literature on risk management and focuses on the relevant aspects of risk management process. Next, it analyzes the literature on risks of globalizing firms. Then, it proposes a model of risk management in globalizing companies. After that, the final conclusions are drawn. Risk refers to an exposure or probability of losses (Larson and Kusiak, 1996; Remenyi and Heafield, 1996; Chapman and Ward, 1997; Jaafari, 2001). The term risk generally has implications of negative or adverse results from an uncertain event (Ansell and Wharton, 1992). Thus, according to Williams, (1995), a bad event as such cannot be called risk, but instead, the two aspects have to have to be present in the context of risk:
Internal Factors for Radical Artifacts Innovation in Taiwanese Cases
Dr. Yi Ming Tseng, Tamkang University, Taipei, Taiwan
Multiple studies have found that the primary determinant of artifacts innovation failure is an absence of innovativeness-the extent to which a innovation provides meaningfully unique benefits. Given the persistence of this finding and the growing use of organizational factors in artifact development, the authors examine how innovativeness is affected by various characteristics of organizational factors and contextual influences. On the basis of a study of 145 artifact makers, the authors find that innovativeness is positively related to the strength of willingness to cannibalize, specialized investment and future market orientation. Beyond a moderate level, social cohesion among team members has a negative effect on innovativeness. The effect of superordinate identity on innovativeness is strengthened by encouragement to take risk and weakened by social cohesion. Functional diversity has no effect on innovativeness. The authors discuss managerial and research implications of the findings. Considerable effort has been dedicated to understanding the determinants of artifacts product success and failure. An absence of innovativeness (i.e., product benefits that are unique to a given product and are perceived as meaningful by customers) is an important underlying explanation for new product failure. However, despite all the attention devoted to improving innovation, in many cases, the development of innovative products tends to be the exception rather than the rule.
Business and Design Competences in Service Innovation and Development
Katri Ojasalo, Ph.D., Laurea University of Applied Sciences, Finland
With tightening competition and the rapid pace of structural changes in the economy, service innovation and development have emerged as a strategic imperative for most companies, also for those outside of the traditional service industries. Companies find it difficult to survive just on their past successes ─ they will need to be continually innovative, and to strive for the creation of new service offerings and improved services. The importance of service innovation and service development has huge implications for competences needed in business and the knowledge base that underpins these competences. The aim of this article is therefore to increase the knowledge of business and design competences needed in service innovation and development. This article is based on an extensive literature review and a qualitative study in which 20 service development projects were examined. The empirical data also includes several meetings and discussions with service design practitioners and academics. Companies are moving from business models where value came purely from physical goods to models where value comes more or less from intangible things such as services, knowledge and relationships. In this service-dominant logic services are at the centre of exchange, and physical goods become “servicefied”, i.e. they can be seen as appliances which derive their value from their ability to provide service (see Vargo & Lusch 2004). The service-dominant logic is a consequence of fierce competition, economic uncertainty, rapidly changing technology and more demanding customers. Customers of traditional service firms, industrial companies and non-profit organizations are looking for service value, comprehensive solutions and compelling experiences.
Islamic Human Resource Practices and Organizational Performance: A Proposed Conceptual Framework
Dr. Ilhaamie Abdul Ghani Azmi, Universiti Malaya, Kuala Lumpur, Malaysia
The purpose of this paper is to investigate the relationship between Islamic human resource practices and organizational performance. The research draws on the relationship of some Islamic human resource practices selected such selection and recruitment, training and development and reward on the organizational performance specifically service quality and productivity. This paper is the first one that attempts to find the relationship between the Islamic human resource practices and organizational performance. Human capital is an intangible asset. However, it is the most important resource compared to the other intangible resources such as reputation and goodwill and tangible resources such as machines or equipment, financial, land and buildings. This is because without human resources, these tangible resources could not be utilized in order to achieve the vision, mission, goals set and functions expected (Roslan, 2008). Human resources are the thinkers, planners, strategists and movers. Moreover, reputation and goodwill can only be gained when the employees hired are quality employees. In order to manage these quality human resources to the highest level, good human resource practices are needed. Conventional human resource practices, however; does not integrate the worldly and Hereafter matters in order to produce better workers. Many of the workers are not loyal, give priority to own self interest and have higher tendency to commit theft, embezzlement, bribery and corruption. Likewise, others have the higher tendency to come late to work, skip work, lazy or unserious in doing work (Azhar, Fauzi, Koharuddin, Rozeyta & Esa, 2006). Consequently, optimum level of individual and organizational performance could not be obtained. On the other hand, Islamic human resource practices aims at synergizing both.
Mentoring in Talent Management: Implications for Female Employees and Employees from Less Advantaged Socioeconomic Backgrounds
Gaye Karacay-Aydin, Bogazici University, Istanbul, Turkey
This paper analyzes the under-researched effects of mentoring on talent management among female employees and employees from less advantaged socioeconomic backgrounds. An extensive literature review, examining mentoring in general; career mentoring and progress; the moderating effects of gender and socioeconomic background; and talent management highlights the positive outcomes of mentoring for women and employees from disadvantaged backgrounds. Using these findings, recommendations on how to use mentoring programs to attract, retain, motivate, and develop these talent pools are presented. This is the first conceptual paper that ties mentoring applications with talent management programs for the identified employee groups. The purpose of this study is to answer the following research questions: How does career mentoring affect career progress in general and talent management specifically? And how are these relationships moderated by gender and different socioeconomic backgrounds? To answer these questions, we conducted a comprehensive literature review. We discovered answers to the following sub-questions in each part of this study: How does career mentoring affect the career progress of employees? How does the gender and socioeconomic background of employees moderate mentoring relationships? What are the possible effects of mentoring in talent management applications? And how can career mentoring be used in talent management applications among female employees and employees who come from less advantaged socioeconomic backgrounds?
What is Market Orientation and How Did it Evolve During the Time? What Do the Empiric Findings Show?
Dr. Amalia Pandelica and Dr. Ionut Pandelica, University of Pitesti, Romania
Dr. Ionel Dumitru, Academy of Economic Studies, Bucharest, Romania
The paper is an extensive analysis of the literature in the field about market-orientation. The purpose of the paper is to highlight the way in which researchers’ studies focused on different aspects of the concept during years and thus, to establish the stages that the analyzed concept underwent within its evolution. At the same time, we tried to synthesize the most important findings of the empirical researches on this subject since 1990 in order to emphasize what is market orientation. Therefore, the model of analysis is rather descriptive than normative, focusing on the most important findings of the empirical researches of the period we refer to. At the end of the paper, there is a presentation of a series of conclusions regarding the way in which market orientation has evolved since 1990 up to present time, the stages underwent by the concept within the process of evolution and some suggestions regarding future market orientation research directions. In marketing literature there is a large agreement about the roots of market orientation. Thus, it is considered that this concept has its origins in a managerial philosophy known as the concept of marketing. The concept of marketing represents the basis of modern marketing since the very moment when Drucker (1954) stated that there is only one valid definition for the purpose of a business – to create a client. Therefore, Drucker (1954) considers, the company has two and only two basic functions – the marketing and the innovation. He was the first who pointed out that marketing is not only selling but rather understanding consumers. In practice, the concept of marketing was applied for the first time by General Electric in 1950 as a managerial philosophy. The reorganization of activities allowed marketing to become the main function coordinating projecting and design activities as well as the production based on market information.
An Empirical Study on Capital Structure and Financing Decision-Evidences from East Asian Tigers
Dr. Jung-Lieh Hsiao and Ching-Yu Hsu, National Taipei University, Taiwan
Dr. Kuang-Hua Hsu, Chaoyang University of Technology, Taiwan
In general, managers make financial decisions of corporations by two ways which includes internal financing and external financing. The internal financing is the using of retained earnings. The external financing is the usage of equity, debt, hybrid securities. Based on these two kinds of financial behaviors, the capital structures of companies could be shaped differently. As a consequence, it is an important issue for managers how to minimize financial costs and maximize shareholders’ equity. According to mention above, several theories explaining financing behaviors have been developed. There are the Modigliani-Miller theorem, the trade-off theory, the pecking order theory and the market timing theory. In the present study, we re-examine the model developed by Kayhan and Titman (2007) to provide evidences about the broad patterns of financing activity in Asian emerging markets, including Hong Kong, Korea, Singapore and Taiwan. The empirical results show that the companies from all countries rebalance their leverage following equity issuances, results are more in line with the dynamic trade-off theory rather than the equity market timing or pecking order hypothesis of capital structure. The capital structure refers to the way that a corporation finances its assets through some combination of financing sources. The first choice is internal financing which is the using of retained earnings. The second choice is external financing which is the usage of equity, debt, hybrid securities. Based on different kinds of financial decisions, the companies could shape different capital structures. Eventually, it is an important issue for managers how to minimize financial costs and maximize shareholders’ equity by financial decision and the setting of capital structure.
Risk-Adjusted Performance of Real Estate Stocks in Kuwait, Saudi Arabia, and the UAE
Dr. Lawrence S. Tai, Zayed University, Abu Dhabi, United Arab Emirates
This paper examines the performance of real estate stocks listed in Kuwait, Saudi Arabia, and the United Arab Emirates (UAE) between 2004 and 2008. Using panel regressions, the goal is to identify determinants of the risk-adjusted returns of real estate stocks traded in these markets. The empirical evidence suggests that firm size, book-to-market value, and market performance have significant impact on the returns of real estate stocks in these countries. Real estate stocks in Dubai were the most profitable on a risk-adjusted basis, while real estate stocks in Kuwait registered negative risk-adjusted returns. This paper investigates the historical performance of real estate-related stocks publicly traded in four stock markets in the Middle East: Kuwait, Saudi Arabia, and the UAE (Abu Dhabi and Dubai). The Gulf Cooperation Council (GCC) countries depend on oil as a major source of its economic development, financing the various economic activities in the industrial, commercial, and real estate sectors. However, special attention was given to the real estate sector due to its close link to economic growth and development. In the past few years, GCC countries have witnessed a boom in real estate sector. But the global financial crisis of 2008 is causing the real estate markets in these countries to slump significantly. Table 1 shows the size of real estate sector in the six GCC countries.
Some Remarks About the Accounting Reform: The Case of Romania
Dr. Niculae Feleagă and Dr. Liliana Feleaga, The Academy of Economic Studies of Bucharest, Romania
Where needs have stood out in different environments or countries, accounting has aimed to develop in many ways as a response to a particular framework, starting essentially with a pattern deriving from a Darwinian principle: only the useful accounting has managed to survive (Alexander, Nobes, 2001). Our communication is placed within the field of a permanent reform in Romanian accounting in which not the usefulness of various regulation systems are in question, but the reforms’ simplicity, where the risk to fail the noblest aim of our domain resides. In conclusion, we are trying to improve such an aim and to identify the differences between the IFRS standards and the most recent category of Romanian accounting regulations for the companies registered at the Stock Exchange in Bucharest. The globalization of the capital markets, the growth of the local and international cooperation and the development of the international trade are facilitating many business opportunities in different places of the world. The companies and investors could face a series of problems. In this way, the differences between the national accounting standards could cause problems to the multinationals registered in the different markets. In the absence of a set of universally accepted standards, these companies undertake high expenses to produce and convert the accounting information according to the requirements of other jurisdictions. Moreover, the differences between standards could be a question mark for the investors and financial analysts who are mainly interested in comparing the financial performance of some companies developing similar business in other countries (Ali, 2005). Under such circumstances, the focus is on equalizing the accounting practices on the international level. In June 2002, the European Union established the obligation to apply the IAS/IFRS standards, starting with 2005, for the consolidated accounts of the companies registered on stock exchange markets.
Third Party Logistics Service Providers and Logistics Outsourcing in Malaysia
Abdul Latif Salleh, Ph.D., Prince Sultan University, Saudi Arabia
Azri Dali, University of Malaya, Malaysia
In today’s business environment characterized by the globalization of markets and intensification of competition, business firms have been compelled to find ways to exploit the opportunities and neutralize the potential threats. One of the strategic moves taken by many firms has been to mount a concerted effort to penetrate and develop products for a global market. In turn this has led to impressive growth in external trades and dramatic increase in the demand for logistics services. Thus, many firms today source components for their products globally. The need to have an efficient logistics services and the increasing emphasis on time-based competition have, in turn, called for improved performance on the part of logistics service providers. This paper is based on an empirical study carried out to study the practice of logistics outsourcing in Malaysia and reports part of the study, which examines the usage of third party logistics services in Malaysia from the perspective of logistics service providers. This exploratory study looks at the perception of logistics service providers on the extent to which Malaysian firms use the services of logistics companies, the decision making process involved in choosing logistics providers, and the impacts of such services on the firms involved. Globalization has emerged in recent years as a major force shaping business policy and strategy. To effectively compete in today’s increasingly challenging globalized market, companies must find ways to position themselves in ways that would allow them to take advantage of the emerging opportunities and neutralize the potential impending threats. In order to penetrate the evolving global market, these firms must develop specific strategies tailored to meet the needs of the expanding market. One of the discernible impacts of the pursuit of for global market has been the dramatic growth in external trades and the increasing demand for logistics services. Since competing in the global market requires companies to develop or acquire competitive advantages, many businesses have been forced to seek different ways to enhance their competencies and capabilities.
Attitudes of Spirituality: Pilot Study from Lithuania
Dr. Vilmante Kumpikaite, Assoc. Prof., Kaunas University of Technology, Lithuania, EU
This paper discusses attitudes of spirituality meaning and involving it to work. According to the census data, at the beginning of 2001 in Lithuania lived 3,484 thousand population and 83,60 percent of them are faithful in one of 31 different religions. Therefore the biggest size, even 79 percent of believes are Roman Catholics. The rationale for this study lies in the fact of this statistical data and that people of Lithuania as of most other cultures of the entire world have a spiritual quest. Literature review presents different definitions of spirituality provided by McCormick, 1994, Dehler and Welsh, 1994, Zinnbauer et al., 1997, Marcic, 2000 et al. The pilot survey from Lithuania is based on this literature review and looks at how its residents understand spirituality and its values in everyday life and workplace. The main question of this paper is to describe what spirituality is and how people understand the meaning of it. Can spirituality exist without mentioning God or religion? And should spirituality to exist not only in personal life but also at work? We are a nation of privatized morality that places corporate and civic people in a labyrinth of uncertainty when they try to establish a moral foundation for actions and decisions affecting the public interest (Thompson, 2004). Community, contribution, and cooperation may be important values at home, but in the workplace, rewards accrue from independence, competition, and acquisition. Work provides a livelihood, but at the same time is life-draining for many because it asks us to leave much of ourselves at the door when we come to work. Many academic journals like the Journal of Management Education, Journal of Organizational Change Management, Leadership Quarterly, Organization, Journal of Social Economics, Pfeffer annual of Training and Consulting, and so on, have brought out special issues or published articles on different aspects of spirituality. However it is still field of interest in scientific world and area for theoretical and empirical studies about spirituality at work.
The Internationalization Process of Fashion Retailers
Dr. Joao Pedro Almeida Couto and Dr. Maria Teresa Borges Tiago, University of the Azores
This study analyses the internationalization process of the following firms: H&M, Esprit, Mango, Gap, Inditex and Benetton. Based on the Uppsala model and on various internationalization studies, it is analysed the influence of the following factors: cultural distance, geographic distance, language knowledge, target market attractiveness, target market knowledge/experience, the firms’ internal factors. It is also studied how these factors vary between the initial internationalization steps and the process as whole. When we think in terms of the internationalization of a retail firm, this is normally understood to signify the creation of a retail establishment abroad. However, a retailer can embark on one or more of various forms of internationalization (Dawson, 1993; McGoldrick, 1995). According to McGoldrick (1995), there are three main elements in the internationalization of a retail firm: first, the operation of a retail establishment abroad, second, the production of a product with components obtained in different countries; and third, the transfer of management knowledge between countries. External factors are important in the internationalization decision (Dunning, 2001). Economists consider that there are additional costs and risks derived from political instability and social and economic differences between countries when investing abroad (Davidson, 1980; Hirsh 1976). The decision of a firm to internationalize depends on the identification of alternatives to internationalization, knowledge of the uncertainties involved in the process and the extent of risk that the firm is prepared to take.
Augmented Monetary Conditions Index: The ARDL Approach
Wai-Ching Poon, Ph.D., Monash University, Sunway Campus, Selangor, Malaysia
This paper constructs the augmented monetary conditions index (hereafter AMCI) in Indonesia over the quarterly period 1983:2-2004:4 using ARDL approach. Results evidently reveal a long-run relationship between the real GDP and its determinants, namely short- and long-term interest rate, real exchange rate, claim on private sector and share prices that take into account the interest rate, exchange rate, credit, and asset price channels in the conduct of monetary policy transmission mechanisms. Result has verified the stability of Indonesian output demand function. The monetary policy stance that Bank Indonesia reacts is corresponding to the movement in augmented MCI, especially after the Asian financial crisis. Nevertheless, credit channel is insignificant in the monetary policy stance. The purpose of constructing a Monetary Conditions Index (MCI) is to assess how restrictive a country’s monetary policy is, using a synthetic index that shows the joint effects of variations in the interest rate and exchange rates on economy. MCI is featured eminently as an operational target, as an indicator of the monetary policy stance, or as an instrument in the monetary policy rule (Batini and Turnbull, 2002). MCI provides a means of signalling the view of central bank the appropriate stance of policy, without specifying the view on either interest rates or the exchange rate (Reserve Bank of New Zealand, 1998). There is no reference to a ‘neutral level’, it only represents a relative degree of severity, and not an absolute degree (Frochen, 1996).
European Accounting Harmonization and National Standard Setting
Dr. Voicu D. Dragomir, Dr. Liliana Feleaga and Dr. Niculae Feleaga
The Academy of Economic Studies of Bucharest, Romania
The purpose of this paper is to assess the current knowledge base on financial accounting standardization in EU Member States. Our review of more than 50 articles reveals the methodological diversity of the dedicated literature, from conceptual to empirical, with all shades in between. We adopted a cross-sectional / longitudinal classification for articles available in three scientific databases. Our review indicates that for the majority of EU Member States there is no updated information on national accounting systems. Most of the empirical contributions refer to regulatory frameworks effective in the 1990s or in the early 2000s. In this context, can we find any actual relevance for previous literature in the context of contemporary research? The literature discussing the provisions and evolution of accounting standards has already got a reputable history and is getting richer every day. Some contributions are of a descriptive nature (Cairns, 2004; Stittle, 2004), some are empirical (Bonaci et al., 2008), while others use a comparative (Street & Shaughnessy, 1998), historical (Hudack & Orsini, 1993) or critical (Alexander & Archer, 2000) approach. Overall, we can say that all of these provide insights on comparative international accounting, as well as enriching the discussion base of historical accounting research (Carnegie & Napier, 2002).
Dividend Payout Ratio, Investment opportunities, and the Pecking Order Theory: Evidence from Taiwan
Ching Liang Chang, Kainan University, Taiwan
This paper uses the two-stage least square (TSLS) method to test the prediction of the pecking order theory that there is a negative interaction between dividend payout ratio and investment by a Taiwanese pooled sample for the period 2002-2007. The result is supportive of this prediction. It also observes that there is a positive interaction between dividend payout ratio and financial leverage over the same period. This paper adds to the previous studies by using the TSLS method. The results accord, in general, with the previous evidence as far as the effect of dividend payout ratio and investment, and the effect of dividend payout ratio on financial leverage. The only inconsistence with the previous evidence is the interactive effect of financial leverage and investment. How should firms finance their investment projects? The pecking order theory is the central theory of this financing decision. According to Myers (1984), due to adverse selection, firms are predicted to prefer internal finance as their main source of funds for investment. Next in order of preference is debt, and last comes external equity financing. There are at least two other predictions of the pecking order theory. (1) Internal finance is first used to undertake investments prior to dividend payouts. Thus, investments are predicted to have a negative influence on dividend payouts. (2) Investments will be forgone or postponed since internal finance has been used to pay dividends. It follows that dividend payouts have a negative influence on investments. These predictions were refined into a testable prediction that there is a negative interaction between dividend payout ratio and investment by Adedeji (1998).
“Africa Technology Improvements Aiding in Country Mapping”
Dr. Shawana P. Johnson, President, Global Marketing Insights, Inc. Independence, OH
The U.S. Geological Survey, (USGS) serves the Nation by providing reliable scientific information to describe and understand the Earth; minimize loss of life and property from natural disasters; manage water, biological, energy, and mineral resources; and enhance and protect our quality of life. In their continuing support of the Earth Sciences the USGS funded a comprehensive research study of the African international remote sensing market. This study was a follow on study completed by Global Marketing Insights, Inc. under a contract with the U.S. federal government agency, of the National Oceanic and Atmospheric Administration (NOAA) Satellite and Information Service Division for the U.S., Canada, Europe, and Asia in 2005, 2006 and 2007. The market research study of the African Remote Sensing Market in aerial and satellite data technologies was completed in 2008 and includes a five and ten year analysis of the Political, Economic and Technical Trends impacting the African Remote Sensing Professions; Academic, Commercial and Government Users. Over 400 participants responded to the study through 15 in-country partners. Individuals from the African Commercial, Government and Academic sectors of the Remote Sensing Profession participated in the study by logging onto www.empliant.com/USGS-remote-sensing-research . The following provides the research highlights of the technology and trend findings for the African Market in 2008-20018 versus the findings in the rest of the world.
Food and Beverages Management Performance of Taipei International Tourist Hotels
Jung-Feng Cheng and Dr. Chia-Yon Chen, National Cheng-Kung University
Dr. Yung-kun Chen, Chung Chou Institute of Technology
Dr. Chun-Chu Liu, Chang Jung Christian University
Due to the growth of the global tourism market, the tourism industry has become a major foreign currency revenue source in many countries. The Taiwan government adopted the two-day weekend in 2000 to promote domestic tourism and also initiated a “Plan for the Doubling of Tourist Arrivals” in 2002 to contribute to the boom in food and beverage sales in Taiwan’s international tourist hotels. As Data envelopment analysis (DEA) rarely has been applied to evaluate food and beverages management performance, this research thus appraises food and beverages management performance of Taipei international tourist hotels. DEA states that three international tourist hotels in Taipei have achieved overall technical efficiency, five have achieved technical efficiency and three scale efficiency. This shows that food and beverages management suffers a serious scale problem in Taipei tourist hotels. Overall technical, technical, and scale efficiencies of food and beverage services are better in chain operations than in independent operations. Regarding sensitivity analysis, although most Taipei international tourist hotel food and beverages costs have certain advantages, improving competitiveness by innovating, maintaining advantages, and improving disadvantages are important issues.
Applying the Philosophy of Sufficiency Economy to Form Business Policy and Marketing Plan of Small and Medium Enterprises in Thailand
Guntalee Ruenrom, Ph.D., Chulalongkorn University, Bangkok, Thailand
The philosophy of Sufficiency Economy has been developed by His Majesty King Bhumibol of Thailand for over three decades. During the economic crisis which hit Thailand and the region in 1997, the philosophy of Sufficiency Economy has been applied by people and businesses. The main idea of the philosophy is the middle path of doing things in order to sustain the development of the country and to cope up with external influences and rapid changes of globalization. This paper aims to study the perception towards the philosophy and the applications of the philosophy of Sufficiency Economy of Thai SMEs to form their business policies and marketing plans. In present day of economic system, marketing plays an important role in driving organizations to meet customer needed. Marketing generates investment, production, and employment which are necessarily driving factors for the economic growth of Thailand. Since 1999, the economic, social, and political issues in Thailand have been in volatile situations. Using GDP as an indicator of measuring Thai’s economic size and comparing Thai’s economic with other countries may perhaps inappropriate indicator to reflect the real economic and social situations in Thailand. In 2003, GDP of Thailand is approximately 7.1 thousands billion Bath (NESDB). But the economic growth is measured by using real GDP because real GDP measures growth of productivity at fixed price. The real GDP of Thailand in 2003 was roughly 4.7 percent (NESDB). The export value was roughly 110.1 billion dollars and import value was nearly 117.7 billion dollars. As a result, Thailand had total deficit in trade account 7.6 billion dollars, current account 3.2 billion dollars which was approximately 1.8 percent of GDP. Additionally, the inflation rate in Thailand in 2008 was 4.5 percent.
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