The Business Review, Cambridge

Vol. 23 * Number 2 * December 2015

The Library of Congress, Washington, DC   *   ISSN 1553 - 5827 

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Distribution Practices of Women’s Promotion Groups in Senegal: A Role for Marketing

Dr. Nancy Haskell, Laval University, Quebec (Quebec) Canada

Yvonne M. L. Sawadogo, Laval University, Quebec (Quebec) Canada

Dr. Donald Beliveau, Laval University, Quebec (Quebec) Canada



In Sub-Saharan Africa, social partners and public authorities have provided assistance to local women’s promotion groups in subsistence marketplaces to assist them in producing for their own needs and, under certain conditions, to allow them to sell to the public. However, while microcredit and some basic management seminars aim at assisting these groups to engage in revenue-generating activities, they are left on their own when it comes to how to commercialise their products.  This paper seeks to, first, explore the distribution practices of women’s promotion groups in Africa and, second, analyse whether appropriate distribution practices may help them improve their commercialisation and, by extension, their revenues.  Several approaches were used to maximize the data gathered and to cross-validate information from different sources. Analysis based on the marketing literature offers a structured view of the distribution activities and challenges of three Women’s Promotion Groups (WPGs) in Saint-Louis, Senegal. Managerial implications are offered for both WPGs and supporting organisations.  There has been marked progress in reducing global poverty over the past decades. However, despite the progress realized, the most recent estimates suggest, in 2011,  more than one billion people lived on less than 1,25 USD a day (World Bank 2015a). It is therefore not surprising that poverty reduction remains a major preoccupation, especially in developing countries. Positive action programs to assist those living at or below the poverty line are numerous, initiated by supranational and national organisations as well as local authorities and organisations.  In this context, women’s promotion groups (WPGs) in developing countries, in geographical zones characterized by a strong prevalence of subsistence living,  are playing an important role in certain of these economies (Toledo-López et al. 2012). These groups pursue various objectives, many of which are economic. A number of these groups have received microcredit, and some have benefited from basic management education to assist them in engaging in revenue-generating activities. These actions are aimed at breaking the poverty cycle within impoverished communities. However,  Duflo (2010) suggests that “giving the fight against poverty to the poor” may require more context-specific action and structured evaluation if these efforts are to truly help the very poor to improve their conditions.  However,  little is known about women’s promotion groups, their operations, and the difficulties they face.  Furthermore, since promoting economic activities is the focus of much of the assistance they receive, and revenue generation is one of the ultimate goals (to allow group members to improve their living conditions), knowledge of their practices is imperative.  Unfortunately, no research was found that delves into the realities of commercialisation by WPGs.  The particular focus of this research is thus on distribution, an important element of commercialisation that is intimately related to the cultural context within which an organisation operates.  This paper first introduces subsistence marketplaces and women’s promotion groups. The multiple approaches used to collect data are described, and a profile of the three women’s promotion groups in Saint-Louis, Senegal that are the subject of this study is presented. Then a structured description of their distribution practices, both business-to-business and business-to-consumer, is presented from a marketing perspective. Finally, implications for the WPGs and for the organisations that offer them support are discussed. A consensus exists about the severity of poverty that predominates in developing countries. However, there is divergence concerning the approach to evaluate poverty. Prahalad and Hart (2002) estimated that 4 billion people live at the base of the pyramid (Hammond and Prahalad 2004; Hart and Christensen 2002) with less than 1500 US dollars annual per capita income, based on Purchasing Power Parity (PPP), or about 4.11 USD per day.  However, others place subsistence marketplaces far below this level in terms of poverty threshold. For instance, Karnani (2007) defined the poverty line as being a PPP of 2.00 USD per day. and the World Bank distinguishes levels of poverty by defining extreme poverty as a PPP of  1.25 USD /day (Damon 2010), or approximately 455 USD /year. Furthermore, Ireland (2008) suggests a distinction between rural and urban poverty.  Subsistence economies may be characterized as (De Laulanié 1973): a predominance of auto consumption of production:  goods produced serve essentially the needs of producers. a narrow consumer market:  nearly all buyers are local.  Narrowness refers to the quantitative and qualitative aspects of the market: consumers purchase in small quantities which reflect their limited purchasing power; and, qualitatively, producers offer a limited range of products.  marketing/sales of surplus production; the offer varies based on the quantities produced.  direct sales to customers is most frequent. More recently, different disciplines have focused on impoverished communities and nations, each aiming to develop knowledge and understanding and address poverty. Kohl et al (2013) offer an excellent review of different disciplines and their research perspectives on subsistence marketplaces. From the business literature, scholars (e.g. Yunis 1994; Chu 2007) study the effects of providing micro loans to the poor to finance their entrepreneurial activities. In addition, the well-known Bottom of the Pyramid (BOP) approach (Prahalad and Hart 1999) suggests that large firms doing business with the poor will foster market productivity, which will in turn lead to an increase in GDP and help alleviate poverty.


Reducing Stock Risk with Hedge Funds

Dr. Mitchell Ratner, Rider University, Lawrenceville, NJ

Dr. Chih-Chieh (Jason) Chiu, Rider University, Lawrenceville, NJ



This paper tests the risk reduction properties of hedge fund investing against a sample of stocks ranging from 1990 through 2014. GARCH dynamic conditional correlation analysis indicates that hedge funds are a significant diversifier due to the consistent imperfect relationship between the hedge fund returns and the stock return indexes. Hedge funds serve as a weak safe haven in times of extreme stock market volatility. During periods of financial crisis, hedge funds also largely function as a weak safe haven. In contrast to their name, hedge funds do not provide a traditional “hedge” against stock risk.  Imperfect correlation among investments is the foundation of most asset allocation strategies. The potential benefit of portfolio diversification motivates investors to identify assets that have relatively low correlation with stocks. While stocks and bonds remain the primary assets recommended by financial professionals, investors are acutely aware that they must identify alternative assets to reap the gains from diversification. The word “hedge” in finance refers to the reduction of risk. Hedge funds were initially established to reduce the risk of stock investing. Modern hedge funds use aggressive investment strategies that are often more risky than the stock market, but still have the potential to reduce portfolio risk. As global markets continue to converge, investors need to seek out alternative assets to further gain from diversification. Hedge funds invest in a variety of securities, assets, and derivatives, both domestic and international, and are considered assets that move with relative independence from stocks.  A hedge fund is similar to a mutual fund in that it pools money from many investors and purchases securities. Unlike mutual funds, hedge funds can only be sold to accredited investors (those exceeding a minimum of wealth or institutions). Since they cater to relatively sophisticated investors, there is little government regulation of the industry. Hedge fund managers generally use very aggressive strategies and are free to invest in any type of asset (stocks, bonds, commodities, real estate, derivatives, etc.). Hedge funds increase their risk relative to mutual funds in that they frequently use leverage (borrowed funds) to increase their bets. Hedge funds appeared in the early 20th century but weren’t a consistent product until the late 1940s. While initially designed to reduce exposure to stock risk, hedge funds today are not necessarily expected to have that function. As alternative investments, however, hedge funds are expected to move differently than the stock market, and offer superior performance and/or diversification benefits compared with traditional investing. In addition to diversification benefits, hedge funds can serve as stand-alone investments. Largely the domain of the wealthy, retail investors now have the opportunity to easily purchase hedge fund-based mutual funds and exchange traded funds (ETFs). While hedge funds have outperformed the overall stock market from 1999 – 2014 (including the financial crisis of 2008), they have underperformed the broad stock market since 2009 (Copeland and Zuckerman, 2014). The perception exists that hedge funds are another tool that enhances the wealth of the rich. Regardless of wealth, this study will address the impact of hedge fund investment on a diversified stock portfolio. Using GARCH dynamic conditional correlation (DCC) this paper investigates hedge funds as a hedge, safe haven, or diversifier, against stock investment in the United States and globally from 1990-2014. Following Bauer and Lucey (2010), an effective hedge is defined as an asset that is consistently uncorrelated or negatively correlated to stock price movements. A safe haven is an asset that is consistently uncorrelated or negatively correlated to stock price movements during times of market turmoil. A diversifier is an asset with a positive, but imperfect correlation against stocks.  There are several main findings presented in this study. First, hedge funds are diversifiers against stock risk as evidenced by consistently positive but imperfect co-movement between hedge fund returns and stock index returns. Second, in times of extreme market volatility, hedge funds are a weak safe haven against stock risk. Third, hedge funds are largely a weak safe haven during periods of financial crisis. Fourth, in contrast to their name, hedge funds do not provide a traditional “hedge” against stock risk. The remainder of this article is presented as follows: a review of the literature on hedge funds and on safe haven assets; description of the data; methodology and specification of the models used; empirical analysis; conclusion of the study. As hedge funds utilize proprietary models, it is not always easy to evaluate their risk and return structure (Agarwal and Naik, 2004). Given the varying ways to measure performance, some studies have questioned the effectiveness of examining hedge fund returns using traditional techniques (Eling and Schumacher, 2007). Studies have shown that hedge fund returns are not normally distributed, may experience a change in strategies over time, and are not generally connected to global stock returns and risk factors (Fung and Hsieh, 1997 & 2011). Stulz (2007) claims that hedge funds have distinct advantages over mutual funds due to their light regulation and employment of more complex investment strategies. The author argues that hedge funds increase market efficiency and are beneficial to the overall market. Stulz (2007) observes that hedge fund risks are relatively small, except for short-term liquidity risk. Soydemir et al. (2014) find that lack of reporting regulation creates a bias in the hedge fund data used in all academic studies, including their own. Amenc et al. (2003) show that the low correlation of hedge funds with stocks improves the risk and return structure of stock portfolio returns.


Unintended Consequences of Dodd Frank Act When Shadow Banking Creates A Moral Hazard

Dr. Michael Ulinski, Pace University, NY

Dr. Roy J. Girasa, Pace University, NY



The  Dodd Frank Act was intended to stop bank that were too big to fail and spurned a smaller scale but potent banking system coined as Shadow Banking. The researcher provide background on the creation of and the potential harm of this system. Comparisons with traditional banking, pitfalls of it's use are examined and conclusions are drawn. There are a variety of definitions of shadow banking and what the term encompasses, none of which are all inclusive and are dependent on the approach one takes in its examination. The term “shadow banking” was originally coined by Paul A. McCulley in 2007 who attended the Kansas City Federal Reserve Bank annual symposium in Jackson Hole, Wyoming. The meeting to discuss the financial crisis then occurring nationally and globally focused on systemic risk and, in particular, what the author dubbed the “shadow banking system” which he noted was “the whole alphabet soup of levered up non-bank investment conduits, vehicles, and structures.”(1) In a series of Staff Reports issued by the Federal Reserve Bank of New York (“FSB”), the authors defined “shadow banks” as “financial intermediaries that maturity, credit, and liquidity transformation without explicit access to central bank liquidity or public service credit guarantees.(2)Similarly, two of the said authors in a later FSB report defined the term as “a web of specialized financial institutions that channel funding from savers to investors through a range of securitization and secured funding techniques.(3) Other definitions are comparable: “The system of non-deposit taking financial intermediaries including investment banks, hedge funds, monoline insurance firms and other securities operators;(4) “all financial activities, except traditional banking, which require a private or public backstop to operate;(5) and “The financial intermediaries involved in facilitating the creation of credit across the global financial system, but whose members are not subject to regulatory oversight. The shadow banking system also refers to unregulated activities by regulated institutions.(6) Historical Setting. Traditional banking has had a checkered history having commenced at the inception of the new republic with the creation of the First Bank of the United States (1791-1811) under the leadership of Alexander Hamilton, the first Secretary of the Treasury under President George Washington. The issuance of bank notes was by state banks due to the lack of a national currency. In the seminal case of McCulloch v. Maryland(7) the United States Supreme Court decided that Congress had the right to create a bank under its power to make “all laws which shall be necessary and proper, for carrying into execution” its delegated powers under Article I of the Constitution. In the midst of the Civil War of 1861-1865, Congress enacted the National Banking Act(8) that established standards for banks including minimum capital requirements and the issuance of loans, as well as the imposition of a 10 % tax on state banknotes that effectively removed them from circulation.(9) The Federal Reserve Act of 1913(10) created the national system of banks that has existed to the present day. It required all national banks to be members of the Federal Reserve System and to maintain levels of reserve with one of the 12 Federal Reserve banks. State banks are also eligible to become members of the Federal Reserve System with all of the attendant benefits thereto including federal protection of deposits. The “Fed” conducts monetary policy, supervise and regulates banks, protects consumer rights, provides financial services to the government, financial institutions, and makes loans to commercial banks. The Great Depression that commenced in 1929 and ended with the entry of the U.S. into World War II led to Congressional inquiry concerning the causes of the said Depression. It was noted that there were bank panics almost every 20 years. It discovered that among the major causes were the heavy investments in securities by bank affiliates in the 1920s, serious conflicts of interest between banks and their affiliates, speculative investments by banks, and high-risk ventures. Accordingly, the Banking Act of 1933,(11) better known as the Glass-Steagall Act, became the law of the land.  Bank Separation. Glass-Steagall created the separation of banks into commercial banks and investments banks. Thus, §20 of the Act forbade a member bank from engaging in the issuance, flotation, underwriting, public sale, distribution, or participation of stocks, bonds, debentures, notes, or other securities. §21 forbade firms that engaged in the said forbidden activity from receiving deposits, certificates of deposits, or other evidences of debt. The payment of interest on accounts was restricted by the Act to prevent ruinous competition. As a result bank panics that occurred virtually every other decade did not occur from 1933 until many decades later apparently as a result of the removal of the said separation of banks. The passage of the Riegel-Neal Banking and Branching Efficiency Act of 1994(12) repealed the prohibition of interstate banking by permitting banks to purchase banks in other states or to establish branches therein. The Federal Deposit Insurance Corporation (FDIC) was given jurisdiction over state nonmember banks; the Office of the Comptroller of Currency received jurisdiction over state nonmember banks; and the Federal Reserve Board over state member banks. Applicants for expansion were judged by their compliance with the Community Reinvestment Bank of 1977,(13) which mandated reinvestment by out-of-state banks in the local communities where they were located.  Repeal of Glass-Steagall. In the 1990s U.S. banks complained that they could not compete with foreign, especially Japanese multi-service banks that offered both commercial and investment banking services. The share of total private financial assets held by these banks declined from 60 % to 35 % for the period of 1970-1995. As a result and after four decades of the Glass-Steagall separation without any major run on banks, the Financial Services Modernization Act popularly known as the Gramm-Leach-Bliley Act of 1999 was enacted.(14) The first section of the Act repealed the Glass-Steagall separation of commercial and investment bank. It permitted the creation of a new “financial holding company” whereby the entity may engage in any activity that the Federal Reserve Board determines to be financial in nature or incidental to such activity. It did provide, however, that the activity not pose a substantial risk to the safety or soundness of depositary institutions or to the financial system generally. Thus, banks could now offer services that included insurance and securities underwriting and merchant banking. Whereas banks had avoided panics for twice the time period historically, the banking crisis of 2007-2009 raised issues of the soundness of the Glass-Steagall repeal and “too-big-to-fail” bank holdings. Dodd-Frank Reforms. Whenever a financial crisis looms, it is almost inevitable that governmental regulation is promulgated to solve or prevent re-occurrence thereof. The thousand-page Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank)(15) was signed into law which contained numerous sub-titles that sought to alleviate many of the ills affecting the financial system. Title VI, known as “Bank and Savings Association Holding Company and Depository Institution Regulatory Improvements Act of 2010,” explicitly dealt with bank holding companies created under Gramm-Leach-Bliley. Rather than restore the Glass-Steagall separation of commercial banks from investment banks, the major emphasis of Title VI is that a bank holding company is to be “well-capitalized and well-managed.”(16) §38(b) of the Federal Deposit Insurance Act(17) defines “well-capitalized” as follows: “An insured depository institution is “well-capitalized” if it exceeds the required minimum level for each relevant capital measure.” Dodd-Frank raised the standard of well-capitalized to be where its total risk-based capital ratio is 10 % or greater, a Tier I risk-based capital ratio of 6 % or greater, and a leveraged capital ratio of 5 % or greater.


The Potential Impact of FASB’s Proposed Changes to the Statement of Cash Flows

Dr. Roberta Cable, Professor, Pace University, Pleasantville, NY

Dr. Patricia Healy, Pace University, Pleasantville, NY

Dr. Claudia Li, Pace University, Pleasantville, NY




This research studies the impact of FASB’s proposed changes to the Statement of Cash Flows on not-for-profit organizations. Our study focuses on the change in the classification of purchases and sales of long-lived assets to operating activities from investing activities.  It examines the potential effect of this change on the cash flow from operating activities for two different types of not-for profit entities, charities and hospitals.  Our result shows that this reclassification affects different types of not-for-profit organizations differently.  Specifically, hospitals, representing the kind of not-for-profits that receive the majority of its revenues from private payments, incurred a significantly larger impact on cash flows from operating activities than did charities, representing the kind of nonprofits that receives the majority of its revenues from donations. Our study provides insights not only on not-for-profit, but importantly, on for-profit entities about the possible effects of a future FASB proposal on the Statement of Cash Flows. The Financial Accounting Standards Board (FASB) proposed major changes in the financial presentations of not-for-profits.  Working under their goals of improving the understandability and usefulness of financial statements, they issued the recent exposure draft, Proposed Accounting Standards Update (2015).  A focus of this exposure draft was to change the presentation of financial statements for not-for-profit entities as required in the Statement of Financial Accounting Standards No. 117.   Among other things, this proposal dealt with the Statement of Cash Flows, a mandatory part of issued financial reports detailing cash inflows and cash outflows during a reporting period.  Along with requiring only the direct method of reporting cash flows from operating activities, the FASB proposal required a change in classification of certain items within this statement.  Our research examined the change in classification of purchases and sales of long-lived assets as operating activities rather than investing activities for two different types of not-for profit entities, charities and hospitals.   FASB’s Statement No. 95 (SFAS No. 95), Statement of Cash Flows (1987) and Statement No. 117 (SFAS 117) Financial Statements of Not-for Profit Organizations (1993) require for-profit and not-for-profit entities to provide a cash flow statement for each period for which operating results are required.  Similar requirements are applicable to enterprises following International Accounting Standards Board (IASB) Standard No. 7, (IAS No. 7) Cash Flow Statements (1992).  The cash flow statement explains the change during the period in cash and cash equivalents, and classifies inflows and outflows relating to operating, investing and financing activities.  While the objective of FASB is to provide accurate reporting metrics, many reporting issues persist that cloud the transparency of the Statement of Cash Flows.  Specifically, limitations arise from inconsistent, and sometimes, ambiguous implementation of the three-part classification of cash inflows and outflows. Under SFAS No. 95, cash flows for business entities are classified in the cash flow statements under three activities:  operating, investing and financing.  SFAS No. 117 for not-for-profit entities also requires the same three activities.  For the most part, there are only slight differences between SFAS No. 117 and SFAS No. 95, relating to the classification of items as activities in this statement.  Alderman and Mueller (2003) state that SFAS No. 117 provides little guidance on reporting cash flows beyond that offered in SFAS 95. One exception is that donor imposed restrictions may influence activity classifications for not-for-profit entities. Operating activities include all transactions and events other than investing and financing activities.  These activities generally relate to producing and delivering goods and providing services.  Operating inflows include customer collections from the sales of goods and services, interest and dividend collections on debt and equity securities, and all other receipts not defined as investing and financing inflows.  Operating outflows include interest payments, payments for inventories, payments to employees, payments to suppliers of other goods and services, payments to settle asset retirement obligations, payments to governments for taxes (if applicable), duties, fines and other fees, and all other payments not defined as investing or financing outflows. The analysis of the operating activities section of the statement of cash flows is essential to assess the financial health of an enterprise.  Financial analysts use this section in several ways.  For example, net income under accrual accounting may be an unreliable indicator of quality as it is based on various estimates to determine both revenue and expenses.  When assessing quality, analysts are looking for cash flows from operating activities to be consistently greater than a company’s net income.  Some analysts believe the focus on cash flow from operations rather than earnings provides a clearer picture of a company’s abilities to generate cash as it strips away the accounting assumptions built into earnings. Furthermore, analysts can determine if an entity has a positive cash flow coming from the company’s recurring activities, its operations.  An entity can have positive cash flow because of selling off assets or issuing stocks and bonds.  However, these activities are typically one-time gains in cash flow, and should not be considered an indicator of financial health. Also, a popular measure of financial performance, free cash flow, tells how much cash is left over from operations after capital expenditures.  It is computed by subtracting capital expenditures from cash flow provided by operating activities (although there may be variations in calculating this financial ratio).  Analysts focus on free cash flow because it tells them how much cash an entity has to pursue future opportunities.  Potential opportunities include developing new products or programs, making acquisitions, paying interest and dividends and reducing debt.  Investing activities include the acquiring and disposing of plant assets, other productive assets, and financial investments, and making loans to and collecting loans from other entities.  Investing inflows include receipts from collecting or disposing of loans, receipts from sales of debt and equity instruments from other entities, and receipts from sales of plant assets and other productive assets.  Investing outflows include the payments to make or acquire loans, payments to acquire debt or equity securities of other entities, and payments to acquire plant and other productive assets.  A change in cash flow from the investing activities is the result of gains or losses from investments in the financial markets, and purchases and sales of capital assets, such as, plant and equipment.  


Reclassifications for More Meaningful Presentations of Cash Flows

Dr. Farrell Gean, Pepperdine University, CA

Dr. Fred A. Petro, Pepperdine University, CA

Virginia Gean, California Lutheran University, CA



The authors of this paper continued to receive positive feedback from both undergraduate and graduate students when certain reclassifications for the statement of cash flows accounting report would be suggested in the classroom. Consequently, it was believed it would be useful to provide supporting arguments for these suggested changes in the following paper. After the underlying theory of the reclassifications is presented, it was believed that empirical evidence should be gathered to ascertain the desirabilityof the suggested changes by undergraduate and graduate students. Empirics are presented and analyzed. Evidence seems to support the desirability for these proposed changes. The generally accepted format for the statement of cash flows is to categorize cash flows according to three types of activities:  operating, investing, and financing.  This three prong approach is believed to provide more useful information for users than simply to place all cash inflows into a sources and all cash outflows into a uses classification.  This two category approach was the generally accepted format for a number of years.  Some made reference to this format as the “Where got? Where gone?” statement.  It was sometimes compared to a swimming pool with the beginning cash balance the level of water at the beginning of the period, and the level of the water at end of period represented the ending balance of cash. If there were more sources of cash, inflows of water, than  outflows of cash, outflows of water; then the level of the pool water would rise.  The level of the water would drop if the reverse was true being more outflows than inflows of water.  This required one to conceptualize the difference between a stock and a flow; with the beginning and ending balances of cash  viewed as stocks, and the inflows and outflows a flow.  This in part led to the preference to form three categories for the cash flows. In 1987the FASB issued statement of financial accounting standard No. 95, “Statement of Cash Flows”. This statement established standards for cash-flow reporting. It provides the authoritative support for the three activity format mentioned above. The primary purpose of the statement of cash flows is to provide relevant information about the cash receipts and cash payments of an enterprise during a period.  This purpose is consistent with the objectives and concepts set forth in the FASB conceptual framework as set forth in statements of financial accounting concepts  Nos. 1 and 5.  For example, statement of financial accounting concept No. 1, “Objectives of Financial Reporting by Business Enterprises,” states that the general objective of financial reporting is to provide information to investors and creditors about the amount, timing, and certainty of future cash flows. Because of this three category structure, concern and controversy continue to surround the classification of three items: interest expense, dividend income, and interest income in the statement of cash flows accounting report.  All three items are presently reported as cash flows related to operating activities.  There is a belief that this is a generally accepted accounting principle ,GAAP, heavily influenced by income tax law.  Interest expense is an allowable deduction for calculating taxable income but dividends are not allowable.  Furthermore, both interest and dividend income are considered income by the tax laws.   It is generally known that a number of accounting standards endorsed to  guide external, financial reporting are influenced by income tax law as well as legal liability. This paper  presents the theoretical arguments for reclassifying interest expense, dividend income, and interest income in the statement of cash flows.  After supporting theory for the suggested reclassifications is provided, procedures for implementing these changes is demonstrated.  Following the theory and procedures, empirical evidence is presented showing the desirability of these reclassifications by both business undergraduate  students,  and MBA graduate students.  Dividends paid to stockholders are reported as cash outflows related to financing activities but interest paid to creditors, being a return for debt financing, is reported as an outlay for operations.  It seems to the authors that consistency argues that both dividends and interest expense should be categorized as financing activities.  Both outflows of cash represent a return to capital suppliers as a return on investment.  These cash flows are related to the capital structure of the firm and not linked to the production and marketing operations. The sale and retirement of debt are categorized as financing activities. Why not treat the interest payments as financing activities as well? Therefore, the first suggested reclassification is to move interest expense from the operating activities category to the financing activities section of the statement of cash flows.  Research shows that cash from operations is frequently used by investors and creditors in their decision-making. This reclassification would provide a more reliable number for the cash from operations to be used in predicting future cash flows from continuing operations.   Anecdotal evidence gathered through discussions with controllers and chief financial officers reveals that interest expense is often treated as a financing activity when a statement of cash flows is prepared for internal use for management.  The next step in this research project is to survey controllers, chief financial officers, certified public accountants, certified management accountants and accounting professors to assess the desirability of these groups to make this reclassification as well as the other two included below. These reclassifications apply to any business that is not an investment banker where financial assets bought and sold would be inventories.  On the front end of the buying transaction, purchases of both debt and equity instruments are classified as investing outflows.  Then when these instruments are sold , the proceeds are classified as investing inflows.  These classifications are logical because these outflows and inflows in no way can be considered as flows related to revenue and expense transactions. Furthermore, for these businesses, when applying the indirect method to calculate cash flow from operating activities , gains and losses from selling both debt and equity instruments are currently removed or added as adjustments to net income and reclassified as cash flows associated with investment activities.  These adjustments are also justifiable because these gains and losses are not derived from transactions with customers buying inventory or services.


Corruption and Multi-National Corporations: A Conceptual Model

Dr. Wissam AL-Hussaini, Lebanese American University, Lebanon



The aim of this study is to explain the diverse motives behind Multinational Corporations (MNCs) opting to enter corrupt countries. It also illustrates why some corporations are not willing to seize a part in any corrupt transaction. This paper discusses when MNCs would relatively decide to amend the different dimensions of corruption such as pervasiveness or arbitrariness to further entrench themselves in the corrupt host country and protect their interests and profitability. Moreover, this study provides an overview of the different corruption definitions, types, causes, consequences, and measurements. Propositions and implications regarding the dealings of MNCs with corruption are presented. Corruption has been existent and strongly ongoing for a very long time. Throughout the history, this phenomenon played a major role in the fall of great civilizations. People, institutions, and even religions have sought many ways to deal with corruption. Religions, in specific, introduced andattempted to spread morals that fundamentally aimed at fighting corruption. The topic of “corruption” has been receiving more attention with the upsurge of the global operations of Multinational Corporations.  With a high level of globalization nowadays, organizations do not solely operate at a national basis where rules are generally understood and clear-cut, but in multiple nations, each possessing its own customs and regulations (Eiche, 2012). Illegitimate corporate activities involving bribery and corruption have augmented as an effect of the global economy growth, particularly in emerging markets (Ulinski et al, 2013). Since corruption has made it across the threshold to the public globe, dealing with it ought to be considered a leading issue (Eiche, 2012). Thus, in face of this global spread, it has become the task of the large economies nation-states (e.g. U.S.), supranational organizations (World Bank, OECD), and scholars to define corruption, understand its causes and consequences, and develop strategies and cures for this phenomenon. Some actions have already been adopted. For instance, the United States passed the anti-corruption law “Foreign Corrupt Practices Act” in 1977 which penalizes American multinational companies that engage in corrupt practices.  The OECD countries also put into effect a “convention on combating bribery of foreign public officials in international business transactions” in 1999 (Spalding, 2012). Many researchers have devoted much of their attention to corruption in the global context, particularly its effects on the levels of Foreign Direct Investment (FDI). Most studies on corruption, though, have concerted on the effects of government corruption on the MNC strategies, and how the corporations are required to overcome them. Ring et al. (1990) explain how firms encounter political imperatives from the host country and how they adapt by developing certain strategies; forestalling or absorption. This research explains why some MNCs will intentionally target corrupt countries in order for them to achieve competitive advantages and benefits not-accessible for them in their home nations. Thus, this paper asks the following questions: 1. Why and when is the MNC willing to engage in corrupt transactions in corrupt host countries? 2. What prevents the MNC from engaging in such transactions?      3. What are the MNC’s policies whilst it is operating in a corrupt host country? This paper provides an overview of corruption definitions, types, causes, and measurements in section II. Section III moves ahead with propositions regarding the MNC and corruption.  After that, section IV discusses the feasibility of conducting the study, and Section V concludes with remarks about the implications of the study. According to Eiche (2012), one major struggle concerning corruption is defining it. Nevertheless, it can be noticed that most of the scholars agree on the basics of the definition. Rodriguez et al. (2005) define it to indicate any “abuse of public power for private benefit”. Other authors such as Mauro (1997) tend to define corruption in relevance to its effects as “Illegal activities that reduce the economic efficiency of governments”. Moreover, Jain (2001) offers a “consensus among scholar that corruption refers to acts in which the power of the public office is used for personal gain in a manner that contravenes the rules of the game”. Eiche (2012) claims that corruption may be distinguished between public and private corruption. Throughout this paper, corruption will refer to the actions by public officials (politicians, bureaucrats, or legislators) who abuse the authority contracted to them to chase self-benefits.  The literature on corruption introduces numerous approaches for classifying and identifying different types of corruption. However, most scholars have an agreement on two broadly defined models of corruption. The first is the Principal-Agent model (Jain, 2001, and Mirrless & Raimondo, 2013). This model derives basically from the agency theory which occurs when agents seek their own interests and not those of the principals they were supposed to serve (Pepper & Gore, 2012). The second model is the Resource Allocation Model in which “corruption changes the relative costs of inputs and outputs as well as the penalties faced by decision-makers and, hence, the behavior of the players as well as the output of an economy” (Jain, 2001). Shleifer and Vishny (1993) provide three types of bribery. The first one is ‘minimum bribery’, where there is always a “clean agent” that the client can go to when asked for a bribery from a corrupt agent.  The second type is the ‘one-time bribery’, where the client bribes the official and has full access to the “property rights” he purchased through his bribe. Third is the ‘not-guaranteed bribery’, where the size and number of bribes for a certain task are not clear.  Rodriguez et al. (2005), supported by Teixeira & Grande (2012), extinguish between two dimensions of corruption: pervasiveness and arbitrariness. Pervasive corruption means the number of encounters the client has to go through with corrupt agents. Arbitrary corruption is the “degree of ambiguity associated with corrupt transactions in a given nation or state.” This ambiguity includes the number of bribes and the amount of each bribe required to gain full property rights of the service purchased.  Carvajal (1999) classifies corruption into ‘small-scale’ where it occurs at the individual level and can be controlled by certain monitors, and ‘large-scale’ where corrupt individuals and agencies form a “network” that complements and protects each other. Miller & English (2014) affirm that the different kinds of corruption include “conflicts of interest,” attempts at “gaming the system,” and the phenomenon of “regulatory and institutional capture.”


Customer Learning Capability of Event Management Businesses in Thailand: An Empirical Investigation of the Antecedents and Consequences

Nattawut Panya, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Prathanporn Jhundra-Indra, Mahasarakham Business School, Mahasarakham University, Thailand



In the context of high competitive intensity, businesses need to seek the factors that determine competitive advantage. Customer learning is a key factor, which encourage firms to quickly achieve business goals. This study aims to examine the impacts of five dimensions of customer learning capability on marketing profitability. The data that are used to test these relationships are generated from 134 event management firms in Thailand. The results show that the five dimensions of customer learning capability have important effects on learning outcome and marketing profitability. These findings are interpreted and discussed in the context of existing literature and a context of Thai business. Contributions of this study and future research directions are identified. In the new global economy, communication can develop the life standard of a customer through the awareness of goods and service quality. Especially, the value of those products and services are the main factors to decide whether to purchase or not. Consequently, customers have many choices to select the best ways to consume products and services. Customers are more informed, considerate and concerned about products and service quality. Faced with a deluge of product information and choices, they have the capability to integrate incoming and outgoing messages, leading them to demand diversity. They can purchase products and services through an ever-growing, changing number of channels which motivate them by special conditions. Consumption is made through a wider range of products than ever before, and it is not easily segmented into categories (Baird and Gonzalez-Wertz, 2011). However, to survive in speedy environmental change, firms must adapt business strategies and setting organizational configurations to maintain the markets in which competition is high and the essential market mechanisms swing continuously (Luo and Park, 2001). Customer learning capability is a main factor that provides the knowledge to improve business strategy. The previous study mentions to the information of the customer as a part of market orientation. The main concept of market orientation is customer focus that seeks to meet the customer needs and wants (Tadepalli and Avila, 1999). Therefore, most scholars often focus on customer orientation more than customer learning. It associates with obtaining information from their customers. Information about customer needs and preferences are an important factor for businesses to gain market intelligence (Kohli and Jarworski, 1990). Yet the gap of customer orientation is lack of the study of the customer learning process and customer learning elements.  Learning is the process of excerpt hidden predictive information from large databases, identities valuable customers, learns about their preferences, predicts future behaviors, and estimates the customer value (Sun et al., 2006). Nowadays, customer learning capability is the key factor that supports firms to face competition. It is the firms’ ability to learn and understand the current and future set of customers’ behaviors, potential needs, and preferences in order to effectively respond to them and continually discover additional needs of which customers are not aware (Narver and Slater, 1990). Based on Resource-Based View (RBV), it is a resource that unique operation capability that can’t be imitated in a short time. It encourages firms to learn and evaluate the segment possibility, the importance of the market, and its possible growth rate (Gatignon and Xuereb, 1997). Firms with a high level of customer learning are more likely to be better in communication, analysis, interpretation, and understanding of customer information that involves their needs; so, it results in effective customer responses (Phokha and Ussahawanitchakit, 2011). Moreover, the firm’s ability to learn faster than competitors may be the only source of sustainable competitive advantage (Degeus, 1988). Also, it is accepted by many scholars as an essential to organizational success in the future (Lukas et al., 1996).  Customer learning is influenced by both the internal and external environments. Especially, the external factors comprise marketing technology growth and marketing competitive intensity are the dominant factors. There are three characteristics of three external factors: rapid technological change, the advance of globalization, and competition intensity (Easterby-Smith, 1997). In line with learning, all organizations already have this resource within their firms at many levels. However, an organization begins to learn when individuals or organizational units interact. Also, an organization learns when the member shares newly-acquired knowledge, beliefs, and acquires, essentially, an increase in knowledge and improvement in understanding experience and interaction. In a similar way, know-how is the accumulated practical skill or experience of the firm (Gnyawali and Grant, 1997). Therefore; it is both market-driven and market-driving in different contexts. In the context of market-driving, customer learning capability is a proactive operation to increase the competitive advantage. In contrast, the context of markets driven, customer learning capability also increases the competitive advantage. In summary, customer learning enhances firm operation through better information, knowledge and insights. The customer learning constructs attempt to describe the activities or process of customer learning systems and incorporate external environments as vital to the construct. Thus, businesses must develop new information and knowledge that influence and change behavior for improving performance or marketing outcomes. This study is outlined as follows. The first significant literature in the areas and streams of customer learning capability and links between the concepts of the aforementioned variables, and develop the key research hypotheses of those relationships. The second explicitly describes the details of research methods, including data collection, measurements, and statistics. The third provides the analysis results of the current study and corresponding discussion with the reasons and explanations. Moreover, it intends to expand empirical studies to discover the factors of customer learning capability to increase the marketing performance, such as marketing profitability, marketing advantage, and value development success in Thai context. The final summarizes the findings of the study and points out both theoretical and managerial contributions, suggestions for further research of the study.


Think Tank Comparisons: Lessons Learned at a for Profit University and Applied in a Corporate Setting

Dr. Maja Zelihic, Forbes School of Business at Ashford University, CA

Dr. Lora Reed, Forbes School of Business at Ashford University, CA

Dr. Alan Swank, Forbes School of Business at Ashford University, CA

Bill Davis, Forbes School of Business at Ashford University, CA



This paper sets the stage for an unlikely exploratory analysis comparing business and business school think tanks focused on group development and community building.  The paper is based on a recent study of a virtual faculty think tank implemented in the business school of a large online university.  Notably, the business school think tank is modeled after think tanks in industry.  Thus, the impetus for the research proposed here will complete a ‘full circle’ when it comes to fruition.  First, the business school virtual think tank study and its preliminary findings are summarized as foundational to the exploratory analysis that will later be conducted.  The literature on think tanks as venues for group and community development is reviewed.  Two theoretical frameworks, Peck’s stages of community and Tuckman’s stages of group development, are examined for relevance to the impending study and with relation to the recently completed study.  Research questions are posited.  A methodological approach is considered.  Significance of the study is scrutinized and plans for future research are investigated.  The notion of a diverse body of thinkers engaged in brainstorming, collaboration, and collegial action geared towards accomplishing common goals is as old as Plato’s Academy, which Rohrer (2008) posits may have been the first informal think tank in human history.  Later, organizations such as medieval monasteries, the Royal United Services (founded in 1830), Fabian Society (as early as 1884), and Brookings Institution (originated in 1916) became recognized as other iterations of contemporary think tanks (Roher, 2008).  More recently, corporations, such as the Rand Corp., Proctor and Gamble, and General Electric have been among industry leaders whose think tanks have been “game changer[s]”…”mechanisms for keeping the idea pipeline full” (Lafley & Charan, 2008, p. 101).  Corporate think tanks have been instrumental in generating innovative approaches to problem solving, developing new products, and serving underdeveloped markets, to name a few uses.  However, business schools have not always followed or led business and think tanks have only recently appeared on college and university campuses for purposes of idea generation and knowledge sharing.  This paper begins by summarizing a recent exploratory study of a virtual faculty think tank in the business school of a large online university.   In 2011-2012, a small group of faculty at the campus of a growing online university chose to implement an idea exchange, a think tank, for purposes of generating ideas and knowledge that would serve their growing student body.  By 2013, the original faculty had moved on to other tasks and two remote faculty members began to facilitate the regular bi-weekly meetings for purposes of, among other things, creating a sense of community among faculty that were geographically dispersed.  Although distant, the virtual participants of the think tanks were adept at using communication technologies to teach online courses and to work together for other common goals such as improved student success and ongoing faculty development.  At that time, the think tanks consisted of both online and remote faculty and participation began to increase as presenters from campus and across the country, sometimes from abroad, shared knowledge, ideas, teaching tips, and collegiality in a virtual learning community. In spring of 2015, a team of researchers completed a mixed methods study of the business school think tank.  Their findings demonstrated, among other things, that the faculty participating in the business school think tanks did so, at least in part, to enjoy a sense of community.  The researchers learned that faculty had been enabled to experience the characteristics of a virtual learning community, and to build unlikely collaborative relationships that were conducive to knowledge sharing and idea generation (See Reed, et al, 2014; Reed, et al, 2015; Davis, et al, 2015).  Many of the techniques regularly employed in the business school think tanks had been adapted from industry.  Thus, the researchers became curious and decided it would be wise to determine if the business school think tanks had evolved similarly to their corporate counterparts.  To that end, they formulated the following research questions:  1. How, if at all, are business think tanks similar to virtual think tanks in the business school of the large online university?   2. Are Peck’s stages of community evident in both the business school study and corporate think tanks?  3. Are Tuckman’s stages of group development evident in both the business school study and corporate think tanks?  4. Does the business school think tank, as a virtual learning community, afford opportunities for collaboration that are similar to those in business settings?  The significance of this research is important as virtual collaboration and idea generation are increasingly essential for diverse learning communities and collaborative complex problem solving.  In addition, there is a gap in the academic literature pertaining to think tanks in business.  Although empirical research exists on the direct financial benefits of business think tank implementation, there is little to no research on think tanks as a means of community building in businesses.   The study proposed here could also contribute to the body of knowledge pertaining to virtual learning communities, community development, and group development.  The notion of shared goals and joint efforts toward those goals appears to be at the core of both business school and corporate think tanks. The reasons behind the formation of each groups are clearly similar in nature. The business school think tank has relied on an open, collaborative, non-judgmental, and collegial environment. Within this venue, faculty shared information about their research and scholarship activities, often in accordance with Tuckman’s group development, but sometimes as a result of creating something akin to Peck’s community as well. Corporate think tanks surely also exemplify these group characteristics.  Thus, the reason for first general research question is evident: Research Question #1: How, if at all, are business think tanks similar to the virtual think tanks in the business school of the large online university?  Two frameworks for collaborative group engagement are Peck’s community model and Tuckman’s group development.  These frameworks are commonly used and differentiated by their underlying motivational differences.  Tuckman’s model has evolved over about 50 years, but has continued to emphasize teams coming together for short periods of time to achieve common goals. On the other hand, Peck’s model does not occur as frequently, but its emphasis is on the authenticity that occurs in enduring relationships.  Community can be an end unto itself. 


Strategic Brand Orientation and Marketing Survival: An Empirical Investigation of Cosmetic Businesses in Thailand

Supachai Tungbunyasiri, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Pratanporn Jhundra-indra, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Pakorn Sujchaphong, Mahasarakham Business School, Mahasarakham University, Thailand



The purpose of this research is to investigate the effect of strategic brand orientation on marketing survival through several mediating constructs, including organizational product success, unconditional customer fulfillment, competitive reaction effectiveness, outstanding market acceptance, marketing excellence, and marketing advantage. The model is empirically tested by using the collected data of mail surveys from 125 cosmetic businesses in Thailand. Marketing director and marketing manager of each firm is the key informant. The OLS regression is used as a main analytical instrument to examine the proposed hypotheses. The results indicate that strategic brand orientation positively relates to several antecedents and consequents, and consequently affect marketing survival. Finally, conclusion and the suggesting for future research are presented. The competition continuously extends every year. New competitors are occurring from several directions, such as, from global competitors that aim to increase sales in new markets, from online competitors that seek the cost-efficient distributions, from store brand and private-label that provide low-price alternative, and from megabrand competitors that extend their brand into new categories to leverage the strength (Kotler and Keller, 2008). The significant increase of amount of competitors makes a difficulty in associating between firms and customers (Barich and Kotler, 1991) .Thus, in order to survive from such situation, firms are needed to create their identity to identify them in competitive market (Balmer and Soenen, 1997). Because ability of brand is to identify the firm’s products and to separate them from competitor’s products (Ghodeswar, 2008), brand management and branding are increasingly highlighted as the key areas for both practitioners and marketing academics in the commercial sector (Hankinson, 2001; Sarkar and Singh, 2005). By applying strategic brand perspective to marketing activities, firms can be better able to confront with market force and intensive competition (Simões and Dibb, 2001).  Brand commonly refers to the name that represents the item(s) in product line in order to identify the source of such items (Kotler, 2000). The brand can be a name or symbol such as a trademark or logo that intends to differentiate firms’ products or services from competitors, and to identify products or services of one or a group of sellers (Ghodeswar, 2008). Moreover, there is a common premise that the brand is more than a given name of the products; it incorporates a whole set of socio-psychological and physical beliefs and attributes (Simões and Dibb, 2001). Customer benefits, features and values are also embodied in brand (Pearson, 1996). Likewise, empirical evidence points out that a strong brand can promise a good quality, reduce risk, generate trust, and simplify their choices (Keller and Lehmann, 2006). As a result, brand building will be one of the answers to survive in severe competition.  In the literature, brand orientation is the merging between brand concept and business orientation, based on the resource-based view of the firm (Evan, Bridson, and Rentschler, 2012). Urde (1994, p.117) first introduced brand orientation concepts and later defined it as “an approach in which the processes of the organization revolve around the creation, development and protection of brand identity in an ongoing interaction with target customers with the aim of achieving lasting competitive advantage in the form of brand.” Then, several alternative definitions of brand orientation are introduced later (e.g. Bridson and Evan, 2004; Ewing and Napoli, 2005; Gromark and Melin, 2011; Hankinson, 2001; Wong and Merrilees, 2008). However, existing definitions are just the concept. They lack a concrete view. This paper introduces a new construct of strategic brand orientation that is more concrete than brand orientation concept. It is a fusion of the brand orientation concept with strategic orientation. In addition, although prior literature suggests that brand orientation will increase marketing performance (Baumgarth, 2009), financial performance, and firm performance (Wong and Merrilees, 2008), they have been explored in the limited scope of performance and they lack the empirical investigation. Accordingly, the purpose of this research is to investigate the relationship between strategic brand orientation and marketing survival through several consequents, including organizational product success, unconditional customer fulfillment, and outstanding market acceptance. Moreover, the relationships between antecedents of strategic brand orientation, comprising marketing leadership, firm resource readiness, and competitive intensity and strategic brand orientation are examined. This research is organized into five chapters as follows. The first part provides an overview and the motivation of the research and the purpose of the research. The second part reviews prior empirical research and relevant literature, proposes the theoretical framework to explain the conceptual model, and develops the related hypotheses. The third part describes the research methods, comprising the sample selection, data collection procedure, development of the measurements of each construct, the verification of the survey instrument by testing the reliability and validity, the statistical analyses and equations testing the hypotheses. The fourthpart presents the results of statistical testing, demonstrates the empirical results and provides a discussion in full detail. The final part identifies the details of the conclusion, the theoretical and managerial contributions, the limitations, and suggestions for future research directions. This paper mainly explored the relationship between strategic brand orientation and marketing survival via any consequents, including organizational product success, unconditional customer fulfillment, and outstanding market acceptance. Moreover,there were three factors that will influence the use of strategic brand orientation, namely, marketing leadership, firm resource readiness, and competitive intensity. The relationships between constructs were linked by using Resource Advantage Theory and Contingency Theory. Then, theses construct and the relationships were drawn as shown in figure 1.  Branding is built from the outside-in approach, suggesting how brands should define themselves by asking of the targeted segment what the brand should stand for (Ind and Bjerke, 2007). Strategic brand orientation is developed from the integration of brand orientation with strategic orientation. The concept of brand orientation is introduced as an alternative perspective of brand that emphasizes brand as a resource and strategic hub (Melin, 1997; Urde, 1994; 1997).


Understanding the Segmentation of Consumers in the Gulf Region: A Critical Element of Marketing

Dr. Ahmad A. Alfadly, Arab Open University, Kuwait



Purpose: The aim of the current research is to comprehend the consumer segmentation in the Gulf Area.  In addition, the study focuses on segmenting the consumer Gulf market on the basis of actionable and strategy yielding marketing variables.  Design: The study relied upon both secondary and primary sources for collection of the required information and data. The secondary sources included previous studies as well as the published reports and materials about customer segmentation. These data were utilized in designing the research that identified the main factors, variables of the study, and development of the survey. The ethical beliefs of consumers from Saudi Arabia, Oman and Kuwait were revealed, which include Machiavellianism, ethical beliefs, and their preferred ethical ideology.  Findings: As per the research a few limitations are particularly ascertained if clients in the Arab world vary from one another in context to their moral perspectives, moral philosophies, and extent of Machiavellianism. Also, the study shows that Arab customers differ in context of their moral perspectives, their favored philosophy, and the degree of Machiavellianism they portray.  Value: Currently, international enterprises and public choice makers contemplate the job of analyzing the Arabs’ attitude a chief importance for successively functioning in the area. Despite this sensitive interest, restricted attention has been paid by both social and behavioral analysts to analyze the individuals living in that area of the globe.  A major part of the current research is journalistic in character and inclines to discuss the Arab nations as monolithic instead of one that comprises of different preferences, approaches and conducts.  Since the concept was established in the late 1950s, segmentation has been a theme majorly analyzed in the marketing literature. There have been two dimensions of segmentation study: segmentation bases and methods. A segmentation basis is described to be a group of attributes employed to allocate prospective clients to similar cohorts. Research on segmentation bases emphasizes recognition of effective variables for segmentation, such as socioeconomic status, loyalty, and price elasticity (Frank et al., 1972). Lancaster and Reynolds (1998) argue that there are two sources for segmenting consumer markets: customer characteristics and customer reactions. The major segmentation variables for buyer markets are geographic, demographic, behavioral, and psychographic. These variables can be used alone or mixed. Off late several European firms got the chance to set their trade in the Arab nations and have been exposed to the probable potential to earn revenues for European enterprises that are keen to do so. As Europeans are consistently drawn to function in the Gulf nations, frequently by way of foreign direct investment; however they need to deal with the moral issues put forth by their rivals and the trade in addition to the issues put forth by the intended clients. As foreign direct investment are advancing rapidly in this area, firms have to have knowledge related to the moral issues that the Gulf domain clients themselves are most liable to be present.  Another crucial problem is that the moral customs of clients have risen; on the other hand, empirical research and critical debates have failed to focus or put forth a limitation amongst the retail shop and clients from the perspective of the client. Differing moral attitudes of the client may result in the retailers designing personalized policies that are liable for their clients’ morals and may differ in varied markets. Thus, the client perspectives need to be crucial if the retailers need to initiate any strategy, coach their personnel, and reduce the innate harm that immoral clients may cause to their functions. The current research will offer perspectives for retailers functioning in varied markets in the Arab locations where differing degrees of morality exist.  For many years, European firms have considered the Gulf areas are complete of monolithic clients instead of an area that comprise of several different sub-markets, each one comprising of relatively similar desires, conducts and approaches. While these countries have a relatively artificially assumed similar culture on account of their mutual location in the Gulf nations foreign direct investment (Hofstede, 1980), delicate variations resulted by historical, political and differing degrees of cultures in the area require a more grave examination into the variations between the clients of the area. As European managers pursue to handle the intended markets in different Gulf nations, there is a requirement to comprehend the client’s moral outlook.  The aim of the current research is to comprehend the division of clients in the Gulf Area. In the entire study, we can comprehend the Arab clients’ moral perspectives and focuses, and we desire to depict remarkable and significant variations in the moral thinking of the Arab client. The chief aim of the research is to comprehend the degree to which Arab clients vary from their equals in these three Arab nations. By following this aim, we desire to outline the state of agreement in contrast to the variance of moral principles in this area of the globe.  The current research chose three nations as the sample.  These nations were chosen due to their oil wealth and that the latest geopolitical experiments have resulted in these Arab nations becoming profitable venues for transnational firms. It is, thus crucial that European managers identify the moral thinking of their prospective clients, vendors, associates and personnel.


Audit Excellence Orientation and Audit Survival: Empirical Evidence from Tax Auditors in Thailand

Srisuda Intamas, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Sutana Boonlua, Mahasarakham Business School, Mahasarakham University, Thailand



This research aims at investigating the relationships among five dimensions of audit excellence orientation (professionalism focus, audit independence awareness, audit creativity development, audit expertise orientation, and audit skepticism mindset) and audit survival through mediating influences of best audit practice, audit report quality, and audit information value. Audit vision, audit competency, audit experience, stakeholder force, market competitive pressure become the antecedents of audit intelligence. In this study, data were collected by mail survey questionnaire to the 415 TAs in Thailand who are the sample. The results of OLS regression analysis indicated that audit excellence orientation has a significant positive effect on audit excellence orientation consequents. In addition, audit excellence orientation consequents have a significant positive association with audit survival. Furthermore, audit vision, audit competency, audit experience, and stakeholder force have a positive influence on audit excellence orientation. To verify and increase the benefits, advantages, and contributions of the study, future research needs to collect data from a larger population or comparative population in order to increase the reliability of the results as well as use another sample population, such as certified public accountants (CPAs), governmental auditors (GAs), internal auditors (IAs), or others in Thailand. A potential discussion concerning the research results is effectively implemented in the study. Theoretical and managerial contributions are explicitly provided. The conclusion, suggestions, and directions for future research are recommended. In the era of globalization, the change of business environment structure is based on a capital-based structure to a knowledge-intensive competitive environment due to changes in customer need, demand uncertainty, complexity and high competition, and the regulatory environment (Evans and Schwartz, 2014). In addition, the AEC fundamental freedoms are becoming a point of increased focus for international business. Thailand is going into the ASEAN Economic Community in 2015 and will have a free flow labor with the other ASEAN member countries. Moreover, the mutual recognition agreement (MRA) is one of the important tools to increase the level of utilization of the liberalization of cross-border trade in professional services in ASEAN Thailand, which lays down the broad principle and framework for the negotiations of bilateral or multilateral MRAs on accountancy services between or among ASEAN Member States (AMS). MRA may be able to facilitate mobility of accountancy services professionals across AMS, enhance the current regime for the provision of accountancy services in AMS, and exchange information in order to promote adoption of best practices on standards and qualifications ( Thus, Thai accountancy professionals should understand requirements to qualify and practice as an accountant in all AMS. Most businesses need to convey useful information in order to reassure the investors’ rapid decision makings. Today’s audit environment is one of increased responsibilities and workloads for auditors, enhanced auditor’s roles in detecting and preventing frauds, including evaluating the fair value of assets and liabilities (Curtis and Payne, 2008, Curtis et al., 2009). Therefore, businesses demand the auditor who has excellence audit work and produces a high quality audit to quickly advise or resolve the situation. The survival auditors need to develop the potential ability and professional expertise in order to create a sustainable competitive advantage relative to non-specialist auditors (Numan and Willekens, 2012). After the global accounting scandals surrounding Enron, WorldCom, and Xerox, which are giant United States firms, Enron is the world’s leading energy, electricity, and natural gas company with high growth and high returns. Arthur Andersen as an audit firm did not engage in disclosure about Enron’s financial information, hidden liabilities and financial losses were off the balance sheet (Chabrak and Daidj, 2007). In 2002, Arthur Andersen maintained it was not notified overstated WorldCom’ s earnings rather than showing net losses by classifying operating expenses as capital expenditures which resulted in an erosion of confidence in the stock market and affected the overall economy of the U.S. It included lack of transparency in the financial statements of Xerox, greatly affecting the image and confidence in the accounting profession (Ball, 2009). Similarly, Thailand faced an economic crisis due to currency attacks from foreign investors in 1997. The report from international investors indicated that the lack of reliable information systems and transparency was a major cause of the crisis (Hooper and Kearins, 2007; Hurtt et al., 2013). Picnic Corporation Limited, a Thai-listed firm, is an obvious example of a design to detect the user's understanding of the financial statements. Picnic was highly profitable and assets had significant business growth that was more likely to invest in misrepresented financial statements due to impaired audit quality, similar to Enron, WorldCom and Xerox. After the crisis, Thailand agreed to resolve the problem. The Federation of Accounting Professions set up the Accounting Profession Act, which affected the structure, governance, and the development of the independent accounting profession.  Furthermore, statutory auditors were assigned by the shareholders at their annual general meeting and were endorsed by the Securities and Exchange Commission (SEC). The auditor is responsible for reviewing and expressing an opinion on the financial statements in order to increase confidence among investors. Therefore, the SEC has issued regulations regarding the preparation and submission of financial statements that are accurate, complete, transparent and more reliable. Moreover, the SEC promotes and improves the performance of the auditor for performance in accordance with reliability and transparency, affecting the accuracy of financial reporting (Lin and Hwang, 2010).


The Components of Marketing Strategies (MSM) and the Relationships with Strategy Antecedents and Consequences: Evidences from Egypt

Dr. Mansour S. M. Lotayif, Associate Professor of Business, Beni Suef University, Egypt



The current study aims at identifying the causality relationships between components, consequences, and antecedents of marketing strategies making MSM. The experiences of 213 Egyptian executives were utilized to achieve these objectives. Throughout multivariate analytical technique (e.g. multiple regression), bivariate analytical techniques (e.g. correlations), significant relationships between MSM components, consequences, and antecedents were found.  Antecedents and consequences of marketing strategy making (MSM) have not taken enough interest from marketing scholars, and even the few empirical studies that dealt with both of them have focused on a limited set of components (Menon et al., 1999). Literature in this perspective is dichotomously characterized, as either the consequences or the antecedents of MSM are focused but not both. More specifically, Sinha (1990); Bourgeois and Eisenhardt (1988); and John and Martin (1984) have focused on the antecedents of MSM whilst Eisenhardt (1990); Ramanujam et al. (1986) have investigated its consequences. Therefore, the current study adopts a comprehensive approach by addressing MSM components, antecedences and consequences simultaneously. The main contribution in this filed is Menon’s et al. (1999) model. They suggested and tested a three phases’ model: antecedents, MSM components, and consequences. The former included three main organizational antecedents of MSM: centralization i.e. the extent of decision making authority concentrated at the higher levels of an organization (Dewar and Werbel, 1979); formalization i.e. the extent to which rules, procedures, instructions, and communications are written and standardized and the degree to which roles are clearly defined (Pugh et al., 1968) and; innovative culture i.e. the extent to which there exists - within an organization- an emphasis on inventiveness, openness to new ideas, and quick response decision making (Menon and Varadarajan  1992; Zaltman 1986). The latter includes another three consequences of MSM: strategy creativity, organizational learning, and market performance. Finally, MSM components contain seven variables: Situation analysis i.e. the rational and systematic consideration of the organizational SWOTs in a marketing strategy domain (Kohli and Jaworski, 1990; Bourgeois and Eisenhardt, 1988);  Comprehensiveness i.e. the systematic identification and in-depth evaluation of multiple alternatives to chosen strategy (Eisenhardt, 1989; and Fredrickson, 1983);  Emphases on marketing assets and liabilities i.e. the historical and ongoing core marketing related processes, resources, and skills on which the marketing strategy is based (Day, 1994; and Bharadwaj et al., 1993). Assets refer to investments in scale and scope (e.g., advertising, promotions), brand image, and locational and channel advantages.  Whilst, capabilities refer to marketing processes and applications of assets such as pricing, customer service capabilities,  innovation, and product development (Day, 1994); Cross-functional integration i.e. the extent to which the MSM team reflects the main organization, includes adequate representation from relevant functional areas, and is well organized and coordinated (Ayers et al., 1997; Miller et al., 1997); Communication quality i.e. the nature and extent of formal and informal communications during the strategy making process (Miller et al., 1997; and Bonoma, 1985); Strategy consensus commitment i.e. the adequate level of people, time, and money allocated to the pursuit of the marketing strategy (Day, 1986; Ramanujam et al., 1986); and Strategy resource commitment i.e. the extent to which members of the strategy team agreed with and supported the chosen strategy (Wooldridge and Floyd, 1989).  Two main aspects are worth mentioning here: first, the logic behind the selection of these variables is appreciated and accepted in the current study as well. Second, the regressors i.e. the independent variables (IVs) have had very limited effects on the behavior of the dependent variables (DVs), as they were responsible only for 0.06 to 0.29 of the variances of DVs in Menon’s et al., (1999) study. More specifically, the three suggested antecedents that were centralization, formalization, and innovative culture were responsible for 0.06 to 0.27 of the variances of the seven components of the MSM. Additionally, the suggested seven MSM components were responsible for 0.10, 0.25, and 029 respectively of the variances in strategy creativity, organizational learning, and market performance (as MSM consequences). As the magnitudes of the causality effects (expressed by the adjusted R) are limited, other variables rather than those suggested by Menon et al. (1999) ought to be considered. Following the footsteps of Menon et al., (1999), the current study attempts to extend their model by opening an avenue on some new MSM antecedents like (1) reward systems, and (2) team work, as suggested in Menon et al., (1999). Obviosly, the logic behind pussing these two variables with MSM literature could be the link between reward system and satisfaction and then performance. Same logice goes for team work. Firstly, human resources’ literature reveals that reward systems can take various shapes. These are; individual rate, job or spot rate, pay spine, job rang, graded structure, curve structure (Armstrong, 1993), bonus tied to performance, public recognition (Azzone and Palermo 2011, and Groves and Hollister, 1999), wages and bonus together (Ding and Warner, 1999), and profit-sharing (Florkowski, 1994. Kerrin and Oliver (2002) discussed two ways of reward system: one for team-based activities, and the second for each individual within the team. Regardless the components of the reward system, two main aspects have to be considered: (1) system multi-dimensions i.e. to depend on a mixture of different types of pay plans that suit the circumstances of the organization and the people involved; and (2) system flexibility (Armstrong, 1993). Reward systems are viewed as part of the motivational theories. The best known theories are those of Maslow (1958), Herzberg (1968), McClelland (1987) and McGregor (1960). In fact all these theories are interested in their outcomes i.e. the performance that could be considered attractive for an individual and the reasons behind that.


The Internal Audit Professionalism Orientation and Firm Goal Achievement: An Empirical Assessment of Auto Parts Businesses in Thailand

Kongkiat Sahayrak, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Sutana Boonlua, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Kesinee Muenthaisong, Mahasarakham Business School, Mahasarakham University, Thailand



This study aims at investigating the influences of internal audit professionalism orientation on firm goal achievement through the mediating effect of audit practice efficiency, internal audit report reliability, operational information quality, and business value creativity. Internal audit professionalism orientation consists of internal audit regulation compliance focus, internal audit independence awareness, professional code of ethics mindset, internal audit well roundedness integration, and internal audit creativity orientation. In this study, data were collected by mail survey questionnaire administered to the92 auto parts businesses in Thailand who are the samples of this study.  The results of OLS regression analysis suggest that internal audit creativity orientation has a strong significant positive effect on audit practice efficiency, internal audit report reliability, operational information quality, and firm goal achievement, while professional code of ethics mindset has a significant positive effect on audit practice efficiency, internal audit report reliability, and operational information quality.  Furthermore, internal audit regulation compliance focus and internal audit well roundedness integration has a significant positive effect on business value creativity. Meanwhile, internal audit independence awareness has no significant positive effect on internal audit outcome and the consequences.  Potential discussion is efficiently implemented in the study. Theoretical and professional contributions are explicitly provided. Conclusions, suggestions, and directions for future research are recommended. Nowadays, an uncertain economic environment has rapid change, which influenced on firm survival in a highly competitive situation.  The high intensity competition in the market requires firms to improve and develop processes.  Moreover, event of financial fraud by executive, which leads to financial scandals make the company such as Enron and WorldCom be well known among the general public.  This event has pushed the concept of corporate governance and internal control effectiveness to build credibility and improvement of business operations (Carecello et al., 2005).  The internal audit has a very important as to the success of the business (Hass et al., 2006).  The role of the internal audit is the confidence and consultation fairly and independence to add value and improve an operations of the organization.  Therefore, the internal audit is value-added activities of an operation to help support the organization achieve its objectives (Vasile et al., 2011). The responsibility of the internal audit department is related to the audit, evaluation risk management, internal control, corporate governance, worthwhile operations, and enterprise information systems, including various performances.  Additionally, the main objective of the internal audit function is to play a role as a monitoring mechanism and support organizations in effectively achieving objectives by providing unbiased and objective assessments (Hermanson 2006).  However, there are many questions about the professionalism of the internal auditor which is an important factor for the quality of the internal audit because it is seen that the internal audit department are part of the company.  Thus, internal audit professionalism cannot be ignored since it is related to the business survival(Reynolds and Mary, 2000).In audit context which is composed of external and internal audit, professionalism orientations has been emphasized for external audit practices and are widely implemented in certified public accountants’ tasks.  Meanwhile, there are few studies investigating how internal audit departments’ professionalism is sharing in and utilizing internal audit tasks.  As a result, this study attempts to expand a perspective of internal audit professionalism orientation in the context of the internal audit department of firms.  Thus, Internal audit professionalism orientation is an internal audit department capability derived from the implementation of relevant professionalism orientation to diligently perform internal audit tasks.   This study will be the first empirical evidence that supports causal relationships between internal audit professionalism orientation and its consequences of the auto parts businesses in Thailand, which seems to be necessary in academic research. The objective of this study is to investigate the impact of internal audit professionalism orientation and firm goal achievement through the mediating effect of audit practice efficiency, internal audit report reliability, operational information quality, and business value creativity.  Furthermore, the key research questions: (1) How does each dimension of internal audit professionalism orientation associate with firm goal achievement? (2) How does each dimension of internal audit professionalism orientation associate with audit practice efficiency, internal audit report reliability and operational information quality? (3) How does each dimension of internal audit professionalism orientation associate with business value creativity? (4) How do audit practice efficiency, internal audit report reliability and operational information quality associate with business value creativity? (5) How does business value creativity associate with firm goal achievement? This study is outlined as follows. The literature review of internal audit professionalism orientation, audit practice efficiency, internal audit report reliability, operational information quality, business value creativity and firm goal achievement are addressed and examined; and significant research hypotheses developments are presented. Next, the research methods using to test the hypotheses are discussed including the sample selection and data collection procedure, variables, and methods. The results of the study were derived from 92 auto parts businesses in Thailand are indicated and their reasonable discussions with existing literature supports are shown. Lastly, the study concludes by discussing the implications for theories and practices, identifying the limitations of the study, and providing suggestions and directions for future research. The resource-advantage theory (hereafter R-A theory) which is the theory of competition, is proposed by Hunt and Morgan (1995) and has been used in the marketing strategy literature (Griffith and Yalcinkaya, 2010; Hunt, 2012). According to the R-A theory, organizational competitive advantage is derived from resource comparative advantage which leads to better financial performance (Hunt and Morgan, 1995). Hunt (2011) states that the R-A theory focuses on the importance of market segments, the heterogeneous of the firm’s resources, the comparative advantages or disadvantages in the resources, and the marketplace positions of the competitive advantages or disadvantages. This theory argues that resources are significantly heterogeneous and immovable between firms and emphasizes resource deployment. When firms employ the resource advantage, it may be a foundation for competitive advantage and firms will possess superior marketplace position leading to higher firm performance (Hunt, 2012). In summary, the significant key components of The R-A theory are categorized into financial, physical, legal, human, organizational, informational, and relational. Similarly, internal audit professionalism orientation is one type of the firms’ resources. Hence, the meaning of internal audit professionalism orientation is the resources in internal audit practice, including all organizations should take an interest in internal audit professionalism orientation that impacts firm goal achievement. In this research, the R-A theory is applied to describe internal audit professionalism orientation, which is the crucial resource of the firm for competitive advantage and goal achievement. The research model of this research is illustrated in Figure 1.


A Preliminary Study on the Role of Risk Perception in Electronic Commerce Systems Adoption

Dr. Yujong Hwang, DePaul University, Chicago IL

Kyung Hee University, College of International Studies, South Korea



The different influences of online trust, such as integrity, benevolence, and ability, on customer loyalty to the website are discussed with risk taker and risk avoider characteristics in this preliminary study. We propose that, in the risk taker samples, the influence of online trust through website ability on customer loyalty is fully mediated by the intention to use the website. However, in the risk avoider samples, online trust beliefs such as ability and integrity as well as intention to use website have direct influences on customer loyalty. Theoretical and practical implications of these proposed models are discussed in this paper. Recent failure of a large number of companies operating in B2C segment of electronic commerce has damped the perceptions about future success of e-tailing sector. Managers have retracted to rethink business models and devise new strategy for building a sustainable business model. Researchers are in a constant hunt to develop models that capture and explain electronic commerce phenomenon. The current situation is ripe for a better understanding of factors that drives consumers behavior in online market channels. This study makes a coherent effort in enhancing understanding of consumer behavior in electronic markets by analyzing and proposing the new model.  Even though there have been many research endeavors to explain online trust and consumer behavior (e.g., Gefen, Karahanna, and Straub, 2003; Grazoli and Jarvenpaa, 2000; Pennington, Wilcox, and Grover, 2004; Jarvenpaa. Tractinsky, Saarinen, and Vitalle, 2000; Ba and Pavlou, 2002; Gefen, 2002a; Gefen, 2002b; Pavlou, 2003; Bhattacherjee, 2002; Saeed, Hwang and Grover, 2003; Kim, Kim, and Hwang, 2009; Hwang, 2010; Hwang, 2012; Kim and Hwang, 2012; Hwang and Lee, 2012), one of the main questions is how to understand the influences of online trust on consumer loyalty behavior (Saeed, Hwang, and Yi, 2003). Based on the meta-analysis of online consumer behavior in the 42 leading IS articles published between 1995 and 2002, Saeed, Hwang, and Yi (2003) argued that the relationship between online trust and customer loyalty should be studied further to fully understand  online consumer behavior.  Thus, this study has three primary objectives. The first objective is to investigate the potential influences of multidimensional online trust beliefs, such as ability, benevolence, and integrity, on online customer loyalty to the website. Using the multidimensional trust constructs, this study can discuss more complex relationships between trust and the customer loyalty to the website. The second objective is to investigate the effects of mediating roles of intention to use the website on multidimensional trust beliefs and customer loyalty. We expect that there should be some interesting mediating role of intention to use the website in these relationships. Given that the relationships between trust and loyalty would be different in the risk taker and risk avoider groups would be different, the test results could provide some interesting insights to the IS and e-commerce community.  There are numerous electronic commerce studies in IS domain. The seminal study by Jarvenpaa and Todd (1997) is one of the first efforts in capturing consumer reactions to web shopping. The study draws on research conducted in retail patronage and service quality. Product perceptions, shopping experience, customer service and customer risk are the four main factors that are investigated. Product perceptions are further sub-divided into product price, product quality and product variety. Similarly, shopping experience is categorized into effort, compatibility and playfulness. The five dimensions of customer service are responsiveness, assurance, reliability, tangibility and empathy. Customer risk is presented as comprising of economic risk, social risk, personal risk and privacy risk. The study found that consumers valued product variety but only in terms of store options available and were rather dissatisfied with the product offerings available from a single online merchant. Demographic variables and personal characteristics of the consumers are another distinct category that has been subject to investigation by various studies. Bellman et al (1999) using WVTM data explored the role of demographics (age, income and education) and lifestyle on decision to purchase. The results show that higher a person’s income, education and age the more likely he/she is to buy online. However they caution that demographic variables alone explain a very low percentage of variance in the purchase decision. An interesting result of this study is that consumer more likely to buy online have a “Wired lifestyle”. Such consumers have been using internet for a long time, receive a large number of emails every day, believe that internet improves productivity at work and use internet for most of their other activities such as reading news and searching for information. Kim et al (2000) validate these results. They found that “net oriented lifestyle” and “time oriented lifestyle” positively impacts online purchase behavior.  Studies have endeavored to evaluate the impact of a host of individual level characteristics and perception towards external objects. Personal innovativeness is a construct that a few studies have looked into. Agrawal and Prasad (1998) validated this construct in the IS domain and proposed that it is an individual’s trait that moderates the relationship between perceptions and intentions. Limayen et al (2000) found that personal innovativeness has a marginal impact on attitudes towards purchase and intentions to purchase. Ramasawami et al (2000) found that product knowledge and confidence in decision-making neither impacts search for information nor online purchase. However, they caution that such results may be due to subjective measurement and halo effect. Consumer perceptions towards internet shopping are also widely used as the main variables of interest in variety of studies. (Grazioli and Jarvenpaa, 2000; Jarvenpaa et al, 2000; Jarvenpaa and Todd, 1997; Gefen and Straub, 2000; Limayen et al, 2000; Kim et al, 2000; Laio and Cheung, 2001). Perceived risk, perceived benefits or consequences and attitude towards shopping are constructs common to most studies based on theory of reasoned action and theory of planned behavior.


Internal Audit Process Excellence and Decision Making Success: An Empirical Investigation of ISO 9001 Businesses in Thailand

Krittayawadee Gatewongsa, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham Business School, Mahasarakham University, Thailand

Dr. Kesinee Muenthaisong, Mahasarakham Business School, Mahasarakham University, Thailand



The purpose of this study is to investigate the relationships between internal audit process excellence and its consequences to the companies that are certified by ISO 9001 in Thailand. The consequences of internal audit process excellence comprise internal audit quality, internal audit reliability, internal audit acceptance, operational information advantage, and decision-making success. These 244 companies are certified by ISO 9001 in Thailand and OLS regression is examined in this study. The results indicate that internal audit process excellence has strongly supported with internal audit quality, internal audit reliability and internal audit acceptance. Meanwhile, stakeholder expectation as an antecedent of internal audit process excellence is strongly supported. Conclusions and suggestions for future research are presented accordingly. Organizational management has expanded, resulting in greater administrative complexity in a variety of situations, arising from the rapid changes occurring in the economy and society, policy making, and advanced science and technology. Management is unable to supervise the implementation details of the various agencies thoroughly. The internal audit is intended to serve an important role as a tool for effective management, monitoring and providing control measures (Daniela and Attila, 2013). Internal audits are faced with many challenges such as organizational growth, increasing use of electronics and computer technology, etc. (Pinto et al., 2014). Therefore, there is a need to develop an internal audit in terms of knowledge, skills and abilities in an appropriate manner. The contemporary professional practice of internal auditing was established with the founding of the Institute of Internal Auditors in 1941 (Chun, 1997; The Institute of Internal Auditors (IIA), 2012). In particular, over the last five decades, the Institute has increased the professionalism of internal auditors through such measures as the approval and issuance of the statement of responsibility, research and development of a general body of knowledge, the systematic development of education and professional certification programs and continuing, to make use of standards of professional practice of internal auditing with a code of ethics. Internal audit is a tool to support decision makers in organizations. There has been a great deal of activity regarding internal audits since 1941. It developed from the perceived duty to monitor the payments of accounting departments, until it achieved its current role to assure the proper operations of the organization. Internal audit now assesses all management resolutions meant to ensure their normal and efficient operation, and in so doing creates added value (Daniela and Attila, 2013). The goal of internal audit is to enhance the overall economy, efficiency and effectiveness of the organization by adding value to its operational performance (Griffiths, 1999; Wynne, 1999). Internal audit, having two main benefits for an organization from having an internal audit department; first, it was derived from the conventional audit of financial systems and controls. Additionally, internal audit has a primary focus on the prevention and detection of irregularities from mistakes or fraud, and the safeguarding of the assets of an organization. The second is performance audit, which concerns the economy, the efficiency and the effectiveness of various aspects of the organization (Al-Twaijry, Brierley and Gwilliam, 2003; Cosserat, 2000). Due to several driving factors, internal audit has become increasingly more important for almost 40 years. That is an effective internal audit can protect a company from such internal failures causing a loss in the organization. This is the reason why many institutes have attempted to create new methods, tools and practices to help internal audit either to prevent or to reduce opportunities that may cause a rise in corporate fraud. For example, the historic lack of effectiveness of the internal audit is the FCPA (Foreign Corrupt Practices Act) legislation of the United States in 1977 to prevent the payment of bribes to government officials in the country (Collier, Berry, and Burk, 2007). The management of the organization was held responsible for making a report to regulators, including the securities and exchange. Thus, the international standards for the professional practice of internal auditing provides practical guidelines for the auditing method includes a comprehensive audit (e.g., monitoring, operating, monitoring systems, monitoring operations), 3E Audit (Economy, Efficiency, Effectiveness) or issuing new standards for internal audit as begun in 2002 and identifying the internal controls and risk management. Another example is the Public Company Accounting Oversight Board (PCAOB) and the Institute of Internal Auditors (IIA), which developed internal audit standards which play an integral role in effective corporate governance, as they can strengthen the internal controls of businesses by monitoring the risk and compliance requirements according to the Sarbanes-Oxley Act of 2002 (Alles, Kogan and Vasarhelyi, 2008; Gramling and others, 2004). Nevertheless, many organizations attempt to use new methods to help improve the internal audit so that it is effective and meets the organization’s objectives; both the problem of corruption and the inadequacy of control still exist. A review of past research has attempted to study some of processes of internal audits, but it is not covered all processes such as the slight research about internal audit planning, operational risk, internal control and internal audit review. However, it has found no studies that cover all processes of the internal audit. Therefore, the process of auditing including process review is a gap in this study. Aforementioned discussion, internal audit process excellence may help organizations to gain compliance with the guidelines for good operations under the standards or rules involved, which brings firms to achieve the main objectives of the organization through the quality of internal audit process. Resource-Based View (RBV) was applied from the discipline of strategic management. RBV concerned with the competitive advantage achievement leads to superior performance, depending on a firm’s resources (Barney, 1991; Grant, 1991; Wernerfelt, 1984). All firms rely on a combination of resources including all assets, capabilities, organizational processes, firm attributes, knowledge and information to conceive of implementation strategies that improve effectiveness and efficiency (Haines and Sharif, 2006).The basic question of RBV is how the organizations create a competitive advantage and sustainable way. Barney (1991) has presented the concept of a source of competitive advantage as an important resource that is required by the organization. H


IT Scammers Target Retiring Baby Boomers

Ronald O. Acton, University of Central Missouri, Warrensburg, Missouri

Dr. Mustafa Kamal, University of Central Missouri, Warrensburg, Missouri



According to AARP, 25% of US population is categorized as Baby Boomers (BB) age group. The first of the BB generation started to retire at the age 65 in 2011. Among all age groups, these citizens have accumulated the highest percentage of household wealth over the years. This population is specifically targeted by internet based thieves.  From email phishing, to internet based scams, elderly populations are target of local as well as international crooks. Identity theft, bank account fraud, illegal money transfer, virus based threats have become very common and are on the rise.   The aging population, however, has many resources available to help them become aware of risks and identify new threats against them. These include available support groups, readily available knowledge, conscious family members, community support, support organizations, awareness of law enforcement agencies and protective software. By educating themselves the aging population can greatly reduce their risk of falling prey to internet scams. Many of us have great experience going fishing with grandpa. All the preparation that take place the night before, all the excitement in planning, all the measurement of big fishes that are going to be caught. Everyone goes to bed thinking about all the catch tomorrow will bring. These are happy thoughts and best time of one’s life.  There is another type of phishing looming on the horizon that many grandparents experience and are not so pleasant.  The 2010 Census Bureau data suggests that those turning 65 years and older increased by 15.1 percent since 2000, making this the largest number ever in this age group (Werner 2011). Many of these grandparents fall under the Baby Boom generation. The Baby Boom generation is generally considered those born between 1946 and 1965 (The Pew Charitable Trusts 2013). This generation has worked hard saving money for retirement; now they can go fishing with their grandkids and enjoy life. However, reaching retirement age does have some downsides. People are not as trusting as before, and growth in technology products have contributed to new thread of crimes that many are not aware of.  Grandpa recently received what seemed to be email from his bank, asking for his social security number, account numbers, user id, and password so that the bank can verify his information for their new system. Grandpa is smart and remembered advise given to him that ‘legitimate agencies don’t ask for social security number, driver’s license number, passport number, bank account number, loan number, etc. over internet. Grandpa just blocked a phishing attempt on his computer and successfully defended himself. Phishing is defined by the Internal Revenue Service as random fishing activity for personal and financial information of unsuspecting victims by hooking them with a fraudulent email so that the stolen information can be used for identity theft (Suspicious e-Mails and Identity Theft 2014). Most Phishing scams we see today involve technology and the use of email or bogus websites. This paper focus on the Phishing scams involving technology and our aging population and how common everyday Internet and phone scams need to be examined for insight into their future usage. We also discuss why Phishing scams work so well when most of the intermediate and advanced computer users do not understand how someone can fall for such common scams.  According to market research firm Gartner, “Approximately 1.2 million U.S. computer users suffered “Phishing” losses of more than $900 million between May 2004 and 2005” (Goldsborough 2008). There are many Phishing scams out there. Many scams that are not commonly performed on the Internet will soon migrate to it. Thus we need to be aware of the growth of the common scams that impact society. With the yearly influx of Baby Boomers turning sixty-five we are at the beginning of a paradigm shift in the way this demographic will use technology now that they have more free time available. As technology continues to evolve and become more complex, the aging population has to deal with the changes while battling declining cognitive skills. With increased access to Internet, they become more vulnerable to falling prey to criminals through various Phishing scams. Unfortunately many of these scams have been successful over the years, stealing millions of dollars, and causing havoc on the lives of the victims. ‘Advanced fee’ fraud scams are some of the oldest scams on the Internet. Fee fraud scams are also known as 419 scams because common attacks come from Nigeria asking for help transferring money from their country which is a violation of section 419 of Nigerian law (LaFlamme 2014) (FBI 2010) (Goldsborough 2008). This scam involves the recipient receiving an email letting the person know that they have won a prize of some kind. The prize can range from free cruises to foreign lottery dollars. To claim the prize, the victim is requested to send a small payment of 25 to 100 dollars to unlock the winnings. Once the payment is received, the criminal keeps the cash and moves on to the next victim (Goldsborough 2008) (Read 2014). A 76-year old woman lost $200,000 over years on this scam. She had ignored warnings from others that this was a scam because she wanted to believe she was going to win a fortune (Read 2014). In a survey by the American Associations of Retired Persons, it was found that many first time victim become victims of these types of scams at least one additional time (FBI 2010). Phishing scams can prey on the fear of the victims when the criminal pretends to be an authority figure, such as a FBI or Homeland Security agent. Another common Phishing scam involves the criminal sending broadcast emails with alert words in their subject lines. Some examples include Urgent, Alert, or Suspended in relation to bank accounts and credit cards (Workman 2008). This type of scam preys on the victim’s fear of missing a bill payment or having their bank account suspended. They may fear collection agencies will start calling if they do not act quickly to restore their account to good standing (Workman 2008). Tax Phishing scams often show up around tax season.


The Impact of ICT on e-Government

Dr. Shahram Amiri, Stetson University, DeLand, FL

Dr. Joseph M. Woodside, Stetson University, DeLand, FL

Brianne Boldrin, Stetson University, DeLand, FL



Given the global debt crisis, increasing government debt ratios are unsustainable.  An e-government model utilizing ICT and resulting Big Data is anticipated to reduce costs and decrease debt.  This manuscript examines the relationship between the United Nations’ International Telecommunication Union’s ICT sub index and the World Economic Forum’s Networked Readiness Index to governmental debt levels through analytical and quantitative methods.  Our research concluded that there is in fact a significant correlation between technology and governmental debt.  The paper contributes a quantifiable measurement and relationship between technological advancement, and government debt across the BRICS countries. Current and developing technologies promote the advancement of E-government.  E-government uses information and communication technologies (ICT) to allow the government to connect with citizens and private groups electronically (Relationship between E-Government, ICT and E-Governance).  This provides citizen centered services that increase the transparency of governmental agencies through the integration of various departments and programs.  Two major trends have increased E-governance projects for ICT.  The first is the recent development in the ease of the use of the governmental operational systems.  The second is the increasing use of ICT in the daily lives of citizens, growing the community’s level of knowledge and skill (Vijaykumar 2011).  Literature says, “E-government systems frequently encompass strategic goals that go beyond efficiency, effectiveness and economy to include political and social objectives, such as trust in government, social inclusion, community regeneration, community wellbeing and sustainability” (Grimsley & Meehan 2007). Big data, cloud computing technology and increased departmental communication have been described as recent development trends in E-Government.  Big data is the massive amount of digital data that is collected and compiled from a variety of different sources.  Sources say, “90% of the world’s data today was generated during the past two years, with 2.5 quintillion bytes of data added each day” (Kim, Trimi & Chung).  A large amount of this data is unusable to relational databases because of its structure.  Resources are need to transform this data into more than just figures. Data is a valuable resource that has new value and can increase discovery and business intelligence.  Governments can use big data to help serve their citizens and overcome national challenges such as rising health care costs, unemployment, natural disasters and terrorism (Kim, Trimi & Chung).  Recently, the Obama admiration began a Big Data Research and Development Initiative with the intent to "improve [American] capability to extract knowledge and insights from large and complex collections of digital data; harness these technologies to accelerate the pace of discovery in science and engineering; strengthen national security and transform teaching and learning" (Quing).  Big data will help enhance the use of E-government along with the use of several other technologies. Today’s literate provides a limited amount of data and research that significantly supports the overall cost savings of the government with the implementation of an ICT system (Bhatnagar & Singh 2010).  However, many works of literature do note the cost savings that the ICT provides to citizens once the system is implemented.  Recently, a study was conducted with the Road Safety and Transport Authority in Bhutan.  The study analyzed the transition of several offices from a manual system of issuing drivers licenses and automobile licenses to an electronic database system.  The old system required that the licenses be sent from four regional offices to a main office for approval.  This resulted in a large amount of backorders and a long duration of travel time (at least 2 weeks each).  With automobile documents requiring renewal every year and drivers licenses every five years, the volume of documents was very high.  The government hoped that an electronic system could help streamline this process and reduce turnover time so a new IS system was installed in November of 2004.  The system was completed less than a year later in July of 2005.   In order to retrieve substantial data, the licensing system was studied before the IS implementation as well after the new system had been fully functioning for a significant amount of time, in 2007 (Miyata 2011).  Data showed that the activity based cost of direct labor fell 24%.  However, the costs to implement the system itself rose 43% (Miyata 2011).  Literature cites a high rate of project failure, the learning curve and the need to implement a system simultaneously to an existing system, as some of the challenges of ICT similar to the project in Bhutan (Heeks 2011).  However, there are several cost and service benefits the citizens receive through successful implementation.  The customers have better service, a higher level of quality and fairer treatment.  This can allow the customer to cut down on travel expenses and the time that they spend away from work or waiting to get a license.  A similar study conducted at seven service locations in rural and urban India also concluded comparable findings.  They found that after the various projects began using ICT systems, the number of trips citizens made to complete transactions for a service were reduced at all seven locations, thus reducing the citizens travel costs.  They also found that the wait time at all seven locations was reduced 30-60%, resulting in a reduction in forgone wages (Bhatnagar & Singh 2010). Recent publications also recognize cost savings through the correct research and use of big data.  The British government could make a savings of £33bn through better use of big data (Burn-Murdoch 2012).  This large predicted figure is the result of better data collection, storage, analysis and interpretation.  Government officials stated that the use of data should increase the quality of decision-making and increase the collaboration between departments. Currently, the siloes in government lead to bad decision making because of the poor and restricted sharing of data and communication.  With an improved big data system, information can become more accessible from all departments and can be exchanged more frequently.  Big data can also help the government by decreasing the amount of fraud that occurs after the ability to complete a more comprehensive analysis on tax submissions data.  Data can also be used to be the base of a health care system that is more focused on preventative care the wellbeing then chronic care.  This will create a much greater return for the public information (Burn-Murdoch 2012). 


Re-launching of CCCTB Project in the EU: Moving from CCCTB Towards CCTB

Dr. Danuse Nerudova, Mendel University, Brno, Czech Republic

Dr. Veronika Solilova, Mendel University, Brno, Czech Republic



On 16th March, 2011, the European Commission has published the draft directive on common system of corporate taxation. The project proposed a single set of rules that companies could use to calculate their taxable profits. Primarily, the goal of CCCTB proposal was to strengthen the smooth functioning of Internal Market and to decrease compliance costs of taxation for companies operating cross-border. However, the element of consolidation comprised in the proposal, turned to be the most difficult part for the negotiation. Therefore, on 17th June 2015, the European Commission introduced Action plan on re-launching of CCCTB, announcing the move from CCCTB towards CCTB i.e. common corporate tax base. The aim of the paper is to research the impact of the change on the tax bases of the companies. The comparative analysis of the situation when the allocation formula under CCCTB system would be applied and the situation of cross-border loss offsetting under currently proposed CCTB system was performed during the research.  On 16th March, 2011, The European Commission has published the draft directive on common system of corporate taxation in the European Union (hereinafter as CCCTB). The system offered unified set of rules that cross-border companies could use for calculation of their taxable profit. It is considered as the most ambitious project in the history in the area of direct taxation. The uniqueness of the project lied in the fact that on one hand it represented unified rules for the construction of the tax base, on the other hand it did not breach the national sovereignty of EU Members States to apply independently the tax rate.  Primarily, the goal of CCCTB implementation was to strengthen the smooth functioning of Internal Market, by tackling the obstacles in the form of 28 different national taxation systems and the non-existence of the possibility of cross-border loss offsetting or the consolidation regimes. However, the element of consolidation comprised in the proposal, turned to be the most difficult part for the negotiation. Therefore, on 17th June 2015, the European Commission introduced Action plan on re-launching of CCCTB, announcing the move from CCCTB towards CCTB i.e. from common consolidated corporate tax base towards common corporate tax base. From now on CCTB is perceived by the EU and its Member States not only as a tool for significant improvement of business environment, but newly as an important instrument to combat tax avoidance, which can make corporate taxation in the EU much more transparent and can help to decrease aggressive tax planning. Under CCTB, all member States would apply unified set of rules for calculation of taxable profits of companies with cross-border activities, which should eliminate loopholes between national corporate taxation systems, often used by companies for tax planning. According to the European Commission, CCTB also represent a framework for the implementation of many of the new standards being agreed through OECD in BEPS project (Base Erosion and Profit Shifting Project). Based on the previous experiences with CCCTB proposal from 2011, European Commission is also changing implementation strategy. It is proposing mandatory CCTB for multinational companies in the first step. It means mandatory implementation of unified tax base construction rules. Only once the CCTB system will be functioning, consolidation should be introduced as the second step. The Action Plan comprise a set of measures to compensate the lack of consolidation in the short-term, until the second step will be implemented. One of them represents the possibility of cross-border loss offset and the review of the transfer pricing system. The aim of the paper is to research the impact of the change in the implementation strategy on the tax bases of the companies. Based on the comparative analysis of the situation when the allocation formula under CCCTB system would be applied and the situation of cross-border loss offsetting under currently proposed CCTB system, we are researching the differences in details. The paper presents the results of the research in the project GA CR No. 13-21683S  “The quantification of the impact of the introduction of Common Consolidated Corporate Tax Base on the budget revenues in the Czech Republic”. The theory offers several mechanisms for tax base sharing. Some of the have already been implemented in some states – e.g. U.S.A. or Canada. Generally, allocation mechanism can be divided according to the employed factors on allocation formula with macrofactors and allocation formula with microfactors. As mention Lodin and Gammie (2001), the selection of the allocation formula and its factors significantly influences the size of the allocated group tax base.  First possibility for the allocation of the group tax base in the group of allocation formulas with macrofactors represents allocation formula with factors aggregated on the national level – i. e. GDP or national VAT tax base. When this mechanisms would be employed in CCCTB, it could be implemented in two variants. Either the group tax base would be distributed just amongst the states in which the member of the groups are active, or it could be distributed amongst all participating EU Member States. It is necessary to mention that the latter opens the space for tax planning. The companies can speculate and can try to remove the activities to the low tax EU jurisdiction in order to decrease the overall tax liability. Second group of the allocation mechanisms represents the allocation formulas with microfactors. As mentions Nerudova (2014), it is possible to apply either Value Added Method (hereinafter as VA) or Formulary apportionment (hereinafter as FA).   Based on the above stated allocation formula, the consolidated group tax base would be allocated amongst the corporations operating in individual member states, based on their share on total value added of the group as mentions Agúndez-Garcia (2006).   Formulary apportionment represents the tool, traditionally used for tax base sharing in U.S.A. and Canada. The history goes back to the 1870´s in the U.S.A., where it had been firstly applied in the area of property taxation. As mentions Weiner (2005), instead of measuring company´s property in individual state, the companies measured their property and the tax base was distributed to individual states based on their share on railways in individual states. For income taxation purposes, the FA was firstly applied in Wisconsin. At the end of 1930´s nearly all companies already applied three factor formula with equally weighted factors. 


Fiscal Policy and Private Investment in Namibia

Dr. Esau Kaakunga, Senior Lecturer and Deputy Dean, Faculty of Economic & Management Sciences, University of Namibia, Windhoek, Namibia



The purpose of this paper is to analyse the impact of fiscal policy on private investment in a developing economy. The regression results indicate that the share of taxes on income and profit and the ratio of total central government to GDP are negatively related to investment by the private sector. They also revealed that investment by the public sector had promoted investment by the private sector. The findings also show that taxes on income and profit crowd-out private investment during the period under review. The results of the study suggest that the government should continue with its emphasis on infrastructure development, since this would create an enabling environment for the private sector to play its vital role in the economy. It is also recommended that the government should review its tax structure annually in order to make its tax regime more competitive and to avoid high taxes on income and profit which could have detrimental effects on the investment by the private sector. The study further recommends that there is a need to put a limit on the increase of current expenditure as well as to monitor the levels of the total central government debt. Namibia, on the eve of independence in 1990, could be described as having a siege economy. It was a country which had been isolated from the rest of the world and was characterized by extreme disparities in access to public facilities and distribution of income. The economy is also characterized even now by its complex nature that ranges from a traditional hunter-gatherer subsistence economy to the advanced technology of a modern industrial sector. The economic activities are mainly dominated by mining, agriculture and fishing and to some extent services. The emphasis has been on primary production for export, while the bulk of processed goods required for domestic market are imported from South Africa. Hence, the performance of the Namibian economy has to be viewed against the behavior of global economies as the country relies heavily on the exports of its primary commodities. While Namibian products still enjoy high demand in their export markets, the country’s dependence on its primary exports makes it extremely vulnerable to fluctuations in the world market. The country is endowed with unique flora and fauna and geographical which attract tourists.  Output growth in Namibia started to improve considerably after independence, surpassing the 1.1 percent average achieved during the previous decade. In 1991, the economy grew by 8.2 percent. It sustained this pace between 1991 and 1995, achieving an average growth rate of 5 percent during this period. The turnaround came in 1995, after the economy had hit a high of 7.3 percent growth in 1994. Between 1996 and 2000, the average growth rate of real GDP declined to 3.5 percent. Between 2000 and 2013, the economic growth rate has fluctuated (see table 1). A growth rate of 1.2 percent was recorded in 2001, which later improved to 4.8 percent and 4.2 percent in 2002 and 2003, respectively. The lower growth in 2001 resulted from declines registered in the sectors like mining, fishing, transport and communications, electricity and water, and hotels and restaurants. In contrast, the agriculture, manufacturing, construction, government and financial intermediation sectors experienced higher output growth. Table 1 also indicates that the growth rate of gross domestic product in 2009 declined to - 0.7 percent. This poor performance was attributed to the collapse of mineral prices, when some major mining companies in Namibia adjusted their production plans downward for the medium term. In the case of copper, production was stopped altogether at the end of 2008, with all copper mines put on a care-and-maintenance schedule. However, the economy recovered in 2010 with a growth rate of 6 percent. Furthermore, during the period, 2011 – 2013, the growth rate of real GDP averaged at 5.2 percent. The main drivers behind this growth were the secondary and tertiary industries (Namibia Statistics Agency, 2014).  Since independence, the ratio of central government debt to gross domestic product has increased steadily. The increase in debt has been driven by two factors, namely, the financing of budget deficits and increasing foreign borrowing outside the revenue fund. Tax revenue as a share of GDP has grown gradually during the period after independence in 1990. The main factors affecting this performance were taxes on income and profit, SACU receipts and domestic taxes on goods and services. Total government spending as a ratio to GDP has increased substantially since independence. This increase was mainly due to the commitment of government of widening access to social services, especially health and education to the majority of the Namibian population.  The ratio of gross fixed capital formation to GDP had increased significantly during the pre-independence period. The high ratio was mainly caused by public investment which formed a large portion of GDP. However, this ratio decreased towards the close of the 1980s. This was mainly owing to the deadlock in the constitutional process that caused uncertainty about the country’s future and adversely affected the investment decision of local entrepreneurs; with investments being postponed indefinitely or directed into small short-term ventures. This uncertainty was accentuated by a succession of political dispensations and signs of impending independence. After independence in 1990, the country has witnessed a considerable increase in investment GDP ratio, which was due to confidence by investors in the country resulting from its political and economic stability, and the various incentives introduced by the new government. Given this background, the objectives this paper are (i) to examine the long run effects of fiscal policy on private investment and (ii) to assess the empirical relationship between public investment, taxes on income and profit, central government debt, current expenditure and private investment.  The study consists of several sections: Section One contains the Introduction while Section Two surveys the theoretical and empirical literature, and is followed by Section Three that presents the methodology and the analysis of regression results. Section Four presents the conclusions. In this section we review the literature with a view to identifying the causal relationship between fiscal policy and private investment. Most of the theoretical and empirical literature looks at the relationship between fiscal and economic growth. Yet, this literature is essential for evaluating the relationship between fiscal policy and private investment. When government expenditures create positive production externalities, focusing on enhancing innovation and research and development and/or stimulating the accumulation of private capital, they are seen as productive. It is also assumed that public investment in infrastructure, education and heath belong to this category (Aschauer, 1989; Kneller et al., 1999). In this case public investment is said to be crowding in private investment. However, if financial resources are limited, public investment may also reduce the possibilities for the private sector to obtain credit to finance investment. Moreover, if public investment is financed through monetary financing, private investment may be seriously discouraged (Ramirez, 1996). Government expenditures transferred to inefficient state-owned enterprises that produce market goods are regarded as non-productive expenditure. Furthermore, spending on salaries is regarded as non-productive expenditure.

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