The Business Review Journal
Vol. 8 * Number 2 * December 2007
The Library of Congress, Washington, DC * ISSN 1553 - 5827
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Degree of Complementarity Among Off Balance Sheet Items: The Empirical Evidence
Dr. Vassilios N. Gargalas, Herbert H. Lehman College, Bronx, NY
This paper tests the theory that loan sales without recourse and standby letters of credit are activities undertaken jointly by commercial banks in order to avoid the "regulatory taxes," imposed on loan sales with recourse. The implication of the theory is that the production structure of the two instruments is determined mainly by the supply side, in such a way that, on average, for each loan sold without recourse, a standby letter of credit, guaranteeing an amount equal to the loan sold, is issued. Therefore, the hypothesis tested is that loan sales without recourse and standby letters of credit are complements. The alternative hypothesis is that the production of the two instruments is mainly driven by the demand side making the two activities unrelated. This could also be viewed as a test of whether banks have been transformed to something new or they maintain their traditional function of credit analysis and loan origination, as well as risk bearing. Data from ninety banks are used to perform a number of empirical tests. A series of tests that involve loan sales without recourse and standby letters of credit is conducted. Other variables that are “naturally” involved in these tests are the three “regulatory taxes,” reserves requirements, FDIC premiums, and capital requirements. Considered in the tests are a number of variables identified as having a potential impact on loan sales without recourse activity and standby letters of credit issuance. Finally we test whether the hypothesized relationship stands in the presence of non-stationariry, by testing for co-integration of the time series of the two off balance sheet instruments. Loan sales with recourse can be easily seen as instruments of traditional banking, since banks both perform the credit analysis and also undertake the risk of lending. A close inspection of the data, however, shows that the vast majority of loans sold are sold without recourse. In doing so, banks appear to have become simple loan brokers and thus deviate from their traditional role.
An Economic Analysis of Tax Reform in Texas
Dr. Michael F. Williams, Prairie View A&M University, Prairie View, TX
This paper examines the economic impacts of changes to the Texas tax system enacted in 2006. We contend that property tax relief, combined with an increase in tobacco taxes and changes to the business franchise tax, enhance the productivity of the Texas economy while reducing the progressivity of the tax burden. Reform of the tax system in Texas—a topic which had considerable urgency due to an adverse ruling by a Texas district judge—culminated with the signing of House Bills 1-5 by Texas Governor Rick Perry on May 18, 2006. Support is strong among Texans for this tax reform that not only reduces local property taxes but also increases total education spending. Achieving both of these objectives required an increase in the state cigarette tax and an extension and modification of the Texas business franchise fee. These sweeping tax changes may have substantial economic effects in Texas; economic analysis suggests that the changes, by shifting the tax burden away from capital owners and toward laborers, consumers, and smokers, will increase the productivity of the Texas economy while reducing the progressivity of the tax burden among Texans. Aggregate expenditures on K-12 public education in Texas were $45 billion for school year 2005-2006 (Perry, 2006). Approximately $4.5 billion of this total was funded with federal dollars. The remaining portion was funded through a system commonly known as “Robin Hood,” first implemented in 1993. Prior to the 2006 tax reform, approximately half of Robin Hood funding was generated by property taxes levied by the 1,037 school districts in Texas. These districts faced a state-mandated tax rate limitation of $1.50 per $100 of assessed property value. (This cap relates to “Maintenance and Operations” expenses. Property taxes levied for capital expenditures were not subject to this cap.) The remainder of public school expenditures were funded from state revenues, including state sales taxes and business franchise taxes.
Advertising Strategy and Returns on Advertising: A Market Value Approach
Dr. Peggy Choong, Niagara University
Dr. Greg Filbeck, Schweser Study Program and University of Wisconsin, La Cross
Dr. Daniel L. Tompkins, Niagara University
Marketing managers are today increasingly pressured to provide evidence of their advertising strategies. Targeting specific premier television programs has become such an expensive strategy. There is some anecdotal evidence of the successful outcomes of this strategy in the form of improved sales, phone inquiries or hits on the web sites. However, there is no research that has provided credible evidence of how the market views this strategy. Using event study methodology, this paper evaluates the returns on advertising in major event television programs. Three types of television programs are investigated. The first is a one-shot final episode of popular sitcoms, the second and third are recurring annual television programs namely the Academy Awards and Super Bowl. The results indicate that the effectiveness of the actual advertising strategy depends on the specific program the firm chooses to purchase advertising slots. Reaching a broad audience has always been a difficult problem for advertising executives. It doesn’t get easier with new technologies that enables television viewers to avoid these advertisements altogether. Throw into the mix the many new cable channels and other micro-targeting media, and a very fragmented audience topography results. Members of the American Advertising Federation have identified audience fragmentation as one of the biggest issue the advertising industry faces and will continue to grapple with for the “next five years” (American Advertising Federation, 2003). And, as if reaching the largest proportion of prospective buyers wasn’t problem enough, advertising executives are also plagued with the reality of audience indifference and inattention. In response to these issues, marketers have felt compelled over the last two decades to concentrate on major event television programs.
Estimation of Derived Demand for and Supply of Better Education in Louisiana
Dr. Donald R. Andrews, Southern University and A&M College, Baton Rouge, LA
Dr. Sung C. No, Southern University and A&M College, Baton Rouge, LA
Dr. Ashagre Yigletu, Southern University and A&M College, Baton Rouge, LA
The paper conducts a market analysis of demand for and supply of better education for the state of Louisiana. The 2SLS estimates indicate that as class size increases, school performance significantly deteriorates and better education is on demand and that as a school’s performance score improves, more academically oriented parents seek improved schools and their class size increases, resulting in a positively-sloped-supply curve for better education. Based on parameter estimates in the derived demand and supply, the study finds that the state average class size (K-8) is well above the desired class size and the average test score is about half of the desired test score. As a result of Hurricanes Katrina and Rita, Louisiana is in the process of rebuilding its economy. The New Orleans area has suffered a major disaster and the recovery effort has been slow and bureaucratic. Even before the storms, the schools in the state and especially the New Orleans area were performing well below national and state standards. One of the major concerns as the state rebuilds is the provision of the incentive to improve performance in primary and secondary education. A high performing educational system is a prerequisite for the state to make the transformation from a low income natural resource dependent area to a more entrepreneurial knowledge-based globally focused economy. Investments in human capital in the form of education and training will be a determining factor in the ability of this region to recover and move forward. It is a widely held belief that education provides the foundation for students to acquire many other skills required to achieve their life long goals ; moreover, “quality” education enhances the possibility for students to excel in competitive markets.
Takeovers and Agency Problems: A Reexamination of the Pre-Acquisition Operating Performance of Targets
Dr. Rupendra Paliwal, Sacred Heart University, Fairfield, CT
Both the issue of agency problems in corporate takeovers and the role of takeovers as an external control mechanism have been addressed extensively in previously published empirical literature. This existing literature suggests that removal of inefficient management to improve operating performance is one of the key underlying motives for takeovers. However, the results of the analyses of the pre-acquisition operating performance of targets have not been conclusive concerning the efficacy of this motivation to improve underperformance in target firms. I propose that the existing research fails to adequately account for other factors that may also act as control mechanisms, such as managerial ownership, institutional holdings and leverage, which should also be considered when analyzing the pre-acquisition operating performance of targets. These alternative means of controlling agency problems may prevent managers from wasting resources. In this paper, I have sought to contribute to the debate on the inefficient management hypothesis. I do so by examining the pre-acquisition operating performance of targets in the presence of alternative control mechanisms such as insider holdings, institutional holdings and leverage. I have also investigated whether the takeover announcement abnormal returns are higher for targets with poor performance and potentially higher agency costs. I found that target firms are characterized by higher operating expenses compared to control firms. The results of my analysis suggest that targets with entrenched managers and low external monitoring have significantly higher operating expenses. I also found weak evidence that the announcement period abnormal returns are higher for targets with poor operating performance. It has been widely recognized that separation of ownership and control results in agency problems. For example the free cash flow theory of Jensen (1986) argues that managers have incentives to expand firms beyond their optimal size to increases resources under their control and also because managerial compensation is often tied to firm size.
Application and Enforcement of Two Specialized Lease Provisions: Radius Clause and Continuous Occupancy
Dr. J. Bruce Lindeman, University of Arkansas at Little Rock, Little Rock, AR
The radius clause is a lease clause that sometimes is found in a lease between a shopping center and a tenant. It states that the lessee merchant agrees not to open a similar store within a radius of x distance from the lessor shopping center. While radius clauses could appear in any lease, by any lessor, to a retail tenant, these clauses are most common in shopping mall leasing. However, enforcement is a different matter: courts usually require the shopping center prove specific damage from an offending tenant’s violation of the radius clause provision. This generally is very difficult to do with respect to a small tenant. However, this paper describes a situation in which enforcement of the radius clause against a small tenant was successful. Leases require the tenant to pay rent, but do they always require the tenant to occupy the rented space? A continuous occupancy clause requires that the tenant not only pay rent, but also remain in and actively use the leased premises. This paper presents a case in which continuous occupancy was enforced against a tenant even though there was no specific mention of continuous occupancy in the lease agreement. The radius clause is a clause that can appear in a lease between a shopping center and a tenant. It states that the lessee merchant agrees not to open a similar store within a radius of x distance from the lessor shopping center. While radius clauses could appear in any lease, by any lessor, to a retail tenant, these clauses are most common in shopping mall leasing. The reason for the radius clause is to protect the marketability of the shopping mall; close by duplicate stores will “cannibalize” sales from the mall. Requiring duplicate stores to be at least a prescribed distance from the mall, the mall management can “assure” that the competition from these stores is either outside the mall’s predominant market area or, at least, no closer than the periphery of the market area.
The Future of Taiwan Depends on Relationships of Taiwan, China, and United States of America
Dr. Raymond S. Chen, CPA, California State University Northridge, CA
Dr. James S. H. Chiu, CPA, CMA, California State University Northridge, CA
Economic development in Taiwan over the past forty-seven years has been truly miraculous. Per capita gross national product (GDP) increased from US$154 in 1960 to US$14,216 in 2000, which translates to an increase of over 92 times. Per capita GDP decreased in recent years reflecting the negative and low growth rates and the devaluation of Taiwan’s currency. Although there are many factors attributing to the economic growth in Taiwan, this paper identifies the major economic, educational, and taxes policies that assisted in propelling Taiwan’s prosperity. This paper also identifies the political and economic factors that will challenge the future of Taiwan. The future of Taiwan depends on the delicate relations amongst Taiwan, Peoples Republic of China, and United States of America. This paper will also discuss strategies that the Taiwan government can implement to further promote political stability and economic growth. About sixty years ago, Taiwan was basically a rural and insulated society, when Taiwan was returned to China from the Japanese occupation after Japan was defected in World War II. Even though industrialization had started during the period of Japanese rule, it had been pretty much crippled by the bombing of the United States during World War II. When the Nationalist government of the Republic of China lead by Chiang Kai-shek moved its government to Taiwan in 1949 at the time of the Communist takeover of mainland China, economic development in Taiwan was at a virtual standstill due to civil war. The population of Taiwan had increased significantly when a huge number of mainlanders migrated to Taiwan with the Nationalist Chinese Government in 1949. Currently, the population of Taiwan is estimated to be about 23 million. The distribution of the population is influenced by the island’s terrain. The coastal plains and basins in the west are agriculturally cultivated areas where the population is dense as a result of transportation and industrial development.
The Two-stage Optimal Matching Loan Quality Model
Chuan-Chuan Ko, National Chiao Tung University, Taiwan
Dr. Tyrone T. Lin, National Dong Hwa University, Taiwan
Chien-Ku Liu, Jin-wen University of Science & Technology, Taiwan
Hui-Ling Chang, Ming Chuan University, Taiwan
This study attempts to optimize the loan quality requirement objective of the depositor, financial institution and investment agent in a two-stage loan market. Assuming that the financial institution may completely or partially fail to discharge his/her responsibility for liability in which a loan claim occurs following each stage, mathematical analysis is employed to identify the threshold of required loan quality and optimize the allocation of loan amounts in this two-stage loan market. This study defines the financial institution as the enterprise that is heavily reliant on manipulating financial leverage via minimum capital investment, and whose operating profit mainly derives from the interest spread of making loans with deposit volume; meanwhile, the depositor makes all deposits to obtain a steady stream of interest income. However, because of different lending criteria between the financial institution and the depositor, they have conflicting interests with each other. The financial institution wishes to increase loan credit, but loan volume is actually the balance held by the depositor. Therefore, the depositor asks the financial institution to rise up the loan credit to better guarantee his/her deposit. Furthermore, the securitization of financial assets has also provided the investor with an alternative financial commodity. The manner in which the financial institution re-packages and offers this financial asset securitization and the manner in which the investor purchases this commodity will also generate different perspectives regarding the loan quality of assets securitization subsequently represented by the investment agent among the financial institution, the depositor, and the investor. Lockwood et al. (1996) found that when enterprises begin asset securitization, the wealth of automobile manufacturers is increased after securitization, whereas the wealth of banks is decreased, and the financial institution should improve its capital structure before securitization and promote its financial health.
Worldwide Sourcing Practice of Malaysian Electrical and Electronics Companies
Dr. Abdul Latif Salleh, University of Malaya, Malaysia
The advent of globalization and the increasing intensity of competition have put immense pressure on companies to intensify their worldwide sourcing activities. However, it is questionable whether these companies understand the extent of commitment and scope of operations, and possess the resources and capabilities to coordinate and handle complex and sophisticated worldwide sourcing activities. These issues are particularly relevant in the case of companies in developing countries. Hence, the primary objective of this study is to explore the extent of worldwide sourcing and the practice of supply chain management among Malaysian electrical and electronics firms. Specifically, this paper examines the benefits, challenges, and critical success factors of worldwide sourcing as perceived by these companies. Organizational success is often attributed to the ability of business firms to develop or acquire competitive advantage. Acquiring competitive advantage is becoming increasingly difficult but vital to the survival of any organization operating in today’s global environment. Thus, understanding how to achieve competitive advantage in today’s fast changing and often unpredictable environment should be a major concern for companies that manufacture and market their products or services all around the world. To that end, understanding the benefits and challenges of globalization is crucial and is particularly critical to firms originating from or operating in developing countries. One area where companies can begin to capture the benefits of globalization is through global sourcing. With the lowering of trade barriers, the survival of a company depends heavily on its ability to compete globally and global sourcing has become a prerequisite in venturing to compete in global market. As suggested by Kotabe (1998), the ultimate objective of a company’s global sourcing strategy is to exploit both its own competitive advantages (e.g. R&D, manufacturing, and marketing skills) and the comparative location advantages (e.g., inexpensive labor costs, certain skills, mineral resources, government subsidy and tax advantages) of various countries in global competition.
The Effect of Organizational Change Readiness on Organizational Learning and Business Management Performance
Dr. Chih-Chung Chen, Aletheia University (Matou campus), Tainan, Taiwan
The purpose of this research was primarily to explore the influence of employees' readiness for organizational change on organizational learning and business management performance when they are facing organizational change. A questionnaire was used for data gathering, and the samples were adopted from the top 500 business organizations ranked by the China Credit Service, Ltd. A total of 500 questionnaires were released and 175(35%) valid responses were received. This research revealed that the level of preparedness for organizational change influenced organizational learning and business management performance. A negative passive attitude among employees resulted in a negative effect on organizational learning and business management performance, while a positive aggressive attitude and collaborative coordination with relevant activities resulted in a positive effect on organizational learning and business management performance. Our conclusions also suggest that organizational learning can improve organizational business management performance, especially when there is an emphasis on the creation and distribution of internal knowledge of the organization. In a dramatically competitive and changing business climate, organizations must constantly adjust their organizational structures and strategies. However, organizational change, although vital for organizational development (Piderit, 2000), means ceaseless change. Past studies about organizational change have focused on ways to overcome resistance against change (Kotter & Schlesinger, 1979; Rosenberg, 1993), when organizational change occurs (Nadler & Shaw, 1995; Kanter, Stein, & Todd, 1992), and factors related to resistance (Clarke, Ellett, Bateman, & Rugutt, 1996), while others have focused on other organizational factors that influence organizational changes (Jermias, 2001).
Applying Analytic Hierarchy Process to Evaluate the Development Strategies of Intellectual Capital for Fabless Integrated Circuit Design Houses in Taiwan
M. C. Kao, Yuan-Ze University, Taiwan
In the era of knowledge economy, it has become a key issue for business to develop intellectual capital. The study employs analytic hierarchy process (AHP) to evaluate the priority of development strategies of intellectual capital of fabless integrated circuit design houses in Taiwan. The results indicate that the most important construction of intellectual capital is human capital and the next is innovation capital. Furthermore, the highest weight of intellectual capital development strategy is to improve team quality and cultivate capability (13.8%), followed by encouraging the technological innovation (10.6%) and investing in R&D resources (8.5%).These strategies are consistent with the development direction of the industry. With the coming of knowledge economy, intellectual capital has become the main source of competitiveness and the key resource for wealth creation. Prior studies (Lev and Zarowinn, 1999; Lev, 2002) mention that nearly 80% corporate market value has not been reflected in financial reports. Kaplan and Norton (2004) also point out that about 75% of market value of U.S. firms comes from intellectual capital. This phenomenon is more obvious to knowledge-based enterprises (Edvinsson and Malone, 1997). Many studies have identified intellectual capital as the value driver of an enterprise (Amir and Lev, 1996; Edvinsson and Malone, 1997; Stewart, 1997; Ittner et al., 1997; Bontis, 1999; Sullivan, 2000). Intellectual capital thus can be considered the core competence in business. Fabless Integrated Circuit design (FICD) industry is knowledge-intensive and intellectual capital is the core element of creating value. Taiwanese FICD industry ranks second only to that of the U.S., representing 1/3 of the global market value. Among the numerous FICD houses, Media Tek, Novatek, VIA, Realtek, Sunplus and Mstar rank in the top 20. According to statistics from the IEK-ITIS Project of the Industrial Technology Research Institute (ITRI), Taiwan had a total of 268 FICD houses in 2005. The operating income of these houses during 2006 totaled NT$323billion, increased 13.5% from 2005 and the growth rate of total Taiwan FICD industry production value is expected to reach 14.3% in 2007. Apparently, intellectual capital exerts the key influence on FICD houses competitiveness. Hence, it is crucial to set up intellectual capital development strategies properly. Although the concept of intellectual capital is easy to understand, there are bottlenecks in its practical application.
Apply Delphi and TOPSIS Methods to Identify Turnover Determinants of Life Insurance Sales Representatives
Dr. Chiang Ku Fan, Shih Chien University, Taipei, Taiwan
The high sales representative turnover rate usually forces a life insurance company to face difficult dilemmas. The first purpose of this study is to identify the major turnover determinants of life insurance sales representatives in Taiwan by interviewing experienced human resource managers in life insurance companies. The second purpose of this study is to rank the turnover determinations. A Modified Delphi Study and a Mixed-Methods Approach were employed. The qualitative data were coded relative to themes explored throughout questions asked in each interview. The technique for order preference by similarity to the ideal solution (TOPSIS) method was conducted to rank the turnover determinants for life insurance sales representatives. According to the research results, emotional exhaustion or job stressors, manager mentoring process for career enhancement and psycho-social functions for subordinates, wage rate, career opportunities, length of working hours. Human resource managers can justify which turnover determinants are the prior ones should be moved out in the very short run. According to the data reported by the Taiwan Insurance Institute (2004), life insurance sales representatives’ average retention ratio of the 13th month from 1996 to 2003 in Taiwan was just 48.1%. This means that more than 50% of life insurance sales representatives terminate their job in the first year. The high sales representative turnover rate in the first career year usually faces life insurance companies with difficult dilemmas. On the one hand, an insurance organization may try to discourage turnover by designing competitive compensation packages, better benefits, and efficient training programs for their sales representatives. On the other hand, human resource managers may face the risk that the well-trained sales representatives will become an attractive potential workforce for other life insurance companies (Wong and Law, 1999).
The Outlook for Taiwan’s Domestic Air Marketing Strategy and Trend Development
Shyue-Yung Ho, China Institute of Technology, Taipei, Taiwan
Since the open sky policy in 1987, marketing strategy in the airline industry has been one of the major concerns for Taiwan’s domestic airliners. The deregulation policy led Taiwan’s domestic air market into a new era of perfect competition. The market characteristics of the airline industry, such as fleet plan, fare, route operation, frequent flyer program etc, has become the main factors in their marketing strategy, which has significantly impacted the domestic air market. Because of changes in the competitive air transport environment in Taiwan, there is a need to review marketing strategies in this particular field. With the advent of market recession and confrontation of the high-speed railroad launched recently, Taiwan’s domestic airlines are under a severe competitive market environment. Thus, this paper will investigate the competition among these four domestic carriers (Uni, Far Eastern, TransAsia and Mandarin Airlines), as well as analyze the future development of domestic air transportation from the perspective of the local carriers and the market itself. The extreme changes in Taiwan’s domestic air transportation marketplace were accelerated with the advent of the open sky policy in 1987. Deregulation was expected to result in a larger number of airlines competing for passengers and freight traffic. The number of Taiwan’s domestic airlines did increase initially, which also provided a clearer picture of entry into and exit out of the domestic airline market following the development of marketing strategy. It should be noted, however, that several strategic acquisitions formed resulting in different competing airline groups in the domestic air market. At the present time, there are four carriers still operating the domestic air transportation： Far Eastern (EF), TransAsia (GE), Uni Air (B7) and Mandarin (AE). Due to their unique features, Taiwan’s domestic airlines faced intermodal competition in types of aircraft, scheduling, and their duration. In addition, intramodel competition in rates and services presented a challenging marketing environment. The crisscrossing routes of domestic airlines in Taiwan result in three areas of operation – the Western island, the Eastern island and the Off islands.
Marketing Ecological Communities: Experience from the Eco-Community Pilot Projects in Tainan of Taiwan
Dr. Kang-Li Wu, National Cheng-Kung University, Taiwan
With the promoting of the concept of sustainable development and ecological design, developing ecological community has become an important policy goal in Taiwan. However, how should the concept of ecological communities be promoted to the potential homebuyers remains an unanswered research question. This paper explores a marketing approach for promoting the concept of ecological communities. Through an examination of the pilot ecological community project in Tainan Salun High Speed Rail Station of Taiwan, this study identifies the core values, target markets, and the demand of services of ecological communities. By incorporating research methods involving interviews, field survey, STP analysis, and a questionnaire survey, this study finds that the demand of the facilities and services of ecological communities is related to the household income and the values of ecological communities perceived by homebuyers. Based on the results of the empirical studies, this study develops a set of marketing strategies for promoting the development of ecological communities. The concept of ecological community has received widespread attention in Taiwan in the past decade. This concept outlines a vision for building a living environment that integrates the considerations of ecological integrality, economic efficiency, and social equity. However, since the concept of ecological community has proposed a new type of community development and lifestyle that is different from the current housing market products, how this concept can be efficiently implemented in current community planning and real estate practices in Taiwan has become a critical issue. Employing research methods involves field investigation, in-depth interviews and the STP（segmentation, target market, positioning）analysis of the proposed pilot ecological community project around Tainan High Speed Rail station of Taiwan, this research attempts to explore two research questions: (1) How decision-makers in real estates and land development should identify the key elements and facilities in building eco-communities in Taiwan? (2) How should we develop suitable marketing strategies to promote eco-communities in the existing real estate market? Through our empirical study, a set of workable marketing strategies are suggested in order to promote the concept of ecological community in Taiwan.
Using Grey Prediction Model to estimate Inbound Visitors to Taiwan
Dr. Ching-Yaw Chen, Shu-Te University, Taiwan
Dr. Pao-Tung Hsu, Shu-Te University, Taiwan
Chi-Hao Lo, Shu-Te University, Taiwan
Yu-Je Lee, Tak-ming College, Taiwan
Che-Tsung Tung, Tak-ming College, Taiwan
This research uses the Grey Prediction Model to estimate the possible number of visitors to Taiwan subsequently by using the official figures on visitor arrivals to Taiwan published annually. After formulating the most ideal forecast model to estimate the number of inbound tourists, it will then be compared to annual visitors to Taiwan for accuracy and error value comparison. It is intended that the research findings will not just provide the related governmental departments and industry with a foundation to base their decision-making on, but also act as a reference point for conducting further research by fellow academicians. In recent, the vibrant growth of the tourism industry has driven up the number of tourists in the world, and brought about a great increase in total economic production. Facing such bright prospects and great potential, satisfying and accommodating to Tourism Attractiveness conditions by finding a way to blend nature and heritage to develop the industry is a great challenge. We can see from here that the development of tourism holds the balance to the economy of not just an individual country, but also the world. In addition, due to the perishable ability of tourism products, which causes the peak and low seasons, or seasonal fluctuation of travel demands, This results in a stable cyclical pattern on the number of tourists to Taiwan. Under such productivity constraints, it will be more advantageous for countries to, through forecast methodology, to estimate the number of tourist arrivals and then establish the necessary policies to ensure growth in the industry. Therefore, it is essential that Tourism Demand Forecasting be not just a necessary area of tourism research, but a key area of tourism research. In view of the fact that the progress of tourism has by now become a guideline on the economic development of a country, Tourism Demand Forecasting has indeed already developed to become a key area of research. However, research on an efficient and accurate forecasting method on tourist arrivals to ensure adequate supply and future tourism trends should not be overlooked, and this is also the first motive of this research.
Fuzzy Neural Model for Bankruptcy Prediction
Dr. Chokri Slim, Manouba University, ISCAE, Tunisia
In this paper, we present a novel fuzzy neural model (FNM) as an alternative technique to both Linear Discriminant Analysis (LDA) and Classical Backpropagated Neural Networks (CBNNs) for forecasting corporate solvency. Each method is applied to a dataset of 68 bankrupt and nonbankrupt Tunisian firms for the period 2000-2005. The results of this study indicate that the FNM applied in the present study provides superior results to those obtained from either the LDA method or from CBNNs using the standard backpropagation algorithm. Beaver’s (1966) study is considered the pioneer work of bankruptcy prediction models. For Beaver, the firm is viewed as a “reservoir of liquid assets, which is supplied by inflows and drained by outflows. A firms’ solvency can be defined in terms of the probability that the reservoir will be exhausted, at which point the firm will be unable to pay its obligations as they mature.” Using this framework, the author states four propositions: The larger the reservoir, the smaller the probability of failure. The larger the net liquid-asset flow from operations, the smaller the probability of failure. The larger the amount of debt held, the greater the probability of failure. The larger the fund expenditures for operations, the greater the probability of failure. In recent years, much attention is given to the choice of methodology for bankruptcy prediction models. Methods like recursive partitioning, neural networks and genetic programming are commonly applied to the bankruptcy prediction problem. Morris (1998) offers a survey of both new and traditional approaches to bankruptcy prediction. Recent work, such as that done by Poddig T. (1995) suggests that CBNNs are a superior methodology to LDA in terms of ability to accurately predict corporate distress. At first glance, this information should come as no surprise, as CBNNs are capable of constructing highly complex decision surfaces, while LDA is limited to linear hyperplanes.
Mergers and Scale Economies in Taiwan’s CPA Firms
Dr. Chung-Cheng Yang, National Yunlin University, Taiwan
Tsung-Yi Tsai, Shin Chien University Kaohsiung Campus, Taiwan
The Translog cost function model is specified to analyze the relationship between the mergers of CPA firms’ in Taiwan. Estimation of the model uses a balanced panel data for 120 CPA firms for the period 1997-2001. The survey data are based on "Survey Report of CPA Firms in Taiwan," from the Department of Statistics, Ministry of Finance, Taiwan, ROC. The empirical results indicate that scale economies are prevalent in Taiwan‘s public accounting industry. Taiwan’s public accounting industry underwent a brief period of dramatic change in recent years. After a spate of mergers, by the end of 1999, the Big 6 CPA firms had become the Big 5. The recent increase in merger activity is often attributed to Certified Public Accounting (CPA) firms’ efforts to avail themselves of scale economies (Banker et al., 2003), so merger has been an important strategy adopted by CPA firms for growth and development. In an ever-changing environment, new management strategies are designed and undertaken, but CPA firms have also consolidated so their professional skills could be combined and their services could be more comprehensive. Mergers have benefited CPA firms by increasing scale economies, allowing multi-dimensional development, increasing market share, combining resources, reducing total costs, and maintaining the market standing of the firms (Wootton et al., 1990, 1994). The United States General Accounting Office (GAO, 2003) also pointed out that mergers could produce scale economies in the public accounting industry. We address the question of whether these incentives are consistent with merger activities among Taiwan’s CPA firms by constructing and estimating the public accounting industry production function using balanced panel data published in the "Survey Report of CPA firms in Taiwan" for the years 1997-2001 for the 120 CPA firms in Taiwan, ROC. In the past, the research on CPA firm mergers often focused on the auditor concentration, market share and audit fees (Minyard and Tabor, 1991; Payne and Stocks, 1998; Tonge and Wootton, 1991; Wootton et al., 1990, 1994).
Antecedents of Turnover Intention toward a Service Provider
Dr. Ipek Kalemci Tuzun, Baskent University, Ankara, Turkey
This paper reports an investigation of the variables that may be predictive of turnover intention, and test a model that includes mediating variables. A total of 578 bank employee attended to the study. Participants completed measures of organizational identification, perceived external prestige, and turnover intention and job satisfaction. Structural equation modeling and LISREL8.30 (Jöreskog and Sörbom, 1993) is used to assess the research model. The results indicated that PEP is positively related to the job satisfaction and identification. Identification and job satisfaction are also negatively related to the turnover intentions. The findings show that the relationship between perceived external prestige and turnover intentions is mediated by both job satisfaction and identification. The current paper is very useful to understand the determinants of turnover intention. Future research should apply longitudinal design to fully understand the process of turnover intention and this study could be repeated with a larger sample with a wide range of demographic and social cultural features. The study of employee turnover attracts academic attention in the field of human resources management. By identifying the determinants of turnover, researchers could predict turnover behaviors (Mobley et al., 1978; Newman, 1974). Among the scholars job satisfaction and identification has been studied and little attention has been paid to the role of perceived external prestige as determinants of turnover (Carmeli, 2005; Herrbach et al., 2004). This article is attempted to link perceived external prestige (PEP) and turnover intention through the job satisfaction and identification. These variables are selected because researches have shown their influence on important human resources outcomes such as turnover. The current study suggests a mediation model, in which the relationship between PEP and turnover intention is mediated by both identification and job satisfaction. Turnover intention is an individual own estimated (subjective) probability that they are permanently leaving the organization at some point in the near future (Vandenberg and Nelson, 1999 p.1315).
An Analysis of the Major Source of Finance for Small Businesses in Developing Countries
Kisembo K. Deogratius, Breyer State University, London Centre
Many smaller businesses in developing countries end up using the owner’s assets to start up and/or to stay afloat, and this has obvious problems. These assets are often needed for other things, and they also can run out quite quickly, leaving the (former) business owner in a great deal of trouble when he cannot pay his bills anymore, his business goes under, and he has nothing left in the bank with which to save himself. When something like this takes place the individual may then end up having to sell assets or property in order to keep the business going or in order to pay bills and get out of debt that was created through the business. While this is unfortunate it is all too common with small businesses, and this is especially true of developing countries where banking options are somewhat more expensive than in more developed nations. This paper therefore addresses the issue of funding for small scale businesses in Developing nations. The discussion will concentrate on Foreign Direct Investments (FDI) as the only way to rescue small businesses from financial constraints in developing nations. In order to fully understand how businesses in developing countries continue to grow and prosper, there are several issues that one must be aware of. The main concerns are with foreign direct investment (FDI), the growth that is taking place in Developing countries, and case studies of various areas such as Africa. The African region is of great importance when it comes to developing countries and FDI because it has both small and medium-sized businesses, as well as big business, and many of these businesses get financial help from companies and corporations in other countries through foreign direct investment. It is becoming increasingly difficult, however, for the smaller businesses to receive FDI because big businesses seem to take much of this. They have larger budgets for advertising and they are able to make presentations to companies, banks, and others as to why they should receive the funding.
Post-Offering Performance of Convertible Bond Issuers: The Information Effect of Poison Put Covenants
Dr. Claudia Kocher, University of Michigan-Dearborn, Dearborn, MI
Dr. Hei Wai Lee, University of Michigan-Dearborn, Dearborn, MI
The objective of this study is to examine the information content of convertible bond offerings with and without poison puts by comparing long-term changes in operating performance of the issuing firms around their convertible bond offerings. The results show that poison put users experience smaller decreases in operating profit margin from the pre-issuance period through the first two fiscal years following the issuance, especially in the 1990s. These results are not surprising, given the relatively favorable market reactions reported in Nanda and Yun (1996) for convertible bond issuers who use poison puts. The use of poison put covenants in convertible bond contracts appear to convey a favorable information effect regarding the issuing firm’s operating performance for users relative to non-users. Event risk covenants (ERCs) are a recent innovation in corporate bond contracts. The stated purpose of ERCs is to protect bond investors from wealth losses due to the issuer’s leverage-increasing restructuring events. Poison puts are the most common form of ERCs, and are designed to allow bondholders to redeem their bonds prior to maturity, often for par value plus a specified premium, if a predefined change in the ownership of the issuing firm occurs and the bond is downgraded. The earliest poison puts, which were introduced in the U.S. in 1986, required that restructuring events be declared hostile by the issuing firm’s management in order for the covenants to be triggered. After the RJR Nabisco leveraged buyout, in late 1988, such declaration requirement was dropped. Poison puts remained popular in the 1990s. David (2001) reports that $141 billion of bonds with poison puts, which accounted for 15% of all debt issued by non-financial corporations, were issued during the period 1991-1997. While much of the literature on event risk covenants and poison puts focuses on their use by issuers of nonconvertible bonds, convertible bond issuers also use poison puts.
Impact of Exchange Rate Changes on Domestic Inflation: The Turkish Experience
Dr. Cem Saatcioglu, Istanbul University, Istanbul, Turkey
Levent Korap, Marmara University, Istanbul, Turkey
Dr. Ara Volkan, Florida Gulf Coast University, Fort Myers, Florida
This paper examines the extent to which changes in exchange rates result in changes in Turkish domestic inflation. Specifically, we determine if there has been a change in the magnitude of this impact from the pre-2003 period to the post-2003, when the exchange rates were allowed to float. Employing monthly frequency data, we estimate two impulse-response functions and pass-through coefficients, one derived for the 1994April-2002December period using 1994 price indices as base (100) and the other one derived for the 2003January-2006December period using the 2003 price indices as base (100). We confirm that exchange rate shocks feed into domestic inflation, first at the level of manufacturers’ prices and then at the level of consumer prices, and that the impact of the shocks on the price variables of the various stages of the supply chain is different. Our findings indicate that the magnitude of the impact has declined for the post-2003 period by nearly one-half compared to the pre-2003 period during the early stages of the production process reflecting the predominance of the manufacturer price index in determining Turkish inflation rates. In addition, the decline in the exchange rate pass-through impact on domestic prices coincides with a 25 percent decline in the post-2003 consumer price inflation. Regardless, the consideration of the impact of exchange rate changes on the domestic inflationary process is still important when establishing monetary policies for the Turkish economy. The transmission of the effects of exchange rate fluctuations to the domestic inflation rates has been an issue of interest in contemporaneous economics literature. From a developing country perspective, exchange rate stabilization policies have serious consequences on the efficiency of other ex-post economic policy implementations. The Turkish economy constitutes an interesting case study, being subject to chronic, double-digit inflationary framework over the 1983-2002 period.
Constructing Taiwanese Small-Enterprise Innovative Capital Indices by Using Fuzzy AHP
Dr. Jui-Kuei Chen, Tamkang University, Taiwan
I-Shuo Chen, National Dong Hwa University, Taiwan
The purpose of this study is to explore the ways in which innovative capital is used to upgrade innovative operations in small enterprises in Taiwan. Based on the literature and related research, the study extracts two related dimensions—Invisible Innovation and Visible Innovation—of innovative capital fit to the characteristics of small enterprises. In addition, the hierarchical framework of innovative capital evaluation for small enterprises is constructed based on the two dimensions and the factors under each. Fuzzy Analytic Hierarchy Process (FAHP) methodology is used to analyze the opinions collected from a sample expert in small enterprises in Taiwan. The results of the present study found that the most important innovative capital indices for small enterprises are “Innovative culture” (0.378), “Number of New Designs” (0.370), “Copyright and Brand” (0.193), “Number of New Customers” (0.029), “Number of R&D Workers” (0.018), and “Outer Tech Connection” (0.013). A discussion of the key research findings and some suggested directions for future research are provided. The rise of the knowledge-based economy has been attributed to the increasing importance of intellectual capital as an important resource for companies’ sustainable competitive advantage (Roos et al., 1997, as cited in Moon & Kym, 2006; Tan, Plowman, & Hancock, 2007; Sonnier, Carson, & Carson, 2007). Taxonomy of organizational resources or assets with suggested performance was analyzed from the point of view of intellectual capital (Ng, 2006). Therefore, both entrepreneurs and scholars have turned their attention to the subject of intellectual capital (Bontis, Keow, & Richardson, 2000; Lev & Feng, 2001; Guthrie, 2001; Bornemann & Leitner, 2002; Weatherly, 2003; Kaplan & Norton, 2004). A recent concern is that the primary goals of most organizations, including small enterprises in Taiwan, are the production and diffusion of ideas, and their main investments are in research and human resources (Sanchez & Elena, 2006).
Just in Time Manufacturing System and Traditional Turkish Uniform Accounting System on Accounting Recording Basis: A Comparative Study
Dr. Fatma Ulucan Ozkul, Bahçeþehir University, Istanbul, Turkey
With the fact that the competitive environment is getting to be intensive every day, the competitive edge of enterprises in these market conditions is related to a great extent to their ability to reduce their costs. The search for producing the highest quality product at the lowest cost has caused the emergence of new methods in cost accounting applications. The just in time production system which targets elimination of inventories reveals the errors hidden in the inventories of the enterprise and help in the formation of an effective inventory control system in the enterprise. When the reasons for the rise of costs in the enterprises are examined it was found that many costs were those activities that do not create any value and form the waste. With just in time production system it is aimed to remove the activities that do not generate value in the enterprise and thus lower the costs that are created in the whole production process. The fact that in cost accounting that is traditionally practiced in enterprises specially focuses on inventory valuation and the intensity in the accounting records hinders the effective working of all the process. With the JIT system which is one of the modern approaches, changes come about in the production process and cost accounting of the enterprise by was of simplification and a healthier working of the process is enabled. Because of rapidly changing consumer needs and demands and increasing competition, service life of the goods has been shortened and enterprises’ current cost management systems became insufficient. When consumers demanded to obtain the goods at the price, quality, functionality, time and place they desired push type manufacturing systems have been replaced with pull type ones. JIT manufacturing is an approach which takes including of required or demanded activities immediately to the system as basis. In this paper, the conceptual dimension of JIT is examined; the benefits and purposes mentioned and the changes it caused in accounting recording system have been studied in an example.
Challenges on Mode Decisions in South Dakota
Dr. Jack Fei Yang, Hsing-Kuo University, Taiwan
Dr. I-Chan Kao, The Open University of Kaohsiung, Taiwan
Min-Chun Chen, Hsing-Kuo University, Taiwan
Dr. Ching-Mei Hsiao, Hsing-Kuo University, Taiwan
Leading development of online education with desired outcomes in higher level learning requires knowledge of the impact of delivery systems and learner preferences. In South Dakota—a US leader in distance education—the writers asked faculty experienced in various modes of delivery what factors supported higher level learning outcomes, leading to application of knowledge to practical work challenges. The faculty in South Dakota public universities generally thought that most any distance delivery mode can produce higher level learning outcomes, if labor costs are well funded and student motivation is high. But, there is the rub: Costs of cyberspace delivery modes vary widely; student acceptance is related to popularity and newness; and incentives for faculty vary widely between in-load and overload assignments. Higher level learning outcomes for cyberspace programs have less to do with modes of delivery than with faculty teaching methods and choice of learning objectives. Educators who become involved in designing, delivering, or taking courses and programs online encounter a wide array of delivery modes, aggressive marketing advocacy of the merits of widely varying modes and methods, and a far-flung vocabulary of terms and teasers. Deciding to throw out their long-established correspondence courses for the sake of keeping up with the newest WebCT system requires less advertising “noise” and more good information. As online offerings to teachers continue to expand, K-12 teachers should be aware of the pressures placed on university faculty as they try to offer courses in cyberspace. Simonson et al. (2000) presented a taxonomy of distance technologies including the following applications: Correspondence: based on use of copy machines and postal system. Prerecorded media: based on use of audio or video recording systems. Two-way audio: based on use of telephone system. Two-way audio with graphics: based on use of display board transmitter or computer network. One-way live video: based on use of television classroom or video transmission system. Two-way audio, one-way video: based on use of telephone system.
Dr. Kimberly Killmer Hollister, Montclair State University, Upper Montclair, NJ
Planning a hazardous waste management system is an extremely complex decision making process. In this paper, a framework within which decision makers can develop and evaluate hazardous waste routing and facility location plans is developed. This decision support system develops plans which are "robust" to uncertain realizations of the future. Our stochastic representation of the noxious facility location and materials routing problem provides planners with a tool with which they can develop plans which are "good" regardless of parameter outcomes. Planning a hazardous waste management system is an extremely complex decision making process. In this paper, a framework within which decision makers can develop and evaluate routing and facility location plans hazardous waste management is developed. Planners are faced with the simultaneous problem of decreasing budgets and increasing regulatory mandates. The Environmental Protection Agency (2006) has indicated that it considers the reduction of risk to be the most important goal of any environmental policy. This type of environment makes the difficult task of planning a hazardous waste management system even more challenging. As a result of the complex nature of the problem, planning has emerged as a mechanism for improved decision making. The purpose of a decision aid is to assist decision makers, not to replace decision makers. An appropriately designed decision support system (DSS) can be used to bridge the gap between policy makers and complex computerized models (Maniezzo, et. al, 1998). The main goal of the DSS is to reduce, to the extent possible, the overall impacts - economic, environmental, etc. - associated with the transportation and disposal of hazardous waste. In planning for hazardous waste management systems, planners are usually faced with the problem of evaluating a set of potential sites for waste disposal.
The Impact of Cognitive Fit and Consensus on Acceptance of Collaborative Information Systems
Dr. Ming-Tien Tsai, National Cheng-Kung University, Tainan, Taiwan
Wenjywan Su, National Cheng-Kung University, Tainan, Taiwan
This paper incorporates a cognitive factor as an extension to the technology acceptance model (TAM) and empirically examines it in a collaborative working environment. In addition, it investigates the external variables influencing perceived usefulness and perceived ease of use from a cognitive fit perspective and evaluates the impact of consensus on appropriation (COA) and on perceived usefulness as a group factor in the team context. The paper concludes that (1) COA, task-tool fit and representation-task fit all have positive effects on perceived usefulness; (2) the representation-task fit influences the perceived ease of using the collaborative system; and (3) perceived usefulness substantially explains system adoption in terms of perceived performance. Thus, the paper provides empirical and theoretical support for how the use of cognitive intervention, such as consensus on appropriation and cognitive fit, influences the acceptance of technology. This paper contributes to the extension of TAM external variables and provides team leaders with a cognitive viewpoint when implementing a collaborative information system. There is a growing body of research on various information systems applied in the business environment. Information systems have been designed to facilitate problem-solving (DeFranco-Tommarello & Deek, 2004; Smelcer & Camel, 1997), entertainment (Hsu & Lu,2 004; Heijden, 2004), learning (Bondarouk, 2006; Liebowitz & Yaverbaum, 1998), and data-searching (Shih, 2004; Vandenbosch, 1997). Professional application software, like project management systems, gives practical help to users to resolve problems in their work effectively and efficiently and to improve their performance. Users of such systems can be regarded as problem-solvers who have the ability to distinguish how information representation will facilitate their work. System developers use cognitive fit theory to achieve higher problem-solving performance. This theory should be able to explain the adoption of IT when we view the end-users as the occupational problem-solvers. Teamwork has become more and more important in global competition, and collaborative groupware has been developed to integrate and facilitate teamwork. Through the adoption and use of collaborative information systems (CIS), collective contributions can be identified among team members.
The Correlation between School Marketing Strategy and the School Image of Vocational High Schools
David W-S. Tai, National Changhua University of Education, Taiwan
Jorge W-C. Wang, National Changhua University of Education, Taiwan
C-E. Huang, National Changhua University of Education, Taiwan
This study focuses on investigating the correlation between school marketing and the school image of vocational high schools. The paper finds that the correlation is remarkably obvious. In addition, quality, one of the strategies of school marketing, plays a dominant role in building a school’s image. As the economy in Taiwan has been rapidly developing, the demand for people with higher education has been increasing. This increased demand has inspired the Taiwanese government to be more concerned with higher education. Furthermore, the increase in the number of universities and colleges contribute to a high percentage of students entering at an advanced level. According to the Ministry of Education in Taiwan (2006), statistics shows that the percentage of students entering the advanced level dramatically climbed from 61.35% in 2000 to 89.08% in 2005; however, the percentage of students entering advanced level in colleges just reached 58.02% in 2005. Consequently, most junior high students prefer to choose senior high schools rather than vocational high schools. Moreover, the government in Taiwan has changed the policy of education. For instance, the ratio of the amount of senior high schools to vocational high schools is 217: 204 in 1996 and 314: 157 in 2006, according to the Ministry of Education in Taiwan (2006). In other words, the increase in senior high schools has led to a decrease in vocational high schools, thereby extending the length of education. In the article “Broadening the Concept of Marketing,” Kotler and Levy (1969) first introduce the concept of the marketing of non-profit organizations; they view a school as a kind of non-profit organization and utilize methods of corporate management, such as marketing, to adjust and adapt changes in the modern age. Today, because of the effects of Taiwan’s economic recession on educational institutions and the shortage of national taxes, schools should begin to use marketing tools to attract and acquire more social resources. Jiang and Xu (2005) state that marketing for schools is necessary, especially when schools face competition due to freedom of choice in the market.
Visionary Approaches to Management of Corporate Communication Strategy and Its Implications
Dr. Mohannad Khanfar, AL Ghurair University, Dubai, U.A.E.
Within the views of Newtonian science, and the classical ontology of management, organizations are operated according to deterministic modes. This worldview implies that structures determine the information needed and that perceptions must be managed by feeding the `right' information and withholding information that might lead to disorder and chaos. The formal planned approaches to strategic management have forced managers to be structured when communicating organizational goals and strategic issues. Current public relations theory in terms of management and corporate communication strategy is very much in line with the general strategic management views of structured planning and decision-making. A more recent approach to corporate communication has developed because of the fact that fast changing environments demand more contingent methods. This has moved organizations to postmodern approaches such as those described through the chaos and complexity theory. In this paper I suggest a new approach to corporate communication strategy in line with these postmodern theories. I argue for a more participative approach with high ethical and moral meaning creation through action science and research rather than the structured approaches suggested by current corporate communication theorists. I further more call for relationship management based on the basic interpersonal relationship principles where ethics, integrity, trust, openness, and listening skills determine the success of relationships. Organizations that favor their shareholders above other stakeholders and believe that business determines success and drives policy should be replaced with organizations that function as responsible, moral, and honest citizens of a larger environment. This approach ensures a positive reputation for the organization through socially responsible change processes that have relational influences into a larger societal community structure. Communication practitioners and students in the field of public relations often look for a step-by-step guide to follow in order to design a `proper' communication management strategy, which will be accepted by top management structures in organizations, as well as reflect the contribution this function makes to the overall success of the organization.
Modernization of EC Competition Law Enforcement: From Regulation 17/62 to Regulation 1/2003
Dr. Lung-Tan Lu, Fo Guang University, Taiwan, R.O.C.
Regulation 1/2003 on the implementation of the competition rules laid down in Articles 81 and 82 EC Treaty took effect on May 1st, 2004. This article discusses and analyzes the centralized system set up by Regulation 17/62 and the modernization reform of EC competition law enforcement starting from the Commission White Paper. Regulation 1/2003 is the result of reform and brings several fundamental changes: (1) Abolition of notification and implementation of self-assessment; (2) Decentralization of enforcement; (3) Supremacy of EC law; (4) Broader investigation powers for the Commission; (5) The new relationship between the Commission and national authorities in the European competition network (ECN). These changes also bring some practical issues for undertakings: (1) the need for self-assessment; (2) dealing with an increased number of enforcement authorities; (3) increased costs for expert advice on complex procedural issues; (4) the legal basis of damage actions; and (5) the different procedural possibilities. Finally, this article proposes that the success of EC competition law enforcement will mainly depend on its implementation and application by the Commission, NCAs and national courts, and the cooperative degree of ECN. The centralized system of competition law enforcement governed by Regulation 17/62 provided a substantial degree of legal certainty to undertakings in the European Community for over four decades. However, the European Commission (hereafter: the Commission) could not deal with the agreements referred to it within a reasonable period of time or with individual exemptions upon which it was asked to adjudicate. A need to change the centralized enforcement of EC competition law was the root cause of reform, which is designed to cope with the enlargement of the European Union on May 1, 2004, and to strengthen the Commission’s position as the “competition watchdog” in the enlarged EU. The reforms have been known as the “modernization” of EC competition law. In 1999, the Commission published its White Paper on the Modernization of the Rules (hereafter: the White Paper), which proposed a thorough overhaul of the existing enforcement system (Wesseling, 1999).
Reputation Herding in Corporate Investment: Evidence from China
Bei Ye, Wuhan University of Science and Technology and
Huazhong University of Science and Technology, Wuhan, P. R. China
The paper examines the relationship between corporate investment herding and managerial reputation concerns. I use the average return over equity ratio and the pay received by top directors as proxies for managers’ ability and accumulated reputation respectively. With a panel of 127 Chinese listed companies in the industry of machinery, equipment and instrument manufacturing during the period 2001-2005, I find that: reputation herding exists in corporate investment in China; investment herding decreases with managerial ability but increases with accumulated reputation; reputation concerns seem to exert greater effect on investment herding among state-controlling firms than among non-state-controlling ones. Herding is usually regarded as an irrational behavior for that the decision-maker imitates the actions of others while ignoring his own information and judgment. Investment herding is prevailing not only among financial investors, bust also among corporate decision makers. In corporate settings, herding increases investment concentration. It may lead to industry-wide over-investment or under-investment during a certain period, and affect the stability of macro economy. In China, there have been a lot of such lessons, such as the recent automobile-related investment boom, the over-investment in luxurious housing projects, and the shortage in primary industry investment etc. Behavioral financial research finds that though inefficient from a social standpoint, herding can be rational from the perspective of the managers. One explanation is that given the principal-agent relationship, to pursue self-interests, managers herd in order to preserve their accumulated reputation or hide their low ability so as to avoid penalty under relative performance evaluation. This idea has been theoretically illustrated by many scholars such as Scharfstein and Stein (1990), Zwiebel (1995), Graham (1999), Prendergast and Stole (1996), etc. However, their analyses are mostly based on observation of financial analysts. To the best of our knowledge, few have attempted to study it empirically in corporate settings, probably due to observation difficulties of real investment behavior. Bo (2006) initiated an empirical study in this area. She presents a reputation herding model and uses the pay received by the highest paid director of firms as the managerial reputation.
Emiratis' Demographics and their Reaction to TV Commercial Breaks: The Case of the Emirate of Sharjah (UAE)
Dr. Hussein Abdulla El-Omari, King Fahd University of Petroleum & Minerals, Kingdom of Saudi Arabia
The main objective of this research is to examine the relationship between Emiratis' demographics and their reaction to TV commercial breaks. To do so, convenience-sampling procedures were used and a total number of 700 questionnaires were distributed, evenly, between Mega and Sahara Shopping Malls in the Emirate of Sharjah (UAE). Of all the distributed questionnaires, 200 completed questionnaires were received. A follow-up study with 400 questionnaires was carried out using the same sampling procedure. The follow-up study resulted in 100 more completed questionnaires and, therefore, a total number of 300 completed questionnaires were received and used in the study. The researcher and his assistants did everything possible to encourage Emiratis to complete the questionnaires, but the response rate remained below 30% (i.e., 27.3%). The findings of this study showed that some significant relationships exist between some demographics and Emiratis' reactions to TV commercials. Local and international marketers should view the findings of this study with great care and interest, as the UAE market is considered as a competitive one. Sharjah is considered to be the UAE cultural centre. Tourists from all over the world, particularly from the AGCC countries, go there to enjoy every charming aspect of life. The Emirate is distinguished for its ever-growing modernization process, and for the various activities such as seminars, lectures, fairs, plays, festivals and other cultural events. On the banks of Khalid Lake, one can enjoy every sort of water sport and spend dreamy romantic evenings. In its well-known market, built to embody the Islamic architectural style, you can enjoy shopping with your family and friends. Sharjah does not have the immense oil resources like the Emirate of Abu Dhabi. However, there are proven reserves that run into billion of barrels. Sharjah's complex geology makes exploration and production an expensive challenge. However, recent improvements in technology have enhanced oil discovery. Trade, agriculture and fishing are the traditional way of life in Sharjah. Dates are grown extensively in the coastal plain and the highlands, and cattle are raised in many parts of the Emirate. The government of Sharjah is undertaking many development projects to modernize the economy, improve the standard of living, and become a more active player in the global marketplace.
Examining Financially Distressed Companies in Taiwan: Application of Survival Analysis
Ou-Yang Hou, National Cheng Kung University and Kun Shan University, Tainan, Taiwan
Dr. Shuang-shii Chuang, National Cheng Kung University, Tainan, Taiwan
In contrast to the traditional modeling of financial distress construction at the firm level using only accounting ratio variables in financial statements and Logit regression, this essay provides an alternative method and offers variables to predict firm survival and financial distress across industries and over time. We use earnings management index, accounting ratio variables, and corporate governance variables to form Cox proportional hazard regression and to construct models for business financial distress. We adopt 63 Taiwanese companies in financial distress and 4,356 healthy companies during the period 1996 to 2006, as samples. Because we use matching in the analysis, we construct seven warning models for financial distress to examine the effects of earnings management index, accounting ratio variables and corporate governance variables on a firm’s survival power over financial distress. Our empirical results reveal that companies with higher earnings management, pledge ratio of directors, and lower profitability, liquidity, and activity much more easily enter financial distress situations. In particular, for earnings management index － the discretionary accruals item is the most important key factor on firm’s survival probability; it has positive effect on financial distress probability at the 1% significant level, with hazard ratios of 17.751，5.594，12.744 and 6.042 in Models 1, 3, 5 and 7. This paper provides evidence as to the key determinants of financial distress for publicly-listed companies in Taiwan, and our findings also provide substantial implications for and contributions to financial warning models of corporate distress. In recent finance and economic literature, considerable attention is directed toward issues concerning the effects of changes in the macroeconomic environment of Taiwan on company failure risk.
An Automatic Hyperlink Generation Approach for Content Management
Dr. Jihong Zeng, New York Institute of Technology, Old Westbury, NY
This study develops a new approach to automatically generating hypertext links using keyword extraction, off-the-shelf database software, and proximity measuring techniques. Two approaches were developed, differing in whether the keywords were manually generated by a human author, or mechanically extracted by an automatic process. In both prototypes, different types of intra-document and inter-document links were generated by using Salton et al.’s Vector Space Model based on occurrences of keywords. The first prototype was based on keywords that were produced by the document authors. A preliminary evaluation shows that this prototype system is comprehensive and sufficiently useful to help people with information searching and browsing tasks. A second prototype was developed to explore the possibility of generating hyperlinks through automatically extracted keywords. This prototype used the Oracle Text gist/theme generation tool plus a sliding window approach to extract keywords. Candidate links were generated using the same linking method identified in the first prototype. Although the automatically generated keywords were different from the keywords identified by the authors, there was a significant overlap between the set of links generated by each prototype. This study also develops a new concept of keyword-based links in a content-based, one-to-many linking environment, and develops a new approach to automatically extracting keywords. The analysis indicates that link generation based on keywords holds promise for further exploration and needs a thorough evaluation. The traditional manual method of generating hyperlinks is impractical for large collection of documents because there are a number of limits to manual link generation. However, automatic link generation is a challenging task in that it involves advanced techniques, and only limited success has been achieved (Bernstein, 1990; Allan, 1995; Agosti et al., 1996; Kellogg and Subhas, 1996; Cleary and Bareiss, 1996; Green, 1998; Witten et al., 1999; Lempinen, 2000; Liu et al., 2004; Cerbah, 2004). There would be considerable potential benefits, especially in terms of reducing the cost of building a hypertext collection, to having a hypertext system that is capable of creating links automatically. An automatic system would be especially useful when adding documents to a large collection of inter-linked documents. While automatic methods might not be as good as a skilled human editor would produce, they could be used to suggest links to an author/editor, who could decide whether or not to include the link.
A Management Policy for Taiwan’s Water Treatment Plant Using Toxic Chemical Compound
Yao-sheng Hsu, National Cheng Kung University, Tainan, Taiwan
Dr. Su-Chao Chang, National Cheng Kung University, Tainan, Taiwan
A risk characteristic analysis for chlorination disinfection system is of help for the dangerous-potential identification and the modification management of water treatment plants (WTPs) for using toxic material. This research included a policy with the risk analysis could be applied, and the risk management could improve in a WTP using toxic materials should be discussed. This study results shown the initial risk frequency at WTP was fairly high. After the modification of the system, the risk frequency could decrease. In addition, the modification of the chlorination disinfection system, the safety efficiency could increase. The risk analysis of serious and hazardous harmful on humans in a WTP can serve a standard model for using and management of toxic materials. A policy goal of water purification is so that the treatment natural (raw) water to meets the requirements of potable drinking water for human used (Gibbons and Laha, 1999). But the frequency change in raw (natural) water was causing a deviation of drinking water quality for water treatment plants (WTPs). Extremely awful, water pipes with rough inner linings generally facilitate the growth of microorganisms, and bacteria-mediated corrosion has been frequently reported (Holden et al., 1995). The harmful effect or health risk of pathogens is generally considered higher than that of chemical compounds (Craun, 1993; Downs, 1999), while the pathogens and bacteria have been assessed to be detrimental to human health (Hunter et al., 2002; Ashbolt, 2004). Therefore, in order to avoid the occurrence of water-born diseases caused by pathogens meanwhile to ensure safe drinking water quality, using disinfectant was to destroy pathogens should be acceptable in WTPs, which as for chlorine (Cl) chemical compound using in pre-chlorination of oxidization pollutants (for raw water), post-chlorination of sterilizing (for clean water) and re-chlorination of residual chlorine (for drinking water) etc. at Taiwan WTPs to insure a drinking water quality. Using chlorine was generally serves a disinfectant to oxidize organic matters, pathogens and pollutants in WTPs, its toxic was listed as “health hazards” in the Material Safety Data Sheet (MSDS) of Taiwan and the concentration regarded as Immediately Dangerous to Life or Health (IDLH) is 30 ppm. According to the United States National Fire Protection Association, the chlorine chemical compounds are on the third level, that is, the human threshold limit value is 0.5 ppm (Kirchsteiger, 2004), a operator in the work place needs to protect himself by wearing protective gloves and masks for routine management.
Corporate and Organizational Citizenship: A Case from Turkey
Dr. Muberra Yuksel, Kadir Has University, Istanbul, Turkey
Recently, organizational citizenship behavior such as sharing knowledge and complying with procedures has become increasingly important as a source of competitive advantage. A lively debate is going on across the business world questioning the role of business, balance of power between the organizations and the social agenda. While encouraging employees to act in line with the organizational goals both in terms of result and competencies, organizations emphasize human resources and knowledge management so that integration for innovative solutions to business problems may be possible in the globalizing economy. Meanwhile, compliance with the norms of stakeholders concerning issues such as consumer and employee rights and environmental safety in developing countries are often the top issues of corporate citizenship. Following Matten & Crane, I have regarded corporate citizenship in a broad sense which emphasizes the role of a corporation in administering individual citizenship rights that distinguished it from corporate social responsibility. Such a definition reframes the citizenship by acknowledging that the corporation administers certain aspects of citizenship for other constituencies. These include traditional stakeholders, such as employees, customers, or shareholders, along with wider constituencies with no direct transactional relationship to the selected organization. Most studies on organizational citizenship are either focusing on personality aspects of employees or on organizational culture. This study aims at contributing to the literature by examining this important and diffuse issue empirically and paves the way for clarifying the conceptualization of organizational citizenship attitudes and behaviors. Building upon prior studies on citizenship in Turkey, I aim at showing the perception of employees about organizational citizenship in a developing country framework empirically.
The Work Adjustment of Taiwanese Expatriates
Dr. Hsin-Kuang Chi, Nanhua University, Taiwan
Dr. Cherng-Ying Chiou, The Overseas Chinese Institute of Technology, Taiwan
The purpose of this study is to explore the work adjustment factors that influence the Taiwanese expatriates when they work in the U.S. Questionnaires were mailed to HR Department in 93 subsidiaries which were all selected from TSEC (Taiwan Stock Exchange Corporation) Market in Taiwan. A total of 186 subjects were asked to respond to the questionnaire. The results indicated that language, support, relationship, role novelty, role ambiguity, role conflict and role discretion were related to expatriates’ adjustment to the work. However, previous experience was not related to work adjustment. Family support and satisfactory work adjustment were related to intent to stay in the overseas assignment. Equally important, support, role conflict, and role ambiguity are the most influential on expatriate work adjustment. It is important to develop and retain expatriates who possess global knowledge and experience in international business. Organizations have used several methods to help expatriates acquire global knowledge and experience. One of the methods is to have expatriates live and work in multicultural groups where members have diverse cultural backgrounds (Adler, 1984). However, the failure rate commonly fell in the 20% - 40% range for expatriates’ transfers because of poor performance or the inability of the employee or the family to ineffectively adjust to the foreign work environment (Tung, 1981; Black, 1988; Mendehall & Oddou, 1985). Moreover, there are few key studies in Taiwan on the overseas adaptation of Taiwanese expatriates working at Taiwanese subsidiary companies in the U.S.
Cyclical Cooperation and Non-cooperation in an Alliance
Hsien-Hao Ting, National Cheng Kung University and Shih Chien University, Taiwan
Len-Kuo Hu, National Chengchi University, Taiwan
Shaung-Shii Chuang, National Cheng Kung University, Taiwan
This study attempts to provide a model explaining the dynamic behavior of an individual’s cooperativeness and the evolution of an alliance based on the implication of prospect theory. By endogenizing an individual’s willingness to cooperate through its direct impact on his utility function and incorporating the factors of cooperation attitude and the individual’s output share in the Ricardian type of production function, this model is able to describe the cyclical fluctuation of the individual’s willingness to cooperate. This study concludes that except for perfect alignment of the initial cooperativeness among its constituents, the dynamics of an organization’s cooperation cycle will be very irregular. The gradually widening and divergent cooperation attitudes among its constituents will eventually lead to the collapse of the alliance. Throughout history, an individual’s free choice and the government’s central authority have gone hand in hand. Nowadays the bottom-up mechanism like democracy or capitalism seems to transcend the top-down totalitarianism or communism. However, these two mechanisms will alternate if the evolution of our economic system can be examined over a longer span of time. As Douglass North argued in his recent book (2005) that the key to human evolutionary change is the intentionality of the players, the alternation of these mechanisms, therefore, is for the most part a deliberate process shaped by the perceptions of the individuals about the consequences of their actions. Our study basically follows North’s analysis and ascribes the above institution change to the interaction of two opposing forces that dictate an individual’s daily behavior: one is pro-individual’s autonomy and absolute freedom; the other favors gregariousness and is prone to yielding to the central governance. This paper examines the deeper determinants of how these forces evolve and how economies change. A firm would behave like a representative individual if we could ignore the problem of aggregation. Henceforth, we will treat the issue of inter-firm’s relationship as the one of inter-person’s, and focus on the general theory of organization that can bring in the cyclical consequence. Different structure of alliance provides different incentives to the individuals of the alliance. The bottom-up system is primarily driven by an individual’s self-interest.
Characteristics of Power Interruptions and Its Impacts on Tourist Hotels in Kenya
Nehemiah Kiprutto, Moi University, Eldoret, Kenya
Power outages can be characterized along a number of dimensions including frequency, duration, timing, warning time and interruption depth (Adenikinju, 2005). Interruptions of electricity supply in Kenya are frequent, and have become normal and generally accepted. Consequently, operations in many industries including tourism have been affected negatively. Tourism in Kenya is concentrated in Masai land, Kenyan Coast and Nairobi. Hence, this study aimed at determining the frequency, duration and warning time of scheduled power interruption in two of these regions by analyzing interruption of electricity supply announcements posted by the Kenya Power and Lighting Company on the Daily Nation newspaper and the company’s website. Through questionnaire technique, the study also aimed at finding out the behaviour of tourist hotels in their attempts to mitigate outage losses. It was found that Nairobi and Kenyan Coast experienced high frequency of scheduled power interruptions that last for over eight hours. Due to these frequent outages, tourist hotels have had to acquire generators and Photovoltaic (PV) panels to supplement the grid. As a result, they incur extra expenses in running and maintaining their generators, which in turn reduces their profit margins. Nevertheless, bookings in these hotels have not been affected by the outages. Infrastructure plays a positive role in economic development. It represents an intermediate input to production, and thus changes in infrastructure quality and quantity affect the profitability of production, and invariably the levels of income, output and employment. Tourism infrastructure provides an important foundation for tourism development. Infrastructure increases the efficiency of privately producing and distributing tourism services. Electricity is an important infrastructure that has become central to achieving the interrelated economic, social, and environmental aims of human development.
The Synergy of Brand Alliance: A Brand Personality Perspective for Benq-Siemens
Wei-Lun Chang, Tamkang University, Taipei, Taiwan
Brand management is the significant issue in the competitive business environment, for example, specialize a brand among many choices for consumers. The present paper explores the synergy and effects of brand alliance from BenQ-Siemens case by survey. The results reveal the consumers’ perception and cognition for BenQ-Siemens and the effects of brand personality for brand alliance. The relationships between the customers and companies become dynamic and unpredictable in the existing business environment. Companies attempt to build a strong brand image in order to attract customer attention and bind the relationships. That is, brand is not only a company name but an embedded image for customers. The enterprises can attain high market share if they identify the personalities and specialization of their brands. Brand alliance is a special strategy for brand management which combines two brands to a single brand with a unified name. Brand alliance is a branding strategy used in a business alliance. Brand alliance, which has become increasingly prevalent, is defined as a partnership or long-term relationship that permits partners to meet their goals (Cravens, 1994). For instance, Sony-Ericsson is a successful paradigm for brand alliance through joint venture. The synergy of brand alliance is unpredictable and potentially powerful. BenQ, the top 10 brand in Taiwan, merges the Siemens’ telecommunication department in 2005. Despite the outcome is failure for two companies, the brand image and personality are worthy to explore from customer perspective. The present research explores the perceptions of customers for two brands and allied brand through survey analysis. The results demonstrate the attitudes of brand personality for BenQ-Siemens based on customer perceptions. Meanwhile, several advantages are identified from this work: (1) providing clues for the perceptions of BenQ-Siemens from customers, (2) exploring the brand personality of BenQ-Siemens primitively, and (3) furnishing a roadmap for brand alliance research. The rest of the paper are organized as follows, section 2 briefly defines the brand and brand alliance from the literature, section 3 demonstrates the research framework , section 4 provides data analysis, and a conclusion is furnished in section 5. AMA (American Marketing Association) defines brand as “a name, term, symbol, design or the combination of above in order to identify the product or service and distinguish from the competitors”. Furthermore, Aaker (1991) defines brand is “a specialized name or symbol”.
Effect Estimation of Workplace Health Promotion Practice of Taiwan High-tech Industry: Using System Dynamics as an Example
Ching-Kuo Wei, Oriental Institute of Technology, Taiwan
Ming-Shu Chen, Far Eastern Memorial Hospital., Taiwan
Corporate practice of Workplace Health Promotion (WHP) can considerably reduce the employee absence, employee turnover rate, and application for health insurance expense. Although there are many successful cases overseas, companies in Taiwan still believe that this measure will increase corporate expenditure. Moreover, under the current national insurance system, employers are relieved from serious burden of medical insurance cost. Thus, there is lack of incentives and motives for companies in Taiwan to introduce WHP. However, past studies indicated that the benefits of implementing WHP include the increase of employees’ available work hours, reduction of turnover rate, reduction of related medical expenses, and important performance indicators, such as reduction of personnel expenses, and increase of productivity. This paper used the financial statements of leading company in the Taiwan high-tech industry, Taiwan Semiconductor Manufacturing Company, of the recent five years, and System Dynamics to simulate the effect of WHP implementation. The results revealed that if the Workplace Health Promotion was implemented for 20 years under normal condition and high effect, the personnel expenses could be reduced by 2.84%(NT$1,606,079) and the productivity increased by 3.76%( NT$449/person year) per year in average. If the effect was normal, the personnel expenses could be reduced by 1.8%( NT$1,022,451/year) and the productivity increased by 2.5% ( NT$299/person year) per year in average. Under low effect, the personnel expenses could be reduced by 0.77% (NT$442,048) and the productivity increased by 1.25% (NT$149/person). In the first and second year of the implementation, the effects were lower or even negative. However, from the third year on, the positive would become effect, and from the sixth year on, the effect would be stable. Through the simulation by the system dynamic tool, this research validated the hypothesis that “by promoting WHP, companies could improve their operational performance” For domestic companies, they should strengthen the support from the executive levels and facilitate the willingness of implementing WHP, so that public health organizations and medical institutions can have the opportunities to intervene in the implementation of WHP. The proper and feasible WHP promotion measures can thus be established. Corporate implementation WHP can considerably reduce employee absence, employee turnover, and health insurance expenses.
Consumer Expectation and Consumer Satisfaction Measurements: A Case Study from India
Dr. Marwan Mohamed Abdeldayem, AL Ghurair University (AGU), Dubai, UAE
Dr. Muhannad Radi Khanfar, AL Ghurair University (AGU), Dubai, UAE
Previous research on consumer satisfaction revealed that satisfying consumer’s needs and wants is critically important for the success of any business organization. Many prior studies have examined the antecedents of consumer satisfaction ( e.g. Cho & Park, 2001; Devaraj, Fan &Kohli, 2002; Bloemer & Kasper, 1995; Jones & Suh, 2000; Szymanski & Henard, 2001; Teng et al., 2006; Teng & Hung 2007). In this study we introduce a survey among two wheeler buyers in India. Where in satisfaction has studied with some variables such as prior expectation, actual product demography, confidence, performance, etc. For the purpose of this study, data relating to buyer expectations from the scooter, and disconfirmation (performance scores minus expectations scores) were cross tabulated both among each other and against other variables (where associations were observed, chi square tests were also carried out). While many of the findings of this study are confirmations of past observations, (mainly ceiling-floor effect, expectation effect, deleterious effect of involvement), the finding relating to the unique impact of very high expectations on satisfaction is both new and interesting and has serious implications for business and future research. The concept of consumer satisfaction is crucial in market nowadays. This is happened because of the competition in market, awareness of consumer or customer’s and because of entry multinational companies. The consumer can be satisfied by keeping the balance in demand and supply, we always keep in mind what consumer expect and as per their expectation how market (Shopkeeper) perform this relationship plays a very important role in satisfying the consumer. Consumer satisfaction provides the basis for the marketing concept and has been shown to be a good indicator of future purchase behavior. Consequently, consumer satisfaction is a popular topic in the marketing literature.
The Wicker Basket Effect: A Special Case of the Expulsion Effect
José Villacis, Universidad San Pablo-CEU, Madrid, Spain
In a budget deficit situation where public expenditure is greater than taxes (G>T), the Treasury borrows money to pay the margin of expenditure – the budget deficit – by means of national debt. In this case, the Treasury borrows from the Central Bank, which, in turn, produces money to purchase national debt. This operation – formally similar to an expansive open market operation – is not monetary policy. Moreover, such monetary disarray inexorably leads to very serious inflation levels. Although private economy savings are available to finance investment, they drop in nominal terms due to inflation. Due to such erosion, savings cannot finance planned investment. In other words, private investment is expelled as a result of the wicker basket effect of savings. Financial flows in an economy have an origin, a purpose connected to that origin, and full monetary support. They are money. Any economy having to grow, or even maintain itself, requires savings – not consuming now in view of consuming more in the future. Those savings are used to finance investment in maintenance or replacement and also, if possible, to increase the system production capacity by implementing net investment. It is clear that both in a monetary and a non-monetary economy savings are required to finance investments. Any activity that diverts savings or causes them to vanish is evil for the economic system itself because these activities prevent the system from maintaining itself properly and/or from growing. Involvement of the public sector contributes to the annihilation of savings. The simplest example of this occurs when the budget deficit turns to the private economy (companies and household economies) to attract its savings and then pays the margin of public expenditure, that is, the budget deficit. We call an investment expulsion effect to the situation when the monetary value of reduced inversion is equivalent to the declined monetary value of the deficit.
A Study of Level of Service on the Departure System of the Taiwan Taoyuan International Airport
Chui-Yen Chen, Yuan-Ze University and Chin-Min Institute of Technology, Taiwan
As the economy changes, service management must change, too. Since Taiwan joined the World Trade Organization (WTO), since 2002 there will be more chaos and keenly competitive circumstances in airport operations. With the prevalence of education and the widespread concept of ISO9001, customers are concentrating more on the service quality of airport operations. As a consequence, airport operators are devoted to improving their service quality and can promote their reputation. Raising customer satisfaction may lead to a rise in customer loyalty, and therefore airport operations will retain good customers. The performance evaluation of airport operations is an important issue for the government. In recent years, there have been some research studies published on this subject. The dimensions considered and the research methods used, however, are not satisfying. In this study, we use Process Capability Indices (PCI) to develop a methodology for performance evaluation in airport operations. We have selected the departure system of Taiwan Taoyuan International Airport to establish airport operations performance indices. The world’s economic situation is growing continuously; the ratio of service business’s earned value is also becoming higher and higher. Service businesses, therefore, are playing a very important role in the world’s economic system. Thus, scholars lately have tried to study all the characteristics of service businesses and their effective management in order to reach a level of service quality that can satisfy customers. Owing to the booming economy and increasing national income in recent years, passenger’s value their time more highly and fast air transportation becomes people’s preference. As an island country, Taiwan can transport internationally by sea and air only; its passenger transportation is mainly by air.
The International Role of the ECB: Myth or reality?
Elisabeth Paulet, Jean Monnet Chair, ESCEM Groupe, France
Since its foundation in 1999, the ECB has been criticized for its weak position on the international stage. After having recalled that its statutes explain this situation, we intend by a comparison between the FED and the ECB, to discuss the differences of the two institutions in order to justify their respective role. In the last step, some hypotheses will be formulated as regards the future of the ECB. The aim of the third section will be to give some necessary conditions to reach more efficiency and stability for the European financial markets. Both the ECB and the Fed are independent and obtain similar result as regards inflation (e.g. table 1). The main difference is that the ECB concentrates its effort to fight inflation whereas the Fed’s target is more macroeconomic. Among the Fed’s objectives, one could mention growth and unemployment (e.g. table 2). To satisfy these goals, the Fed uses interest rate to attract foreign direct investment, stimulates consumption etc... Table 1 provides evidence of this situation: short term interest rates are more volatile in the USA than in the Euro Zone; long term interest rates are much higher than the ones proposed by the ECB. On the contrary to European situation, budgetary policy is very voluntary in United States and United Kingdom. For the USA, between 2000 and 2004 it represents an impulsion of 5 points of GDP. Cumulated with flexible monetary policy based strongly on consumer indebtedness (we will develop this point in our second section), deficit spending (e.g. table 2) is one important instrument of American economic policy, which leads to growth rate of 3.5 for 2005. Until a recent past, its level was not at the core of the government preoccupation. However, just before its retirement, Alan Greenspan began to prevent the authorities about the danger of the public debt, which could imply a decrease of growth (more than 3.2 for 2006). This is essentially due to strong investment supported by the consumption of economic agent.
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