The Journal of American Academy of Business, Cambridge

Vol.  16 * Num.. 1 * September 2010

The Library of Congress, Washington, DC   *   ISSN: 1540 – 7780

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An Empirical Study of the Effectiveness of Counsel in United States Tax Court Cases

Janene R. Finley, Ph.D., J.D., Augustana College, Rock Island, IL

Allan Karnes, J.D., Southern Illinois University Carbondale, Carbondale, IL



In the U.S. Tax Court, taxpayers may choose to be represented by counsel, including attorneys and non-attorneys, or to represent themselves.  This study examined the effectiveness of counsel representation as compared to pro se appearances in 3,200 Tax Court cases involving individual taxpayers over a period of 16 years.  The results of t-test and chi-square analyses suggested that taxpayers overall won about 15 percent of the time.  However, those who were represented by counsel had twice the percent reduction in the amount of tax assessed than those taxpayers who appeared pro se, and taxpayers were almost twice as likely to win with counsel than if they appeared pro se.  In the U.S. Tax Court, taxpayers may be represented by attorneys or others who are admitted to practice before the Tax Court.  An attorney may be admitted to practice before the Tax Court if he or she has been admitted to practice before the U.S. Supreme Court or the highest court of a state or of the District of Columbia (U.S. Tax Court Rule 200(a)(2)).  Individuals who are not attorneys may be admitted to practice before the Tax Court if they pass a written examination given by the court (Rule 200(a)(3)).  If taxpayers do not wish to hire counsel to present their cases, they may represent themselves (Rule 24(b)).  It had been estimated that taxpayers represent themselves in approximately 40 percent of all regular tax cases (Daily 2003, 5/13).  Prior research that had examined the effectiveness of attorney representation in various courts found that litigants who were represented by attorneys tended to have an advantage over those who represented themselves, or appeared pro se.  Litigants who appeared pro se had a disadvantage compared to those who were represented by attorneys when presenting evidence in trials without a jury (Sheldon and Murray 2003, 228).  If a taxpayer does not agree with the results of an examination by the Internal Revenue Service (IRS), the taxpayer may appeal the tax assessment in the Tax Court.  In a Tax Court trial, which is a civil case, juries are not available and only one judge hears a case (U.S. Tax Court, About the Court).  The purpose of this study was to examine whether representation by counsel, including both attorneys and non-attorneys, affected the outcomes in Tax Court cases.  This study can assist individual taxpayers in determining if an assessment should be appealed to the Tax Court and if it would be advantageous to retain counsel to assist with an appeal.  This article presents evidence that taxpayers who were represented by counsel in Tax Court cases had a significantly greater reduction in their assessed taxes and won more often than those taxpayers who appeared pro se. This article proceeds as follows.  A literature review discussing attorney representation and pro se litigants is included in the second section.  The data included in the study is discussed in the third section, with the variables discussed in the fourth section.  In the fifth section, the method and results are presented, with limitations of the study discussed in the sixth section.  This article is concluded in the seventh section. The number of litigants who appear pro se in cases has increased considerably in court systems within the United States over the years (Swank 2005, 376).  Surveys have been conducted regarding pro se litigants, and those surveys found that some of the reasons why parties choose to represent themselves are that the litigants could not afford to retain counsel, their cases were simple, they had an increased belief in their own abilities, they had an anti-lawyer sentiment, they had a mistrust of the legal system, and they had a belief that the court will do what is right even if the party is not represented by counsel (378-9). Prior research has examined the effectiveness of counsel in various types of court cases.  In criminal cases, defendants have the right to counsel (U.S. Constitution Amendment 1).  However, defendants may waive that right and represent themselves (28 U.S.C. § 1654; Faretta v. California 1975).  Hashimoto (2007) examined data from federal and state court criminal cases to determine whether results of cases in which defendants who represented themselves were worse than those who were represented by attorneys and to determine whether defendants who represented themselves were mentally ill (441).  When looking at the state court data, the author found that of those defendants who appeared pro se, approximately 50 percent were not convicted (448).  Of those pro se defendants who were convicted, approximately 50 percent of those defendants were convicted of felonies (448).  However, 75 percent of those defendants who were represented by attorneys were convicted (448).  In addition, of those represented defendants who were convicted, 85 percent were convicted of felonies (448).  In the federal courts, many more defendants were represented by attorneys than appeared pro se (452).  When comparing the cases that went to trial, the acquittal rate for pro se defendants was 7 percent, while the acquittal rate for represented defendants was 16 percent (452).  However, when looking at the total felony defendants, the acquittal rate was 0.64 percent for those who appeared pro se, and the acquittal rate for those who were represented by attorneys was 0.61 percent (452).  These results indicated that pro se defendants in criminal cases did not do worse than if they were represented by attorneys (454).  The author suggested that the reason why the pro se defendants performed so well in the state and federal courts is that few defendants chose to appear pro se, and those defendants who did so may have been qualified to represent themselves (477).  In addition, the author found that over 78 percent of the defendants who appeared pro se in criminal cases did not display signs of mental illness (456).


The Relationship Between Wealth Creation and Professional Management in Small-Medium Enterprises

Dr. Eli Konorti, University of Phoenix, British Columbia



This mixed method study explored the relationship between the employment of professional managers and wealth creation in small-medium enterprises. Specifically, the study attempted to determine whether professional managers contribute to the profitability of small-medium enterprises in the secondary wood manufacturing industry. Furthermore, the study investigated the reasons why entrepreneurial firms have difficulty attracting and retaining professional managers. The study involved 36 secondary wood manufacturing firms engaged in the manufacture of a variety of products. The research validated that the more professional managers entrepreneurial firms employ, the greater profitability they realize and furthermore, entrepreneurial firms face major challenges in their pursuit to attract and retain professional management. Wealth creation, survival, and sustainability require that small-medium enterprises (SME) establish and institute strategic initiatives that lead to competitive advantage. The attraction and retention of professional management is one such strategic initiative (Drucker, 1987).  Peterson, Kozmetsky, and Ridgway (1983) wrote that small business is an important part of the American economic system. In 1997, close to 40 percent of American households worked for a SME creating 95 percent of the wealth in the United States (Swiercz and Lydon, 2002). Small-medium enterprises account for approximately 80 to 90 percent of all business enterprises (Phan, Butler, & Lee, 2005), and they create 50 percent of the employment and the gross national product (GNP). In Canada, 80 percent of the wealth is concentrated in the hands of family businesses that are often considered small-medium enterprises (Leighton & Thain as cited in Phan et al., 2005). The purpose of this mixed method study is to measure the degree of association between profitability and professional managers. Furthermore, the research explains why entrepreneurial firms in the secondary wood manufacturing industry in British Columbia, Canada, have difficulty attracting and retaining professional managers. The organization of the paper is as follows. The next section will elaborate, amplify, and provide a detailed background of the problem. The following section presents the hypotheses and research questions that will guide the study. The theoretical framework and a list of definitions that represent operational terms used in this research as well as a list of assumptions will be discussed. An outline of the scope of the study and its limitations and delimitations is provided. The literature review section documents both historical and current literature relative to wealth creation in small-medium enterprises in the context of the secondary wood manufacturing industry in British Columbia (BC), Canada. The next section explains the mixed method research design as well as the validity and credibility of the results. Following is the section that presents the data gathered and the results derived from analysis of the data followed by conclusions and recommendations.  Churchill and Lewis (1983) and Kets de Vries (1985) wrote that business founders that are often associated with small-medium enterprises find giving up what they have created difficult. Characteristic of a SME, often referred to as an owner-managed firm and at times as an entrepreneurial firm is having one key decision maker and very few subordinates in managerial positions. Dun and Bradstreet (as cited in Fredland & Morris, 1976) reported that 47.3 percent of business failures in the United States were directly related to lack of managerial experience as well as managerial incompetence. Chaganti and Chaganti (1983) found that poor management was the primary reason for 55 percent of SME failures in Canada.  Brush, Greene, and Hart (2001) suggested that the inability to attract and retain qualified human resources could result in business discontinuance. Another reason cited by Heneman and Berkley (2000) for the challenge SMEs have attracting managerial talent is that often founders are looking for managers who have a similar set of values to their own. Rowe (2001) stated, “Organizations led by visionaries who are not supported by strong managerial leadership may destroy [the] wealth [of the organization] even more quickly” (Executive Overview section, 1).  Much of the research in the field of SMEs has centered on the traits, attributes, and characteristics of the chief executive officer, the founder, or owner-manager and entrepreneurial activity in general (Drucker, 1984; Feltham, Feltham, & Barnett, 2005; McKenna, 1996; Mitchell, Smith, Morse, Seawright, Peredo, & McKenzie, 2002; Mueller & Goic, 2002; O’Gorman & Doran, 1999; O’Regan & Ghobadian, 2002; Schein, 1983; Swiercz & Lydon, 2002). Founder strategic decision-making and visioning, succession planning, firm culture, and innovation are also the focus of much research in SMEs (Audretsch, 2004; Baumol, 2004a; Bhide, 1996; Bommer & Jalajas, 2002; De Vries & Margaret, 2003; Drucker, 1985; Drucker, 1987; Grant & Cibin, 1996; Haugh & McKee, 2004; Oswald, 1998; Thompson, 1999a; 1999b; Wasserman, 2003; Zahra, Hayton, & Salvato, 2004). Furthermore, researchers have studied factors that contributed to small firm success and failure (Chaganti & Chaganti, 1983; Chaston, 1997; Cochran, 1981; Fredland & Morris, 1976; Theng & Boon, 1996; Walker & Brown, 2004).


Real Estate Foreclosures and/or Short Sales Tax Consequences

Raj Kiani, Ph.D., EA, Real Estate Agent and Professor of Accounting

California State University, Northridge California



Early in the decade, lenders were willing to loan money to home buyers with bad or no Credit (subprime loans). Lenders were hedging losses (i.e. from future foreclosures and/or Short sales) on the significant appreciation the housing market was experiencing.  Furthermore, lenders were offering borrowers adjustable-rate mortgages (Arm’s) tied to the federal funds rate (FFR). This is an excellent financing tool when the market conditions are right.  However, because of changes in the market conditions and recent economic recession, the real estate foreclosures and short sales begin to escalate and defaults increase. Currently, with home prices decreasing, home may have fair market values (FMVs) less than the associated mortgages. Foreclosures and/ or short sales on high loan –to-value recourse debt make the effects of the historical debt forgiveness provisions even worse. Homeowners, in addition, to losing their homes, may have to recognize ordinary income equal to the excess debt (i.e., debt less the home’s FMV).Moreover, if you transfer title on your home, whether voluntarily through a warranty deed of grant deed, or involuntarily through foreclosure, you have sold your home. You might be subject to taxes, even if you sold your home at a loss, either on a short sale or by foreclosure. When the economy falters, real estate foreclosures and/or short sales and related actions (voluntary reconveyance, abandonments) become facts of life. Foreclosure and /or shot sale are unfortunate and emotionally devastating events to happen in one’s life. So it is important to understand why a situation for foreclosure and /or short sale arises and what one can do to avoid it. Buying a home is a complicated yet important decision in one’s life. It has been some time since the real estate industry has had to deal on a large-scale basis with foreclosures, deeds in lieu of foreclosure, short sales and other distress sales of real property. Tightening credit, falling property values, and the consequences of prior lending practices, are all too common currently and do not appear likely to end any time soon. Owners of real property facing a distress sale may be unpleasantly surprised to learn that two types of taxable income can result from a foreclosure: deed in lieu of foreclosure, or short sale; and capital gains and forgiveness of debt (cancellation of debt) income. Both of these can trigger expected taxes for the owner.  Although the federal government passed a law in 2007 directing the Internal Revenue Service (IRS) not to count mortgage debt forgiven by a lender, as well as debt reduced through mortgage restructuring as income, the provision is limited. This provision also applies to debt forgiven in 2008 or 2009. It applies only to refinancing, and it doesn’t apply to second homes. There is also a dollar limitation, albeit a generous one ($1 million for married couples filing separately), twice that for join filers. (1) But debt is forgiven is not forgotten by Uncle Sam (IRS). This exclusion only applies to federal taxes which are allowed from 2007 through 2012 Under the Emergency Economic Stabilization Act. (2) It is up to the individual states to pass similar legislation impacting states taxes.  To understand the tax consequences of real estate foreclosures and/ or short sales, we will explain: (1) real estate foreclosures vs. short sales process, (2) how to avoid foreclosure if it is possible, and finally what are the tax implications of real estate foreclosure and/or a short sale to the homeowner? In simple terms foreclosure means a legal seizure of a real estate property by the lender (mortgagee) if the homeowner (borrower) defaults on repayment of principal and/or interest. A lender can be your bank or a housing credit society to which your real estate property is a collateral guarantee for repayment. In short, a foreclosure is the legal right of a lender or other third-party lien holder to gain ownership of the real property and/or the right to sell the real property and use the proceeds to pay off the mortgage if the mortgage or lien is in default. This process has existed for centuries. A foreclosure refers either to a trustee’s sale foreclosure (not a judicial proceeding) or to a judicial foreclosure (a judicial proceeding).  A deed in lieu of foreclosure means the lender has agreed to accept title to the property and the borrower transfers title to the lender rather than waiting until the lender forecloses on the property. It is a simply a conveyance of the property to the lender by grant deed or quitclaim deed. In exchange, the lender will cancel the promissory note secured by the real property. In this way the lender can avoid the foreclosure process to regain title to the real property. Furthermore,  the Foreclosure Process (3) (California Foreclosure Process in Appendix A) is well defined and codified legal step that a lender (mortgagee) takes to recovering over due payments toward the advances the lender extended to home owners to purchase their homes. A short sale is a transaction in which a lender allows the real property securing the loan to be sold for less than the remaining mortgage amount due and accepts the proceeds as full payment of the loan. Usually a lender may accept a short sale when the borrower is in severe financial straits and market conditions make a short sale the best choice to mitigate the lender’s damages. Like a deed in lieu of foreclosure, this saves the lender the costs of foreclosure and the borrower avoids having a foreclosure on his or credit report for at least seven years


Perceptions of Leadership under Conditions of Environmental Uncertainty

Dr. Crystal J. Scott, The University of Michigan – Dearborn, Dearborn MI



This study examines various leadership attributes, traits, and behaviors and synthesizes them into eight succinct dimensions of leadership (supportive, charisma, intelligent, responsibility, vision, integrity, risk taking, and challenges tradition).  The research takes a contextual view of leadership by examining the importance of these leadership dimensions under conditions of environmental uncertainty.  While all eight dimensions are important to high-performing leadership, supportive, charisma, and risk-taking are particularly important when there is uncertainty.  The findings also suggest further areas of study on leadership when there is industry competition and technological turbulence.  There are almost as many theories of leadership as there are papers on the subject.  This study aims to pull together theories that focus on the numerous attributes, traits, and behaviors that have been related to high-performing leadership.  We seek to synthesize these characteristics into succinct dimensions of leadership.  Our research takes a contextual view of leadership by considering aspects of the environment, such as industry competition and technological turbulence, as impacting the perceived importance of these leadership characteristics.Although much has been written on leadership, much less has focused on leadership in light of the organizational context.  As Porter and McLaughlin (2006, p.1) point out, “Leadership in organizations does not take place in a vacuum. It takes place in organizational contexts”. Porter and McLaughlin (2006) review the leadership literature from 1990-2005 to assess the extent that organizational context is used as a factor in the study of leadership. Overall they found 373 articles from 21 journals with a “moderate/strong” emphasis on organizational context. Out of the empirical studies they reviewed, only five of them considered organizational context as the “central variable of interest”. An additional limitation was the number of articles that covered transformational and/or charismatic leadership with little regard to other aspects of leadership. They suggest that future research focus on the organizational context as a primary object of interest. In this research we seek to answer that call by considering an array of leadership attributes and by making organizational context the focal point rather than the afterthought. Thus, the intended contributions of this work are to determine the dimensions of leadership and consider how the context of environmental uncertainty impacts the perceived importance of these leadership dimensions.  The paper begins with an overview of leadership theories that outline traits, attributes, and behaviors of leaders. From this review we compile a comprehensive list of leadership attributes and determine the over-arching dimensions of leadership.  Next, we determine if these leadership perceptions differ when there is uncertainty in the environment. Our review of the leadership literature starts with the trait approach which held the belief that people had innate skills that made them leaders.  Stogdill (1948, 1974) reviewed over 200 studies of leadership and found traits such as masculinity and dominance associated with leadership.  Other research on traits verified the importance of 5 major leadership traits including intelligence, self-confidence, determination, integrity, and sociability. Recent theories such as charismatic leadership (House, 1977; Conger and Kanungo, 1988), visionary leadership (Sashkin, 1988) and transformational and transactional leadership (Bass, 1985) identified more distinct behaviors that separated leaders from non-leaders.  Examples of such behaviors include setting an example, inspiring and motivating subordinates, and personal risk-taking.   We also covered situational approaches to leadership (Hersey and Blanchard, 1969) as well as the path-goal theory (Evans, 1970) and consulted reviews of the leadership literature by Yukl (1994) and Northouse (2004).  In this study we employ theories that explicitly identify attributes and traits related to leadership.  Therefore theories focusing on leadership as a relationship such as Leader Member Exchange and the vertical dyad linkage approach were reviewed but not included in this research.  From our review we constructed a list of leadership attributes, traits, and behaviors by author and year.  Examples of list entries include ambition, confidence, creativity, and vision.  Although more recent forms of positive leadership have emerged such as authentic, spiritual, level 5, servant, etc. we do not consider these in this discussion.   However, some of the attributes we include in this research such as honesty, integrity, and self-renewal relate to elements of authentic leadership and other positive leadership forms.


Veblenian Analysis of the Recent American Business Cycle

Dr. Adil H. Mouhammed, University of Illinois at Springfield, IL



This paper examines the recent American business cycle of 2001--present by using a general explanation grounded in Veblen’s and Mitchell’s theories of the business cycle. The expansionary phase of the business cycle, which is the outcome of increased profits is explained by various sources, including the low cost of doing business, high investment and consumption expenditures which increase prices and revenues, globalization, and the support of various institutions. The recessionary phase, which is explained by the reduction in profits, is analyzed by the same sources as they operate in the opposite direction.The last recession in the American economy, which started in March 2001 and ended in November 2001, lasted eight months. That recession was followed by an economic expansion lasted until December 2007, an expansion of 73 months. During the economic expansion unemployment and inflation were on the average of 5.3 and 2.83 percent, respectively, and labor productivity increased by an average of about 2.5 percent. The average weekly real wages increased by 0.38 of one percent, because the economy was not able to create high-paying jobs. Clearly, the increase in wages was lower than the inflation rate by about 2.45 percent. That is, the American people lost 2.45 percent of the purchasing power of their income: disguised exploitation. In addition, the number of poor people was 32.9 million in 2001 and increased to 37.3 million during the expansion. The inequality in income distribution measured by the Gini coefficient was on the average of 0.44, indicating that income inequality was higher than the inequality of 1973 when the Gini coefficient was 0.35. It is fair to conclude that the majority of the American people were squeezed very much during this business cycle, as they lost part of their income due to unemployment, inflation, and poverty. If the percentages of unemployment, inflation, and poverty are added, one can obtain at least 20 percent of what can be termed the augmented misery index of the American working people, an index indicating the percentage of income transferred to the wealthy people.Various theories of the business cycle are available in the literature. The real business cycle (Kydland and Prescott 1983 and 1990, Plosser 1989, and Freeman and Kydland, 2000) argues that shocks to aggregate supply such as changes in technology are the driving force for an economic expansion and contraction. These shocks affect the basic components of the production function, influencing the growth rate of the aggregate output and employment. The New Keynesian theory (Hall 1990, Mankiw and Romer 1991, Bernanke and Carey 1996, and Borda etal 2000) contends that the business cycle is generated by the instability of aggregate demand and supply.  For example, a decline in consumption and investment expenditures generates a recession, because as the aggregate demand decreases, aggregate output and employment decline. Minsky (1986), a great post Keynesian economist, contends that when investment increases, earnings and profits will rise. Consequently, firms borrow more funds so that the ratio of total debt to asset (or leverage) will increase. In a boom condition the actual earnings may be even larger than the expected, which simulate firms to borrow to finance investments. The boom will end according to Minsky when interest rates increase and investments decline, creating a situation of financial fragility for many firms. This fragility reduces the sources of new loans to finance investments, and many business enterprises are not able to pay their debts. Hence, investments cease and recession occurs.This paper uses an explanation of the business cycle (Mouhammed 2005 and 2008), which is grounded in Veblen’s and Mitchell’s theories of the business cycle, to analyze the American business cycle of 2001-present whose trough phase has not yet been officially determined. The explanation provided in this study is far more superior than the various explanations provided by the existing models of the business cycle. Section 2 provides a condensed view for this explanation of the business cycle, which will be used in sections 3 and 4 to analyze the causes behind the economic expansion and recession of the American economy during 2001-2007. Section 5 is devoted to a summary and conclusions.Veblen (1904 and 1923) provides a dynamic analysis of the theory of the business cycle in a capitalist economy, according to which the recession and the expansion are explained by the principle of increasing (decreasing) cost and decreasing (increasing) revenues, or decreasing (increasing) profit margins. For an expansion (or prosperity), Veblen suggests various causes for the reduction of the production cost and the increase in revenues. He (1923: 97) contends that a "ceaseless advance of the mechanical technology has...the effect of lowering the production cost of the necessary equipment, as also the (physical) cost at which raw materials may be had." So, a reduction in prices of capital goods and raw materials such as oil whether by developing new technologies or by globalization generates a lower cost of production for business enterprises and increases profits. In addition, the new technology requires greater investment expenditures, which is the most important force for augmenting the aggregate demand and productive capacity. It is also true that the new technology represents innovations, materialized by investment spending, that always stimulate the economy cumulatively.


Beating Insiders: Illusion or Reality? An Empirical Analysis

Dr. Huabing (Barbara) Wang, West Texas A&M University, Canyon, TX



Section 16(a) and 16(b) of the Securities Exchange Act of 1934 require insiders to disclose their insider transactions in a timely fashion and subject insiders to binding constraints of not being able to unwind their insider transactions within six months. From the perspective of outsiders who are aware of the timing and price of insider transactions, they may be able to purchase the stocks insiders have purchased at a better price over the period insiders are locked in their transactions. This paper explores this possibility and finds that 87 percent of purchases made by company executives over the sample period of 1996-2006 are beatable. In a logit framework, we further document transactions that are more likely to be beatable: (1) larger-sized insider purchases, (2) insider purchases of smaller company stocks, (3) insider purchases made by company executives other than CFOs, and (4) insider purchases occurred after the accelerated insider reporting rule of 2002.The Securities Exchange Act of 1934 classifies corporate officers, corporate directors, and any person with greater than 10 percent stake in a company as corporate insiders. Corporate insiders have substantial information advantage over the public. Prior studies show that insiders, especially executives, earn higher abnormal returns when they purchase. To maintain the fairness and integrity of the stock market, regulators subject insider trading to various regulations and vigorous monitoring. For example, insiders are required to make public their insider transactions including transaction prices in a timely fashion (Section 16(a)). Meanwhile, they are not allowed to unwind their transactions within six months (Section 16(b)). Therefore, outside investors are aware of the timing and price of insider transactions, and thus may be able to follow insider transactions at a better price over the period insiders are locked in their prior transactions. This paper examines this possibility. Prior insider trading literature generally documents that insider purchases are informative, but only finds mixed results on insider sales. For example, Lakonishok and Lee (2001) document that there is informativeness in insider purchases but not in insider sales. Therefore, we focus on insider purchases made by company executives, the insider transactions that are more likely to contain valuable information and to yield positive abnormal returns for insiders. We find that the majority of insider purchases are beatable. In particular, 87 percent of the executive purchases over our sample period of 1996-2006 can be mimicked by outsiders within the six-month lock-in period at a better price. Given the consensus of extant literature that insider purchases contain information on future stock returns, our results indicate that outsiders are able to perform better than insiders in most cases by buying the stock the insiders have bought at a lower price within the period that insiders are not allowed to unwind their purchases. Our results also suggest that the likelihood might be even higher for outsiders to beat insiders following the passage of the accelerated insider reporting rule in August 2002, which requires insiders to disclose within two business days following the day the insider transaction is executed. Specifically, 90 percent of executive purchases made in the 2003-2006 period are beatable.  We further examine the factors affecting the likelihood of beatable purchases in a logit framework. We find that insider purchases of smaller companies are more likely beatable by outsiders, probably due to the high volatility of stock prices in these companies. We also find that purchases by CFOs are less likely beatable. Purchases are more likely beatable after the 2002 accelerated insider reporting rules, which makes insider reporting more timely. Transaction size is also positively related to the likelihood of beatable trades. However, we do not find that the CEO title significantly affects the probability of beatable insider purchases. Overall, our paper suggests that beating insiders is not an illusion due to the combined effect of the insider disclosure rule of Section 16(a) and the short-swing rule of Section 16(b). In most cases, outside investors are able to follow insider transactions, specifically purchases, at a better price, and therefore beat insiders. According to the law, corporate insiders include corporate officers, corporate directors, and any person with greater than 10 percent stake in a company as corporate insiders. On the one hand, corporate insiders have substantial information advantages over the public, and their transactions convey valuable information, thereby enhancing the efficiency of the market. On the other hand, allowing insiders to exploit their superior information may harm the fairness and integrity of the stock market, hurting public trust and eventually the well-being of the market itself.  For that reason, regulators subject insider trading to various regulations and vigorous monitoring.


Alternative Methods of Incorporating International Financial Reporting Standards (IFRS) into the Accounting Curriculum

Dr. Consolacion Fajardo, National University, CA

Dr. Gregory Merrill, National University, CA



This paper examines the pedagogical options and preferences for incorporating International Financial Reporting Standards (IFRS) into the accounting curriculum. The preferences of accounting faculty at National University on four (4) different methods for incorporating IFRS into the accounting curriculum: (1) as a separate course, (2) as part of every course, (3) in both Intermediate and Advanced Accounting, and (4) in Advanced Accounting only, are examined.  Survey Questionnaires were sent to full-time and part-time accounting faculty and the results were analyzed using appropriate statistical techniques.  For many years, the U.S. Generally Accepted Accounting Principles (GAAP) was the most dominant basis of accounting in the world providing a foundation for the reliability of U.S. financial markets.  However, due to numerous corporate accounting scandals, the investing public quickly lost faith in the corporate reporting model.  In recent years International Financial Reporting Standards (IFRS) have quickly emerged as the accounting standards followed by most of the world's capital markets. The European Union mandated IFRS adoption for listed companies within member countries generally starting January 1, 2005. Around 100 countries have either adopted in total IFRS or are converging with IFRS (Larson & Brady, 2009).  The U.S. Securities and Exchange Commission (SEC) also considered the use of IFRS in the United States. In December 2007, the SEC granted permission to foreign private companies using IFRS without having to make a reconciliation to U.S. GAAP.  In August 2008, the SEC issued a proposed roadmap (current proposal) for public comment.  The current proposal is the move forward towards the potential mandatory adoption of IFRS by all U.S. public companies (Munter & Reckers. 2009).  The current proposal has two parts: Part I would allow a small number of U.S. public companies to early-adopt IFRS for years ending on or after December 15, 2009. According to SEC staff estimates, at least 110 companies representing approximately 14 percent of U.S. market capitalization would be eligible for this early adoption election. Part II of the proposed roadmap identified four milestones whose progress the SEC would consider in 2011 as vital input in making a final decision  on whether to require all U.S. public companies to adopt IFRS.  The four milestones against which the SEC will judge progress are: 1. Continued improvement of the IFRS body of literature to be achieved in large part through continued convergence of standards issued by the FASB and IASB.  2.. Progress on accountability and stability including development of a monitoring body and a stable funding mechanism. 3. Continued development of the IFRS XBRL taxonomy to provide enhanced data.  4. Progress on IFRS-related education and training of investors, preparers, and auditors and progress in incorporating IFRS content into collegiate accounting curricula. It will be noted that one of the important point of references for the SEC is the progress being made by educators in incorporating IFRS content into the accounting curriculum. The SEC is not the only one interested in the status of IFRS incorporation in accounting education. Other players include employers in establishing eligibility requirements of future hires in their accounting departments, CPA examiners in deciding when to include IFRS in the examinations; and the American Accounting Association in determining ways to enhance accounting education programs.In 1976, the Financial Accounting Standards Board (FASB) defined a conceptual framework as a constitution, a coherent system of interrelated objectives and fundamentals that can lead to consistent standards that prescribe the nature, function, and limits of financial accounting and reporting. The fundamentals are underlying concepts of accounting that guide the selection of events to be accounted for, the measurements of those events, and the means of summarizing and communicating them to interested parties and in an effort to provide a set of cohesive objectives and fundamental concepts on which financial accounting and reporting can be based.  The FASB has issued seven Statements of Financial Accounting Concepts (FASB, 1976). Of importance to the subject of this study is SFAC 2 which defines the qualitative characteristics of financial reporting divided into primary (relevance and reliability) and secondary (comparability and consistency) characteristics. SFAC 6 discusses the elements of financial statements, and SFAC 5 and 7 include recognition and measurement concept assumptions (economic entity, going concern, periodicity, monetary unit) and general principles (historical cost, realization, matching, and full disclosure).  SFAC 4 deals with objectives of financial reporting for nonprofit organizations and SFAC 3 was superceded by SFAC 6.  To date SFAC 1,2,5,6 and 7 are the conceptual frameworks that provide structure and direction to financial accounting and reporting, but are not considered Generally Accepted Accounting Principles (GAAP). 


Big 4, "Next 4", and Smaller Accounting Firms: Resignations v. Dismissals and the Outcome of the Auditor Change Process

Dr. Charles P. Cullinan, Bryant University

Dr. Hui Du, University of Houston – Clear Lake



The GAO (2008) documents a material realignment in the audit market from 2002 to 2006. Many of these changes involved clients moving between the different tiers of CPA firms. In this paper, we examine the potential effects of the tier of the former auditor on the likelihood of resignation, and the tier status of the new CPA firm. Using a sample of 875 auditor changes from 2003 to 2008, we find that auditor resignations are more prevalent among Next 4 firms than they are among Smaller firms or the Big 4 firms. We find that Big 4 firms charge higher fees, but there was no difference between the fees charged by the Next 4 and Smaller firms. We also find that if the former auditor resigns from the engagement, the client is more likely to engage an auditor from a lower tier of auditing firms. Overall, our results suggest the Next 4 CPA firms are more selective in their choice of clients than they have been in the past. A recent report from the United States Government Accountability Office (GAO, 2008) examined concentration in the market for audit services among publicly traded companies. Among most sizes of publicly traded companies, the market share of the Big 4 accounting firms decreased from 2002 to 2006. For example, among small publicly traded companies (defined as publicly-traded company with revenues less than $100 million), the market share of Big 4 firms decreased by half, from 44% in 2002 to 22% in 2006. What was not addressed by the GAO study was the nature of these auditor realignments. Were these changes initiated by Big 4 accounting firms resigning from clients, or did they results from client decisions to change auditors? This information may be of interest because if the realignments were largely client-driven decisions, this would suggest that the value of a Big 4 auditor may no longer be considered worth the incremental cost that Big 4 firms typically charge for their services. Our objective in this paper is to examine auditor-client realignments from 2003 to 2008 to determine if these realignments were an auditor driven or client driven process. Unlike most previous research, we do not examine solely Big 4 v. non-Big 4 firms. According to the GAO report, there is also a new tier of firms below the Big 4 firms, but that are still larger than most of the other firms in the audit market. These firms, called the "Next 4", are BDO Siedman, McGladrey Pullen, Grant Thornton and Crowe Chizek. These firms have expanded their market share among clients of most sizes of publicly-traded firms. For example, the Next 4 firms increased their market share among client with revenue in the $100 million to $500 million dollar range from a 6% market share in 2002 to a 16% market share in 2006 (GAO 2008). Auditing firms that are neither Big 4 nor Next 4 will be referred to as “Smaller firms.” Our results suggest that there are no significant differences in the likelihood of resignation v. dismissal between Big 4 firms and the Smaller accounting firms. There is, however, a significantly greater likelihood of resignation when the former auditor was one of the Next 4 accounting firms. Consistent with previous research, we find that the audit fees of the successor auditor are higher for Big 4 firms than for other firms. The Next 4 firms, however, do not charge significantly higher fees than Smaller firms. Finally, also consistent with the literature, we find that clients whose Big 4 auditors resigned are significantly more likely to engage a successor auditor from among a lower tier of auditing firms. The remainder of this paper is organized as follows. First, we present the relevant background literature, and research questions. We then discuss our research methods, followed by the results of testing. The paper closes with a summary of the study and the implications of our results. There are three main streams of literature which we will draw upon for our research questions and analyses. First, we address the literature examining auditor resignations v. dismissals, which implies whether an auditor change is auditor-driven or client-driven. Next, we discuss the prior studies about fee premiums associated with certain types of accounting firms. Finally, we review the literature on the nature of the successor auditing firm when an auditor change has occurred. Most of the literature on auditor resignations recognizes only two types of auditing firms: Big 4 (or 5 or 6, depending upon the time frame) and non-Big 4. For example, Raghunandan and Rama (1999) develop and test a model of whether the successor auditor is a Big 6 or a non-Big 6 accounting firm. Similarly, many studies testing or control audit quality, audit fee, and auditor change (e.g. Ettgedge et al. 2007a; Griffin and Lont 2008; Feng 2009) include a variable as to whether the accounting firm is a Big 5/4 or a non-Big 5/4.


A Study of Peruvian Entrepreneurs’ Leadership Expectations

Sergio G. Matviuk, Ph.D., Regent University, Virginia Beach, VA



Entrepreneurship studies literature reports several research efforts aimed to determine entrepreneurs’ personal characteristics. However, the literature indicates there has been little research to determine how entrepreneurs understand and practice leadership. This article reports the findings of an empirical study oriented to identify leadership behavior expectations of Peruvian entrepreneurs. Based on the concepts of leadership perceptions, prototypes and expectations, the study assessed leadership behavior expectations of 655 Peruvian entrepreneurs. Leadership behaviors expectations were assessed by using the Leadership Practices Inventory (LPI) adapted to describe an ideal leader. Findings suggest that Peruvian entrepreneurs hold the perception that an ideal leader enables people to act in the first place, and secondly serves as a role model while encourages followers to action. Findings also suggest that Peruvian entrepreneurs have lower expectations regarding leaders’ vision setting and communication, and innovation and risk taking. Further analysis also indicated that gender, age and years of experience as an entrepreneur have no significant impact on participants’ leadership behavior expectations. A review of the existing entrepreneurship studies’ literature indicates that entrepreneurs posses particular characteristics. Although in the literature there is not a universally accepted set of entrepreneurs’ characteristics (Raposo, do Paco & Ferreira, 2008), there is evidence of an important effort from scholar and researchers to determine what personal characteristics entrepreneurs posses.Casson (1982) identified risk taking and innovativeness as personal characteristics of successful entrepreneurs and also stated that entrepreneurs are knowledgeable about how markets function, how to produce goods or services, how to market products or services, how to manage a business and how to network. Caird (1988) agreed with Casson and added that successful entrepreneurs have abilities to detect business and profitable opportunities and posses flexibility to correct errors to improve business performance and opportunities. Davidsson (1989) identified five skills factors such as thinking skill, human relations skill, communicating skill and technical knowledge as characteristics of entrepreneurs. Also, a group of researchers such as Bellu (1988), Beverland & Lockshin (2001), Bird (1989), Brockhaus (1982), Davidsson (1989), McClelland (1961), have focused their research efforts to study risk taking as a characteristic of entrepreneurs arriving sometimes to contradictory results. MacClelland’s (1961) seminal empirical work on entrepreneurship indicates that entrepreneurs’ are motivated and behave based on a need for achievement. Begley and Boyd (1987), Bellu (1988), Beverland and Lockshin (2001) agreed with him. Complementary, another corpus of studies posit that locus of control, self-confidence and optimism are characteristics of entrepreneurs (Begley and Boyd, 1987; Beverland and Lockshin, 2001; Davidsson (1989); Kets de Vries, 1977; Robinson et al., 1991).Other entrepreneurs’ characteristics that have been studied are profit motivation (Baumol, 1983; Davidsson,1989), innovation (Raposo,  do Paco & Ferreira, 2008, Torrance, 1967) and  need to chose an independent occupation (Kets de Vries, 1977; Brockhaus, 1980; Bird, 1989). However, although important research and scholarship efforts have been invested in identifying entrepreneurs´ characteristics, there has been little research to determine how entrepreneurs understand and practice leadership. Despite the leadership role entrepreneurs play (Jensen & Luthans, 2006), entrepreneurship and leadership researchers alike have not paid much attention to understand entrepreneurs and small business owners’ leadership perceptions, concepts and behaviors (Cogliser & Brigham, 2004). This article contributes to the field of entrepreneurship and leadership studies by reporting the findings of an empirical study on leadership behavior expectations held by Peruvian entrepreneurs. The study was conducted in Lima, Peru and due the lack of research on the topic of entrepreneurs’ leadership expectations in general and Peruvian entrepreneurs in particular, the research reported in this article was exploratory in nature, aiming to establish an empirical and theoretical background for future entrepreneurship and leadership research. According to The Global Entrepreneurship Monitor (GEM), “the world’s leading research consortium dedicated to understanding the relationship between entrepreneurship and national economic development” (Bosma & Levie, 2009), Peru ranks high in a global scale in terms of entrepreneurial activity and entrepreneurship is an important cultural aspect in that country. However, it is hard to find formal academic studies about this country’s entrepreneurs’ styles and personal characteristics or entrepreneur’s leadership practices, behaviors or perceptions. 


Introduction to Quantitative Methods in Business: An experimental Approach Without the Use of Calculus

Dr. Bharat R. Kolluri, University of Hartford, West Hartford, CT

Dr. Rao Singamsetti, University of Hartford, West Hartford, CT



The purpose of this paper is to present some topics in an introductory quantitative methods course for undergraduate business students who have taken algebra and pre-calculus courses as prerequisites but not calculus.  This is due to lack of direct applicability of calculus techniques such as differentiation and integration in business applications.  Methods that are alternative to calculus are presented and illustrated with examples.  Topics covered include, marginal value, price elasticity of demand and optimization techniques with and without constraints.The undergraduate program of study in business at the University of Hartford used to require M110 Pre-Calculus, M112 Calculus, QNT230 Business Statistics and QNT231 Quantitative Analysis for Business Decisions.  Recently, we adopted the non-calculus-based approach to quantitative methods in business for several reasons. First, the calculus taken as a pre-requisite fails to provide direct utility in understanding of the concepts and applications in business.  For example, the topic of integration has a minimal use in any business quantitative course, because most often the probability tables are used in determining the required areas and/or critical values.  As another example, the concepts of marginal value, elasticity could be easily introduced without the use of derivative.  Second, the calculus-based techniques in quantitative courses may turn off the student away from real use of business data and interpretations.  For example, too much time may be devoted to derivations and technical computations rather than emphasis on business relevance and reasoning.  Third, the traditional calculus based approach introduces too many symbols and cumbersome notations taking away the students' attention from problem solving aspects of business.  For example, students are often confused between partial derivative  and total derivative.  Fourth, the availability of the state of the art computer technology facilitates broader coverage of topics as well as de-emphasizing the calculus-based techniques and computations.  For example, computations on large scale data sets have become easier by the use of computer technology. Finally, majority of our faculty felt it necessary to increase the coverage in business statistics such as c2 tests and the use of multiple regression in business.In view of the above considerations a new sequence of these required quantitative courses, M110 Modeling with Elementary Functions, QNT130 Introduction to Quantitative Methods for Business and QNT230 Business Statistics courses were introduced.  As a pre-requisite to QNT130, M110 covers a study of linear and non-linear functions, modeling real world situations, graphing of functions and solving equations.First half of QNT130 includes applications of linear functions in business, average, marginal and elasticity values, two equation models and optimization techniques.  The remainder of the course dealing with introductory topics of business statistics provides a foundation for QNT230.  Starting with probability distributions, QNT230 covers sampling theory, statistical inference and regression.  Both QNT130 and QNT230 use Excel and SAS software package, throughout the business applications.  In light of these developments we make an attempt in this paper to present specific topics and techniques without the use of calculus in the QNT130 course.  More specifically, alternative approaches to calculus based methods are suggested and demonstrated by examples.We attempt to introduce the concepts of average, marginal values and price elasticity of demand. If Y = f (X), then the average of the function is defined as .   is known as the marginal value of the function.  In other words, it represents change in the functional value per unit change in X. Elasticity of Y = f (X) is defined as.  Thus elasticity is the relative change in the dependent variable corresponding to a small relative change in the independent variable.  It measures the responsiveness of Y to changes in X and it is independent of the units in which the variables are measured. Demand function is  Then Revenue function is   Total cost function is C (Q) = 25 + 25Q.  With output levels, Q = 0, 4, 5 and 6, we compute the values in the following table 1. Here Q = Quantity and P = Price.


Calculating NPV and IRR with Sub-Annual and Seasonal Cash Flow Patterns

Dr. David Cary, University of Michigan, Dearborn and Stalla/Becker Professional Education



Most corporate finance textbooks present a standard method of calculating Net Present Value (NPV) and Internal Rate of Return (IRR) by assuming that the cash flows from the project are at year end. Unfortunately that is rarely the situation in the real world.  Cash inflows and outflows will usually occur during the year, and frequently in non-synchronized patterns.McMath (1989) demonstrated that level sub-annual flows could be simply adjusted to year end flows to compute NPV and while the IRR for the projects is also given in the examples, the method of calculation is not discussed.   The McMath NPV method simplifies the calculations compared to the brute force method of calculating the present value of every cash flow at the appropriate time, a method that would lead to over 1,000 cash flow listings for a three year project with daily cash flows.  This paper will derive a straight forward method for calculating IRR for projects with sub-annual cash flows and then expand the analysis to include methods for calculating both the NPV and IRR for projects with realistic patterns of seasonal cash flows. Often corporate finance textbooks try to finesse the sub-annual cash flow problem by assuming end of year cash flows in the calculation of the weighted average cost of capital used for the discount rate to offset using end of year flows for the projects being examined.  However, this is rarely an appropriate adjustment.  For a simple example, assume a firm is 100% financed by equity with a current stock price of $10.00, a quarterly dividend of $0.15, and an expected annual growth rate in the price of the stock of 4%.  The effective annual return for the stock would be (1 + 0.15/10.00)4 -1 + 4% = 10.14% compared to the nominal return of 10% (= 0.60/10.00 + 4%) assuming a single annual dividend paid at year end.  (Note: including debt with semi-annual interest payments would lead to an even smaller difference between the effective and nominal cost of capital.) However, for a project that costs $100 and returns $27 at the end of each quarter, the effective annual IRR is 13.21% (= (1+0.03151)4 -1] while the nominal IRR from assuming the cash flows are all at year end is 8.00%, 5.21% less.  With a cost of capital of 10%, using the quarterly cash flows would lead to the acceptance of the project while assuming year-end cash flows would lead to its rejection (Quarterly: N = 4, I = 2.411%, Pmt = 27, Þ NPV = +1.79, Year-End: N = 1, I = 10%, FV = 108, Þ NPV = -1.82).McMath’s method adjusts for the sub-annual periods by assuming level periodic payments during the year and compounding those payments to year end at the cost of capital and then calculating the NPV.  He demonstrates that the adjustment factor for each year would be the same, simplifying the calculations.  As part of the discussion, he presents a capital budgeting project where the annual cash inflows and outflows are rather large compared to the initial outflow. Assuming end-of-year annual cash flows the project has a small positive NPV.  However, if the NPV is calculated assuming weekly cash inflows and monthly cash outflows the NPV and IRR greatly increase and conversely assuming weekly cash outflows and monthly cash inflows, then NPV goes negative and the IRR is less than the cost of capital.  Anderson (1997) expands the McMath model by adding seasonal patterns, but uses geometric patterns such as Sine, Cosine, and Geometric for the patterns instead of discrete historical patterns such as by quarter or by month. Pogue (2004) derived the end of period factors by assuming continuous cash flows rather than periodic cash flows. Ismail (2005) follows up on Pogue’s paper pointing out that using a continuous cash flow assumption is usually not appropriate. The method of adjusting for sub-annual periods is based on the idea that the NPV method assumes that cash flows are reinvested at the cost of capital.  Thus for calculating NPV the periodic flows can be adjusted to year-end cash flows using the cost of capital and the appropriate time span.  The cost of capital should be calculated on an effective basis for the appropriate period, for example 10% per year would not be 2.5% per quarter, but 2.411% (= 1.101/4 -1 ).  Using the simple example above with quarterly payments, the calculation would be to find the future value of an ordinary annuity of $27 per quarter for four quarters at 2.411% per quarter = $111.97, significantly different than the $108 (= 4 x $27) that would be used assuming all cash flows at year end.  Then discounting the $111.97 for one year at 10% gives a PV = $101.79 and an NPV of $1.79, the same as the value calculated previously on a quarterly basis.  While compounding the quarterly cash flows to the end of the year in the above example doesn’t seem to simplify the calculations, the example in Panel A where cash receipts are collected weekly, operating cash expenses are paid monthly and taxes are paid at the end of each quarter over the three year life of the project does show the benefit of this method. 


Fuzzy Comprehensive Evaluation Applied in the Performance Assessment of Service Quality of Insurance Companies in Taiwan

Dr. Hsing-Ping Kuo, Southern Taiwan University



The management over service quality comes with multiple dimensions and it is improper to measure the complex dimensions of service quality in a traditional model.  Thus, this research is designed with the method of Fuzzy Comprehensive Evaluation to integrate five dimensions of service quality scales which were proposed by Parsuraman, Zeithaml and Berry(1988).  The five dimensions of SERVQUAL were tested with five insurance companies using the method of Fuzzy Comprehensive Evaluation to analyze the entire service quality performance in the Taiwanese insurance market and to suggest implementation priorities of service strategies.  The results of this research will allow managers and decision-makers of insurance companies understand the benchmarking insurance companies in Taiwan, together with the service strategies performed by their competitors. Also, it assists decision-makers of insurance companies to consider the importance of the said five dimensions to correct the service quality of companies.  This method can also be used to explore strengths and weaknesses for insurance companies in order to conduct strategy planning in the future.  Recently, because peoples' income has been increasing, the demands on life insurance are also growing. Thus, the frequency of people's demands for life insurance and investment activities are increasing substantially with resultantly vigorous activities in the insurance market.  Because the transactions of insurance companies are involved with high frequencies for service contact, the relationship among people will naturally be intimate and important.  Thus, how to implement highly efficient service strategies based on the original resource layout of various insurance companies will be an issue worthy of further exploration.  The traditional statistical methods always show a fixed answer in evaluating respondents' repliessuch as Likert Scales.  However, some parts of people's cognition belong to the fuzzy concept realms (the cognition realm).  Such issues cannot be well solved by means of traditional statistical methods or questionnaires.  Furthermore, it can be seen from the past scientific lectures that most research on service quality were implemented with traditional statistical methods that focused on quality measurement but had no individual strategy suggestions for various insurance companies.  Based on the aforesaid motives, this research aims to take the views of customers and implement researching analysis using the service strategies of insurance companies. The market positions for the service offered by various insurance companies can be well explored.  Also, through the analysis of the Fuzzy Comprehensive Evaluation, it is expected that the individual suggestions for service strategies of insurance companies can be concretely proposed.  The major research goals for this research are described below: 1. By using the SERVQUAL Scales proposed by Parasuraman et al.(1988), the service quality analysis for insurance companies can be implemented. 2. The modes for important attributes among the service quality dimensions performed by insurance companies can be well created. 3. The priority to create service quality attributes for insurance companies can be served as the key points for improved service quality by insurance companies and practitioners.4. By using the Fuzzy Comprehensive Evaluation Method to assess the various dimensional performance of service quality provided by insurance companies , the overall performance values can be further determined. 5. All the research results can be used as a reference for various insurance companies to improve their service quality.  Practitioners and theorists generally have approached service quality measurement very differently. This difference is particularly evident in the services industry.  The most famous measurement of service quality in the service industry that can be used across various service domains is that established by Parasuraman et al. (1985). The initial work by these three researchers was based on in-depth interviews with executives and consumer focus groups in four industries. This pioneering effort produced a ten-dimensional conceptualization of service quality. Subsequently, Parasuraman et al.(1988) derived the widely used, five-dimensional SERVQUAL instrument using exploratory factor analysis. The five dimensions in this instrument are ”reliability”, ”responsiveness”, ”assurance”, ”empathy” and ”tangibles”. Moreover, the questionnaire contains 22 items, each with two forms, namely expectations and perceptions. Service quality is worked via a previous procedure in which each individual respondent was rated based on the gap between consumer perceptions and their expectations regarding performance. SERVQUAL can also be used to study other gaps, such as that between management and customer perceptions of service quality.  However, carrying out a quality management program may require managers to understand consumer perceptions and expectations and give consumers what they want.


Customers’ Perceived Brand Equity and A Research on the Customers of Bellona Which is a Turkish Furniture Brand

Dr. H. Anıl Degermen Erenkol, Istanbul University, Istanbul, Turkey

Adnan Duygun, Istanbul University, Istanbul, Turkey



Extensive competitive environment that the enterprises are confronted with today and their competition in being different among thousands of similar products that could draw consumers’ attention necessitate the products to have certain elements of differentiation other than their physical characteristics. One of the primary reasons of the necessity in question is that the effort in differentiating the physical specifications of a product from other products is not always successful and the efforts made could cause unnecessary losses of time and money. Therefore, recently, it has been observed that the enterprises focus on “brand value” which is an important element in differentiating both the enterprise and the products they offer. The motive under this focus is that especially nowadays the brand is an important means of competition and the increasing brand value would bring great advantages to the enterprises. For the brand value concept to be established appropriately by the enterprise and to be applied accurately, first of all, correct measurement of the brand value is extremely important. Hence, the brand value concept brings along the question of measuring the brand value. For this reason, the brand value and the measurement of the brand value issues appear in the literature as the issues of utmost importance. There are two types of methods in the literature which are used for measuring the brand value. These are the financial methods and the methods based on consumer behavior. In the studies conducted, sometimes the brand value is measured based on one of these methods, and in other cases the brand value is measured using both two methods together at the same time. In this study, the brand value of Bellona, which is one of the leading furniture brands in Turkey, is measured in accordance with the method based on consumer behavior via a questionnaire survey conducted on the customers of Bellona.  Currently, brand is one of the most important concepts related to the marketing science. Brand is a concept that belongs to an enterprise, a football team, a political party, or even an individual person; and it adds value to those it belongs, it integrates and associates with them. The brand that associates with the correct and positive image is critical for product management and marketing communication. Because of all these reasons there are many definitions related to the brand in the marketing literature. According to the definition of American Marketing Association the brand is “the name, term, indicator, design, shape, or a collection of all these which serves the purposes of determining, defining a product or products and services of a group of sellers, and distinguishing and differentiating them from their competitors” (Kotler and Armstrong, 2006). According to “the Decree Law (DL) No: 556 on the Protection of Brands”, provided that it assures the differentiation of the goods and services of an enterprise from those of another, the brand includes especially words, shapes, letters (characters), numbers, all kinds of signs together with names of persons which could be displayed through drawings, or expressed in a similar way, published and copied by printing such as the format of the goods or their packages. The condition of the signs “to be displayed through drawings or expressed in a similar way” explained in the DL does not mean that only two dimensional signs can be brands, as a matter of fact, voice or melody represented in musical notes, a two-dimensional picture of a three-dimensional sign may also be considered within this context (Kaya, 2006). This description provided by the DL emphasizes that the brand is a concept made of distinguishing names, signs, or symbols that is protected by law. However the brand is a concept with a context that is wider than this description made by the DL. The use of the brand as a wider concept than distinguishing name, sign, or symbols that are protected by law has emerged initially by the assessments done from the marketing point of view. From this perspective, the brand is not only a name/sign protected by the law but also a means that explains the positive images about the enterprise and the product in the heads of the customers and potential customers, customer loyalty, and quality perceptions about the product; causes the customers or potential customers to have emotions about the product such as prestige, robustness, and reliability. In other words, the brand is perceived as an integration of all the psychological elements that connects the customers to the product and the enterprise and it becomes one of the most important entities (assets) that the enterprise possesses for surviving in the competitive environment (Kotler and Armstrong, 2006).Within this context, it is all of everything that the consumer considers before his/her purchase decision is made. The brands represent a long term strategy that is built around an economical value both for the consumer and the owner of the brand (Pickton and Broderick, 2001).


Green Industry’s Sustainable Development and Government’s Motivation Strategy

Dr. Chen-Kuo Lee, Ling Tung University, Taiwan

Hsueh-yung Hsueh, Ling Tung University, Taiwan



Green industry makes remarkable contributions to Taiwans sustainable development. As a strategic industry, the green industry helps the enterprises across Taiwan and the entire society to upgrade economic benefits and social welfare. This study concentrates on the game equilibrium between the preferential policy promulgated by Taiwan government, the fundamental environment, and the green industry thereby present recommendations to facilitate the system implementation and decision-making process for the development of green industry in Taiwan. This study find that, despite the necessity of expanding the preferential policy, an optimal environment is the only assurance for the rapid development of the green industry in the long-run and, furthermore, a flawless fundamental environment plays the most critical role that upgrades the optimal degree for the environment. Apparently, the incentives for the fundamental environment is by all means more important than the incentives for the preferential policy in the long-run. In this connection, the fundamental environment inspires the development of green industry ultimately. Therefore, system renovation and technical renovation are the only way for Taiwan government to improve the fundamental environment for the green industry and upgrade the optimal degree for the environment thereby promote the sustainable development for the green industry. Peace and development have become the major concerns across the world ever since the Cold War ended. Triggered by the conflicts and confrontations resulted from population and resource utilization, the environment issues is attracting more and more attentions from the international community. Human beings have caused a number of environment issues, such as global warming, ozone depletion, distinction of biological diversity, hazardous wastes and acid rain, resource depletion and the destruction of ecological system, by overusing and misallocating the natural resources. The biased allocation and the interest groups’ unethical competition have worsened the environment issues. Human begins have desperately searched for solutions over the past two decades and have eventually switched their attention from “environment issues” to “environment vs. development”. Thus, a new perspective – sustainable development – was presented with emphasis on satisfying the current generations needs without sacrificing the next generations needs. Now, the whole world has understood the importance of the substantial development. In an effort to materialize the substantial development, the 1992 worldwide “Environment and Development” Convention has passed its ‘21st Century Agenda” that outlined the substantial development has become an option for all mankind in the 21st century. After the conclusion of 1992 UN Environment and Development convention, more and more international organizations, governments, and academic organizations have engaged themselves in the researches on the national or regional substantial development, assessment indexes, and assessment methods. Apparently, these topics have drawn attention from all walks of life. A number of international organizations and government, such as the Organization of Economic cooperation and Development (OECD), United Nations’ Council for Substantial Development (UNCSD), United Nations’ Department of Policy and Substantial Development (DPCSD), United Nations’ Department of Planning (UNDP), United Nations’ Scientific Council On the Problems of Environment (SCOPE), United Nations’ Statistics Department (UNSTAT), US, Canada, the Netherlands, Scandinavia, and World Bank (WB), have released a series of research results regarding the substantial development assessment indexes, such as the Human Development Index (HDI, 1990) released by the World Bank, the “Pressure – Status – Response” framework presented by OECD (Chen-ye Wu, 1999), the Real Saving Ratio released by the World Bank (Hamilton and Clement, 1997), the “Inspiration – Status – Response” Core Index Framework publicized by UNCSD (DSR, 1996), and the Biological Footpath released by Wackernagel et al. (1999). Apparently, researchers have switched their focus from theoretical study to the application. In the late 1970s, researchers began their study on the environment conflict issues. For example, the United States’ Carpenter and Kennedy (1980) released an environment conflict management theory in which the conflict analysis method was considered an important means to solve the environmental issues; Australias Daris (1985) concluded that the general publics participation and an effective environment policy are needed to solve the environment conflicts; Crocker and Shogren (1994) studied environment conflicts with emphasis on risk transfer and alleviation techniques; Fraser and Hipel (1980~1994) studied the environment conflict theory based upon a transnational waters conflict; Brown Wiseman and Handmer et al. (1995) publicized “Environment conflict management and changes” that presented conflict management and environment changes analysis method and related case studies with emphasis on the approaches to solve environment management and conflicts. The environment conflict researches are divided into two categories. Researchers concentrate on the fundamental theorems with emphasis on the occurrence, development, and prediction of various types of environment conflicts in addition to the vulnerability of the environment. In general, however, the research is just beginning at this moment, the theorems are too abstract and too simplified, and has a long way to go before identifying an effective solution. Researchers concentrate on case study and summarize the experiences thereby identify the solutions. Up until now, the researchers have eventually started analyzing the qualitative features of the issues.


Developing a Brand for the Sabah State in Malaysia: Empirical Research Among its Tourists

Mandy Mok Kim Man, Universiti Malaysia Sabah, Sabah, Malaysia



This paper examines the importance of evaluating Sabah state’s image as an ecotourism destination. Like consumer products, states are increasingly trying to brand themselves in order to appeal more strongly to the tourism market. Consumers continue to rely on country and state images to pick their tourism destinations. According to the literature review, effective state branding should reinforce positives images, thereby providing a competitive advantage in world markets. The important role of identity in branding is discussed, and the process of image evaluation as a self-analysis process leading toward building a strong destination brand is considered. Image evaluation is important for Sabah state as an ecotourism destination. This study addresses the theory and practice of country branding, providing recommendations for Sabah state’s ecotourism branding. The study proposes that Sabah be associated with its natural beauty and offers a number of recommendations derived from branding theory. Brands have been considered as marketers’ key tool for creating product differentiation (Kotler and Gertner, 2002). According to Kapferer (1998), the two functions of brand are to distinguish different products and to indicate a product’s origin. Konecnik (2004) indicated that destination branding is a new research area. State branding is important because consumers rely heavily on country or state images to make their economic decisions. The concept of ecotourism requires careful management to ensure ongoing sustainability through a strategic balance of numbers and yield. The key to achieving an optimal return on tourism investment is to develop and manage the ecotourism brand by identifying and understanding the target audience—in other words, to get into the heads of the audience (stand out) and deliver ecotourism branding messages in a way that they will understand them. Under globalization, countries need brand themselves on four different dimensions: public diplomacy, tourism, exports, and foreign investment dimension (Vicente, 2004). Kapferer (1998) explained that brand identity comes from the sender’s (manager’s) side while brand image relates to the receiver’s side. With the brand position in place, state branding can be developed through promotion, publicity, marketing, the Internet, etc. Sabah state has the potential for a strong ecotourism product as it has been nominated as one of the new seven wonders of nature. Measuring the equity of the state brand from the tourist’s perspective will provide the input necessary for Sabah state branding. According to Kotler (2002), a brand’s purpose is two-fold: i) serve as a “major tool to create product differentiation” and ii) represent a promise of value. From a consumer’s viewpoint, a brand is above all a shortcut to a purchasing decision. Consumers often do not take the time to compare and contrast products, even when differentiation is possible based on product characteristics. Furthermore, de Chernatony and Dall’Olmo (1999) indicated that successful service brands result from well-nurtured relationships, evolving from the consumers for particular values. This conclusion is supported by Keller (1998), who indicated that brand name is an important element that often captures the central theme of a product or service. Therefore, logos and slogans could assist the consumer to remember and recognize the features and meaning of the brand. This can applied to country and state images as well. Jaffe and Nebenzhal (2001) reviewed the theoretical underpinnings of country image for products and provided useful insights into how it can be managed by countries, industries, and firms. Papadoupulos (2002) devoted a special issue on country branding, bringing together contributions from the leading experts in the field. Anholt (2003) also argued that developing countries can increase their competitiveness and therefore reduce economic disparity through effective branding.Arnold (2002) indicated that branding relates to the way in which customers perceive and buy things. In this sense, marketers typically distinguish three levels in a brand: essence, benefits, and attributes. The essence of the brand is a single simple value, easily understood and valued by customers. It is the personality of the brand, and the element that is distinctive in the market. The benefits delivered by the brand (emotional, status, image) should match the needs and wants of the consumer. Finally, the attributes—directly noticeable and tangible characters (colors, shapes, functions, and graphics)—should do the same.


Examining and Comparing the Competitiveness of Tourism Industry in Cambodia and Taiwan: An Assessment from Professionals

Yu-Ping Lee, Shu-Te University, Taiwan

Ching-Yaw Chen, Professor, Shu-Te University, Taiwan



The development of competitiveness indicators links with the existing and potential tourism flow to one destination. Our result of our previous research on Tourism Competitiveness of Cambodia showed that while Cambodia’s tourism has a lot of strengths, there is still a lot of space to improve. However, one famous Taiwanese tourism professional stated publicly that Taiwan’s tourism cannot be compared to only one Angkor Wat of Cambodia alone. This triggered our interest to conduct this study. Is Taiwan’s tourism industry less competitive than Cambodia’s? In what areas? And, why? This study aims at examining and comparing tourism competitiveness of Cambodia and Taiwan from the perspectives of academia and industries in both destinations. Tourism competitiveness is measured by 7 factors categorized as endowed resources, created resources, supporting factors, destination management, situational conditions, demand condition, and market performance, benchmarked from previous research. The result showed that Cambodia has more strengths and opportunities than Taiwan in terms of natural and heritage resources, location of the destination, government’s policy, and environmental management. These strengths can be the explanation to that famous Taiwanese tourism professional’s speech. However, Taiwan also has some competitive advantages over Cambodia in terms of created and supporting resources, human resource, and marketing strategies. From the authors’ perspective, Cambodian tourism has stronger core competencies, for we believe that the competitive advantages Taiwan’s tourism has over Cambodia’s are not rare and unique and can be overtaken once the economy situation of Cambodia improves. Tourism is known to be one of the most dynamic and fastest growing sectors. It has recently emerged as an important contributor to Gross Domestic Product (GDP) and has become a main economic indicator for many countries in the world. It is also a key industry for a country seeking to increase its foreign revenues. Facing such bright prospects and great potentials, the Royal Government of Cambodia has recognized tourism as one of the key strategies to reduce poverty in the country (National Strategic Development Plan, 2005). The second authors’ previous research on competitiveness of Cambodian tourism (Chen et al., 2008) showed that while Cambodia has many competitive advantages, there is still a lot of space for improvement. However, a very famous person in Taiwanese tourism industry gave a speech at … in … that “….”. This piece of news triggered the authors’ interest to conduct this study. Taiwan is much more advanced than Cambodia in terms of industry and economy development, but is its tourism industry less competitive than Cambodia’s? in what areas?, why? Therefore, the main purpose of this study is to examine Taiwanese tourism competitiveness and to compare it with Cambodia’s. The determination from both governments to create tourism competitiveness serves as a motive for us to conduct this study. Moreover, at a time like this when tourism worldwide is becoming increasingly competitive, all awareness into the development, weaknesses and strengths of competing destination will become more pivotal (Pearce, 1997; Dwyer et al., 2000a). Since existing and potential tourism flows to any destination are jointly linked to that destination’s overall competitiveness (Ritchie & Crouch, 2000), there is an urgent need to develop a framework of destination competitiveness. The development of competitiveness indicators can set out as a beneficial appliance in determining what aspects or factors dominate tourists’ decision to visit other destinations.Our study on the comparison of tourism competitiveness between Cambodia and Taiwan aims at providing an in-depth analysis of the destinations’ strengths and weaknesses so that a sustainable tourism competitiveness model can be established for both destinations to develop their strengths and improve their weaknesses.Taiwan, located in the main tourism boom area, has the strategic geographical environment with rich natural resources and also valuable cultural heritage. Under the influence of a global tourism development, the administration is doing their best in launching several related projects to develop tourism. Taiwan is becoming a place of interest and potential tourist attractions. During the early days, Taiwan concentrated her efforts on attracting international visitors. However, due to the lack of attractions, disorganized traffic conditions, pollution and a slump in the world economy, the number of tourists slowly dwindled. In view of the situation, the administration put forward a National Development Plans – Vision 2008, and within the plans is the Doubling Tourist Arrivals Plan, which is the current vision for the tourism industry. Besides upgrading the local tourism attractions, it mostly concentrates on marketing the tourism image of Taiwan to improve its competitiveness, and actively seeks to restructure tourist facilities, and also improve service standards to attract more visitors to the country.


Developing Place Marketing Strategies to Promote the Redevelopment of the Historic Main Streets to Take Better Advantage of Globalization: The Case Study of Tainan City, Taiwan

Dr. Kang-Li Wu, National Cheng-Kung University, Taiwan



Given the impact of globalization and a new policy direction that emphasizes place marketing and urban redevelopment, the issue of developing place marketing strategies to promote the redevelopment of historic main streets has received widespread attention in Taiwan. However, how the issue could be efficiently and effectively addressed in current planning practice remains a critical research question. Employing the concept of place marketing, and using the renowned cultural city in Taiwan-Tainan city-as the empirical example, this study attempts to explore the issue. By employing research methods that involve interviews, field surveys, and a fuzzy questionnaire survey, this research identifies the core values and issues that influence the redevelopment of the historic main street in Tainan city. This is followed by the reposition of the redevelopment of the historic main street district. Based on the analysis of planning and marketing environment, this paper suggests a set of marketing and planning strategies in order to promote the redevelopment of historic main streets in Tainan city in order to take better advantage of the trend of globalization.Historic main streets are valuable cultural capitals that represent the collective memory and shared images of cities. They are also important resources to promote cultural tourism under the trend of globalization. Nonetheless, amongst the urban environment in Taiwan, many unique historic main streets are gradually losing their functions and identity due to the trend of globalization and rapid urbanization.  Moreover, many historic street districts are facing problems of environmental deterioration, lose of economic activities, and social inequity.  Therefore, how decision makers and urban planners should reposition and redevelop historic main streets and their surrounding blocks given the trend of globalization has become an important and urgent research issue.  The redevelopment of historic main streets of cities has become an important issue of urban redevelopment and urban revitalization in Taiwan given the new policy direction that aims at enhancing the quality of the urban living environment and the competitiveness of cities.  Employing place marketing to create new urban images and promote tourism development of cities has also become an important policy goal that is associated with urban redevelopment.  However, most of the related studies on the redevelopment of inner city areas in Taiwan focus on the reuse of historical buildings and vacant lands. There are relatively few studies that have addressed the redevelopment of urban historical main streets from the viewpoint of place marketing.  Nor have previous studies explored the influence of the interactions between globalization and localization during the process of the redevelopment of historic streets and their surrounding blocks. Without fully understanding the marketing issues and strategies of the redevelopment of historic main streets of cities under the trend of globalization, many important urban historic streets are improperly maintained (or redeveloped) and fail to meet the dynamic changes of the urban environment and needs of the local people. Using the downtown historic main street in Tainan city (the famous cultural city in Taiwan) as an example, this study attempts to explore the following research questions: (1) What are the influences of globalization on the redevelopment of historic main street in Tainan; (2) How should decision makers reposition the role of historical main streets of urban development under the trend of globalization; (3) What place marketing and planning strategies should be developed in order to promote the redevelopment of historic main streets under the trend of globalization.The concept of globalization has been widely discussed in the context of international politics, economy, culture, technology and urban development studies since 1980s. In general, globalization refers to a process in which economy, technology, culture, and means of production and consumption are being ‘transnationalized’ and ‘networked’ (see e.g., Beck, 1997; Borja and Castells, 1996; Sassen, 1994). Under the trend of transnationalization and networking, human resources, enterprises, capital, information, technology, culture, and even ideas can go beyond borders of nations and interflow internationally to configure new market orders, supply and demand chains, and ways of communication and transnational networks. Such new markets, production orders, and networks have not only redefined the roles and functions of a city, they have also altered the meaning and functions of geographic space (Friedmann, 1995).


Potential Determinants of Brand Extension Success: Direct and Indirect Effects

Esra Sonmezler Arikan, Bogazici University, Istanbul



Even though many studies on the potential determinants of brand extension success have been conducted, in those studies, only the direct relationships between brand extension success (dependent variable) and potential success factors (independent variables) have been tested, disregarding the fact that some success factors may constitute dependent variables in other relationships. Prior research suggests that customer acceptance of a brand extension is affected greatly by the perceived fit between the extension and the parent brand. Yet, in real life, it is not difficult to find examples of brands that have been extended successfully into relatively distant categories. At this point, the proposed indirect effects that other success factors have on brand extension success through perceived fit may help explain this discrepancy between prior research and marketplace observations. Thus, the proposed model not only considers the direct relationships between success factors and extension success but also the relationships between perceived fit and other success factors, offering various managerial implications that can be very helpful for reducing the fear of launching non-similar extensions and expanding the boundary of extension products. Leveraging brand equity through brand extensions is a strategic option for a firm looking to grow. Brand extensions are products and services that an organization offers beyond its core product (Keller, 2003). When a brand uses its established name to introduce a new product, the risks associated with the launch of the new offering as well as the investments needed are lowered, and there are higher chances that the new product will be successful (Tauber, 1988). Trusting in an established brand with which they may have had prior experience, consumers are more willing to purchase the extension because of the quality assurance they receive from the known brand name (Romeo, 1991). Another advantage of introducing extension products is that they do not require as much promotional support as new products, because consumers are already familiar with the brand name. Therefore, the advertising investment needed is much lower (Smith and Park, 1992). The existing relationship with distributors, too, facilitates the new product introduction (Keller, 2003). So it is not surprising that in today’s competitive environment many firms choose to rely on their existing brands to introduce new products.  Given the increased reliance on brand extensions as a marketing strategy, it is important to better understand what constitutes a successful brand extension. Most of the studies on brand extensions have primarily investigated conditions required for introduction of successful extensions (e.g., Aaker and Keller, 1990; Bottomley and Doyle, 1996; Boush and Loken, 1991; Dacin and Smith, 1994; Keller and Aaker, 1992; Sunde and Brodie, 1993). Even though many studies have been conducted in this context, as Völckner and Sattler (2006) claim, in those studies only the direct relationships between brand extension success (dependent variable) and potential success factors (independent variables) have been tested, disregarding the fact that some success factors may constitute dependent variables in other relationships. Prior research suggests that customer acceptance of a brand extension is affected greatly by the perceived fit between the extension and the parent brand (e.g., Aaker and Keller, 1990; Boush and Loken, 1991; Keller and Aaker, 1992). Yet, it is possible that the main effect of perceived fit may be overstated due to the fact that the relationships between perceived fit and other success factors that indirectly contribute to brand extension success have been mostly neglected in prior research. Thus, this study not only considers the direct relationships between success factors and extension success, but also the relationships between perceived fit and other success factors. Based on a systematic review of the previous studies that have been conducted since 1985, a conceptual model is developed for brand extension success (Figure 1). As illustrated in the model, brand extension success is a direct function of the perceived fit between the parent brand and the extension, the quality of parent brand, the strength of brand portfolio, the marketing support the extension receives and the corporate image of the firm that introduces the extension. Moreover, these factors other than perceived fit indirectly contribute to the brand extension success through their effect on perceived fit.  The variable that has generated probably the most discussion in the brand extension literature is perceived fit that refers to the similarity between the brand and the extension. Drawing primarily on categorization theory, prior studies propose that the degree to which brand associations are transferred to an extension depends on the level of perceived fit between the parent brand and the extension (e.g., Aaker and Keller, 1990; Boush and Loken, 1991; Smith and Park, 1992). Categorization theory holds that people organize objects or information into categories that enable them to process and understand their environment efficiently (Mervis and Rosch, 1981). To the extent that a person perceives an object to be a member of a category, the components of the category (i.e., affect and beliefs) are transferred to the object. Hence, greater the similarity between the parent brand and the extension, greater is the transfer of positive associations to the extension.


Gulf Bank, Kuwait Corporate Strategy and Management Issues

Dr. Ahmad Assaf Alfadly, Gulf University for Science & Technology, Kuwait



Gulf Bank reported a net loss of KD359.5 million for the year 2008, due mainly to exceptional losses in derivative transactions, but also from losses on its investment and loan portfolios relating to the global financial meltdown. This study discusses the challenges facing Gulf Bank and reviews strategies that could be adopted to face them, covering many issues that together reflect the significance of banking in our economies.  Strategy is the art of organizing or coordinating the means (money, human resources, and materials) to accomplish the ends (profit, customer satisfaction and company growth) as defined by company policy and objectives.  According to Paley (2006), strategy is defined further as actions to achieve long term objectives, which exists at three levels. First, higher level of corporate strategy: In this strategy, the manager's aim is to coordinate and deploy company resources toward filling his/her company's vision for the future, along with related long term objectives. Second, mid-level strategy: In this level strategy operates at the division business unit department.  It is more specific than corporate strategy.  Third, lower-level strategy: The low level strategy requires a shorter time frame than those at the two higher levels.  This study aims to analyze the issues regarding Management and Corporate Level strategy. As we probably know, many firms operate multiple business units in different environments and various situations. Also, the study discusses the financial returns associated with various corporate level strategies and the role that top managers' motives may play in corporate acquisitions.  Corporate Level strategy arms senior managers and planners of a corporation with a set of approved strategic principles and clear guidelines for successfully managing a diverse, multi-business company.  Here, I demonstrate that developing a clear corporate-level strategy to reach parenting advantage is essential to the successful portfolio management of a multi-business corporation.  It is suitable when conducting this specific research assignment to start with the framing of a research question that would determine the general direction of this research effort. The research question is  How can a Gulf bank implement its Portfolio Management and Corporate Level Strategy?  Portfolio management is the professional management of different securities such as shares, bonds, real estate etc., to find suitable and specified investment goals for the profit of the investors. Investors may be organization such as insurance companies, pension funds, IT companies, corporations, etc., or private investors.  The terms of portfolio management includes elements of financial analysis, asset selection, stock selection, plan accomplishment, and ongoing watch of investments. In addition portfolio management is an outsized and significant global industry in its own right, responsible for caretaking of trillions of dinar, dollars, euro, pounds, and yen. Coming under the umbrella of financial services, many of the world's largest companies are at least in part investment managers and employ tens of thousands of staff and create billions in revenue.  The four main classes of assets are: Bonds: This is similar to secured loans in portfolio management where the client receives the principal and interest amount on maturity (after the period ends). Stocks: The stock is the capital in portfolio management moved up by the issuance of shares of a firm. Real estate: This refers to all properties, land (commercial, industrial, agricultural), and buildings owned by the client. Commodities: This refers to agro-based products (crude oil, iron ore, sugar, soybeans, aluminum, gold, silver, etc.) in portfolio management.  Why is a change in portfolio management needed ? There are many reasons firms need to move toward managing the portfolio of change in progress.  The main reasons for such an approach include: 1. The organizations are facing an ever increasing number of change organizations. The swiftness and sum of change is not decreasing. The main changes are that organizations are facing more external drivers of changes, such as the competitive landscape and a need to stay ahead of the changing demands of customers. Also, internal drivers that turn out to be more effective and efficient are continuing to emerge. Across the board, the amount of transformation is on the rise. 2. The possibility for transformation diffusion change diffusion occurs when there is more change than individuals and groups in the organization can manager. Each individual and group in a firm has a change ability that it/they can put up with, though when the amount of change commotion exceeds this change capacity, there are harmful implications. Individuals become stressed, confused, and disengaged. Projects begin to suffer. Overall, the organization's productivity declines. A portfolio viewpoint provides insight into probable transform diffusion. 3.  The consequences of transform impact. This means that when there is not an outlook of the portfolio of change, initiatives and projects begin to crash. Collisions happen on numerous fronts, such as budgets for change efforts, individual resources needed to hold the initiatives, time requirements by people involved, and mindshare of workers. In the nonexistence of a portfolio perspective, these collisions cannot be appraised and alleviated, and each project and initiative suffers. According to John et_al. (2001), Corporate-level strategy is defined in terms of variation in the deployment of a firm's resources among the portfolios of industries within which all business firms compete.   Corporate level strategy basically is concerned with the choice of businesses in which the company should try to compete and with the development and coordination of the business portfolio. It is concerned with:


A Taxonomy Model for a Strategic Co-Branding Position

Wei-Lun Chang, Tamkang University, Taiwan



In the competitive and shifting business environment, creating non-replaceable value and strengthening core competences are critical. M&A is the best strategy for survival because of one rule: the big ones get bigger. This study investigates the effects of co-branding strategies and strategic alliances in order to propose a co-branding taxonomy. It analyzes co-branding from four dimensions and two perspectives: The perspectives are the management and brand perspectives, and the dimensions are goals, reasons for M&A, brand image, market segmentation, financial reports, and reasons for successful/failure. Hence, this research furnishes a roadmap and guideline for future co-branding strategies and provides clues for managers in decision-making related to brand alliances. In the competitive and shifting business environment, creating non-replaceable value and strengthening core competences are critical. Merger and acquisition (M&A) has become a significant strategy that assists companies in gaining competitive advantages in a global environment. M&A allows firms to develop in vertical and/or horizontal dimensions, to expand scales of business, and to handle advanced technologies.  Drucker (1992) indicated that it is inevitable that companies evolve into globally allied businesses. Ohmae (1989) specified that alliances are essential for business strategies based on diffusion of IT, cost increments, and protection of trade. Thomson Financial reported that total revenues of M&A reached US$3.87 trillion in 2006 (as shown in Figure 1). According to Bloomberg LP (11/20/2006), the global scale of M&A in 2006 was US$3.1 trillion, which was a50% growth compared to 2004 and 7 times higher than 2003. Forty-seven percent of the M&A activity was in Europe and the US. M&A is not only a trend but an altering process for specific areas or domestic industries. However, M&A is not the only approach by which to gain competitive advantage. Companies seek new marketing strategies and create their own competitive advantage from building their own brands. Kolter (2000) indicated the key factor for firms to grow is to build sufficient brand portfolios, which is considered brand construction (Ries and Ries, 1998). Leith Reinhard, the CEO of DDB Worldwide Communications Group, Inc., specifies that brand is everything and that, unlike product, brand value is not duplicable. Hence, it is beneficial to companies if the synergy from an M&A is greater than either single brand. As a result, M&A is the best survival strategy for companies, given the rule that the big ones get bigger. Moreover, brand construction is the critical factor for enterprises to maintain their competitive advantages. The existing research has been conducted only from the viewpoints of organizations or strategic alliances, but the current study attempts to investigate the effects of co-branding strategies and of strategic alliances. In addition, we propose a co-branding taxonomy and conduct our analysis in four dimensions: goal, reasons for M&A, market segmentation, and reasons for success/failure. The rest of this paper is organized as follows. Section 2 surveys the extant literature. Section 3 demonstrates and describes the devised co-branding taxonomy, while Section 4 provides further analysis based on the four dimensions. Section 5 discusses the contributions of this research, and section 6 provides a conclusion. In this section, we will survey the extant literature related to strategic alliances and brand. In the first sub-section, we synthesize the state of the art for strategic alliance research and identify its advantages and shortcomings. The second sub-section discusses the theories related to brand, brand similarity, and brand equity. Finally, M&A and branding are merged and discussed as a single new issue: co-branding. A strategic alliance can be seen as an alliance formed by two or more organizations with a joint strategic goal (Killing, 1983), and/or as merged resources and capabilities by which companies use their cooperating strategies to create competitive advantages (Michael et al., 2005). In a strategic alliance, companies sign contracts to create short-term relationships and agree through a joint venture format to be strategic partners.


IPO Profit Forecasts Regulation and Earnings Management

Dr. Norashikin Ismail, Accounting Research Institute and Universiti Teknologi MARA, Malaysia

Dr. Pauline Weetman, University of Edinburgh Business School, UK



This study investigates the impact of revised regulation of earnings forecast on management reporting behaviour for the period of three different regulations 1996, 1998 and year 2000 using working capital accruals  model.  The regulatory changes affecting earnings forecast disclosure in company prospectus which has taken place in January 1996 and the government regulation is applied to penalise under achievement of forecasts beyond a defined range is expected to influence management behaviour in reporting their actual earnings.  Earnings management measured in terms of discretionary accruals is computed for the year of forecast issuance and three years after the IPO. The results show that median discretionary accruals for examined IPO companies are highest and significantly positive at the 1% level in the year when the forecast is made in the prospectus and  managers continue to manage earnings during the period after listing where there is continuing regulatory scrutiny.  Our findings are mainly consistent with the evidence from prior research that there are positive abnormal accruals in the year of an IPO and that the positive abnormal accruals persist during regulated periods subsequent to listing.  Companies in a regime of mandatory earnings forecasts disclosure may have a greater cost associated with disclosure.  The disclosure regulation is likely to encourage IPO companies to issue more optimistic forecasts, sending positive signals to the market so that the IPO proceeds may be maximised.  Inaccurate forecasts give the appearance of company instability and high risk.  It may be assumed that security and reputation are in some way dependent on reported profits.  In adjusting earnings to reach forecasted targets, managers are presumably attempting to establish positive reputations in order to, for example, raise the company’s stock price.  The theoretical relationship between mandatory forecast disclosure and earnings management goes back to the study of   Kasznik (1999) and Teoh et al. (1998a, and 1998b) who focuses on the behaviour of management of IPO companies immediately after the date of the IPO and the behaviour of managers in response to earnings forecasts. Earnings forecast error can impose costs by impairing management’s reputation for accuracy.  Some support for the reputation costs hypothesis is evident in studies by Kasznik (1999), who documents evidence that managers use positive discretionary accruals to manage reported earnings upwards, when earnings would otherwise fall below management’s forecasts.  Teoh (1998a and 1998b) find evidence that IPO companies managed their earnings upwards in the first post-IPO year and suggested that IPO companies which are under great pressure to meet the projections made to investors at the beginning of issue marketing, are managing their earnings in their first year post-IPO to safeguard their reputation for reliability and to avoid lawsuits by shareholders after a shortfall in post-IPO earnings.  This study contributes to the earnings management literature by relating evidence of earnings management in IPO companies to the operation of IPO regulation in a developing country.  We choose Malaysia for this study because regulation was introduced in 1996 governing profit guarantees in IPOs. In such a situation investors may believe that a regulation incorporating profit guarantees provides a degree of financial comfort for companies in which they have invested (TheEdge, 1998).  On the other hand, an awareness of scrutiny under regulation may affect management behaviour in managing expectations reflecting the expectation of regulators.  However, financial statement users in developing countries like Malaysia are less likely to be able to see through the managed earnings due to lack of technical knowledge and the lack of a sophisticated capital market (Saleh and Ahmed, 2005). Research on earnings management provides some evidence that companies tend to inflate or deflate earnings depending on their motivation.  Healy (1999) in a review of the earnings management literature, note a range of potentially significant incentives to undertake earnings management.  These include capital market expectations and valuations, contracts written in terms of accounting numbers, and government actions such as anti-trust legislation.  In particular, empirical studies suggest that companies tend to manage earnings around various corporate events including initial public offerings (Roosenboom, 2003; Teoh et al. 1998; Friedlan, 1994) seasoned equity offerings (Teoh et al. 1998a) and to reduce regulatory costs (Navissi, 1999; Jones, 1991)  Prior research documents consistent evidence of significant income-increasing discretionary accruals in the year of the IPO or in the first year as a public company. The first reason given for income-increasing earnings management is to support the stock price of the firm. As managers have entered into lock-up agreements with underwriters that prevent them from selling shares for a specified period, managers who wish to sell their shares at the end of the lock-up period may have an incentive to support the stock price of the firm in the first year after the IPO (Roosenboom, 2003; Teoh et al. 1998; Friedlan, 1994).  Secondly, managers tend to manage earnings upwards in the first year after the IPO because companies are facing unusual legal and reputation scrutiny after the IPO (Teoh et al. 1998; Friedlan, 1994)  or to counter bad news that may adversely affect the share prices (Friedlan, 1994).


The Constraints and Obstacles Facing Women in Auditing Profession: The Case of Jordan

Dr. Muhammad Yassein Rahahleh, Al-al Bayt University, Jordan



The study aims to identify the constraints and obstacles facing women in auditing profession in Jordan. The Likert Scale was used on various statements of the constraints and obstacles facing women in auditing profession mentioned in the questionnaires. An independent t-test was carried out on the respondents’ perceptions. The analysis noted that the perception of women and men external auditors on the constraints and obstacles facing women in auditing profession is significantly different in general while some characteristics as individual, shows no significance difference between male and females auditors. Meanwhile, the study revealed that finally, using the linear regression, the study found that there is a significant relationship between women's salary in internal auditing the constraints and obstacles facing women in auditing profession experienced by women auditors while there is significant relationship in external auditing profession  Women have traditionally been attracted to careers in teaching, nursing, information, and library services... etc. however, increasing numbers of women progress to top positions in both small and large firms in public and private sectors. But while the numbers of women holding the top positions increases, the view is still expressed that it is more difficult for a woman to reach some professions than it is for a man. The process of feminization of the accountancy profession has well been documented by contemporary feminist accounting researchers. Women have been entering the accountancy profession in increasing numbers since the early 1980’s (Chung, 2000; McNicholars et al., 2000). Currently there are increasing numbers of female accounting students enrolled in Jordanian universities, recent statistics shows that female represents more than (34.8%) of the accountant students in Jordan. Despite these accomplishments in gaining entry to the profession, however, women have been less successful in gaining advancement in entering in auditing, especially in external auditing profession in view of the fact that researches and studies done in the field of external and internal auditing in jordan (master’s thesis at Jordanian universities) pointed out the very low or even no participation of women in auditing profession.  As reported by the Association of Jordanian Certified Public Accountance (AJCPA), which regulates organizes working in external auditing activities; there was significant growth in its membership over the recent years. The association currently has (686) individual members of external auditors as at September 2009. The external auditing is dominantly by males, out of the total members of the (AJCPA) only (20) women auditors who represent less than (3%) of the total members. In the contrary, there is no association neither a law regulates the profession of internal auditing in Jordan, thus there are no records for the internal auditors in Jordan, preparation for this study shows that only (40) women internal auditors working in the private companies. Thus the participation of female in this field is still considered low in Jordan; despite the high in demand for both external and internal auditing profession is Jordan.  The Jordanian regulations enforced the partnership and corporation companies to appointment independent auditor; usually this auditor is appointed by the general assembly of those companies. In the other hand, many enterprises, especially the larger ones regard internal auditing as an important feature of the total management function as company increasing in size, the demand for the internal auditor is also increasing.   There are few researches done to find out why women are not realizing their full potential in different aspects of professional and economic activities in Jordan. And regarding the higher demand for auditing profession, and high female enrollment in accountant education, there are law rate of women in auditing profession. Hence, this study is undertaken to consider the possible problems that lead to this situation from the Jordanian perspective. The current study seeks to: 1. Examine the potential the constraints and obstacles experienced by women in auditing profession in Jordan; internal and external auditing; and 2. Examine whether there is any differences between the perception of women and men towards the constraints and obstacles experienced by women in internal and external auditing.  Problems generally faced by women in the work force have been identified by many researchers such as Gildea (1952); Inlogev (1989); Kimmel and Marquette (1991): Davidson and Coopers (1992); Ibarra (1992); Maupin (1993); Flanders (1994); Beth (1995); Jancura (1997) Rana (1998); Marshall (1999), Alharthi (2005) and Awawdah (2004) Mosa (2003) Katargi (2004) and Rahahleh (2006). Among the problems are late entry, sexism, family obligation, value differences, unfit, glass ceiling, lack of self-confidence, stress, less able to meet responsibilities of the job, spouse career, employers' prejudice, sexual harassment and competent, tradition, societal, gender violence, Islamic tradition, family responsibilities and long working hours. However, few researches had been specifically conducted on the problems faced by women in internal auditing. [Kusel and Oxner (1990) and; Burridge and Thomas (1996), Jaffar at el (2004)].



A Study on Safety Systems in Canoe Sports –A Case of 2007 International Canoe Slalom Championship in Nantou County, Taiwan

Ming-Chieh Wu, Dr. Pei-Ling Wu, Dr. Ching-San Chiang, and Ju-Mei Hung

Chienkuo Technology University, Taiwan

Dr. Jaw-Sin Su, Chinese Culture University, Taiwan



 Injuries to canoe sports racers may come from accidents. The reasons for injuries, not attributed to people, could come from sets of hardware. Avoiding hardware injuries to racers is an important issue. In this research, we constructed the safety system of hardware sets, environment and tangible objects. These consisted of weather and course, equipments and facilities and outfits, respectively, for canoe sports to detect uncertain accidents. To prove that the model could be applied to the practical field of the 2007 International Canoe Slalom Championship in Central Taiwan, the Shui-Li River in Nantou County, was the case example. Conclusions were that the system could detect the risk cost in canoe sport accidents, and that the model could be used to protect racers from injury through the insurance system.  The canoe and kayak were developed for hunting, fishing, transporting, and traveling in ancient times (Row, 1993). Many kinds of canoes were used in racing (Chiang, 1997). The canoe slalom in whitewater was developed in 1920 (Szanto and Dallos, 1987). Canoe slalom racing has appeared three times in the Olympics; 1972, 1992, and 1996 (Searle and Vaile, 1996). In Taiwan, the "Du-Mu Zhou, in Chinese", was the name for canoeing or kayaking over more than hundred years (Out-Side Sports, 1981), The Chinese Taipei Kayak Association was established in 1991 (CTKA, 1996).


Quality of the Lighting in Taiwan’s Three Inline Hockey Rinks

Chin-Hsien Hsu, National Chin-Yi University of Technology, Taichung, Taiwan R.O.C.



 This research is a survey of the quality of lighting in three of Taiwan’s hockey rinks, which are respectively located in Dajia Riverside Park (in Taipei City), Hemei Park (in Changhua), and Dapingding (Xiaogang District, Kaohsiung). Data were collected and analyzed using SPSS for 11.0. The results show that the horizontal illuminance values at three rinks were 65Lux, 98Lux, and 238Lux respectively. Among the three inline hockey rinks, the one in Dapingding was the only one that lived up to “leisure” grade while the other two fell short of the standards. Secondly, the maximum/minimum illuminance ratios at the three rinks were measured at 58, 38, and 5.5 respectively, which means that none of the three rinks lived up to the max/min illuminance ratio standards. Considering variance, the rink in Dajia Riverside Park was measure at 0.85, the one in Hemei Park at 0.8, and the one in Dapingding at 1.3, which means that none of the three rinks lived up to the variance standards, either.  Since late twentieth century, many professional sports leagues have spread of their places of origin, Huang Yu (2002) observed. And pushed by the trend, inline hockey teams for different age groups have set up one after another in Taiwan (Hou Xiao-ning, 2009). According to Zhang Gong-hong (2001), for the last more than a decade, inline hockey has been taken up by a growing number of people and inline hockey population is ranked in the top-five of Taiwan’s total sporting population.


Female Labor Force Participation in Korea from a Historical Perspective

Namchul Lee, Ph.D., Fellow, and Ji-Sun Chung, Ph.D.

Korea Research Institute for Vocational Education & Training



 Female labor force participation has increased in Korea during decades. This increase has been a result from improvements of labor market conditions and due to the diversification of social structures and opportunities available for women. Using various aggregate data, we find that the effect of fertility rate on labor force participation is negative. The women’s educational attainment and labor force participation have increased relatively to men’s labor force participation. The effect of education and female labor force is positive in Korea. Highly educated female workers defer and have high labor force participation. These issues are relevant to gender differences when it comes to employment associated with increased female education.  The most dramatic change of labor supply in Korea has brought tremendous increase in the number of Working Women. In 1980, less than 6.0 million of 15.6 million labor force participations were women. However, women labor force grew to 10.0 million, an unprecedented number in 2007. Women’s labor force participation rates increased sharply from 47.0 percent in 1980 to 50.2 percent in 2008. The dynamics of change in the pattern of female labor force participation are apparent from the aged participation profiles for women during the same period. In Korea, GNI per capita increased more than twenty times from 1973 to 1997, from US $401 to US $11,176.  However, there was deep recession in the Korean economy after the financial crisis in 1997. GNI per capita dropped to US $7,355 in 1998.  The female labor force participation rate reached 47.1 percent in 1998. It was estimated that the national competitiveness kept slackening and many concerned voices were being heard that the economic hardship could not be overcome within a short period of time.


Leadership Style Orientations of Senior Executives in Australia: Senior Executive Leadership Profiles: An Analysis of 54 Australian Top Managers

James B. Hunt, University of Newcastle, New South Wales, Australia



 Research into the personality trait antecedents of executive leadership styles demonstrates the links between dispositional anchors and the following leadership orientations; autocratic, democratic, visionary-inspirational and laissez-faire.  Australian senior executives in this study are shown to have a strong achievement-orientation, a tendency toward visionary-inspirational leadership, and a range of tendencies toward autocratic and democratic leader behaviours.  This profile emerged out of a study in which 54 senior executives participated, and provides an update on previous senior executive leadership studies conducted on representative samples of top-level Australian managers (eg; Wood and Vilkinas, 2005; Hunt, 2006; Brown and Sarma, 2007). The purpose of this study is to provide new insights into the leadership-style orientations of senior executives presiding over medium and large private sector organisations in Australia.  This study presents an updated perspective on corporate executive leader behaviour, by building on the top management leadership-profile studies conducted by Mukhi (1982), Sarros and Butchatsky (1996), Wood and Vilkinas (2005), Hunt (2006), Brown and Sarma (2007), and Lau, Sinnadurai and Wright (2009).  Specifically, autocratic and democratic predispositions to leadership are investigated, along with individual achievement-orientation and visionary-inspirational leadership, through the identification of trait-based indicators.


The Construction of Scales for the Measurement of Non-profit Volunteer Free time Management

Dr. Chin-Shyang Shyu. National Taichung Institute of Technology, Taiwan, R. O. C.

Dr. Tun-Li Chen, Hungkuang University, Taiwan, R.O.C



 The Non-profit Volunteer Free Time Management Scale employed in this study is compiled based on the time management scale developed by Britton and Glynn(1989), Huffstutter and Smith (1989) and Macan (1994). The original scale has 21items in five constructs. The scale was evaluated by confirmatory factor analysis (CFA) to verify its reliability and validity, measurement model, and overall model fit. The result showed all measurement indexes in the Non-profit Volunteer Free Time Management Scale meet the standard of the goodness-of-fit index. In an effort to effectively compete in our globalized market, while aiming to improve the quality of customer service, the public sector is focused on reducing present financial burdens on the government through outsourcing and privatization. This movement comes with the expectations of organizational downsizing, increased flexibility and improved administrative efficiency. Non-profit organizations play a role in the integration of abundant social resources and the organization of invaluable volunteers. These organizations also make efforts regarding environmental protection, gender equity, human rights, humanitarian aid, and other international affairs via systematic and effective management policies. In recent years, the number of non-profit organizations has climbed; as of the end of 2008, a total of 31,994 government-registered social groups have been established. Among these, 10,228 groups are focused on social services and charity, outnumbering registered groups in 2004 by 7,846 (Taiwan Ministry of the Interior, 2009); over the last decade, Taiwan has seen a substantial increase in non-profit organizations. Non-profit organizations are categorized as part of the service industry with volunteers being one of the core elements.


Information Model of Quality of Bank Lending to Croatian SMEs

Dr. Ljiljana Viducic and Dr. Vinko Viducic, University of Split

Dr. Damir Boras, University of Zagreb



 The object of the analysis in this paper is satisfaction of entrepreneurs with bank lending practice in Croatia. The following fundamental scientific methods have been applied: synthesis and analysis, inductive and deductive methods, descriptive and comparative methods, survey, statistics and modelling (growth matrix). Based on the qualitative and survey analysis, using growth model, authors have formulated information model of quality of bank lending as perceived by Croatian entrepreneurs for the period from 2009 to 2016. Synergetic relations among main features of quality of bank lending have been provided. In the case of Croatian small businesses, the main burdening factor, when bank lending is considered, is an availability of long-term loans. Indirect growth rates of the model indicate that collateral and interest rates will have the greatest influence on this factor. Quantification of the model renders to the creators of the economic policy the basis for policy measures and strategy formulation in order to boost small businesses development.  Small entrepreneurship has been recognised as a locomotive of the economic and social progress. This role requires huge investments and they, in turn, require an approach to financial resources to a suitable extent and under suitable terms. The entrepreneurs' approach to the financial resources is the issue that both developing and developed countries are very interested in.


The Fragile Structure of  Turkey’s Macro Economy and  The Neuroeconomics

Dr. Haldun Soydal and Fatma Nur Yorgancılar, Selçuk University, Konya, Turkey



 In this study, at first; it is explicated that the world countries’s – they have been in the globalization process - their tries’s dimensions that are about owning a comparative advantage as other countries, having a major voice in international platform, with the proviso that is following various strategies and methods, and their policies which they placed them on either economical or political frameworks for achieving their these purposes, and the incidence of pursued policies to the household and to the hand’s macro economies, and then; the neuroeconomics concept that  has just recent acquired a shape in economy science; is displayed with it’s cultivatings in the country economies  which neuroeconomics is being applicated, in terms of its definition, application, sphere, results, advantages and  disadvantages. And after these two conceptualizations, it is canvased that the implication of neuroeconomics  concept to the economical policies which countries followed as in a comformity with their macro economic  structures; and at last, by dealing with the reasons, process and results together, of this fragile structure of our  country which is faces with an economical recession in average, ones for each seven years, it is exhausted that those  present applications, edging of it’s due place in our country of neuroeconomics concept, and the importance of it in  terms of the economies which are hypersensitive against to endegenous – exogen variables like our country.


Innovation Management and Thought Leadership – A Cultural Requirement in a Global Competitive Environment

Dr. Michel Soto Chalhoub, Lebanese American University, Lebanon



 Globalizing markets are imposing a new breed of competitive pressures which include the need for competition and cooperation at the same time - often among the same parties. Business performance is increasingly dependent on the ability of managers make investment decisions about technology and innovation.  However, innovation has been traditionally perceived as synonymous to developing a new product or adopting a new technology.  This paper addresses innovation in its broader definition to include processes for organizations to operate and build performance-driven cultures.  We propose a theoretical model that describes a relationship between technological and process innovation on one hand and leadership in performance on the other hand.  New ways to communicate, organize tasks, design processes, and manage people have evolved. The competitive wave in the late twentieth century spurred firms to cut cost by eliminating almost anything that sounded as out of scope from daily operations. This led to a lack of measures for intangible assets such as innovation management practices, especially when it comes to the generation and use of tacit knowledge in the innovation process.  As many organizations opted not to institutionalize innovation management, individuals took it in their own hands to establish informal networks and intellectual communities of interests. 


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