The Journal of American Academy of Business, Cambridge

Vol.  23 * Num.. 2 * March  2018

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

Online Computer Library Center, OH  *  OCLC: 805078765

National Library of Australia  *  NLA: 42709473

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The Dark Triad of Personality: Impact upon Leadership and Employee Job Satisfaction

Dr. Steven H. Appelbaum, Professor, John Molson School of Business, Montreal, Quebec

Logan Hicks, John Molson School of Business, Montreal, Quebec

Luciana Brasil, John Molson School of Business, Montreal, Quebec

Sara Vitale, John Molson School of Business, Montreal, Quebec

Barbara T. Shapiro, John Molson School of Business, Montreal, Quebec



This article investigates the extent to which The Dark Triad of personality traits as exhibited by superiors affects employees and job satisfaction within organizations. A comprehensive search of relevant research related to the topic has been conducted to determine if a relationship exists between the two variables.  Findings suggest that there is a correlation but largely for short-term financial gains and innovation with the possibility of long-term company demise. This research was collected from other studies on similar and related topics; however, an empirical study directly investigating the subject should be conducted for the most accurate and reliable results.  Supervisors exhibiting The Dark Triad personality traits can have an effect on employee behavior and satisfaction which may have a resulting impact on the overall organization as a whole.  This research will provide companies with more insight into the repercussions of dark leaders on their employees so they may successfully identify, control and in some cases remove potential toxic leaders. This will allow organizations to make informed decisions about their leadership and future directions, effectively balancing the negative risks and visionary potential the Dark Triad can bring to the table. The information contained in this analysis could inform hiring practices within organizations in terms of personality traits, behavioral aspects and emotional quotient.  How does a superior exhibiting the dark triad of personality traits affect employee job satisfaction?: A Narcissist, a Psychopath and a Machiavellian Walk into a Bar… The bartender asks, ‘who has the darkest personality out of you three?’ The Narcissist says ‘me’, the Psychopath says, ‘I don’t care’ and the Mach says ‘it’s whoever I want it to be’ (Chopra, 2013).  The dark side of personality has garnered much interest in organizational behaviour research over the past few decades due to current political, economic, and social environments. The stable patterns of behaviour and consistent internal states often determine how an individual reacts and interacts with other (Appelbaum, 2007). The Dark Triad is composed of three personality types; narcissism, psychopathy, and Machiavellianism. Narcissism can be globally described as a grandiose sense of self-importance. Psychopathy encompasses a lack of empathetic concern and difficulty controlling their impulses towards control. Machiavellianism is the practice of using manipulation and exploitation for personal gain. As opposed to the Big Five personality traits universally accepted to describe personality, the dark triad can be perceived as socially undesirable, negative individual personality traits.   Leadership and job satisfaction are often intertwined, therefore it is essential to propose concrete definitions for these terms in order to investigate the impact that potentially toxic leaders and can have on employees. Job satisfaction is thought of as the employee's positive feelings about a job resulting from an evaluation of its characteristics. Leadership is a key characteristic that influences how employees feel about their jobs as it impacts: productivity, company culture, absenteeism, and turnover. While leadership is the ability to influence a group toward the achievement of a vision or set of goals. Zaccaro, Kemp, & Bader (2004) assert that leaders also possess certain attributes that non-leaders do not. These attributes include: emotional stability, social and emotional intelligence, and a need for power and achievement. However, social context and the company culture the leader is exposed to will also impact their ability to successfully lead the organization. Leslie and Van Velsor (1996) suggest that three negative features of leadership influence employee job satisfaction. These features include: lack of interpersonal abilities, incapability to complete work, and incapability to establish and sustain a team.


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Do Countries That Improve Corruption Levels Attract More Foreign Direct Investment?

Dr. Vijay Sampath, CUNY-John Jay College of Criminal Justice, New York, NY



Drawing on internationalization and institutional theories, this study examines the impact of improvements in country corruption levels on foreign direct investment (FDI).  Internationalization theory suggests that investors consider corruption to be a crucial factor in evaluating the attractiveness of an investment location. Institutional theory provides guidance as to how countries as institutions can institute governance initiatives to reduce corruption levels. Using outward FDI data from the United States, the hypothesis is tested as to whether improvements in corruption levels result in increased FDI. Results suggest that improvements lead to significant increases in FDI, thus providing guidance to government leaders that steps taken to decrease corruption have positive effects on their economies.  The government of the Philippines’ efforts at curbing corruption appears to have been successful when it improved 24 positions in the Corruption Perception Index (CPI) in 2012 as compared to 2011 (Patria, 2012). A government spokesperson attributed the improvements to “efforts to strengthen institutions, provide deterrents against corrupt practices, and hold accountable those who have used power for personal gain” (2012: DU1). In the debate in recent years over the role of FDI in helping developing countries to reform their political and social systems, quality of governance has gained recognition as a crucial variable for measuring progress toward attaining such goals.  This paper attempts to fill this void in the literature on how improvements in corruption levels attract FDI. Institutional theory informs us that country differences in relation to the regulatory and normative pillars represent the governance attributes of those countries (Kostova, 1999).  Improvements in these attributes would be useful in exploring whether these improvements lessen corruption in countries, thereby increasing FDI from developed countries. Multinational enterprises (MNEs) from the developed world emphasize these improvements in governance attributes, making countries attractive as investment opportunities (Dunning, 1998). The cost of doing business increases in countries that are corrupt, which could have a detrimental effect on investments. This study demonstrates that lower corruption and improved country governance explain variations in FDI.  The results would inform policymakers as to how corruption risks can be overcome by understanding governance attributes in corrupt host countries.   In recent years, public policy and academic debates over the efficacy of FDI and foreign aid have polarized around two camps. One camp – proponents for increased FDI and aid – argues that previous investment has been too incremental to show definitive success in achieving the desired goals, and that a massive surge in investment is required for developing countries to experience economic development (Cassen, 1986; Riddell, 1987; Collier & Hoeffler, 2007). The other side of this argument contends that increased aid has had little to no effect in improving economic development or social reform and, in fact, has often done far more harm than good (Boone, 1996; Bauer, 2000; Easterly, 2001; Clark, 2008).


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Bank Credit, Trade Credit and Innovation

Xixi Chen, Pepperdine University, CA

Dr. Jing Guo, Zhejiang SCI-TECH University, China

Dr. Fred Petro, Pepperdine University, CA



Whether bank credit can support innovation is a crucial issue which determines the success of China’s economic transformation and upgrading. In this paper, an empirical study examines the relationship between bank credit, trade credit and innovation. Also studied is the interactive term relationship existing between bank credit, trade credit and innovation, based on information taken from China’s Industrial Enterprise Database over the period 2012-2014. We show that the financing mode, dominated by bank credit for our country, both supported and nonsupported innovation, will be restrained if enterprises provide trade credit. We also find that the effect of repression from bank credit to innovation will be intensified through trade credit redistribution. Thus, to promote innovation, our traditional bank-credit financing mode should be revisited for modification. And we should Build Multi-Level Capital Market, propel financial market reform and reduce the opportunities allowing enterprises to exercise shadow banking in capital market.  China's economic development approach needs to promote comprehensive innovation to achieve quality-oriented and efficiency-oriented intensive growth. This is achieved with the intense speed of extensive growth, with innovation from the micro-enterprise level as the most important driving force. Due to the long cycle, high risk, information asymmetry and other reasons, business innovation is subject to serious financing constraints. The mitigation of corporate innovative financing constraints needs an efficient financial system.  China's financial system is dominated by banks. The allocation efficiency of bank credit funds largely determines the role of finance in promoting economic growth. In addition, China also has long-term financial restraint. Commercial credit plays an important role in the process of secondary allocation of credit resources. Under this special financial system, could bank credit support business innovation? And what is the role of commercial credit with credit secondary configuration? Theoretical and empirical research on this issue will help us to better understand the microeconomic mechanism of the financial impact on innovation in China's special financial system.  The study of finance and innovation goes back to Schumpeter's view that the services provided by financial intermediaries are of vital importance to technological innovation. However, it has been argued that financial intermediation is only a product of the rapid industrialization of society. Also, its impact on technological innovation is not as great as imagined. In general, early macroeconomic studies emphasize that the financial market is the major factor influencing technological innovation (Hicks, 1969; Acemoglu, Zilibotti, 1997 and etc.) Rajan and Zingales (1998) argue that the causal relationship between the two cannot be explained thoroughly if the overall correlation between financial development, technological innovation and economic growth is only studied from the macroeconomic level without explaining the transmission pathways and mechanisms that produce this effect from a microscopic perspective.  The micro-level research began at Hall (1992), where he promoted the assumption that financing constraints influenced firms' R&D investment based on investment theory and demonstrated negative correlation between the two by analysis of US export-oriented manufacturing firm data. Further studies have shown that the main reason for the lack of R&D is the financing constraints (Harhoff, 1998; Hall, 2009; Ayyagari, 2007). Canepa and Stoneman (2008)  found that financial capital, financial credit and other elements promote the upgrading of enterprise innovation based on EU innovation survey data. The impact is more obvious in high-tech enterprises and small and medium enterprises. However, Weinstein and Yafeh (1998) argue that banks have a natural cautious tendency and are not conducive to corporate innovation and growth under the Japanese main bank system. Gilles (1992) found that financial markets and technological innovation are interdependent. Good financial markets promote the development of high-tech industries, while high-tech industry development affects the degree of financial market development. Brown et al. (2009), by analyzing high-tech enterprise data in the United States, illustrated that R&D investment in large enterprises mainly relies on internal funds. However, small and medium-sized technology companies lack internal funds.


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The Impact of Liqudity on Corporate Bond Yield Spreads

Dr. Melissa Woodley, Creighton University, NE

Dr. John R. Wingender, Jr., Creighton University, NE



Holding term-structure constant, corporate bond yield spreads have traditionally been assumed to be made up of only credit risk.  Recent work has expanded this view to include compensation for the tax consequences of interest income, as well as a liquidity premium and a systematic risk premium.  This work shows that while credit risk explains the yield spread for high yield bonds, only 20-32% of the spread of investment grade bonds, depending on the maturity, is attributable to credit risk.  The remainder of the yield spread contains compensation for bond-issue specific illiquidity, differential taxation, and systematic risk.  Further, monthly changes in individual corporate bond spreads are negatively correlated with changes in liquidity. These results suggest that not only is bond liquidity priced, but monthly changes in trading activity at the individual bond level are also a compensated risk.  What explains the corporate bond yield spread, the difference between the yield of a corporate bond and a U.S. Treasury bond of like duration?  Several factors cause this spread to be positive.  U.S. Treasury bonds are considered to be default-free, while there is a positive probability of default for even the highest quality corporate bond.  Income from U.S. Treasury bonds is exempt from state taxes, while income from corporate bonds generally is not.  U.S. Treasury bonds are among the most liquid securities in the world, while some corporate bonds trade only rarely, if at all.  The purpose of this essay is to determine the relative impact of each of these factors on the magnitude of the corporate bond yield spread.  Further, we will examine how changes in the probability of default and the liquidity of the bond are reflected in the yield spread.  There is some disagreement in the literature as to the relative importance of credit risk, liquidity, and tax effects in determining the size of the corporate bond yield spread.  Huang and Huang (2003) find that credit risk accounts for an average of 20% of the yield spread for corporate bonds and that the percentage is inversely related to credit quality.  Elton, Gruber, Agrawal, and Mann (2001) report that default risk accounts for, at most, only 35% of the yield spread.  Further, they find that default risk and asymmetric tax treatment taken together account for at most 74% of the spread.  Depending on credit quality and industry, default risk accounts for between 7% and 35% of the yield spread while the default and tax premia together explain between 54% and 74% of the spread.  Elton et al. go on to argue that the rest of the corporate bond yield spread represents compensation for systematic risk in corporate bonds.  They show that between 67% and 85% of the portion of the yield spread unattributable to default risk or taxes is explained by the three factors of Fama and French (1993).  Longstaff, Mithal, and Neis (2005) separate the corporate bond yield spread into a default component and a nondefault component.  They find that the default component increases from an average of 51% of the spread for AA bonds up to 83% for BB bonds.  The nondefault component in their sample varies substantially with a range of 18.8 to 104.5 basis points and a mean of 65 basis points.  Longstaff et al. (2005) find that the nondefault component is related to both the degree of asymmetric tax treatment and a proxy for bond liquidity.  The nondefault component is positively related to the coupon rate of the bond, indicating the market is pricing the differential tax treatment of corporate bonds.  Additionally, the nondefault component is positively related to the average bid-ask spread for all bonds issued by the company, indicating a liquidity component in yield spreads.  Collin-Dufresne, Goldstein, and Martin (2001) focus on changes in corporate credit spreads.  They find that credit spreads decrease as the market becomes more liquid as measured by the relative frequency of quotes versus matrix prices in the Fixed Income Database (FID) and by changes in the spread between on-the-run and off-the-run 30-year U.S. Treasuries.  Thus, Collin-Dufresne et al. show that the credit spreads of individual bonds react to changes in aggregate liquidity, but do not address changes in liquidity at the individual bond level.  A major problem with all previous studies of corporate bond yields is the lack of a direct proxy for issue liquidity. 


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Independent Accountant’s Issues with Recent Reporting Regulations

Dr. Michael Ulinski, Pace University, Pleasantville, NY

Dr. Roy J. Girasa, Pace University, Pleasantville, NY



Various security laws are designed to regulate financial markets, increase transparency of financial reporting and sometimes provide incentives for economic growth by deregulation of banking and other industries. The researchers describe past efforts to regulate reporting requirements beginning with the Sarbanes-Oxley Act, followed by The Dodd-Frank Act and the Choice Act recently passed by the US House of Representatives. The Choice Act also has implications for Crowd Funding and Dark Pools as alternative trading systems (ATS). Accountants are charged with compliance with changes brought about in reporting requirements as well as interpreting and defending against enforcement efforts by the SEC and other regulatory agencies. Conflicting views about the value of deregulation from the independent accountant's perspective as well as some members of the US Congress are presented. Conclusions are reached with regard to the effects on accountants ability to comply with new and revised regulations.  Independent and government accountants are faced with compliance issues with an ever changing landscape of securities and financial reporting regulations of financial markets. Recent legislation designed to streamline regulations of market activities have caused accountants charged with independent audits of financial statements or those within the SEC to comply with new rules and disclosure requirements. The Choice Act(1) recently passed by the US House of Representatives was designed to reduced regulation of the banking industry by repealing major portions of the Dodd-Frank Act and increase transparency of financial information while streamlining other supposed burdensome regulations to spur economic activity. Historically the Sarbannces-Oxley, Dodd Frank and Choice Act represent regulatory and legislation, or in the case of The Choice Act, deregulation, that effect both Independent and government accountants ability to navigate the complex laws and SEC regulations advanced by Congressional legislation. The Choice Act also contains legislation implications for Crowd Funding and Alternative Trading Systems such as Dark Pools.  Conflicting points of view as to whether changes suggested by the Choice Act are not in the best interests of investors to safeguard against predator brokers and large banking institutions. The American Institute of CPAs cautions against deregulation and rollback of laws they consider important for the protection of the consumer. The contrary point of view contends the regulations hold back small business economic activity and competition. Some evidence of both perspectives are discussed.  The Sarbances-Oxley Act, regulation of Public Accounting, Dodd-Frank Act, the Choice Act, Crowdfunding, Alternative Trading Systems and Dark Pools are discussed in order and future regulation regulation trends are proposed. Both independent and governmental accountants are stakeholders in the final analysis and need to do their best to understand the issues involved in complying and reporting in accordance with older and more recently proposed regulations.   The demise of the Enron corporation and other large corporations brought about new rules for independent public accountants with regards to required additional opinions on the internal controls to prevent fraud and the lack of transparency of major corporations listed on stock exchanges. Section 404(b) was considered a boom to the public accounting employment but also took much of the industries self-regulation into the hands of a quasi-private regulator the PCAOB. The PCAOB was created to levy fines on CPA firms for substandard work .When first limited to certain “issuers” of public float of more than $75 million, smaller capitalized companies were able to escape the sometime burdensome requirements of section 404(b), slightly larger companies would be held to expensive and onerous regulations which made economic growth harder for these companies to expand and grow.  According to the associated press federal regulators charged 69 accounting firms and partners with violating the SOX anti fraud law by auditing public companies without registering with the PAAOB.


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Women CPAs:  Retention Remains a Challenge

Dr. Denise de la Rosa, Grand Valley State University, Grand Rapids, MI

Dennis C. Stovall, Grand Valley State University, Grand Rapids, MI



Public accounting firms have struggled and continue to struggle with the retention, attraction, and promotion of women at their firms. Part of this can be attributed to the fact that many women desire to have a more flexible schedule which allows them to have a better family and work balance. Due to this, many women will leave a firm after only working there a few years, most likely after obtaining their CPA certification. Legislation passed in Michigan in the past few years now allows for accountants to attain their certification through either industry or public practice. Firms have tried to entice women to join and stay by offering flexible-work and part-time arrangements, but this ultimately is not solving the problem in its entirety. Women continue to leave firms at a much higher rate than men. In addition to problems with the current workforce, firms also face a new challenge of attracting the next generation of women accountants, the millennial generation. Like any generational switch, firms must analyze their current policies to ensure they attract and retain the best new talent in the years to come. This paper explores employment trends of women CPA holders, and what measures firms are taking to attract and retain them.  In 1998, former Michigan governor John Engler signed into law Public Act 380 of 1998, requiring candidates applying for a Certified Public Accountant (CPA) certification after July 1, 2003 to have 150 semester hours of college-level education. The 150 hours gives the student a chance to broaden their educational horizon, allowing them to not only have a solid background in accounting and business but the opportunity to strengthen their verbal, written, and interpersonal skills as well. Once the law was enacted, the Michigan State Board of Accountancy was given the chance to create the official requirements that must be met by current CPA candidates.  The official educational requirements with which all CPA candidates must comply are as follows: A Master’s degree in accounting or business administration that includes not fewer than 12 semester hours of graduate-level accounting courses. The 12 semester hours of accounting courses shall not include tax or information systems courses.  OR   An academic program consisting of both of the following: Thirty semester hours of accounting subjects, including not more than six hours of taxation. Thirty-nine additional semester hours with a minimum of three semester hours, but not more than 12 semester hours, in not fewer than five of the following areas: business law, economics, ethics, finance, management, marketing, taxation, statistics, and business policy. (The Michigan Association of Certified Public Accountants)   The next step towards earning a CPA license is to pass the Uniform Certified Public Accountant Examination, which every CPA candidate in the United States must take. In Michigan, though, you are allowed to sit for the exam even if you have not completed your 150 semester credit hours. You must, however, have met certain requirements:  Received a baccalaureate degree from an educational institution recognized by the Michigan State Board of Accountancy (MSBA)  Completed 24 semester hours in accounting and 24 semester hours in business-accounting courses that must include auditing, financial accounting, managerial accounting, accounting systems and controls, U.S. taxation and government/fund accounting.  (*Michigan Association of Certified Public Accountants)   The final step towards earning a CPA is the focus of this report – experience. Experience in the workforce demonstrates an individual’s ability to put their educational experience to good use. An applicant is required to complete 2,000 hours of qualifying experience in a responsible audit position under the direction and supervision of a licensed CPA within no less than one year and no more than five years. There is no requirement as to when the experience can be completed, whether it is before or after taking the CPA exam, but there may or may not be restrictions based on each individual firm.  Before December 2010, these applicants must have done their work experience in either a public accounting firm or a government agency, all under the supervision of a licensed CPA. In June 2010, House Bill 6196 passed unanimously, which was expected to “bring Michigan in line with most other states that allow industry experience to count toward certified public accountant licensure(Lane  2011). The [EB1] law has eased some of the restrictions, and now experience earned in industry, such as working in a controller’s office in a manufacturing firm, counts toward the 2,000-hour requirement. A licensed CPA is still required to verify that the respected candidate has completed the necessary time allotment.   “Industry data suggest that law firms still have much to do in order to enhance the presence and roles of women lawyers. But here's a step in the right direction: Women's initiatives are now fairly common in large law firms to the extent that most have a program in place or are planning to set up a program aimed at retaining and advancing women practitioners” (McMahon 2007).   Working in a public accounting firm is a very demanding job. Between the long hours and the amount of hard work put in, it may be difficult for some people to balance their work and social lifestyle while working at a CPA firm. This is especially difficult for women who want flexible schedules and a life outside of the office.  To make matters worse, Michigan requires that practitioners have one year of experience working under a CPA before they become eligible to obtain a CPA license.  Author Beth Fitzgerald of Newshouse News Service explains the downfall of Michigan’s experience requirement. “For years, certified public accounting firms have hired women and men in roughly similar numbers straight out of school – then watched women leave in droves when the demands of motherhood collided with the industry's notoriously long hours and grueling travel.”  This scenario has been all too common for public accounting firms recently, as efforts to retain women are increasing; yet these efforts are not yielding desirable results under current Michigan law. Although women have been entering the accounting fields at record paces over the last decade, the public accounting firms are struggling to retain women after obtaining their CPA license in search of more flexible scheduling and career paths.  “One of the most vexing challenges for CPA firms, large and small, is how to effectively welcome women into the ranks of partnership. Graduation statistics and workforce demographics confirm that future new hires will most likely be composed of a majority of females” (Finkle).   One of the biggest factors that influence the quality of a public accounting firm is employee retention. With more and more women earning their CPAs, it has become a priority for public accounting firms to retain the women that satisfy their experience requirement through their firm. With an entire year of experience under their belt, they are more likely to transition into working for the company full-time. Add to that the fact that these firms are losing the women they had invested so much time and money in training and it is easy to see why firms are going to need to do a better job of retaining their women employees.


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The Impacts of Safe Harbors on SMEs´ Performance and Other Economic Indicators

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

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



SMEs are an economic backbone of the European economy as they generate 28% of GDP in EU28 and employ at least 60% of persons employed in EU28. Moreover, SMEs are involved in global value chains as partners, suppliers and distributors of large and multinational companies. However, SMEs face many obstacles one of them is tax system which generates excessive compliance costs, which are regressive with regard to firm size. The situation is worse for SMEs which are internationalized in EU i.e. having subsidiaries abroad, where transfer pricing and other international taxation issues may be in point. In this case compliance costs of transfer pricing issues were determined for European SMEs annually between EUR 3,090 and 5,564 per entity and represent 1.32 % up to 2.38 % of corporate tax collection. Therefore, greater simplicity in transfer pricing administration and improving the efficiency and effectiveness of transfer pricing enforcement are considered as essential mainly for SMEs, who are not able to bear the high administrative burden to comply with the transfer pricing rules as large enterprises. One of possible solutions can be considered the introduction of safe harbor arm´s length ranges. The aim of the paper is a research of impacts of the introduction of safe harbor on changes of SME´ performance and other selected items reported in the financial statements with emphasis on the fulfilment of the long-term goals of the EU2020 agenda, such as smart and inclusive growth in the EU. Based on the research we can conclude that safe harbors are able to support the SMEs´ performance as they are able to decrease compliance costs of transfer pricing issues resulting into a smart and inclusive growth in the EU. In this respect we recommend to invest such saved money to an increase of current assets, added value or number of employees.  Small and medium-sized enterprises (hereinafter SMEs) are categorized according to the number of employees and their turnover or balance sheet total. Based on the commonly-used categorization for SMEs provided by the European Commission (1) they are categorized on micro, small and medium-sized enterprises. Medium-sized enterprises are defined SMEs as “enterprises which employ fewer than 250 persons and which have an annual turnover not exceeding EUR 50 million, and/or an annual balance sheet total not exceeding EUR 43 million”. Small enterprises are defined as “enterprises having less than 50 employees and turnover or balance sheet total of less than EUR 10 million, and microenterprises as a firm with less than 10 employees and a balance sheet or turnover below EUR 2 million.” The European Commission report (2) states that SMEs presents almost 99% of all firms in EU, i.e. just under 23 million SMEs in 2015.  SMEs as an economic backbone of the European economy contribute significantly to national and global economic growth. They generate almost 58% of value-added and account for a large proportion of total employment (i.e. provide 90 mil. jobs), mainly in the service sector. (3) Even though the contribution of SMEs to employment differs by sector, as a whole SMEs creates at least 67% of jobs in the EU. SMEs are also involved in global value chains as partners, suppliers and distributors of large and multinational companies.   The surveys (4) of European Commission have revealed that all SMEs face the same obstacle, mainly in the form of tax systems which generate excessive compliance costs. As a certain features of the tax system may disadvantage SMEs relative to large enterprise even though many tax requirements may appear to be relatively “neutral” for business of all size. These tax requirements include higher fixed costs associated with tax and compliance regimes. Due to this fact, governments are taking many measures to reduce these impacts - providing tax preferences, special provisions, specific tax rules and simplification measures targeted at SMEs. If these measures are carefully designed i.e. they do not increase complexity, they can address the disproportionately high tax compliance burdens faced by SMEs.  From an international perspective, more than 44% of SMEs (in EU average) are active in any forms of international activities, such as exporting, importing, investing abroad, cooperating internationally, or having international subcontractor relationships, within the EU (5). However, only 2% (for micro), 6% (for small) and 16% (for medium) of SMEs are investing abroad. This is connected mainly with the facts that only 5% of SMEs are associated (i.e. have subsidiaries abroad) and that SMEs are generally less involved in cross-border activities. The European Commission adds that only 1.2 million SMEs are exporting, while 1 million of them export within the EU. (6) 


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Developing Production Standards for Multitask/Multilocation Service Installers with Varying Levels of Experience:  A Basic Theory

Dr. John Ed Knight, Professor, The University of Tennessee at Martin, TN



As the economy increasingly moves toward service applications and away from highly repetitive short-cycle manufacturing operations, the use and development of production standards necessarily must undergo similar changes.  This paper addresses the development of production standards for multitask/multilocation service installations with varying levels of installer experience.  The application of production standards to these tasks faces special issues given that the work order will contain various, non-standard general job tasks with specific outcomes but not specific and prescribed standard repeatable methods.  Each installation must depend on the experience level of the operator making a planning assessment on arrival at the installation location and deciding which sequence of task installations and methods of installation may be best.  Experience is assumed to play an important role in this assessment and work order execution.  An algorithm will be suggested that will not only make a work order prediction but also will develop a daily work order schedule that will meet the 8-hour daily work requirement with consideration for wide variances in the installation times, travel times from location to location, and the variances of sequential work orders so that the probability of completion in 8 hours meets a predetermined management assurance level.  Production standards have many benefits that have been reaped for years (Quick, 1962).  Production standards are the results of accurately and precisely timed tasks being extrapolated over a prescribed work day (typically 8 hours) with a given output per person per day being generated.  The basic job task times can then be utilized as elements for determining production standards for independent work stations and then utilized as input to assembly line balancing calculations when gross demand makes division of labor more efficient.  Production standards also regulate work flow, determine labor requirements for a forecasted demand level, establish labor costs for standard costing input to accounting, and establish a contract between employees and employer for a fair days work and a fair days pay.  This contract allows the employee to work with far less supervision and oversight.  However, poor production standards can lead to employee dissatisfaction, union grievances and other management complications.  This paper will focus on developing fair standards that do not distort the true nature of the actual work for service installations.  Good work standards and production standards must be viewed as neutral by the employees to be effective.  Employees possess an uncanny ability to understand how different factors affect their ability to complete a task with one of those factors being experience on the job.  Basic to the production standard is the development of time standards for various job tasks and series of job tasks.  Historically, many of the time standards focused on extremely repetitive tasks often performed in a factory location where the physical location, component work flow and completed work disposal were fixed and tightly controlled. Henry Ford was especially focused on the use of time studies and standards for the efficient production of millions of Model T Fords.   The works of Frank Gilbreth (Gilbreth, 1925) and Lillian Gilbreth (Robinson, 1994) and Frederick W. Taylor (Locke, 1982) and his scientific management approach helped develop many of the foundational aspects of time studies (as inputs into production standards).  Gilbreth focused on developing a best method utilizing the 17 therbligs of motion study before actual time studies were developed.  Once the most efficient method was established using those principles, the method was timed and a time standard was established.   Using that basic time, a production standard for a work day was established.   Interestingly, the change in methods and improved times were difficult to obtain in practice.  Lillian Gilbreth with her background and training in psychology began to observe the phenomenon and developed the tabletop experiments to demonstrate how the actual implementation of time standards can be more effective when the concepts of psychology were introduced to better understand how production changes affected the learning curve, worker acceptance, and achievement of the proposed work standard.   Meanwhile Frederick W. Taylor developed time standards focusing on timing of work based on the physical selection of different individuals to accomplish different tasks and the selection of various tools (e. g. shovels) and the sequencing or work and rest periods to optimize total production output.  The pig iron and shoveling experiments at the Midvale Steel Company were some of his famous historical studies. 


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Possible Way to Internally Generated Intangible Assets Reporting

Dr. Hana Bohusova, Mendel University in Brno, Czech Republic

Dr. Patrik Svoboda, Mendel University in Brno, Czech Republic



Costs associated with intangible assets such as software, patents, licenses, copyrights and goodwill became an important item of costs in the recent days. Despite this fact, there are a lot of inconsistencies in their recognition, measurement a presentation in particular reporting systems. The paper is focused on the evaluation of the ways of intangible assets reporting and impacts the reporting treatment on financial position and performance of companies.  There are compared treatments for intangible assets measurement, recording and reporting in selected reporting systems in the paper. The IFRS system, US GAAP system and the Czech Accounting legislation (CAL) are evaluated. The aim of this paper is to evaluate the way of IAs reporting methodology. Based on results of comparative analysis, the most different ways of IAs reporting were identified and the model case was utilized for the demonstration of the impact of different treatments for recognition, measurement and reporting on financial statements items.  The characteristics of the economy had changed from the industrial one to today’s more service and information oriented during the past decades. There were especially manufacturing companies (US Steel, Jersey Standard, Pullman and American Tobacco) among the world’s largest companies in the beginning of the 20th century. Their success was based on their tangible assets: oil fields, railroads and factories. In the recent days besides these companies there are some new companies operating in quite different kinds of industries (Apple, IBM, McKesson, United Health, CVS Health, Microsoft, Intel, GE, and Merck) in the group of very successful companies.  A lot of major businesses (operating in pharmaceuticals, information technology, and consumer products) generate revenue, provide returns for their investors and generate a great deal of value due to investment in intangible assets.  The structure of companies´ assets has been changing since 80th of the 20th century. The share of intangibles in the total assets has increased from 5% in 1978 to the current 75-85 % of all assets in selected companies. According to Zéghal, Maaloul (2011), in 2002, the “total expenditure in intangible capital was larger than the investment in tangible capital” for firms in the United States and Finland. As identified in the PricewaterhouseCoopers’ publication Trends In Corporate Reporting 2004 – Towards VALUEREPORTING, much of the information that relates to value drivers and key intangible assets, and which is critical to a business’s success and sustainability (customers, people, brands and innovation), is not currently being reported in a sufficiently credible and consistent fashion by many companies. There are growing numbers of studies demonstrating the importance of intellectual property in economy. With respect to conclusions of studies carried out on factors of companies´ success, they are moving from tangible to intangible factors due to the realization of the high potential of intangible resources (Hand, 2001, Zigan, Zeglat, 2010). The shift towards consideration of power of IAs and their contribution to companies´ economic growth is attracting attention of researchers (García, Ayuso, 2003,  Vodák, 2011, Volkov, Garanina, 2007, Jerman, Kavčič, Kavčič, 2010, Hussi, Ahonen, 2002, Gerpott, Thomas and Hoffmann, 2008, Boekenstein, 2009).  Also Grüber (2014) concluded that major production inputs do no longer comprise of items, such as property, plant and equipment, but rather of brands, knowledge and other technological innovation and intangible values have continuously become significant value drivers of companies in today’s economy. Despite these facts, financial accounting and reporting still lacks to incorporate and to report such values properly. Academics and practitioners argue that the economic importance of intangible values in industrialized countries has increased significantly during past decades. This phenomenon is mainly due to the notable growth of the tertiary sector, resulting in fundamental changes of the economy: the traditional industrial business model has continuously become less important, as economic wealth creation is more and more based on the exchange and manipulation of invisible or intangible values. The significant items that are key to a business and that drive revenues are brands, copyrights, patents, licenses and the like.   There are some studies concerning the significance of IAs within European companies (Nell, Tettenborn, Rogler, 2013, Jerman, Kavčič, Kavčič, 2010).  Nell, Tettenborn, Rogler (2013) examine both the materiality of intangibles and the related disclosure quality under IFRS in the notes of firms on the German benchmark stock index DAX during the four-year period 2008-2011. The study of Jerman, Kavčič, Kavčič (2010) aims the significance of IAs in transition economies like Croatia, Slovenia, the Czech Republic, Germany and USA. The study is based on data of the period 2004-2008. T


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Pygmalion Syndrome and Misunderstanding the Duality Accounting Concept

Dr. Farrell Gean, Pepperdine University, CA

Dr. Fred Petro, Pepperdine University, CA

Virginia Gean, California Lutheran University, CA



Years ago, the famous physicist, J.L. Synge, commented on the tendency of people to confuse a concept with a something.  He called this confusion the Pygmalion Syndrome.   It is sometimes called reification from the Latin res meaning thing or object.  To reify a concept means to speak of the concept as a physical thing.  This paper has the modest goal of linking this tendency of the human brain to confuse a concept with a something to difficulty in understanding the accounting language.  One of the most important, fundamental concepts underlying financial reporting by accountants is the duality notion.  This is an economic principle that says every business transaction has dual effects on the financial position of an entity. Sometimes one or both effects may be conceptual and not an empirical something such as cash.  Grasping this duality concept is absolutely essential for learning the accounting language. This paper presents a strong argument that the Pygmalion Syndrome is the barrier to cross if accounting is to be learned.  Some empirical evidence gathered from students will be presented to support our philosophical reasoning.  In this information age in which we live, there seems to be an increased tendency for human beings to confuse conceptual models of real things and events with the things and events themselves.  A well-known physicist  chose to call this confusion the Pygmalion Syndrome, after the symptoms of the legendary sculptor of Cyprus who carved a statue of such astonishing realism that it came to life for him and he fell in love with the statue.  A concept is an idea. It is a generalized idea of a class of of objects.  It is a thought; a notion or abstraction of something existing in the real, empirical world.  It is often used to explain something that cannot be directly observed. A conceptual model is often thought of as a simplified way of communicating that which cannot be detected by any of the five senses.  At this point in the paper an excursion into ontology is taken for the purpose of illuminating an understanding of empirical reality as opposed to concepts existing only in the thought world.  This detour into a higher philosophical level is taken because of the revived interest in reality issues within accounting and other social sciences. But more importantly, this seemingly digression will indirectly help provide insight into the primary communication problem addressed in this paper. It does this by clarifying the meaning of real, empirical world as it is used in this research study as opposed to how real world is thought of in certain branches of metaphysics.  Whenever accounting is discussed it often involves dealing with owners’ equity concepts like revenue, income, dividend and retained earnings. The focus in this paper is in what sense do those phenomena that these accounting concepts refer to actually exist in a real world and when are they concepts only. An analysis of the underlying assumptions about the existence of reality that are reflected in accounting concepts is considered outside the scope of this paper and not examined. Instead, the traditional, general idea of objectivity that dominates the thinking in both accounting theory and practice is followed by the authors.  Thus, accounting concepts are interpreted as reflecting the reality that exists somewhere “out there”.  This “out there” is a real external world outside of an individual that can be detected with the 5 senses.  This ontological point of view corresponds to realism in philosophy.  This dominant role of realistic ontology in favor of an idealistic ontology is the view taken in this paper. This realistic ontological view, therefore, rules out the existential view of reality where no external world exists, but what is perceived as an external world is merely an extension or projection of an individual’s thoughts and feelings.  This is inconsistent with the real empirical world we refer to when we contend that assets such as cash, inventory, land, buildings, equipment and so forth are things.  So when reference is made to existing in the real world we are speaking of those things external to ourselves that can be seen, smelled, and kicked.   Accountants function in a world of conceptual models. Accountants speak of revenue, expense, income, and dividends.  All of these are concepts.  A number of years ago, Reed Storey, one of the primary theorists involved with developing the Financial Accounting Standards Board’s ( FASB) conceptual framework, referred to financial reports as “quantitative representations of economic things and events in the real world”.  Other accounting theorists have referred to geographic maps as being analogous to financial reports.  The physicist who originated the term Pygmalion Syndrome claimed that this syndrome is a disease of the mind which blurs the distinction between the real world and the conceptual models employed by humans to communicate complex issues.  Accounting theorists contend that this disease is just as widespread and perhaps more prevalent among accountants than it is among physicists. Loyd Heath claims that this syndrome is insidious in that it begins as a seemingly harmless short-hand way of describing things, but it evolves into much more serious communication problems for those attempting to teach or learn accounting as a discipline.  The writers believe that many problems in communicating with clients, users of financial reports, financial press and other users of accounting information may be caused by the Pygmalion Syndrome.


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ASEAN, the 50 Years Old, Successful Association and Hungary Prospects and Challenges in the Economic Relations, Focusing on Vietnam

Dr. Laszlo Kozar, Professor, Head of Institute of Commerce, Budapest Business School – University of Applied Sciences

Dr. Gyorgy Ivan Neszmelyi, Associate Professor, Institute of Commerce, Budapest Business School – University of Applied Sciences



The economic integration process started fifty years ago among five countries in the Southeast-Asian region. As a result of this, nowadays, the ten members of ASEAN (Association of Southeast Asian Nation) – together – grew to be a new Asian economic power, besides China, Japan, India and South Korea. Beyond the overview of the main steps of this five-decade development, the authors aimed to give an insight to the economic, social and political aspects of the relations between Hungary and ASEAN. The timeliness of the topic can be underlined by the foreign economic strategy “Eastern Opening” proclaimed by the Hungarian Government in 2012. However, the success of this policy has still not been reflected in the trade statistic figures. The integration of the ten Southeast Asian countries develops rapidly, which is coupled by their increasing weight in the world trade. The dynamic economic and social development in the ASEAN region – and in parallel with this the growing demands and purchasing power - may encourage the Hungarian ventures in theory. In practice, however, there are still very few Hungarian entrepreneurs are ready and able to enter the markets of the countries in the region and operate successfully there in long run. Since the political and economic changes, Hungarian foreign trade has become strongly concentrated to the European Union. Due to the geographic distance ASEAN countries cannot be an alternative of the EU market, but in a certain extent they can relieve the one-sided concentration to the EU and may provide additional opportunities for the export of Hungarian goods, services and know-how. The ratio of the ASEAN region within the entire Hungarian foreign trade figures has still been modest moreover for Hungary this region means rather and import source than export market. The presentation is supplemented with a brief case study about Vietnam focusing on how bilateral relations developed and what are the present challenges and possibilities of broadening the economic relation focusing on the field of trade with agricultural goods.  It was just a few months ago when the 50th anniversary of the day was celebrated when - on the 8th August, 1967 - five developing countries of Southeast-Asia (the Philippines, Indonesia, Malaysia, Singapore and Thailand) signed the Bangkok Declaration, which launched a loose alliance of governments – the Association of South-East Asian Nations (ASEAN). The Permanent Secretariat of ASEAN resides in Jakarta, the capital city of Indonesia. Brunei, after having gained her independence, joined the organisation in 1984, Vietnam in 1995 and Laos and Myanmar in 1997 and at last Cambodia joined to the Association in 1999. The declared aims of this regional organisation are the promotion of economic growth and the acceleration of social and cultural development in the region. However, there were also other important political and security considerations for creating ASEAN, which included: a) prevention of political conflicts in the region, which could lead to, or provoke the intervention of an outside power, b) to create a forum for handling disputes between member nations, c) to bring stability to the social and economic systems of the member nations. The member states expressed a keen interest in broadening the forms of cooperation among themselves. In January, 1992 ASEAN announced the future development of AFTA (ASEAN Free Trade Area) for the period 1993 to 2008, with the gradual phasing out of customs restrictions within the Association. In 1995 the deadline for the completion of AFTA was brought forward to 2003. In the course of the half-century history of ASEAN, its members have been among the most spectacularly developing countries in the world. According to competent analysts, the economy has been continuing to grow rapidly in the forthcoming years (see figures of Table 1). The member countries in total represent a population of 622 million people, which - in case of the continuation of the economic growth and increasing incomes - bodes for considerable growth in consumption for the coming decades. According to its population ASEAN is bigger than the European Union or the United States, it is the 3rd largest market in the world, behind only India and China. ASEAN is a fast growing and promising region. Its total trade increased by nearly USD 1 trillion between 2007 and 2014, with intra-ASEAN trade comprising the largest share of ASEAN's total trade by partner. ASEAN attracted USD 136 billion in FDI in 2014, accounting for 11% of global FDI inflows, up from only 5% in 2007. The most recent milestone in the economic integration process of Southeast Asia was formal establishment of the ASEAN Economic Community (AEC) on 31st December 2015 which was built on four interrelated and mutually-reinforcing characteristics: (a) a single market and production base, (b) a highly competitive economic region, (c) a region of equitable economic development, and (d) a region fully integrated into the global economy. ASEAN is nowadays is a highly competitive economic region in the world with a combined GDP of USD 2.6 trillion in 2014, ASEAN economy was 7th largest in the world and the the 3rd largest in Asia. The formal establishment of the AEC in 2015 is not a static end goal, but a dynamic process that requires continuous reinvention of the region to maintain its relevance in an evolving global economy. The agenda “AEC Blueprint 2025” has therefore been adopted to guide ASEAN economic integration from 2016 to 2025 (Fact Sheet on ASEAN Economic Community, 2015). 


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