The Journal of American Business Review, Cambridge

Vol. 4* Number 1 * December 2015

The Library of Congress, Washington, DC   *   ISSN 2167-0803

Online Computer Library Center, OH   *   OCLC: 940146916

National Library of Australia   *   NLA: 49026139

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The Wealth Effects of Stock Certificate Dematerialization

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

Randy Jorgensen, Creighton University, Omaha, NE



We investigate the wealth effect to firms eliminating paper stock certificates in favor of digital certificates.  The move to e-stock certificates is a part of a general movement known as dematerialization.  The transition to digital certificates has been optional for several years although it will likely become mandatory in the United States in the near future. We have two goals in this research.  First, the handling of paper stock certificates and the transition to digital registrations has not been much discussed in the finance literature.  We seek to fill this void.  Second, the motivation for dematerialization is often related to cost savings to the issuing corporation.  If future costs are lower with no impact on business operations or the financial expenses of the firm, then the move should result in increased future cash flow.  This should be a positive net present value decision and thus increase firm value.  In this study we use standard event study methodology to test for significant abnormal returns to investors in companies whose Board of Directors voluntarily decide to go digital with their stock certificates.  We examine the stock returns of 211 firms that switched from paper to digital certificates and find a statistically significant positive impact on share price in the ten days prior to the conversion date.  Our results support the hypothesis is that there is a positive impact on firm value.  Dematerialization is the general term used to describe the transition from a paper-based system to a digital one.  For purposes of this study, we refer to the transition from paper stock certificates to digital registrations as dematerialization.  US corporations have been making this transition for a number of years but few garnered the publicity that surrounded the move by the Walt Disney Company, which announced in October 2013 that it would stop issuing paper stock certificates.  The change was newsworthy to many because the paper stock certificates of Disney had become popular gift items. Disney had encouraged this by creating GiveAShare in 2002, which allowed for the purchase of a framed share of Disney stock to be given as a gift.  The cessation of the paper stock certificates caused a stir in the stock-certificate-gift-giving world, driving sales of the paper Disney certificate up ten-fold in the days following the announcement. Similar moves to digitized registrations by other publicly traded firms have been undertaken without much less fanfare. The act of issuing paper stock certificates is a costly endeavor, especially when compared with digital registrations.  Issuing paper certificates involves the use of specialized paper, secure printing and law firms to oversee the details.  This, of course, oversimplifies the process.  The costs are then increased by the manual handling of the certificates once produced.  Additionally, there are risks involved in the handling of paper certificates.  When Hurricane Sandy rolled through the eastern coast of the United States, trillions of dollars of paper stock certificates were feared ruined when a vault at the Depository Trust & Clearing Corporation was flooded.  When firms choose to transition to digital certificates costs are reduced for the issuing firm and risks are reduced for the stock purchaser. The transition to fully digital stock certificates in the United States has been slow to evolve.  Unlike dematerialization of the US Government’s debt which was achieved several years ago, the public sector’s capital markets have multiple constituents including issuers, transfer agents, service providers, exchanges, investors and regulators to name a few.  Each of these stakeholders has its own ongoing agenda which can compete against the dematerialization of stock certificates and elongates the process.  This is compounded by the preference for the traditionally paper-based certificates of ownership such as what has existed in the United States.  Newer and younger markets are less bound by such tradition and have been much quicker to convert/commence in paperless form.  The DTCC (Depository Trust & Clearing Corporation) states that: “Fortunately, the stakeholders are aligning and progress is being made to move closer to a fully dematerialized US market place.”  In 2008, the US stock exchanges mandated use of the Direct Registration System (which provides for a book-entry alternative) for individual investors to register shares directly on the issuers’ registrar.  At that time, there were only 344 issues that were fully paperless.  As of January 1, 2014 there were 970 issues that do not/no longer offer paper certificates.  By November 1, 2014 this number had grown to 1,075 issues only offering book-entry form, according to Jon Ciciola, Director of Settlement & Asset Services, DTCC New Jersey. DTCC (described more fully below) is spearheading an industry initiative with issuers, transfer agents, professional societies, and exchanges to eliminate certificates.  It expects the stock exchanges to file rule changes with the SEC to mandate Direct Registration/certificate elimination for all newly listed issues, and then for all listed issues sometime in 2015.


Persistence, Resilience, Renewal – A Tale of Three Firms

Dr. David Robinson, RMIT University, Vietnam

Dr. Arthur Morgan, RMIT University, Vietnam

Duc Nhat-Hoang, RMIT University, Vietnam



The purpose of this article is to explore the paradox of how seemingly virtuous coping tools, in particular persistence, resilience, and renewal can mitigate against effective and optimal organizational development. It draws on the concept of workplace pathologies, in particular the mad, bad and sad personality disorders. Three mini cases are used to illustrate the pitfalls of adherence to coping skills and provide a backdrop for discussion on ways to avoid the pathological traps. Business leaders are admonished to create cultures that value persistence and resilience. They are also advised to periodically strive for organisational renewal. But what do these terms really mean? And how, amidst the hustle and bustle of daily crisis management do most firms cope with those imperatives?  This paper explores the theoretical meanings and the practical applications of each of these terms, suggesting ways to avoid the pathologies associated with each and ensure their appropriate place in an evolutionary process of continuous organisational development. Persistence is demonstrated when entrepreneurs choose to pursue opportunity regardless of enticing alternatives (Holland and Shepherd, 2013). This trait can be regarded in two ways: persistence as being staunchly committed to persevere toward a given opportunity, or persistence as dealing with unforeseeable opposing forces (Holland & Shepherd, 2013). It has been shown that entrepreneurs and leaders with a sense of persistency possess a higher possibility of harvesting fruitful results in comparison to entrepreneurs and leaders who lack experience in or do not recognize the essential value of persistency (Gompers, Kovner, Lerner, & Scharfstein, 2010). Persistence, though it is professed to be an organisational virtue, can also be employed to excess, in which case it over-compensates, or covers up, other inefficiencies in the organisational system. Hoang and Gimeno (2010) conceptualise persistence as a doubling and redoubling of effort in spite of negative feedback. This typically occurs in firms that are lodged in a particular values frame. The temptation to resist significant change is fuelled by what Hoang and Gimeno (2010:44) refer to as ‘identity centrality’ i.e. strength of attachment to an idea or course of action correlates with commitment to persist even in adversity. In fact, the very threat of negative feedback, in itself, may evoke vehement persistence.  Resilience is defined as ‘the developable capacity to rebound (or bounce back) from adversity, conflict, failure’ (Luthans, 2002:702; cited in Avey, Luthans and Jensen, 2009). Aspects of organisational development  where resilience is highly valued include, for example, restructuring or downsizing. Resilience demands an openness to new experiences, and a paradoxical mix of emotional stability and flexibility (Avey, Luthans and Jensen, 2009). Since resilience requires a sense of reality and realism, evidence has shown that it is a virtue that can be built and shaped over time. As with persistence, resilience too can be employed to excess. Holland and Shepherd (2013:333) State that resilience requires ‘persistent behaviour under adverse circumstances …. (which) can lead to significant financial and emotional costs if the consequence is the allocation of resources in a fruitless opportunity when it could have been efficiently applied elsewhere”. This typically occurs when a firm’s operational systems are fraught with inconsistency. Renewal (in the organisational sense) is, according to Zhara (1993:321) ‘the redefinition of the business concept, organization, and the introduction of system-wide changes for innovation’. In German SMEs, for example, Schmelter (2010) found the ability to renew is closely linked to creativity. In a strategic sense, Agarwal and Helfat’s (2009: 282) definition includes the ‘process, content, and outcome of refreshment or replacement of attributes of an organisation that have the potential to substantially affect its long-term prospects. These two definitions allude to both systemic and temporal elements of the renewal process. For clarity we define two types of organisational renewal. One is aimed at perfecting current systems, processes, policies and procedures, or in effect ‘doing things right’, and is perhaps the more expedient or incremental approach. The other takes a holistic view of the firm, seeing it as one integrative systemic organism, and strives to ‘do the right things’ over the long term. This may manifest in the company culture as a combination of incremental improvement efforts as well strategic initiatives as pro-active and timely responses to external influences. No-one would argue that renewal is bad, but an over-reliance on renewal can amount to little more than ‘resistance to change’. This occurs when a firm is so intent on renewing existing systems that it neglects to view the bigger picture and focus on systemic renewal. Thus we concur with Agarwal and Helfat (2009: 283) that it is a firm’s ability to embrace ‘discontinuous strategic transformations’ when necessary that sets it apart from the firm that engages in numerous tactical changes but avoids anything that can be regarded as fundamentally paradigm-shifting.  We propose the Values Journey (Robinson, 1998) as a model by which to conceptualize the paradigm shifts and stepwise development of organizations. Three paradigms of development are depicted in the chart (see chart 1: Values Journey), indicating the pre-business (far left, consisting of step 1 – safe-bonding, and step 2 – power-seeking), business paradigm (middle band, consisting of step 3 – duty-compliance, and step 4 – success-striving), and post-holism phase (far right, consisting of step 5 – harmonious, and step 6 – integrative-synergistic).


Bottom of the Pyramid and the Role of the Business Schools

Dr. Satya N. Prattipati, Kania School of Management, University of Scranton, Scranton, PA



It is estimated over 2.5 billion people, accounting for nearly 40 percent of the population, live at the Bottom of the Pyramid (BoP), widely defined as those living on $2 per day or less. The International Finance Corporation estimated the collective purchasing power of the people at the BoP at $5 trillion dollars. There is widespread recognition that the poverty alleviation programs adopted by many governments, international aid organizations, and other philanthropic trusts, did not make any significant dent in global poverty. In recent years many businesses, multinational corporations, and leading thinkers have come to realize that the way to reduce poverty on a very large scale is to harness the power of free enterprise to meet the basic needs of the poor people with quality products at affordable price. Many organizations have initiated several profit oriented projects to lift the people out of poverty. Unfortunately, BoP remains a niche area in the business schools. The strategies used to engage people at the BoP touch upon all the functional areas (like accounting, finance, marketing, supply chains) of the business school curricula. However, none of the BoP issues are included in the core curricula of business schools. The current curricula mainly focus on the issues related to the top-of-the pyramid. The paper strongly that the issues and strategies related the poverty alleviation, are very much relevant to the business students and should be one of the main parts of the curricula in the business schools as opposed to a niche area.  Late Prof C.K. Prahalad was among the pioneers to focus attention on the business opportunities at the bottom of the economic pyramid (BoP). The BoP concept proposes that there is a strong business case associated with the pursuit of the largely untapped purchasing power at the bottom of the world’s economic pyramid. Prahalad and Hart were among the first to suggest that companies can make significant profits and simultaneously help alleviate poverty.  By investing at the bottom of the economic pyramid, private firms could improve the lives of billions of people living in poverty. It is estimated that the 4 billion people at the bottom of the pyramid have a combined income of $5 trillion. Unilever, and Procter & Gamble were one of the first multinational companies to develop affordable for-profit consumer products to the people at the bottom of the pyramid. In recent years, a growing number of large corporations, have started operating in the BoP markets.  For example, in a 2008 report (UNDP, 2008), the UNDP examined 300 cases of private companies operating successfully in the “BoP” space. However, there are also several instances of companies abandoning the initiatives to enter these markets because of poor rates of return. Several strategies to overcome the constraints in low-income markets have been discussed in several papers. Of late, more people and organizations are focusing on the economic development of the people at the BoP.  Unfortunately, the BoP remains a niche area in the business schools. While a number of business schools have introduced special elective courses in the BoP area, none of the BoP issues or topics are included in the core functional area courses. The strategies used to engage the people at the BoP touch upon all the functional areas of the business curriculum from accounting, finance, supply chains, marketing, to strategy. The current curricula mainly focus on the issues related to the top-of-the pyramid. However, there is an overwhelming interest among the students, to develop strategies to empower and enhance the purchasing power of the poor and make a difference. The paper strongly argues to change the overwhelming focus of the business curricula from corporations to “Inclusive Business” models where the people in all the segments of the pyramid are included as stake holders. It advocates why the “markets for the poor” should be one of the main parts of the curricula in the business schools as opposed to a niche area. The paper starts with a high-level overview of the BoP literature. Then, it will propose an action plan for the business schools to integrate the BoP content into the business school programs. Finally, it will map and show how the BoP content can be included in the core courses of the business curriculum.  One of the first papers in this area, “The Fortune at the Bottom of the Pyramid”, was published by C.K. Prahalad and Stuart Hart, in the winter 2002 issue of Strategy & Business journal (Prahalad and Hart, 2002).  This paper brought awareness of the potential economic opportunities lying the bottom of the economic pyramid.  The paper illustrated the BoP strategies followed by multinational companies (MNCs) like Hindustan Lever, and Procter & Gamble.  By entering the BoP markets, the MNCs could become significant players in poverty alleviation. The authors asked the business community to recognize that the BoP poses a fundamentally new question: “How do we marry low cost, good quality, sustainability, and profitability at the same time?”   Al Hammond of World Resource Institute (WRI), and Prahalad published an article titled “Serving the World’s Poor, Profitably” in 2002 (Prahalad, and Hammond, 2002), in Harvard Business Review (HBR). Following the HBR article, Prahalad published a book titled “Fortune at the Bottom of the Pyramid”, (Prahalad, 2004) and Hart published a book, “Capitalism at the Crossroads:, (Hart, 2005). Prahalad’s book described the many stories of the early BoP actors, such as CEMEX and E+Co. considered as prototypical examples of successful BoP cases. In his book, Hart argued, that “environmental and social concerns can be alleviated while spreading prosperity to those at the bottom of the pyramid”. Hart also used real world cases like Grameen Bank to link profits and sustainability. In 2006, the University of Michigan Professor, Aneel Karnani questioned Prahalad’s estimates of the size of the BoP Market on a blog post on (Karnani, 2006). He felt that the estimates of $5 trillion purchasing power were wildly optimistic. Instead, Karnani argued that what poor people really needed was employment not more products. There should be strategies to raise the real income of the poor. This argument was adopted by few other critics of the BoP theory.


Current Developments in Legal Professional Privilege: Perspectives from Australia

Carlo Soliman, BA, LLM, Senior Lawyer and Lecturer TOP Education Institute, New South Wales and Victoria University Sydney, Australia



Legal professional privilege is an important doctrine that preserves the confidentiality between a person and his/her legal advisor as well as communications prepared for the dominant purpose of current or anticipated litigation. In 2007 the Australian Law Reform Commission (ALRC) conducted a landmark review of the doctrine of legal professional privilege with a view to determine whether amendments by way of abrogation or statutory enshrinement were necessary in order for investigative bodies to discharge their duties properly. The ALRC found that legal professional privilege is an important common law right and that its retention should be preserved. Whilst 45 recommendations were made the application of legal professional privilege continues to be predominantly assessed by the courts rather than by specific statutory enactment. This paper provides an overview of the doctrine of legal professional privilege together with some selected cases that detail its ongoing relevance in the commercial world. In the spectre of ever-growing governmental intrusion into the activities of the individual and corporate citizen, the retention of legal professional privilege remains an essential safeguard for the protection of rights and the preservation of a civilised democratic society. Legal professional privilege is an ancient doctrine that dates back to the fifteenth century originating in the English common law. (1) Both under statute and at common law the doctrine protects, from disclosure to third parties, communications between a person and his/her legal advisor, known as advice privilege as well as communications prepared for the dominant purpose of current or anticipated litigation (2) referred to as litigation privilege. Legal professional privilege is not merely a rule of evidence.(3)  It is a substantive doctrine (4) which, at common law, extends to all forms of compulsory interrogation outside court proceedings. The doctrine is for the benefit of the client, unless abrogated by statute. The well established rationale for the doctrine is to promote the public interest and enhance the administration of justice by encouraging clients to make full and frank disclosure to their legal advisors in the process of seeking legal advice. (5) Historically, legal professional privilege has been examined in the context of judicial and quasi-judicial proceedings.(6)  However, the doctrine is equally relevant to non-judicial proceedings,(7) which include those conducted by Commonwealth statutory investigative bodies such as the Australian Competition and Consumer Commission (ACCC), Australian Taxation Office (ATO) and Australian Federal Police (AFP), unless modified or precluded by statute. This paper provides a general overview of the current law in Australia and discusses the wider importance of legal professional privilege to the business community. This is particularly relevant in light of the electronic age, which includes social media such as Facebook and Twitter whereby new forms of communication exist to instantly transmit information. Whilst such technology allows clients to more effectively communicate with their legal advisors it also poses certain risks such as the inadvertent disclosure of sensitive information, which may lead to the loss of a claim to privilege. This in turn can have serious consequences for the outcome of court cases and other investigations.  It is also argued that despite the emergence of technologies that can undermine the protection of legally sensitive information, the advent of world terrorism and the increasing global trend of intrusion into personal liberties by governments, the preservation of the sanctity of the communications between a lawyer and their client must remain a legislative and policy priority. The implications for the business community regarding how legal advice is obtained is also considered in light of the need to strike a proper balance between the protection of rights and the administration of justice, the latter requiring access to relevant information (8) as a matter of public policy. Interestingly, judicial opinion as to the operation of legal professional privilege has changed quite markedly over the last twenty years. For example, in Pyneboard Pty Ltd v Trade Practices Commission (’Pyneboard’) (9) legal professional privilege was ruled not to operate vis-à-vis Section 155(5)(c) of the Trade Practices Act 1974 (Cth) (Act), now known as the Competition and Consumer Act 2010(Cth). In Trade Practices Commission v Ampol Petroleum (Vic) Pty Ltd (10) the Full Federal Court intimated that an examination under Section 155 is outside the ambit of communications which are encompassed within the concept of legal professional privilege. In 2001 the Full Federal Court (11) in Australian Competition and Consumer Commission v Daniels Corporation International Pty Ltd (12) held that Section 155(5)(a) of the Act excluded the doctrine of legal professional privilege. However, on appeal in Daniels Corporation International Pty Ltd and Another v Australian Competition and Consumer Commission (‘Daniels’) (13) the High Court unanimously held that legal professional privilege was not abolished by Section 155 of the Act.  The High Court of Australia’s decision in Daniels (15) reaffirmed the status of legal professional privilege as a cornerstone of the common law and upheld client/lawyer confidentiality except where Parliament has expressly and unambiguously overridden it by statute. The effect of the decision is that individual and corporations may communicate confidentially with their legal advisors in relation to suspected contraventions of the Act for the dominant purpose of seeking or receiving legal advice. Corporations primarily communicate through written documents. Their legal advisors often prepare sensitive legal advice in documentary form which makes the issue of confidentiality particularly relevant. Accordingly, corporations are entitled to refuse to comply with a notice under Section 155 of the Act on the grounds of legal professional privilege. (16) Further, statutes that purport to take away rights must do so by the use of very clear words or by necessary implication. Daniels 917) qualifies and limits the circumstances under which the ACCC can access documents to situations where legal professional privilege is not claimed or if claimed the documents are ruled to be beyond the scope of the privilege. While the ACCC has argued that privilege is often used to cloak contraventions of the Act, (18) the investigative utility of Section 155 remains an important tool in the enforcement functions of the ACCC. (19)


Conditional Risk-return Relationship

Dr. David Morelli, Kent Business School, University of Kent, Canterbury, Kent, UK



This paper examines the risk-return relationship, based upon US data using securities listed on the New York Stock Exchange, adopting a joint conditionality approach.  Autoregressive conditional heteroscedastic models are applied to model time varying conditional variances and covariances which are used to estimated beta.  The methodology of Pettengill, Sundaram and Mathur (1995) is adopted to examine the conditional risk-return relationship.  The results from this paper show a strong positive conditional risk-return relationship when a joint conditionality approach is adopted.  The Capital Asset Pricing Model (CAPM) of Sharpe (1964) and Lintner (1965) is a single factor model, which assumes that the expected return on a security has a positive linear relationship with its systematic risk captured by beta.  Despite encouraging early tests of the unconditional CAPM, such as those performed by Black et al. (1972) and Fama and MacBeth (1973), there have been many since that have questioned its validity.    Such studies include Fama and French (1992) and Davis (1994) on the US markets, Hung et al. (2004), Morelli (2007) on the UK market, Lam (2001) on the Hong Kong market, and Elsas et al. (2003) on the German stock market.  Studies, by Wong et al. (2006),  Wang and Di Iorio (2007a, 2007), Morelli (2012) all on the Chinese stock market failed to find any unconditional relationship between beta and returns. A problem when testing the CAPM is that realized data is used to proxy for expected data. The expectation is that the return on the market will always be greater than the risk free rate given that the CAPM assumes a positive relationship between risk and return.  However the realization is that there will be times that the return on the market will be less than the risk free rate.  There will always be times when the market falls and thus during such periods its return will fall below the risk free rate.  The CAPM, given it is an expectation based model does not allow for this.  Pettengill, Sundaram and Mathur (1995), referred to from now on as Pettengill et al. (1995) recognized this problem and adopted an alternative approach to test the relationship between risk and return.  Pettengill et al. (1995) infer that during upmarkets, namely when the realised return on the market exceeds the risk-free rate, the relationship between beta and return should be positive, and that during down markets, namely when the risk free rate exceeds the retun on the market the relationship should be negative. Thus the relationship is conditional based upon the sign of the realized excess market return. Pettengill et al. (1995) found on examining the US market evidence supporting this Subsequent studies by Hung et al. (2004) and Morelli (2007) on the UK market,  Ho et al. (2006) on the Hong Kong market and Elsas et al. (2003) examining the German stock market, similarly found a significant conditional beta-return relationship.  The role of beta in explaining security returns in the US market is examined in this paper. A joint conditionality is applied in that time varying betas are estimated from changing conditional variances and covariances which are modeled using variations of the family of autoregressive conditional heteroscedastic (ARCH) models first developed by Engle (1982), and the significance of beta is tested conditionally upon the sign of the excess market return. Equation (1) shows the conditional CAPM   where rpt represents the excess return on a portfolio of securities and rMt the excess return on the market portfolio, E(½Ft-1) the expectation conditional upon the information set F available at time t-1 The systematic risk of portfolio p is given by bi, which is given by equation (2): Assuming that an autoregressive process can model the return on a portfolio of securities and the market portfolio, as shown by equations (3) and (4). This autoregressive process can be decomposed into their expected and unexpected component. Given that the expectation part of the sequence, E(ept,eMt½It-1),  represents the conditional covariance between rpt and rMt and E(e2Mt½It-1)  the conditional variance of rMt,  beta can be estimated as follows.  To estimate beta from equation (9) the expectations need to be specified using parametric models.  A simple autoregressive process is applied to represent the sequence of squares and cross products from the return forecast error as obtained from equation (3) and (4).  The components of conditional beta, E(ept,eMt) and E(e2Mt), as shown in equation (9), are represented by variants of ARCH models, including Bollerslev (1986) GARCH (Generalised autoregressive conditional heteroscedasticity) model and Engle and Bollerslev (1986) GARCH-M model (GARCH-in-Mean) which all allow conditional variances and covariances to be time varying.  The use of ARCH processes to model both components of conditional beta, E(eit,eMt) and E(e2Mt), is shown by equations (10) and (11).


An Investigation of the Innovation Performance of Ownership Types in China

Nadine Becker, Jacobs University, Germany

Dr. Angela Munch, National Oceanic and Atmospheric Administration (NOAA), MA



In order to generate a sustainable growth strategy the Chinese government issued the S&T Development Plan in 2006 to transform from a production-driven towards an innovation-oriented economy. In the course of this development plan access to specific resources like financial, physical, human, organizational and technological input factors are granted to certain enterprises operating in China. These firms may be differentiated by ownership types into state-owned (SOE), collective-owned (COE), private-owned (POE), and foreign-owned enterprises (FOE), as well as domestic joint ventures (DJV) and foreign joint ventures (FJV). In this paper a regression analysis based on data from the Chinese National Bureau of Statistics from 2001-2010 is conducted in order to identify the differences of innovation performance among the various ownership types. The newly elected Premier of the People’s Republic of China Li Keqiang has stated at The Annual Meeting of the New Champions 2013 that “China is implementing an innovation-driven development strategy at a faster pace, aggressively promoting technological innovation and integration of science and technology with the economy” (China Daily, 11.09.2013). The status of China as the “world’s factory”, which relies heavily on its low cost input factors and on foreign technology, is perceived by the Chinese government as an unsustainable model to foster long-term growth. Thus, the government has taken action to transform the Chinese economy from the recent production-focused towards an innovation-oriented stage (Mu, Ren, Song, & Chen, 2010). With the proclamation of the current Science and Technology (S&T) Development Plan 2006-2020 (State Council, 2006) the government hopes to build technological capabilities within China. This strategic development concept is primarily focused on improving enterprises’ innovation performance by enabling them to innovate on their own, and hence, to generate homegrown innovative products. In the scope of the S&T Development Plan Chinese authorities issue the target to become a world famous knowledge economy by 2020 and to reduce China’s dependency on foreign research and development by strengthening domestic industries (Gu, Liu, Lundvall, & Schwaag Serger, 2008). This goal has been described by many scholars to create distinctive business conditions in which enterprises operating in China are treated differently with respect to their ownership form (Guan, Yam, Tang, & Lau, 2009; McGregor, 2010). In this regard, the S&T Development Plan is influencing the access to resources for each ownership type (Guan et al., 2009; Ju & Zhao, 2009; Schwaag Serger & Breidne, 2007) which leads to an unequal competitive situation. The resulting institutional advantages or disadvantages for companies operating in China have not been fully investigated yet and are still lacking a thorough theoretical foundation. In this regard the impact of the S&T Development Plan on the innovation performance of each ownership form has to be evaluated and strategic advice to all types of firms on how to position themselves in the Chinese market has to be extracted. Furthermore, the central question to be answered is if innovation performance of enterprises can be influenced by institutional settings such as S&T Development Plan and if the taken measures are leading to the expected results of the government.  Against this background, this paper pursues three goals: (1) this study develops a classification of the diverse ownership structure in China. (2) Based on this classification, a descriptive examination of the institutional settings of each ownership type is achieved. (3) A regression analysis is conducted in order to identify the particular innovation performance of each ownership form from 2001-2010, based on data of the Chinese National Bureau of Statistics.. Thus, this article is introducing an integrated theoretical approach as well as practical innovation performance considerations for each ownership type in China.  The radical enterprise restructuring of China initiated by Deng Xiao Ping’s reforms represents an interesting case to analyze the influence of institutional settings in an economy on the development of enterprises according to their ownership type. The formal laws and regulations issued by the government have changed the Chinese market place in the course of the reform process and allowed new players to emerge on the market. In the first years of the market reformation the main focus was concentrated on the two existing types of legal business entities the Chinese state-owned as well as collective-owned enterprises. State-owned enterprises (SOE) are owned as well as operated by the Chinese national government (Regulation on Legal Enterprises, 2000). In contrast, collective-owned enterprises (COE) refer to companies which means of production are owned collectively (State Council, 2000) and are controlled by local or urban governments (Zhang, Zhang, & Zhao, 2002). During the reform process many small state-operated firms were privatized in order to quickly enhance their efficiency and profitability. Besides transformed state-operated firms, entrepreneurs founded private-owned enterprises (POE) particularly after the law on “Tentative Stipulation on Private Enterprises” was issued in 1988 (Gregory, Tenev, & Wagle, 2000). POEs can be considered as economic units that are owned by private individuals (State Council, 2000). A sub-form of POEs is domestic joint ventures (DJV), which emerge when two private legal entities join forces and found a company together (State Council, 2000). This reemergence of private enterprises was completed when the rule of law and private ownership were officially included in the Chinese constitution in 1999 (Gregory et al., 2000).


Audit Committee Competency and Goal Achievement: Empirical Evidence from Thai-Listed Firms

Sirikwan Junlasri, Mahasarakham Business School, Mahasarakham University, Thailand

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

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



The Thai-Listed Firms will require the establishment of the audit committee. This subcommittee assists the board to practice on issues that may be overlooked and toward the firm's system of good governance, with the aim of enhancing performance to add value to the organization and build credibility with stakeholders and to contribute to the achievement of organizational goals. Thus, the ability of the audit committee is considered very important to the operations under the corporate governance which is achieved. Therefore, this research attempts to integrate the key components of audit committee competency in a new model. The main purpose of this research is to investigate the effects of audit committee competency on goal achievement of Thai-Listed Firms. This research uses stakeholder theory and contingency theory to explain the relationship of the variables. The Thai-Listed Firms were selected as the sample. The questionnaire is used as an instrument for data collection and the audit committee chairman is the key informant. Data were collected from a sample of 128 firms. The regression analysis is a method for testing the hypotheses. The results showed that audit committee competency have strong, positive effects on best accounting practice, internal audit efficiency, business operational transparency and resource utilization effectiveness. Additionally, best accounting practice and internal audit efficiency have strong, positive effect on financial reporting quality. Also, business operational transparency, resource utilization effectiveness have a strong, positive effect on organizational excellence. Moreover, financial reporting quality and organizational excellence have a strong, positive effect on stakeholder credibility and goal achievement. The audit committee competency’s antecedence, executive vision, governance concern and regulation force relate to audit committee competency. Further research, should reflect in-depth interviews for understanding the real benefits in audit committee to create and confirm true construct measurements and all relationships of this model. Furthermore, future research could have a new key informant such as the audit committee or the secretary of the audit committee. The establishment of the audit committee that formed by the demand around the world who wants to have good corporate governance because of which a consequence of the failure of the economic system, and the crisis of financial institutions, which happened in almost every nation of the world (Dellaportas, Leung and Cooper, 2012).  Due to the lack of effective internal controls, recognition system operational risk assessment is not enough, and information and communication systems are unreliable. Governance and debugging are inefficient, operations are not transparent, and inefficiencies in management product leaks and fraud in the organization. Therefore, the bankrupt businesses caused damage to investors and stakeholders, leading to unreliable financial statements and a lack of confidence in the corporate governance of the listed companies (Laura, Emiliano and Manuel, 2012). Which the Sarbanes-Oxley Act 2002 was enacted into law in the United States which reformed disclosures of listed companies which set a high standard and through which now come strict penalties. This law requires the appointment of audit committees that are not part of management, thus causing the system of corporate governance to encourage financial reporting is transparent and provides quality information (Kulzick and Raymond 2004; Naiker, Sharma and Sharma, 2013).  In Thailand, experiencing economic crisis on 1997 by problem partly stems from the problem of corporate governance led to the confidence in financial institutions of the country leading to the overall economy and public interest. This was because of the implementation of the government's faulty policy and lack of good governance. The management was not transparent; as there were conflicts of interest, and executives concealed and misrepresented financial data, thus caused damage to the firm and stakeholders. The Stock Exchange of Thailand (SET) and The Securities and Exchange Commission (SEC) thereby accelerated the recovery process to regulate and voluntarily form best practices to oversee and monitor the operation of the Thai-Listed firms. They detected, both from internal and external sources, the firms that achieved reliability and met the standards using a correct approach. In 1998, The SET announced the qualifications and operation scope of audit committees. Those standards required that a listed firm must have an audit committee in order to act under the SET or SEC. The audit committee is to help the committee to perform on issues that may be overlooked and for the tradeoffs in the performance of management. Best practice guidelines for the audit committee are prepared to strengthen understanding about the duties of the audit committee and coordinate between the audit committee, internal auditors, and external auditors to ensure that performance is smooth and efficient (Mohamad, Rohami and Wan-Hussin, 2010). These led to reliable financial reporting, quality reports and added value for the organization (Afify, 2009). They create credibility for stakeholders and contribute to the goals achievement (Sharma and Iselin, 2012). Then, the role of the audit committee in improving the quality of information flowing through to the stakeholder influence audit committees on a firm’s choice of accounting policies, levels of disclosure, and devotion to professional and regulatory standards have an impact on reporting quality (Dellaportas, Leungand and Cooper, 2012). However, the roles and responsibilities of the audit committee are sometimes confusing or interfere with other agencies or other members of the firm as well. This is because the charter of the audit committee usually requires that the audit committee shall have other duties as assigned. In addition, the audit committee has an independent director with terms or conditions affecting the independence of independent directors for several reasons such as shareholder conditions, the competitors, suppliers, employees or the firm’s professional services etc. Terms or conditions will allow the candidates to have a position on the audit committee, and have independent duties and decisions to fully benefit the firm. However, it can produce a person with knowledge of the conditions and limits so as to not be appointed as a director in the audit committee. This is because it also requires that at least one member of the audit committee must have knowledge or experience in accounting, finances or internal controls (DeZoort and Salterio, 2001).The candidates for a position on the audit committee should be chosen carefully because the firm’s audit committees create a positive impact on the firm. However, if the audit committee is ineffective, it may produce damage to the firm as well. Also, the additional cost to the firm is considered not worth it.


The Relation Between Lessons Learned and the Development of Intelligence Culture in an Organization

Dr. Rimvydas Skyrius, University of Vilnius, Lithuania

Saulius Simkonis, University of Vilnius, Lithuania

Svetlana Nemitko, University of Vilnius, Lithuania



The continuing development of the business intelligence field brings significant innovations in the technology; at the same time, controversies keep coming up in handling expectations and delivering value from investments in BI systems. One of the emerging aspects in the field is the need for the development of BI culture, acting as a catalyst for creating synergy from often-scattered BI activities in an organization. The availability of intelligence information and accumulated experience to all participants of BI process, often hindered by functional and departmental boundaries, is one of the principal obstacles for creating BI culture. The goal of this paper is to define the most important types of such obstacles by using the results of performed research. The importance of accumulated experience, or lessons learned in BI activities and decision making is rather obvious; on the other hand, the performed research has discovered several types of problems in organizing, managing and use of intelligence information. The authors conclude that radical motivational approaches are required to support the common use of intelligence information and creation of intelligence culture in an organization in general.  The field of business intelligence (BI) has experienced dynamic growth over the last two decades. This period is rather characteristic of significant innovations in BI technology; on the other hand, huge expectations of insights and benefits driven by BI innovations have not exactly been justified. Looking back at the experience in using BI systems and applications, it can be noted that academic and professional sources have given significant attention to the problems and failures in implementing BI. Among the reasons for BI problems or failures, technological factors are far outweighed by managerial and human factors (Moss, Atre 2003; Stangarone 2014).  Lack of appropriate organizational culture has been often indicated as one of the principal factors, and one of the emerging aspects in the field is the need for the development of BI culture, acting as a catalyst for creating synergy from often-scattered or rigidly centralized BI activities in an organization. The availability of intelligence information and accumulated experience – gained insights, discovered important facts, directed collections of data to all participants of BI process, often hindered by functional and departmental boundaries and the resulting isolated insights, is one of the principal obstacles for creating BI culture. The research question raised in this paper can be formulated as follows: if there’s a value creating potential in BI, based on access and use of intelligence information and experience as an important part of intelligence culture, what measures are possible to unlock this potential? Put differently, the research issue is to determine what obstacles for unlocking this potential exist, and what are the options to overcome them. A research, based on interviews with project managers in IT field, has been performed to gain insights into the problem.  In a wide definition, the role of BI can be defined as to inform, or make stakeholders informed – know what’s going on against a sufficiently wide context. Among other activities, BI collects and uses experience as points of reference, and all BI tools are based on some experience. Factual experience as well as procedural experience are important components of BI competence, supporting such important features as avoidance of previous mistakes, cost awareness, evaluation of previous decisions and so on. Regarding experience, the term “lessons learned”, or LL, is widely used to define the content of managing experience, so for the purposes of this paper both terms will be used interchangeably. As it has been outlined in (Simkonis, Skyrius, 2013), different authors assign different meaning to the term “lessons learned”; however, the following common points can be concluded from different sources: 1. Activity of some kind, whether a success or a failure, produces valuable lessons. 2. These lessons have to be interpreted and agreed upon. 3. The explicit materials regarding Lessons Learned have to be recorded and preserved in some kind of a specific information system.  4. This information about Lessons Learned should be made available to all parties concerned. The same source (Simkonis, Skyrius, 2013) notes that “the fact of having an experience recorded and made available to others does not necessarily imply that lessons have actually been learned, or this experience has been applied”. It has also been shown that in number of cases availability of LL information did not lead to an efficient use of it. In order to understand better the issues related with experience management, it is important to understand how experience use and learning is related to the business intelligence cycle. The process of learning lessons can be defined as part of the business intelligence cycle, which, according to Vuori (Vuori 2006), includes the following steps (Figure 1). The process of learning lessons is most likely to be attributed to step 6 – “Utilization and feedback”, although experience from previous activities is utilized at all steps from redefining information needs to learning how to have a better way of learning lessons. We also have to note that steps 5 – “Dissemination” and 6 – “Utilization and feedback” assume a presence of organizational culture that supports this part of information processes and is known as intelligence culture. The lesson learning process itself can be defined as having a cyclical nature (Milton 2009), where the typical steps would be: reflection on new experience; analysis – why this experience is considered being new; abstraction – what are the key issues to learn; action, if necessary; return to the first step – ready to accept new experience.  Although the available research on LL covers many varied issues, often this variety of LL issues falls between technology-centered and human-centered approaches as a reflection of attempts to develop an IT-based system for accumulating and managing LLs. As well, the analysis of research work in the area has shown that the issues around LL may be grouped into several groups; few of the more evident groups are discussed below. Many sources stress the tradeoff along the dimension of formal versus informal approach to managing LL. On one hand, the need to assign formal structures to the body of experience in order to utilize the potential of contemporary information technologies to efficiently manage it assumes the creation of databases, document bases or other types of repositories. However, the loss of richness of experience information as a result of structurization calls for human-based approaches, where human networks and circles are the principal vehicles of supporting the creation and use of LL.


Brand Loyalty and Brand Trust: A Case Study on Consumer Preferences

Dr. Saleh Saad Alqahtani, King Saud University, KSA

Dr. Showkat Hussain Gani, King Saud University, KSA



To craft brand loyalty it is fairly significant for companies to recognize how consumers decide among substitute brands and what stimulates them towards a specific brand. The idea of the current study is to discover the influence of trust of consumer and their preferences. Encapsulating pertinent methodical writings and scholastic literature on brand trust, it was originated that there is a necessity to demeanor research which will be committed to the consumer trust in the international brands. Till now there is need of research in this domain of trust in the framework of international brands and this will be research based in the methodically way which will grate beam in the present field but novel manner of conduct of instance .While many researches converged on consumer-based paradigms, only some investigators analyzed the impact of distribution strength on brand loyalty. On methodical terms we use proposition in order to have pertinent outcomes from the consumers‟ perception. Nevertheless, in this research study technique has been implemented, aspects that have an effect in the international brand trust were measured. The outcomes will have constructive influence in the discipline of branding, correspondingly in the domain of international brand trust. In total, 262 questionnaire answers were used from the city of Riyadh, Saudi Arabia, to pragmatically experiment the consumer trust for international brands. This research established that the brand trust has an important impact in the customer loyalty. Further, brand trust has a constructive influence on the consumer predilection.  Branding, the key hub of at present marketing bustles, is the most significant instruments for differentiation that a corporate can utilize. Thus, corporates necessitate differentiating as a brand and obtaining the brand loyalty of customers. Customers’ contentment after buying is the most significant aspect for re- buying the same product or service. The re-buying activity of customers is an indication of loyalty. Nevertheless, customers’ loyalty can differ according to product groups. In the intervening time, various causes can be effectual in the creation of brand loyalty. In the literature, brand loyalty has been draw near typically as “behavioral and attitudinal” brand loyalty (East and Sinclair, 2000); though, approaching brand loyalty only in the framework of these two measurements is not extremely consistent. To examine brand loyalty more consistently, it has to be examined in multi-dimensions (Oliver, 1999). In this consideration, multi-dimensional brand loyalty models can be more instructive for investigators. The brand loyalty model extended by Oliver (1999) comprises four basic brand loyalty phases. These are cognitive, affective, conative, and action (behavioral) phases. As per Oliver (1997), brand loyalty phases indicate the learning process that highlights. Fitzell (1998), Reynolds and Beatty (1999), Sivadas and Baker-Prewitt (2000), Vasquez-Parraga and Alonso ( 2000) Zamora et al (2004), Bravo et al (2005) and Torres-Moraga et al (2008) theoretical and empirical studies have shown that satisfaction of consumer is one of the loyalty enhancing factors. The companies market success depends on being able to satisfy,  retain and attract customers. This requires an understanding of what factors affect consumer’s satisfaction with a service or product and what determines their decision to use a service or purchase a product and their loyalty to the company. It should also be noted that Torres-Moraga et al (2008) and other scientists believe that the brand has an influence/impact on customer satisfaction. Fundamentally, it can be specified that the impact on customer satisfaction of brand factors in setting loyalty is becoming a significant marketing aspect of the investigation. A loyal customer of the firm is extremely imperative for several reasons. First of all, it is often cheaper to retain or maintain a loyal customer than to find a new one. Secondly, it is easier to retain or maintain a loyal consumer. In addition, a loyal consumer’s feedback is often positive; it means positive “mouth-to-mouth” communication. Loyalty benefits are constantly rising and growing. Customers brand loyalty influence marketing actions and satisfaction of consumers’ is also important factor. Among the modifications that corporate make as they advance toward globalization is a sway in marketing eminence from product brands to corporate branding (e.g.Aaker, 1996; Aaker and Joachimsthaler, 2000; Balmer, 1995, 2001a; de Chernatony, 1999; Dowling, 2001, 1993; Harris and de Chernatony, 2001; Hatch and Schultz, 2001, Ind, 1997; Kapferer, 1992; Keller, 2000a, b; Knox et al., 2000; Olins, 2000; Schmitt and Simonsen, 1997). This is typically assigned to the complexities of sustaining probable product differentiation in the face of simulation and normalization of products and services, and the disintegration of conventional market segments that comes about as customers become much complicated and markets more intricate. In an epoch when corporates can no longer stand their strategy on a conventional market or a secure favored product range, the basic norms for opposition change. Differentiation needs positioning, not products, but the entire corporation. Consequently, the values and emotions represented by the organization form main constituents of differentiation strategies, and the corporation itself moves focal point.  Defining the term of” BRAND”, each expert comes up with his or her own definition, or nuance to the definition about the brand. As indicated in Table (1a). In recent times, the rising of customer’s consciousness has made customer’s choose to purchase their familiar and favorable brand. Consequently, if businesses want to overthrow their competitors, they have to make customer’s love to buy their brands and products. Macdonald and Sharp (2000) mentioned that even though customer’s familiarize and are willing to purchase a product, awareness of brand is still an important factor to influence purchase decisions. When customers want to buy a product, and a brand name can come to customer’s mind at once, it reflects that product has higher brand awareness in the market. Customer’s purchase decision can be influenced if a product has higher brand awareness (Dodds, Monroe, & Grewal, 1991; Grewal, Monroe & Krishnan, 1998). This describes why a product with higher brand awareness will have higher share in market and better quality evaluation. Moreover, while customer’s select a product, they care about brand awareness and perceived quality.


Technology-Based Audit Competency and Audit Outcome: An Empirical Investigation of Certified Public Accountants (CPAs) in Thailand

Wilaiporn Hongkhuntod, Mahasarakham Business School, Mahasarakham University, Thailand

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

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



The development of technology causes changes in business processes which has an effect on the accounting and audit process. The ability of the auditor to use of technology is to play a role in the audit. Therefore, technology-based audit competency is probably the behavior of the auditor that may affect performance auditing increased.The objective of this research is to empirically investigate the relationships between technology-based audit competency and audit outcome. In addition, this research tests the impact of four antecedents (proactive audit vision, technology knowledge, audit experience, and professional market force) on technology-based audit competency. The conceptual model is proposed by drawing on the resource–based view (RBV) of the firm theory and cognitive theory The Certified Public Accountants (CPAs) in Thailand were selected as the sample. A questionnaire is used as the instrument for data collection. The data were collected from a sample of 227 auditors. The results indicate that technology-based audit competency (such as audit software, computerized audit, and IT-based audit reporting) has an effect on technology-based audit competency consequence, Moreover, technology knowledge, proactive audit vision and professional market force are, act as the antecedents of technology-based audit competency. This research provides the directions and suggestions for auditors to identify and justify key components of technology-based audit competency. Therefore, the auditors who are responsible should be concerned with technology-based audit competency. Furthermore, auditors should be promoting technology-based audit competency which provides audit outcome. The further research could be conducted on different samples and on a larger scale to widen the generalizability of its findings. In the era of the organizations needs a sustainable competitive advantage in the global economic system. Firms need the reliable financial information which they passed the quality audit process by the auditor who has the knowledge and ability to perform the audit work (IAESB, 2010). Similarly, the active duty effectively of the professional auditor has influenced public interest (El-Masry and Reck, 2008), which many existed firms have continued to expand its operations and change rapidly especially technological and business environment change. Those changes and requirements have the impact of the competition in the audit market.  Consequently, the audit market becomes more competitive and the auditor has aggressive respects to enhance development of audit service (Hezri and Dovers, 2006; Mayhew, Schatzberg and Sevick, 2001). The auditor has faced the expectations from clients and other stakeholders about the necessary competence to adequately to the audit quality and response to the clients and employers need. Thus, the competence of the auditor has more importance in the audit profession. The competence of auditor as a condition that has been encouraged to develop in professional audit standard, especially The International Education Accounting Standard (IESs). The purpose of IESs was to ensure high quality performance by developing the specific professional knowledge, skills, values, ethics, attitudes, providing continuous improvement, and promoting lifelong learning of professional accountants (IAESB, 2010; IFAC, 2003). The responsibility of individual professional accountants is to develop and maintain professional competence necessary to provide high quality services. However, IES focuses on building and promote the professional accountant has competence to generate benefit to profession and social. Especially, IES 8 states that the competence requirements for audit professionals which the aim of the projects as “to ensure the professional accountants acquire and maintain the specific capabilities required to work as competent audit professionals” (IAESB, 2010 p.74). This standard also discusses the uses appropriate forms of technology and complies with all relevant technical standards. The regulators and professional organization has an attempt to improve standards of financial reporting to be accuracy, transparency, and certified by an external auditor who has independent such as the requirements of the Sarbanes-Oxley act of 2002 (Brown, Wong and Baldwing, 2007). The auditor must comply with the code of ethics accounting profession, especially auditors have both knowledge and ability accordance with professional standards, including professional expertise and experience sufficient to succeed perform audit work. The professional accounting standards is issued the framework that its focus on developing the knowledge and ability of the accounting profession  by they must be continuously learning about accounting, auditing, technology, and law in many hours per year for the development of higher competence of professional accounting. Similarly, professional organization has believed and expected that the higher audit competency influence the gains greater development of auditor’s performance. Meanwhile, International Federation of Accountants (IFAC) defines as the competency that the ability of the auditor who performs the audit task to achieve their audit objective (IFAC, 1998). In addition, the auditors who need to high audit performance, which they should be determining the best audit practice of learning, search, and develop the innovation or technology for audit tools and techniques to create new audit methods to achieve their audit task for quality, efficient, and effective.  In the previous research, the competency of auditor has influenced the greater audit outcome. The audit outcome refers to output of audit process that has the advantage to audit work such as effective audit judgment, efficient audit practice, audit efficiency, audit effectiveness, audit quality, audit performance, audit reputation, and audit success. The research of audit competency, auditor has a positive influence on effective audit judgment and efficient audit practice, which this effective and efficient have an important positive impact on audit performance (Uachanachit, Ussahawanitchakit and Pratoom, 2012). Furthermore, the auditor who has the dynamic audit competency has audit efficiency and audit effectiveness increased. Meanwhile, the audit market competition and audit experience led to dynamic audit competency (Musig and Ussahawanitchaikit, 2011). The ability of auditor to use standard, knowledge and skill of audit techniques, client relationships, environmental audit change, and dynamic audit competency that these groups of profession competency which the investigated in the prior search (Demirguc-Kunt, Beck and Honohan, 2008; Dittenhofer, 1994; Hilton and Souhgate, 2007; Niemann-Struweg and Meintjes, 2008). Thus, the competencies are related to audit outcomes which the prior research shows the audit performance as audit efficiency, audit quality, audit effectiveness, audit reputation, and audit success. Likewise, the competencies of the auditor may need to develop in accordance with the requirements of professional organizations, especially the skills and competencies are related to information technology (Chaveerug, 2011).


Analysis of Cultural Tourists’ Motive and Loyalty to Traveling Destinations; The Case Study of a Literature Museum

Dr. Cheng-Te Lin, Department of International Business Administration, Kang Ning University, Tainan

Dr. Chin-Wei Huang, Department of Tourism & Hospitality Management, Kainan University, Taoyuan

Yi-Tsun Ho, Graduate School of Business & Operations Management, Chang Jung Christian University, Tainan

Dr. Chen-Hsien Lin, Department of Hotel and M.I.C.E Management, Overseas Chinese University, Taichung



This study focuses on (a) understanding the characteristics that influence motivation to visit, experience, and loyalty; (b) discovering relationships among motivation to visit, experience, and loyalty; and (c) studying the degree of effectiveness between experience and loyalty.  The researchers developed and administered a survey based on the literature review and divided into four parts: (a) motivation, (b) experience, (c) loyalty and (d) demographics.  The section on motivation covered four dimensions: knowledge, exhibitions, relaxation, and interpersonal relationships.  While developing the survey, the researchers used the basic aspects of experience noted in the literature: sensing, feeling, thinking, acting, and relating. Descriptive analysis, factor analysis, t-test, and one-way ANOVA were used to analyze the data. Based on the analysis, the researchers offer three suggestions to the museum and the local government.  First, the museum and local government should sponsor more family activities, events, and exhibitions to satisfy visitor needs and to stimulate motivation to visit.  Second, the museum personnel must pay attention to and serve the major target group—students.  Third, the atmosphere and service at the museum influence visitor experiences of feeling and sensing, which connect with loyalty; therefore, regularly remodeling and staff training become necessities. Cultural tourism has become a new style of tourism recently. Culture represents an intangible asset, which could be used to create tourism products and generate symbolic value for tourist destinations (Hennessey, et al., 2014). The market of cultural tourism is speedily growing, because demand is driven by visitors, who increasingly view tourism with intellectual curiosity and look for inspiration, investigation, and involvement across their journeys (Middleton and Clark, 2001). Moreover, rising of cultural tourism is able to boost regional imagination and attractiveness for a tourist destination (Carmichael, 2002).  Numerous researchers (Cohen, 1972; Gnoth 1997; Jang &Wu, 2006; Pearce & Caltabiano, 1983) have investigated travel motivation from perspectives held in various fields: psychology, sociology, and anthropology.  The five classical stages of Maslow’s motivation theory have frequently appeared in the literature, and Pearce (1982) transformed Maslow’s theory into a tourism motivation model.  The literature indicated that tourist motivation depends on the satisfaction of psychological needs, including desire, socialization, expectation, and learning, among others.  Tourist motivation derives from push and pull, two dimensions studied by researchers (Uysal & Hagan, 1993; Uysal & Jurowski, 1994; Yuan & McDonald, 1990) and widely understood as dependent on internal and external factors.  The push factor focuses on the intangible or intrinsic desires of the individual; the pull factor relates to the degree to which the attractiveness of the destination benefits the individual (Baloglu & Uysal, 1996; Jang & Cai, 2002; Uysal & Juronski, 1994).  The products of cultural tourism include historical architectures, museums, monuments, and theatres (Bordoni, 2011; Cecil et al., 2008). Museums can be regarded as the representative product of cultural tourism which mostly characterizes as a nonprofit organization. The main contributions of museums includes collecting, preserving, and interpreting cultural heritages, such as artwork, antiquity, folklore artistry, artifact, historical object, etc. In a broad definition, museums can be categorized into types of fine art, historical, scientific, biological, ancient objects, etc (Falk and Dierking, 2000). In addition to preservation cultural heritages, museums also offer recreational places for communities and residents.  The Taiwanese government has been acutely aware of the importance of cultural tourism and it started to increase investment in the development of cultural tourism. Over the years, the development has been planed in the projects of national development. In the 2002 National Development Plan, the prospects for developing and promoting cultural tourism industries were factored into the important points. Nevertheless, Taiwan, which is a small and young island nation, has no a rich source for historical destinations. The cultural tourism developing must therefore rely on the preservation of existing cultural heritages and the promotion of its ethnic history and diversity to cultivate tourism. Holding and sponsoring native cultural activities and exhibitions, such as traditional craft making, folk art performance, visual art design, religious activity, and film festivals, are recommended as an effective strategy to promote cultural tourism and attract more tourists.  The museums in Taiwan mostly belong to the type of antiquities exhibition before 1950. In the period of 1950 to 1970, various styles of museums, such as historical, art, and biological, were continually established. After 1980, scientific exhibitions became a trend in museums. In the post decade, native cultures got more attentions form cultural preservers, consequently, the native cultures, such as local drama, music, folklore craft, and local literature, were used to be the main subjects in many new museums. Following the prevalence of native cultures, many cultural visitors are more interested in finding knowledge and experiences form the tours of local cultural museums.   The type of literature museums, in which the exhibitions consist of history of literature development, writers’ stories and relics, local literary works, penmanship works, etc., is seldom in Taiwan. The National Museum of Taiwan Literature, which opened in October 2003, located in a historic architecture in Tainan City. The subject focused on to introduce local literature of the 3 main races, including Taiwanese, Hakka and, aboriginal, in Taiwan. In addition to tangible exhibitions, the museum further provide intangible exhibitions, such as speeches, concerts, and activities, to educate young generation the importance of local literature.  Experience involves individual perceptions, interests, or inner feelings about special circumstances (Woodruff, 1983); and in the marketplace, customer experiences are key concepts in marketing: “Experiences occur when consumers search for products, when they shop for them and receive service, and when they consume them” (Brakus, Schmitt, & Zarantonello, 2009, p. 52).  Experience marketing, in which customer experience is viewed as strategic experiential modules (SEMS), targets five types of customer experience: sensing, feeling, thinking, acting, and relating (Schmitt, 1999).  Brand loyalty entails the degree to which consumers continue to buy products or avail themselves of services offered by one particular brand.  A popular topic in the contemporary tourism sector is cultural tourism, and museums represent one of its most important segments (Hsieh, 2010).  Museum branding strategy consists of two levels: (a) the goals to be accomplished and (b) achieving visibility.


Management Accounting Responsibility and Firm Value: Evidence from Exporting Furniture Businesses in Thailand

Wareewan Charoenroop, Mahasarakham Business School, Mahasarakham University, Thailand

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

Dr. Suparak Janjarasjit, Mahasarakham Business School, Mahasarakham University, Thailand



This study investigates the effects of management accounting responsibility on firm value via the management accounting consequences, and investigates the impact of antecedents on management accounting responsibility of exporting furniture businesses in Thailand. The stewardship theory and contingency theory are used to explain the relationship of the variables in this study. A questionnaire is used as the instrument for data collection from accounting executives and accounting managers of each firm which are the key informants and, regression analysis is employed to examine all hypotheses of this study. The data are collected from the sample of 151 exporting furniture businesses in Thailand. The results indicate that some dimensions of management accounting responsibility influence information reliability, corporate reputation, stakeholder credibility, business competitiveness, and firm value. And, it is noteworthy that two of the dimensions of management accounting responsibility are budgetary preparation trustworthiness and environmental management accountability which have significant positive effects on information reliability, corporate reputation, stakeholder credibility, business competitiveness, and firm value. The results also show that information reliability, corporate reputation, stakeholder credibility, and business competitiveness have an effect on firm value. Furthermore, the antecedents of this study have significant positive effects on each dimension of management accounting responsibility. Theoretical and managerial contributions are explicitly provided. The conclusion, limitations and directions for future research are also included. At present, the increased competition resulted in the operations, whether a business of any size would need to create a way or ways to survive in the business, if a business is stagnant,  lack of development or lack of responsibility in the operation are likely to be out of competition (Messner, 2009). Moreover, the past management accounting literature indicates that economic pressures affect the effective implementation of management accounting (Hussain and Gunasekaran, 2002), and as a result, organizations need to perform their responsibilities. In addition, Jinga et al. (2010) find that the most common reasons for a weak implementation of management accounting within an organization is the lack of responsibility of the person processing the data. From such reason, an organization is forced to invest in more effective management accounting implementation and have more responsibility for the operation. The responsibility is the onus from the duties of everyone in the organization that performs at their full capability to achieve the goals. Management accounting is very important in the operation (Ahid and Augustine, 2012; Gong and Tse, 2009). The purpose of management accounting is to fulfill the demand of management using the information to make a decision, operate plan, and control (Pizzini, 2006; Cardinaels, Roodhft, and Warlop, 2004; Covaleski et al., 2003; Chang, Yen, and Duh, 2002). However, management accounting has no exact format but depends on the appropriateness of use, and it should contain accurate information for use in planning, controlling and timely decision- making (Talha, Raja, and Seetharaman, 2010). Thus, it is seen that the informal form makes practitioners operate at full capacity according to the functions responsible. Moreover, management accounting is an executive tool that helps in managing organizations to make the staff understand and collaborate in order to achieve goals. In addition, it is also a tool to help prevent, control, or monitor the performance of management so that the executive is operating at full capacity and is transparent. From the reasons above, it can be seen that the responsibility for the operation and management accounting are critical to the success of the business to add value to it. Therefore this research integrates accountability and managerial accounting into management accounting responsibility. This leads to the motivation for this research, which is to increase understanding of management accounting responsibility. In this study, management accounting responsibility is defined as the preparation and presentation of relevant information for the decisions-making of executive by recognizing cost management, budgetary preparation, performance evaluation, environmental management, quality control, and strategy linkage that are accurate, complete, timely, and verifiable. Therefore, the main objective of this research is to investigate the effects of management accounting responsibility on firm value via the management accounting consequences, and investigate the impact of antecedents on management accounting responsibility of exporting furniture businesses in Thailand. The key question of this research is, “How does management accounting responsibility affect firm value?” The remainder of this paper is organized as follows. The second section describes the relevant literature and the theoretical framework is reviewed to describe the conceptual model and develop the related hypotheses for testing. The third section presents the research methods including the sample selection, data collection procedure, measurements, statistics, and equations to test the hypotheses are provided. The fourth section shows the empirical results and discussion are demonstrated. The fifth section describes contributions, limitations and future directions for research. The last section is the conclusion of this study. The conceptual model is presented in Figure 1. It shows the relationships among each dimension of management accounting responsibility (cost management concern, budgetary preparation trustworthiness, performance evaluation transparency, environmental management accountability, quality control concentration, and strategy linkage obligation), information reliability, corporate reputation, stakeholder credibility, business competitiveness and firm value. Furthermore, the association among antecedent of management accounting responsibility and each dimension of management accounting responsibility is tested. Moreover, the stewardship theory and contingency theory are used to explain the framework relationship.


The Effects of Board and Shareholders Structure and Earnings Quality on Security Returns of Listed Companies in the Stock Exchange of Thailand

Dr. Nantana Jaengsawang, Rajabhat Thepsatri University, Thailand

Dr. Kanibhatti Nitirojntanad, Chulalongkorn University, Thailand



The purpose of this study is to analyze the effects of board and shareholders structure and earnings quality on the security returns of listed companies in the Stock Exchange of Thailand.  The study used secondary data of listed companies in the Stock Exchange of Thailand in all industrial groups during the year 2007 to 2011 excluding companies in the market for alternative investment, business financial group, as well as the rehabilitation companies.  The data was collected from 339 listed companies which were analyzed using multiple regression analysis.  The results reveal that the board and shareholders structure including percentage of free float on total shareholders, percentage of directors in board meeting, percentage of independent directors, and percentage of financial or accounting expertise of directors in audit committee have positive relationship to the security returns. The operating cash flows on total assets is the earnings quality variable which is found positively related to security returns. The results of this study suggest that board and shareholders structure and earnings quality have significant effects on the security returns in the stock exchange of Thailand.  The results indicate that the information concerning corporate governance disclosed in the stock market and earnings quality of the financial reports are value relevant and useful for investor decision making.  The purpose of this study is to analyze the effects of board and shareholders structure and earnings quality on the security returns of listed companies in the Stock Exchange of Thailand.  The study used secondary data of listed companies in the Stock Exchange of Thailand in all industrial groups during the year 2007 to 2011 excluding companies in the market for alternative investment, business financial group, as well as the rehabilitation companies.  The data was collected from 339 listed companies which were analyzed using multiple regression analysis.  The results reveal that the board and shareholders structure including percentage of free float on total shareholders, percentage of directors in board meeting, percentage of independent directors, and percentage of financial or accounting expertise of directors in audit committee have positive relationship to the security returns. The operating cash flows on total assets is the earnings quality variable which is found positively related to security returns. The results of this study suggest that board and shareholders structure and earnings quality have significant effects on the security returns in the stock exchange of Thailand.  The results indicate that the information concerning corporate governance disclosed in the stock market and earnings quality of the financial reports are value relevant and useful for investor decision making.  Research concerning value relevance of accounting information such as earnings and financial reports have been subjected to considerable empirical analysis. Over the past few decades, the value relevance of earnings and book value appears to have increased (Collins, Maydew & Weiss, 1997).  Empirical market-based accounting research seeks evidence of the value relevance of earnings and financial reports by analysis of the relationship between these data and various market variables such as security price and returns. Literature indicates the importance of good corporate governance in enhancing quality of financial reports and firm performance. Gompers, Ishii & Metrick (2003) found that good corporate governance increases value and profitability of the firm.  Claessen (2002) found that corporate governance benefits firms through greater access to financing, lower cost of capital, better performance and more favorable treatment of all stakeholders.  Quality of earnings has also played an important role on investor decision making. Mehri, (2011); Schipper & Vincent (2003); Sivaramakrishnan and Yu (2008) and Shiri, (2012) suggested that the earnings quality tends to increase the quality of financial reports. This study combines stream of research on value relevance of earnings quality and corporate governance as proxied by board and shareholders structure on security returns.  The purpose of this study is to analyze the effects of board and shareholders structure and earnings quality on the security returns of listed companies in the Stock Exchange of Thailand (SET). In this study, board and shareholders structure is measured by percentage of free float and board composition including, percentage of independent directors, percentage of financial or accounting expertise of directors in audit committee, percentage of directors in board meeting, and board size.  Earnings quality is measured by coefficient of variation of net profit, the ratio of net profit on total revenue, operating cash index, and operating cash flows on total assets.  Board and shareholders structure has been considered as one of an important part of corporate governance. The main objective of corporate governance is to encourage accountability, transparency, fairness, disclosure and responsibility which are core values for the success of the organization. Yasser, Entebang and Mansor, (2011) defined corporate governance as “the mode through which entities are managed and governed”. Corporate governance attempts to relate the way in which financial resources available to an organization are used to achieve the overall objectives of an organization. According to Gulzar and Wang, (2010) good corporate governance is very important for the continuity and sustainability of the businesses that maintain economic growth. Besides the board of directors, more non-executive and independent directors, board committees, bylaws and company codes should be introduced in a company depending on the set of rules and regulations in each country which may take the form of laws, as guidelines or social norms. Corporate governance aims to ensure transparency to satisfy different stakeholders such as suppliers, customers, and creditors. Corporate Governance lays down an outline for creating long-term trust between company and its stakeholders (Samontaray, 2010). Shaheen and Nishat, (2005) claimed that poorly governed firms have lower valuations, while better-governed firms have higher valuations. Components of corporate governance concerning board and shareholders structure examined in this study include the percentage of free float and board composition including, the percentage of independent directors, the percentage of financial or accounting expertise of directors in audit committee, the percentage of directors in board meeting, and board size.  Although the concept of earnings quality has been discussed widely, there is still no agreement about its definition and measurement (Revsine et al., 2001, Penman and Zhang, 2002). Katsuo (2008) argued that characteristics such as persistence, predictive ability, smoothness, and conservatism, are not necessarily separable theoretically for description of earnings quality. Earnings quality is often discussed from the perspective of value relevance or its usefulness for decision-making, and measurement is examined in connection with capital markets. For example, Scott (2003) defines earnings quality by the predictive ability of the price return and suggests that earnings quality and earnings response coefficients have a positive correlation. Penman (2003) also mentions that it is high quality earnings that will become a better index of future earnings. In this study, earnings quality is measured by the coefficient of variation of net profit, the ratio of net profit on total revenue, the operating cash index, and the ratio of operating cash flows on total assets.


Twenty Ethical Competencies for Surviving Organizational Politics

Dr. Stewart L. Tubbs, Professor of Management and the Darrell H. Cooper Endowed Chair in Leadership Management Department, Eastern Michigan University, MI


Have you ever wondered why things turn out the way they do in your organization? Sometimes a few people seem to consistently get their own way while others can’t. If so, then you have experienced organizational  politics.  One survey from the Journal of Accountancy, (See below) indicated that organizational politics was the leading source of job stress.  Similarly, research on this topic indicates that organizational politics costs organizations millions of dollars in lost productivity every year (Pearson and Porath, 2009; Dillon, 2014)). For example, Bob Woodward titled his latest best- selling book, The Price of Politics (2012) to emphasize just this point. This paper offers twenty tips for surviving organizational politics for those who would like to learn how to be more successful at the game of organizational politics. Organizational politics are more complex than they first seem. One view, states that “Political skill…is the ability to understand social interactions at work and to use this understanding to influence others to act in ways that enhance one’s personal or organizational goals.” (Brouer, Douglas, Treadway and Ferris, 2013, p.187).   Another recent source defines political skill as, “An interpersonal style construct that combines social perceptiveness or astuteness with the capacity to adjust one’s behavior to different and changing situational demands,“ (Harvey, Harris, Kacmar, Buckless, and Pescosolodo, 2014).  However, these definitions combine two very different types of politics. 1. Unethical (or "Machiavellian") politics, and 2. ethical politics. Ethical politics can be thought of as using influences to accomplish organizational goals, (DeLuca, 1999) while Machiavellian politics can be thought of as using influences to promote self-interests as the primary goal [often at the expense of the organizational goals] (Christie and Geis, 1970).  Machiavellian methods may work in the short run, but sooner or later they often fail. In addition, Ferris, et. al.,(2007) argue that, “[successful] individuals are characterized by networking ability and are able to forge friendships and build coalitions, strong beneficial  alliances, and networks, thus vesting the politically skilled with a great deal of information and social support that they can share.” Therefore, the purpose of this paper is to identify and explore twenty ethical tips for navigating organizational politics.  In order to think realistically about surviving organizational politics, it is important to put your expectations into an interpersonal context. Each of us can have some degree of influence on the people and the organization wherein we work.  This is depicted in the following diagram:  On the surface, it would seem that we have the greatest potential to influence our own way of thinking. This often referred to as "Reframing," (Bolman and Deal, 2008; and Schein, 2010), "Self Talk," (Maxwell, 2012; Read and Stoltz, 2011; Seligman, 2011), or "Intrapersonal Communication," (Tubbs, 2013a; Tubbs, 2013b). Whenever organizational politics seem to overwhelm, remember, your own framing of the situation is the one most likely place to start when trying to survive.  As we move outward from the center of the diagram, the likelihood of our successfully influencing others seems intuitively to be less and less. With this context in mind, let us examine twenty ethical tips for dealing with organizational politics. Realize that politics are inevitable: Accounts from Egypt over 5,000 years ago show, for example, that the pharaoh Akhenaton (originally known as Amenhotep IV) was one of the most remarkable of ancient Egyptian rulers. He revolutionized Egyptian religious beliefs by introducing the concept of a single deity named "Aton."  Prior to that Egyptians had worshipped many gods. Six years into his reign as pharaoh he changed his name to Akhenaton, or “he who serves the Aton.” He used vast resources to build great temples at Karnak, the site of many of the temples dedicated to the former gods. His wife Nefertiti is also one of the most famous names of the period. He was succeeded by his now famous son-in-law, Tutankhamen or King Tut. This young king rejected his father-in-law’s worship of Aton and reversed virtually all of Akhenaton’s life-long works. (Axelrod, 2003, p.20-21).  This is an example of ancient political maneuvering.  Similarly, in China during the Han Dynasty (206 B.C.-220 A.D.) the protocol for anyone visiting the emperor, was to “kowtow”-the act of complete prostration, with the forehead touching the ground three times on each prostration.  It was strictly forbidden to disobey this act of political submission. Then, the emperor would offer visitors the "five baits" in order to sway them into agreeing with his plans. The five baits would be "To give them elaborate clothes and carriages in order to corrupt their eyes; to give them fine food to corrupt their mouth; to give them music and women to corrupt their ears; to provide them with lofty buildings, granaries and slaves to corrupt their stomach...and for those who came to surrender, the emperor showed them favor by honoring them with an imperial reception party in which the emperor would personally serve them wine and food so as to corrupt their mind." (Kissinger, 2011, p. 21). The philosophy of the time was that these psychological and political methods were superior to experiencing armed conflict instead. Clearly, politics are inevitable, so it seems worthwhile to learn to become more adept at mastering the art of politics. Even universities have politics. Henry Kissinger, once a professor at Harvard, is often quoted as saying that “The reason that university politics are so vicious is because the stakes are so small.”


Effects of Professional Citizenship Behavior on Audit Success of Certified Public Accountants (CPAs) in Thailand

Thitiworada Sangsawang, Mahasarakham Business School, Mahasarakham University, Thailand

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

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



This research is to examine the effects of professional citizenship behavior (professional conscientiousness orientation, regulation compliance focus, professional loyalty concern, and voluntary self-development intention) on audit ethics awareness, audit practice efficiency, audit enthusiasm commitment, audit quality, financial information reliability, audit excellence, and audit success. Likewise, this research tests the impacts of professionalism concern, audit learning, audit value, professional acceptance and stakeholder expectation on professional citizenship behavior. In addition, the 239 auditors in Thailand were selected as the sample and with data collection by questionnaire. This research results show that professional conscientiousness orientation, regulation compliance focus, professional loyalty concern, and voluntary self-development intention positively influence audit ethics awareness, audit practice efficiency, audit enthusiasm commitment, audit quality, financial information reliability, audit excellence and audit success. Also, the findings reveal that, professionalism concern, audit learning, audit value, professional acceptance, and stakeholder expectation positively affect professional citizenship behavior partially. Both theoretical and managerial contributions are explicitly provided. Conclusion and suggestions and directions for the future research are described.  Before bankruptcy of Enron in 2001, Enron was previously influential in America and the energy industry (Brennan, 2003; Cunningham and Harris, 2006).But in fact; Enron has hidden performance and financial status for several years. Enron was in debt with thousands of billion US Dollars and never show in the annual report financial statement. Moreover, it reviewed 600 million US Dollars profitable income in the past 5 years before the emptiness (Gillan and Martin, 2007; Li, 2010). Catastrophe of Enron led to number of question from US government and business sector. Who should be responsibility? In view of part the business destruction is collaboration of the auditor event caused. The auditors of office Arthur Anderson is unethical, lack of transparency, careless and participatory with Company’s CEO of Enron for personal gain (John and Coates, 2007; Thomas, 2002).It is a major cause of bankruptcy and the memories will haunt the investors for a long time. For Thailand in 2004, it has similar event same Enron such as SinghaParatech Public Company Limited who maximized its profit and income or Electronic Industry Public Company Limited manage and made false account (Sinjuaroonsak, 2013). All matters have their own consequences by unethical and irresponsible auditors. From case Enron and other companies urged several agencies of Thailand behavior awareness of more auditors. Federation of accounting Professional, other institution and agencies is concerned behavior of auditors. They want that to auditor responsibility on the role, tries to improve the regulation and law for contribution the auditors’ public consciousness and behavior that is suitable to be a citizenship of the profession. In addition, auditor is those guarantees the accuracy of accounting information and contributes creditability to investor. Thus, regain the investors’ confidence toward reputation auditor. The auditor should show appropriate behavior to citizenship of the profession. Therefore, this study will be the empirical evidence of causal and affects in supports relationships between professional citizenship behavior and it antecedents and consequences of the professional citizenship in Thailand. The purpose of the this study is to explore its effects of professional citizenship behavior dimensions (professional conscientiousness orientation, regulation compliance focus, professional loyalty concern, voluntary self-development intention) on audit success by thought professional citizenship outcome (audit ethics awareness, audit practice efficiency, audit enthusiasm commitment, audit quality, financial information reliability and audit excellence) as mediating variable. In addition, this study assigns professionalism concern, audit learning, audit value, professional acceptance and stakeholder expectation as the antecedents of professional citizenship behavior. The remainder of this study is seven organized as follows. In the second section shows the theoretical foundation that explains the relationship between the antecedents and consequences of professional citizenship behavior. The third section displays literature review and hypothesis development. The fourth section provides research methods. The fifth section indicates result and discussion. The sixth section illustrates contribution and future research and the last section presents the conclusion. This study presents many theoretical perspectives to explicate the relationships between the antecedents and consequences of professional citizenship behavior, including the organization citizenship behavior concept, professional socialization concept, and stakeholder theory. Organization citizenship behavior concept of organ (1988) suggests that obligations assigned behavior and beyond the duties assigned and demonstrates in operation responsibility consciousness and also raises the efficiency and effectiveness of the organization operation.Investigate, the prior research key elements of organization citizenship behavior consists sportsmanship, organizational loyalty, altruism, individual initiative, consciousness, self -development and civic virtue (Lavelle, Rupp and Brockner, 2007; Podsakoff et al., 2000). Moreover, this behavior is also involved directly to the organization and individuals if that person is satisfied in practice and leads to citizenship behavior and will cause a positive impact on the organization as well (Podsakoff et al, 2000; Organ 1990,Williams,1988). However, previous research found that organization employees displayed citizenship behavior and focus on vocational performance that is important for building an efficient, effective, and quality and leads to operational success (Borman and Motowidol, 1997). Therefore, this research we have used organization citizenship behavior concept to be applied in explaining development dimension of professional citizenship behavior and relationship between professional citizenship behaviors as consequences. Professional socialization is referred to acquisition process of knowledge, values and skill necessary for success to professional career requiring, especially skill and knowledge that influence on one’s professional development (Weidman et al., 2001). Moreover, professional socialization is based on role theory which has responsibility to society (Leddy, 1998). Indeed, professional socialization described process, behavior and outcome with member of a professional under condition knowledge and responsibility (Lai and Lim, 2012).This study professional socialization concept applied to describe antecedences of professional citizenship behavior (professionalism concern, audit learning, audit value and professional acceptance) and relationship between antecedence as professional citizenship behavior under assumed an interpretive approach to professional socialization. From perspective of professional socialization concept, this research believes that professional citizenship behavior of auditors will have cause from affected professional socialization and including several factors since starting, acquisition attitudes, learning, knowledge, skill, value and acceptance in accounting occupation and accounting professional. As the result, outcome of receiving professional socialization and socialization leads to citizenships bevies that have responsibility on the role and society and including the profession in the long run.


Audit Professional Well-Roundedness and Audit Success: An Empirical Investigation of Certified Public Accountants in Thailand

Chatratchada Wiroterat, Mahasarakham Business School, Mahasarakham University, Thailand

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

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



This paper highlights the examination of the influence of audit professional well-roundedness and audit success: an empirical investigation of Certified Public Accountants (CPAs) in Thailand. These are exploring the relations among audit professional well-roundedness and audit success. Also it examines the relationships among three antecedents: audit vision, audit experience, and environmental pressure. Moreover, here among 342 CPAs in Thailand who are the samples are chosen. The results indicate that audit professional well-roundedness, namely modern audit practice ability, audit knowledge diversity, audit skills excellence, audit learning competency, integrative audit resource implementation, have a positive impact on audit expertise, professional judgment, audit skepticism, audit quality and audit success. Professional judgment has positive influence on audit expertise. In addition professional judgment has positive influence on audit skepticism. Professional judgments, audit expertise and audit skepticisms have positive influence on audit quality. Audit quality has positive influence on audit success. Moreover, the findings also indicate that audit vision, audit experience and environmental pressure have positive influence on modern audit practice ability, audit knowledge diversity, audit skills excellence, and integrative audit resource implementation. Moreover, audit vision and environmental pressure have a positive influence on audit learning competency. The contribution of this paper can help to explain the key factor of audit professional well-roundedness and audit success. The results could be used as guidelines for planning to improve capability of auditor to have more audit success. Further, there are key factors in the development and adaptation to improve market access, national and international auditing, and can increase competitiveness in the changing scenario.  Nowadays, businesses have adopted the modern technology into the business operations which help to have communication both within and outside the country quickly leading to the liberalization of trade. These lead to the development of economy and expand its production base investments and labor mobility freely. Intense competitive businesses must adapt to keep pace with changing circumstances, and prepare for the upcoming issue (Chakraborty, 2009). These businesses need to offer quality information that is correct and useful for investors to use the data for decision consideration. In particular, the accounting information which such information is critical for the investment if the investor gets to incorrect information it may make the investor decide to crash and cause the damage to the business. Accordingly, such information must be passed to get around from Certified Public Accountants (CPAs) to ensure that the investors will receive the correct information. An auditor must be responsible in expressing opinion on the financial report of company whether the financial statements of the company have practice as compliance with professional standards and show the correct information by receiving certified from the auditors. Auditor is a person who has a key role to the business (Sudsomboon and Ussahawanitchakit, 2009). Most enterprises are paying attention to the selection of the auditor who has audit success of operational certification to the financial statements which help build confidence to investors. Also at present, Thailand has joined the ASEAN Economic Community by countries in Asia, where participants will work together to build production bases together for economic development, investment and labor mobility freely in diversity professions such as professional auditors. A combined group of countries, making each ASEAN member countries have guidelines and professional standards together. There are setting of legislative laws and develop a monitoring system that uses a standard practice internationally by all nations must follow. Also including the liberalization of the auditor so the auditors in Thailand can audit in other countries and auditors in other countries can audit in Thailand which lead to competition problems in the audit and affect the survival of the auditor. Of such problems, the auditor must adapt and focus on self-development, competency improvement, and can compete with other countries for survival and audit sustainability.In the past, many countries must face with the economic crisis caused by various problems including the collapse of financial institutions such as the collapse of major companies in the U.S. economic events which impact business and investment. These are events that result in the wrong decision of investors leading to economic damage due to investors with insufficient data for decision making. These companies have turned their attention to the selection of auditor increasingly by considering more capable auditor. Auditor must be audit professional well-roundedness in the inspection, to build confidence to the financial statements which has important data for investors. At the present time there are sets of standards and rules which the auditor must be well-round in other issues at diversity. Those auditors must be able to perform effectively but if the auditor may unknowingly fail to comment or express an opinion that is not valid, it will bring damage to the data in report. Therefore, the auditor must develop himself to have audit professional well-roundedness because the auditor has to know, understand ,and develop data in audit process and can applied to give instruction with clients effectively and can comment on the report in accordance with the principles and standards profession  leading to  the audit success and  audit quality  (FAP, 2014). Audit professional well-roundedness is important for auditor to pay attention to and always tries to create him to have audit professional well roundedness. Audit professional well-roundedness assists the auditor to perform according to the standards set and can be used, know how to perform modern audit practice in audit process. These are search evidence and obtain which evidence to support report of quality and success in the operation. Likewise, audit professional well-roundedness will support auditors to have diversity knowledge, ability to learn the appropriate skills in performance and can be applied integrative resources implementation effectively (Chakraborty, 2009; Hebert and Karen 2008; Niemann-Struweg and Meintjes, 2008). Auditors who have high audit professional well-roundedness are able to perform operations in accordance with goals understanding audit process, standard operating procedures and regulations related to the operation and can be used in various situations as well. Audit professional well-roundedness will be assisted to knowledge diversity to have covered the operation; can analyze the various problems linked to finding quality evidence to fit the changing circumstances. Audit professional well-roundedness also allows auditors to use and benefit from the resources that are well worth on practice leads to audit quality. In addition, the auditors who are audit professional well-roundedness will be confident that their ability is enough and can only bring applied to work in every situation. An auditor can be analyzing problems in a timely, using the procedures appropriately for the situation and types of business leading to the audit quality and successful; but if the auditors lack the knowledge of the profession or have insufficient knowledge, they may lead to narrow the performance. The auditor may not understand how to follow the rules, applicable standard and the procedure because these are changing constantly. Result is erroneous interpretations leads to operational problems and the erroneous opinion affects the quality of data causing to wrong decisions and damaging to financial statement for users and investors. However, the auditor or a professional association will need to focus on improving the capability of auditor by realizing the importance of audit professional well-roundedness. The auditor has audit professional well-roundedness of the operation it will consistently make the auditor have expertise in operational and can be discretion to consider evidence that is sufficient and appropriate to consider the evidence carefully using cause and effect of decisions under audit skepticism and search evidence as the profession standards and ethical. In addition, audit professional well-roundedness attainments will allow the auditor to have attitude, good questioning in issues and discretionary until finding proven evidence for supports the issuance of the report. The report of auditor has quality, accurate, reliable and has been recognized from users of financial information and has been trusted by customers to work continuously leading to the successful auditor. Thus, audit professional well-roundedness is important and interested issues for conceptual model in this paper.


How to Reduce Compliance Costs in Transfer Pricing Area for SMEs: Czech Case

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. 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. The aim of the paper is to research possibilities how to reduce compliance costs in the area of transfer pricing issue for SMEs in the Czech Republic. It focuses on simplification measures, i.e. safe harbour for the determination of transfer prices between SMEs. The proposal of safe harbours includes the arm's length ranges for each NACE sector where SMEs are acting. In average the arm's length ranges are running between 4 and 40%. 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. 21.2 million in 2013.  SMEs as an economic backbone of the European economy contribute significantly to national and global economic growth. They generate 58% of value-added (i.e. 28% of GDP in EU28) and account for a large proportion of total employment (i.e. provide 89 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 60% 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.   We assume that the reason of the fact that the very small percentage of SMEs that are involved in international business activities can be caused by the complexity and specialized knowledge required in dealing with the international taxation issues. The most important issues which SMEs are facing when operating on Internal Market are compliance costs of taxation which are generated in connection with non-existence of unified system of SMEs taxation (there are 28 different tax system in EU), transfer prices and problems with cross-border loss compensations. As was already mentioned above, only 5% of SMEs have subsidiaries abroad, where transfer pricing may be in point. These types of SMEs are facing difficulties as a result of the fact that they do not possess enough human and financial capital for coping with that issue.  SMEs are also strongly heterogeneous, specifically across and within industries and sectors, in their innovation behavior, and in their profitability and growth potential. Further, they differ very significantly from large enterprises (hereinafter as LSEs) in many aspects, for example in size, activities, needs, resources, labor productivity, in the qualification and skill levels of the employees and capital intensity. Thus they cannot reach the same scale economies as LSEs. From the international taxation perspective, SMEs are facing specific problems and have specific needs as they do not have the comparable resources to bear the high administrative burden to comply with the transfer pricing rules. The aim of the paper is to research possibilities how to reduce compliance costs in the area of transfer pricing issue for SMEs in the Czech Republic. The research is focused on simplification measures, e.g. safe harbor (6) for the determination of transfer prices (7) between SMEs. The paper presents the results of the research in the project GA CR No. 15-24867S „Small and medium size enterprises in global competition: Development of specific transfer pricing methodology reflecting their specificities“.  The tax system imposes compliance costs on the taxpayers who must comply with record keeping, filling and payment processes. Thera are a number of factors influencing tax compliance costs. For example the number of taxes that must be complied with, the frequency of changes to the tax laws, the complexity of the tax system, the existence of different tax administrations, the difficulty associated with interpreting unclear tax laws, multiple deadlines for tax payments throughout the year, costs of external tax service providers as well as internal staff or owner time spent complying, and tax registration procedures (European Commission, 2007).


The Comparison and Evolution of International Corporate Governance Models

Dr. Chen-Kuo Lee, Ling Tung University, Taiwan, R. O. C.

Dr. Li-Ru Chen, Program of the Management College, Da-Yeh University , Taiwan, R. O. C.



This study begins with the research of corporate governance models using game theories to analyze corporate governance models with emphasis on the dynamic game process in order to implement a dynamic game model, thereby validating the Path Dependence Theory relevant to corporate governance. Secondly, this study validates the implementation of corporate governance models in the developing nations under the developing nations’ unique cultural background, political situations, and economic backgrounds. Finally, this study validates the developing nations’ corporate governance models different from the four corporate governance models outlined in the conclusions.  The theory of corporate governance, or the arrangements related to business administration and corporate management, was presented by American scholars in the late 1960s and gradually became an important topic as time passed by(Henry, 2010). Corporate governance is becoming more and more important because, at the time that corporations are playing an important role in all economies, the general public demands the corporations to regulate their behaviors. Moreover, “corporate governance” requires a higher level of surveillance mechanism, check and balance, and interest surveillance than “corporate administration” and “corporate management”. The higher level of requirements is therefore necessary for the positive development of economy(Black, 2001; Black et al., 2005, 2006; Henry, 2008, 2010).  Western scholars began to study corporate governance theory in the 1980s. In Taiwan, however, scholars did not study corporate governance until 1990s although many corporate governance-related papers had been released, such as the article presented by Berle and Means (1932) regarding the division of ownership and management, the paper publicized by Mace (1971) regarding US corporation board’s functions with emphasis on the difference between theoretical implications and legal requirements, and the paper presented by Jensen and Meckling (1976) regarding agency costs. Williamson (1975) presented the a revolutionary concept governance structure, which was believed similar to the corporate governance discussed by this paper.  The developing nations began to study corporate governance not long ago. Their papers are short of field study although their scholars reviewed the concepts and conclusions drawn by foreign scholars. Most scholars studied superficially without presenting concrete solutions(La Porta, Lopez-de-Silanes et al., 1998, 2000; Beck et al., 2003, Henry, 2010). Therefore, this study attempts to review literatures, examine the major theories of transnational corporate governance models, analyze the evolution and theoretical implications of corporate governance models, and then present conclusions and recommendations.  According to Fama and Fensen (1983), corporate governance deals with the agency issues arising from the ownership separated from management. Therefore, how to reduce the agency costs is the key issue related to corporate governance. Scholars in the early days, such as Berle and Means (1988), Fensen and Meckling (1976), focused on the relationship between owners and managers, concluding that the successful corporate governance requires the owners and managers share the same interests. Cochran and Wartick (1988) conclude that corporate governance deals with the issues arising from the interactions between executives, shareholders, boards, and stakeholders. Shleifer and Vishny (1997) conclude corporate governance deals with how to ensure fund suppliers compensated with return on their investments. There is a growing body of international evidence supporting the existence of correlation between corporate governance and firm performance and valuation outcomes (Henry, 2010). What is less clear from this evidence, however, is the channel through which governance mechanisms derive their impact. Prior studies have suggested a number of potential channels for corporate governance effects, such as resulting from stronger shareholder rights and legal protection mechanisms which lower investor capital costs (La Porta, Lopez-de-Silanes et al., 1998, 2000; Beck et al., 2003), or incentive effect associated with takeover vulnerability(Gompers et al., 2003; Bebcuk et al., 2004; Cremers and Nair, 2005). Other suggested channels included greater coverage and reporting by ratings agencies (Klapper and Love, 2004; Linden and Matolcsy, 2004; Brown and Caylor, 2006), improved management structure and oversight through voluntary or legislative enforcement of codes of governance practice (Black, 2001; Black et al., 2005, 2006; Henry, 2008, 2010), and enhanced disclosure in formativeness (Beekes and Brown, 2006, Henry, 2010). Furthermore, there is other work intimating that it may, in fact, be prior or contemporaneous performance or valuation outcomes that are driving changes in the corporate governance structure of firms(such as Himmelberg et al., et al., 1999;  Hermalin and Weisbach, 2003; Wintoki et al., 2007).  This introduces the issue of governance and performance endogeneity (in the form of reverse causality and/or dynamic dependence) and doubt as to the underlying importance of governance structures and codes of corporate governance practice (Core, Holthause and Larcker, 1999; Ang, Cole and Lin, 2000; Doukas, Kim and Pantzalis,, 2000; Kim and Lee, 2003; Singh and Davidson, 2003; Doukas, Mcknight and Pantzalis, 2005; Basu, Hwang, Mitsudome and Weintrop, 2007; Gao and Kling, 2007; Mcknight and Weir, 2009; Henry, 2010; Ammann et al., 2011).


Open Innovation Platform in a Smart City: Empirical Results

Dr. Jukka Ojasalo, Professor, Laurea University of Applied Sciences, Espoo, Finland

University of Helsinki, Adjunct Professor, Finland

Aalto University, Adjunct Professor, Finland



The purpose of article paper is to develop a framework for open innovation platform between a Smart City and private sector / third sector. This paper is based on literature analysis and preliminary results from an ongoing empirical research of open innovation platforms in smart cities. As a result, it introduces a framework of open innovation platform between a Smart City and private sector / third sector, as well as its central characteristics. The framework shows how the city identifies its problems, brings them to open innovation platform to attract companies and third sector organizations to develop solutions, and in this way gets the problems solved with innovative solutions and creates business to the companies. Open innovation (Chesbrough, 2003a; 2003b) has become an important research area during the past ten years (Huizingh, 2011). Open innovation means “a paradigm that assumes that firms can and should use external ideas as well as internal ideas, and internal and external paths to market, as the firms look to advance their technology ” (Chesbrough, 2006a, p. 1; in Elmquist et al., 2009, p. 327). In an open innovation process, development projects can be launched from internal or external sources and new technology can enter at various stages. Projects can also go to market in many ways, such as out-licensing or a spin-off venture (Chesbrough, 2003b). The focus is on the transformation of the previously solid boundaries of the company to a semi-permeable membrane that enable innovation to move more easily between the external environment and the internal R&D processes. The innovation process also includes organizing the search for new ideas that have commercial potential (Laursen and Salter, 2006). It emphasizes the importance of service and product users as a source of novel ideas among other knowledge sources (Hennala et al., 2011). Innovation networks consisting individuals and organization (Ojasalo, 2008) may have a central role particularly in the case of product and market innovation (Ojasalo, 2003; Ojasalo et al., 2008). The public sector has also adopted the ideas of open innovation paradigm (Walker, 2003; Osborne and Brown, 2005). An increasing number of non-profit organizations are adopting the ideas of open innovation (Bommert, 2010). They take advantage of a growing number of citizen networks and new types of online intermediaries (e.g. to enhance public value. (Lee et al., 2012). The emergence of the open innovation approach has been influenced by changes in thinking about the fundamental importance of organization’s internal and external knowledge environments (Huang and Rice, 2013).  “Innovation platform” is defined here as an approach that systematically facilitates external actors’ innovation with purpose to develop solutions to platform owners’ problems and needs (Ojasalo, 2015). It is an approach for attracting, facilitating, and orchestrating other organizations’ innovation to solve platform owners’ problems. It is primarily a way to organize, rather than a virtual or physical space, even though they may be means used to facilitate the innovation of external organizations. The term “Smart City” has become popular among urban policy makers and in the branding of cities, but what makes a city to be “smart” is rather unclear. In addition, are several similar concepts are likely to cause confusion, such as “wired cities” (Dutton, 1987), “technocities” (Downey and McGuigan, 1999), “digital cities” (Komninos, 2008), “creative cities” (Florida, 2005; Creative Cities Network, 2015), and “knowledge-based cities” (Carillo, 2006). Since a precise definition lacks, cities have a self-congratulatory tendency to promote themselves as “smart”. Indeed, what city does not want to be smart or intelligent? Hollands (2008). In general, a smart city is characterized with a handful of commonly used attributes. Eventually, it is up to the speaker –or the audience- to decide how smart the city in question really is. Smart cities emphasize the role of innovation, openness, and participation platforms (EU, 2014). Due to the rapid global urbanization development (United Nations, 2014) and because the international competitiveness of cities is today driven by the innovativeness (Bakici et al., 2012) there is a clear need to increase the knowledge and propose novel approaches to open innovation platforms that enable the private sector and third sector organizations to develop solutions to city’s problems. The present paper addresses this knowledge gap. The purpose of this paper is to develop framework for open innovation platform between a Smart City and private sector / third sector. This paper, first discusses the special characteristics of innovation and open innovation in public sector. After that it looks at the literature on innovation intermediaries and innovation platforms, as well as characteristics of smart cities. After that, based on the literature analysis and as a result, this paper develops and proposes a conceptual framework for open innovation platform between a Smart City and private sector / third sector. Potts and Kastelle (2010) discuss the definition and distinctive characteristics of innovation in the public sector as follows. The public sector refers to the coordination, production and delivery of goods and services by publically owned and accountable organizations. Thus, the public sector refers to the civil service and public administration as funded by public revenues (i.e. taxes) as tasked with the coordination and delivery of policy mandates, a significant proportion of which are legacy policies. The differences of innovation in private and public sector relate to the following factors. Firstly, the main motivation of the innovation in the private sector stems from creating new profit opportunities by creating new ways to create value to consumers of businesses. In contrast, the incentive structure of motivation and accountability, the innovation context distinguishes the public sector from the market sector. Incentives to innovation in public sector organizations are those of internal career politics and upward mobility in management within an extant hierarchy. Secondly, there is a weak incentive to develop and champion new ideas so as to seed innovation and induce cooperation through leadership. The main incentive to public sector innovation is not to add value to consumers, as in the private sector, but to signal qualities of intelligence and leadership within an internal promotion game focused on the organizational head of a department (i.e. not the customer/consumer). Public sector innovation may become an internal “signaling game” (Spence 1973) of differential promotion in a hierarchical organization. Thirdly, the contexts of experimentation and failure between market and public sector innovation are different. Innovation is about experimenting and learning.


IFRS for SMEs: Is Amendment to IAS 16 – Bearer Plants suitable for SMEs?

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

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



The paper focuses on the desirability and possibility of amendment to the IFRS for SMEs as a consequence of changes in the full IFRS due to the amendment to IAS 16 – Bearer Plants in the regular three years amendments. The main objective of the paper is the evaluation of the treatment developed primarily for listed companies from the perspective of the SMEs agricultural reporting. The paper should contribute to the debate on suitability of fair value measurement application of SMEs biological assets.  The authors are concerning at the differences between the substance of bearer biological assets in a form of plants and animals. The main issue is the possible way of their measurement and accounting for in case of SMEs. The model cases are used for possible accounting treatment proposal.  Difference in national accounting systems was identified as the main reason of spending additional costs in companies that prepare financial statements based on national generally accepted accounting principles in order to raise capital from different countries. Financial reporting as a result of application of accounting treatments should become a comprehensible source of information for users from different countries. The way out of this situation is a global harmonization of financial reporting. The situation is solved out for large companies listed on the world stock markets. There are full International Financial Reporting Standards (IFRS) used for preparation of consolidated or individual financial statements of large listed companies in many countries except the US companies which prepare financial statements according to US Generally Accepted Accounting Principles (GAAP). The use of the full IFRS enhances the comparability of financial statements, improves corporate transparency and increases the quality of financial reporting and significantly improves the communication between business users and all their statements.  On the other hand, only the low share of all business entities over the world represent large listed enterprises. The rest are small and medium-sized companies (SMEs). SMEs are considered as the key factor of economic growth and employment in the economies. They are socially and economically important and represent 99% of all enterprises in the EU. Their activities on the international markets are limited by a great deal of obstacles in comparison to listed companies. Different national financial reporting and tax systems can be considered as the most important obstacles (European Commission, 2003). Due to the fact, that the rate of SMEs is significantly high, the International Accounting Standards Board was authorized to develop internationally acceptable accounting standards for companies, which are not obliged to prepare financial statements in accordance with the IAS/IFRS. The IASB (2009) published the International Financial Reporting Standard designed for use by small and medium-sized entities (IFRS for SMEs) on July, the 9th 2009.The IFRS for SME is designed to meet the financial reporting needs of entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users. The IFRS for SMEs is a self-contained standard of about 230 pages tailored for the needs and capabilities of smaller businesses. The IFRS for SMEs is separate from the full IFRSs and is therefore available for any jurisdiction to adopt regardless it has adopted the full IFRSs. It is also for each jurisdiction to determine which entities should use the standard. This standard could be a suitable instrument for the SME financial reporting harmonization. The IFRS for SME is aimed at millions of companies. The aim of the standard is to provide a simplified, self-contained set of standards.  According to Deloitte (2013), this standard was meant to provide simplifications to the requirements in full IFRSs that reflect the needs of users of SMEs' financial statements and cost-benefit considerations. It is less complex, no relevant topics are omitted, accounting policy choices are reduced, requirements in full IFRSs are simplified and disclosures are reduced. The IASB had decided that the IFRS for SMEs should be subject to a review approximately once every three years in order to keep the requirements of the IFRS for SMEs broadly in sync with those in the full IFRSs.  The full IFRS has been subject of significant changes since 2002. One of the issues which are subject of concern of IASB is the agricultural reporting. The substance of agricultural activities significantly differs from other business activities and it demands the different way of its reporting. Agriculture is a kind of activity which joins labour, land, animals, plants, solar energy to provide food and raw material. It has been associated with production of essential food. It includes farming, forestry, dairy, fruit cultivation, poultry or bee keeping.  The IASB supported the inclusion this issue to the agenda. The limited scope project concerning the bearer plants reporting was started in 2012.  The final amendment to IAS 16 – Bearer plants was issued in June 2014. The idea of the IFRS for SME is to keep the balance with the full IFRS. Possible changes of the IFRS for SMEs due to changes in the full IFRS could be in a form of regular review in the 2015­-2017 period.  The paper is focusing on the suitability of any change of IFRS for SMEs due to the new treatment for barer plants reporting in a form of amendment to IAS 16 and IAS 41 – Agriculture: Bearer Plants in the full IFRS. According to this amendment, plants, which are used only for growing produce, are treated as property, plants and equipment. The amendment is effective for annual period beginning on or after 1st of January 2016, earlier application is permitted.  The aim of this paper is to decide whether it is rational and in accord with the true and fair view principle to account for some or all of them as property, plant and equipment, thereby permitting the use of a cost model, and an evaluation of possible application of the new amendment in the full IFRS with respect to differences between biological assets in a form of plants and living animals for financial reporting of SMEs. The paper is divided into three parts. Firstly, within the framework of theoretical background the possible ways of biological assets reporting are considered. The second part is represented by the comparative analysis of strengths and weaknesses of possible ways of biological assets reporting. The above mentioned parts of the paper served as the basis for the third part -  own research in which the authors are concentrated, in respect to special nature of biological assets and to possible ways of SMEs biological assets measurement and reporting.  Despite to the significant role of agriculture in the global economy accounting standard setters such as International Accounting Standards Board (IASB) and Financial Accounting Standards Board (FASB) have been paid only little attention to accounting for agricultural activities. FASB had not issued any special standard for agriculture prior Accounting Standards Codification. There have been ASC Topic 905 Agriculture since 2009, this topic is based on former SOP 85-3 guidance. This statement discusses accounting of agricultural producers and agricultural cooperatives that intend to present financial statements in conformity with generally accepted accounting principles. It was issued in 1985. The IASC predecessor of IASB added issue of agriculture to its agenda in 1994. According to the Board, the main reasons were the increasing needs for outside capital, and increasing number of cross-border listings, and commercialism of agricultural activity. The Exposure Draft E65 was published in January 2000 and the final IAS 41 – Agriculture was issued in December 2000. The model of fair value for agricultural assets and production measurement was introduced in this standard. It was significant change to prior way of measurement based on historical cost basis.  The fair value measurement in comparison to historical cost model reflects the biological transformation process and the increase in value during the production cycle due to the special biologic nature of transformation.  The IAS 41 defines biological transformation as a process which comprises the process of growth, degeneration, production, and procreation that cause qualitative and quantitative changes in biological assets. The biological assets represent living animals or plants. The agricultural produce represents the harvested products of these assets, such as milk, wool, meat, fruits or cereals. There are significant differences in a nature of individual biological assets. The only way to measure and present all kinds of biological assets seems not to be appropriate. This idea was confirmed by amendments to IAS 16 and IAS 41 published by IASB in 2013.


An Approach for Integrating Accounting and Marketing  in a Project for a Graduate Management Course

Dr. William R. Smith, Jr., Professor, Pepperdine University, CA

Dr. Fred Petro, Professor, Pepperdine University, CA



The advantages of student projects that require the integration across two or more academic disciplines have become more evident in recent years.  In the earlier years of the movement towards integration, it was common to have subjects that shared similarities involved in these types of assignments.  For example, it was common to assign team projects that involved the integration of finance with accounting or organizational behavior with consumer behavior.  This article focuses on developing a template for a project that blends the disciplines of accounting and marketing.  The discussion surrounding the imperative for business schools to teach their students to think in a cross-disciplinary (integrated) fashion has been ongoing for years.  One of the most troubling discussions of some of the issues surrounding this topic was the work of Bennis and O’Toole (2005).  In this article, the authors bemoan a current state of affairs as they see it in which today’s business schools tend to have less integration across academic disciplines and functional areas of business than was the case several decades ago.  Other writers (outside of business schools) who focus on pricing products have pointed to the, “… ongoing conflict between managers in charge of covering costs (finance and accounting) and managers in charge of satisfying customers (marketing and sales).  Accounting texts warn against prices that fail to cover full costs, while marketing texts argue that customer willingness-to-pay must be the sole driver of prices.  The conflict between these views wastes company resources and leads to pricing decisions that are imperfect compromises.  Profitable pricing involves an integration of costs and customer value (Nagle and Hogan 2006, p. 149).”  “To achieve that integration, however, requires letting go of misleading ideas and forming common vision of what drives profitability (Smith and Nagle 1994).” It appears that the academic divide between the disciplines of accounting and marketing is representative of “real world” schisms between different functional areas of management.  While this article is unlikely to propose solutions to natural conflicts between animals such as cats and dogs, there will be an attempt to propose that business schools should utilize team projects that cross disciplinary divides by requiring that students propose solutions to management challenges that require them to use theories and concepts from both accounting and marketing.  There will be some suggestions on how professors from these disciplines might encourage their students to develop or enhance their abilities to empathize with their colleagues from outside of their own functional area of the enterprise.  Let’s now move on to opportunities for this type of academic integration between the focal areas of this paper: accounting and marketing.  As a first step in developing a template for a student team project that integrates these academic disciplines, it’s helpful to have an idea of the type of project that each of these disciplines would develop on a stand-alone basis (see Appendices A and B).  The current authors will then explore some ways in which a cross-disciplinary project could begin to be developed. Let’s begin by focusing on a project that would be developed for students in a graduate level accounting course.  Keeping in mind that an accounting project could involve aspects of both financial and managerial accounting, one would certainly expect students to be asked to make projections of financial instruments such as income (operating if you prefer) statements, balance sheets, cash flow statements, etc.  An additional aspect of a group project in accounting might call for the group to use information that can be gathered from public sources.  This would likely involve having each team be assigned a public company since their financial instruments are required to be publicly available.  It would further be advisable to avoid using a company that a team member works for (or has worked for in the past) and to maximize the potential learning for each team member it would also seem advisable for the instructor to assign companies from industries that team members have little or no experience with.  There can be many more aspects of this type of project that will make for a better learning experience for graduate students. In order to get a more complete template for this type of accounting project, please refer to Petro’s work that is referenced below (2008).  While some suggestions in this template (see Appendix A for an abbreviated version) are universally useful in terms of leading to a strong learning experience for students (e.g., suggesting/requiring that some data such as growth rates be derived from at least four sources), a detailed examination of the template will also point to opportunities that exist for broadening students’ understanding of management issues that extend outside of the accounting discipline into other disciplines, including marketing. For example, the reader will note that Petro requires that in each team’s introduction of their project they describe the policies of the company they are studying in addition to the company’s own plans for the future as contained in documents available to the public.  This requirement is an explicit recognition that there are sometimes both policies and publically stated objectives that will constrain the company’s management from pursuing certain managerial directions.  The implication is that a student needs to understand concepts such as corporate culture that have impacted both policies and objectives that have been or will be developed by the company.  This forces the student to reflect on the academic content of coursework from academic disciplines such as organizational behavior (OB) and organizational development (OD).  If an accounting professor were attempting to assign a project that required integration of either of these academic disciplines, the details of the project could be expanded to require even more explicit consideration of the connections between these disciplines.  Petro’s accounting project then requires that students demonstrate an understanding of the company’s history.  One reason this will be useful as the project unfolds is that students will avoid the temptation to try to “reinvent a wheel” that has already been run over the ground that this company occupies.  An example of the manner in which this would benefit the marketing/sales areas would be to avoid repeating costly mistakes in terms of new product development.  Knowledge of this history will also indicate which functional areas of the company have tended to dominate it over the years.  For example, the fact that a company’s history reveals that the engineering department controlled the senior management functions for many years could explain certain types of management behavior and views of the external environment.  In short, this review of a company’s history will force students to consider issues from a cross-functional perspective.  Understanding growth rates: understanding historical, current and projected growth rates will have a strong impact on issues such as the need to develop new products (marketing) and the need to emphasize some segments of the market (e.g., older consumers/baby boomers) while de-emphasizing other segments that are declining in terms of numbers or having the financial capability to purchase products. This is a classic example of how the type of “number crunching” students have traditionally utilized in accounting and finance courses is absolutely critical for marketers to be able to perform and then interpret.

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