The Business Review Journal
Vol. 3 * Number 1 * Dec. 2004
The Library of Congress, Washington, DC * ISSN 1553 - 5827
Online Computer Library Center * OCLC: 920449522
National Library of Australia * NLA: 55269788
The Cambridge Social Science Citation Index, CSSCI,
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The Effects of Communications and Culture Upon an NPO Merger: A Cross Method Analysis
Dr. Steven H. Appelbaum, Concordia University, Montreal, Canada
Prof. Barbara T. Shapiro, Concordia University, Montreal, Canada
The incidence of mergers and acquisitions has proliferated throughout the world including all private and public sectors. However, the majority (60-80 percent) of them do not reach their intended objectives considering the fact that the merging organizations do not realize the impact of neglecting the behavioral sciences factor. Although they properly assess and address the financial and legal issues, they continually overlook this critical factor. This research seeks to test this list of suggestions, in the form of a unified model, employing the single case study method for an NPO. Rather than a set of hypotheses, twenty-two recommendations/remedies were developed to test the model. Data from interviews and existing documents are used to support or modify the final model. The qualitative results utilized a cross-method analysis that supported the majority of the unified model, requiring a few modifications. This research has subsequently resulted in the development of a unified behavioral sciences model for the proper and successful implementation of mergers and acquisitions for the NPO. The implications of these findings for all organizations, and for mergers and acquisitions theory and practice, are discussed.
Economic Evaluation of Suicide Prevention Programs for Young Adults in Florida
Sahily DeCastro, Florida International University, Miami, FL
Fred Newman, Ph.D., Florida International University, Miami, FL
C. Gerry Mills, Ph.D., Mercer University, Atlanta, GA
Nazmi Sari, Ph.D., University of Saskatchewan, Saskatoon, SK
This analysis investigates the benefits of implementing suicide prevention programs on all 119 college and university campuses in the State of Florida. The direct costs of a suicide aged 18 to 24 years in Florida are $4,106.49; however, the indirect costs are $1,264,853. There were approximately 154 suicides 18 to 24 years old in Florida during the period of study. It is estimated that 65 of those were enrolled in college. Two types of suicide programs, general suicide education with an effect rate of .57 and peer support program with an effect rate of .60, were examined and the associated costs estimated. The resulting benefit/cost ratios were 3.29 and 6.02. The Center for Disease Control and Prevention (CDC) estimated in 1992 that the suicide rate was generally twice as high among persons 20-24 years of age than among adolescents 15-19 years of age. In 2000, the young represented 13.9% of the population and comprised 13.6% of the suicide deaths (Miniño et al., 2002). The National College Health Risk Behavior Survey evaluated the incidence of suicide ideation among college students, aged 18-24 years, through mail questionnaires, and concluded that during the first year preceding the survey, approximately 10% of the students had seriously considered attempting suicide (Brener et al., 1999). As the suicide rate among young adults ages 18-24 continues to rise, the economic burden imposed on society due to loss of life increases as well. However, economic evaluations have not widely been applied to validate the use of suicide prevention programs, particularly targeting young adults. Silverman and Felner (1995) state that the literature has very little information about the long-term effects of suicide prevention programs. It is clear that research addressing the general economic benefits from suicide prevention and intervention programs is greatly needed by these programs to demonstrate their effectiveness. After assessing selected suicide prevention programs, Gould and Kramer (2001) concluded that there is a lack of widely accepted measurements to test the actual effectiveness of suicide programs.
Rising Health Care Costs and Cost Containment Strategies: A Comparison of the Fifty States
Kristina L. Guo, Ph.D., MPH, Florida International University, Miami, FL
This paper compares health care costs for all fifty states. Findings show that while New York had the highest health care expenditures, Wyoming had the lowest in 1999. Wyoming also showed the lowest percentage in expenditures (0.2%), compared to the highest percentage change shown in Kentucky (21.8%). In the Medicaid program, nine cost containment strategies were utilized: controlling prescription drug costs, reducing provider payment rates, reducing or restricting Medicaid eligibility, reducing Medicaid enrollment, increasing beneficiary co-payments, expanding managed care, utilizing disease and case management program, tightening fraud and abuse, and cutting long-term care services. In 2002, Mississippi was the only state to use six of the nine strategies. By 2003, nine states used six or more strategies, including Delaware, which was the only state to use all nine of the strategies. Other cost containment strategies include controlling the supply, pricing, and demand for services. The United States spends more on health care than any other nation. In 2002, U.S. health care spending was 14.9 percent of the gross domestic product (GDP) or $1.6 trillion, a 9.3 percent increase from the previous year.(1) Health spending grew more than 5.7 percent points faster than the growth of the overall economy in 2002. Public spending, mainly Medicare and Medicaid, accounted for 46 percent of all health care expenditures, while the other 54 percent derived from private insurance and out-of-pocket payments.(2) Prescription drug spending grew by 15.3 percent, making it the fastest growing spending category.
Pari Passu Debt and Bankruptcy Settlements: The Nash Bargaining Solution Reexamined
Dr. Jacques A. Schnabel, Wilfrid Laurier University, Waterloo, Ontario
This paper reexamines the Nash bargaining solution in the context of the bankruptcy settlement game. It is shown that the usual textbook critique of the Nash bargaining solution is flawed. The putative shortcoming of the Nash bargaining solution, viz. it leads to bizarre bankruptcy settlements, derives not from the solution procedure itself but from an unrealistic assumption regarding the alternatives available to the bankrupt firm’s creditors. The latter refers to the likely outcome of formal bankruptcy proceedings, which constitute the second stage of the bankruptcy proceedings. The substitution of a more realistic assumption results in a Nash bargaining solution which accords with both common sense and empirically observed legal outcomes. These conclusions are shown to be valid assuming, on the one hand, that the debt claimants are risk-neutral and, on the other hand, that they both exhibit seriatim risk-averse hyperbolic and logarithmic utility functions. In the usual textbook treatment of the Nash bargaining solution (1950), this approach is initially broached but quickly dismissed as leading to outcomes that are both counterintuitive and counterfactual. The venue for this evaluation is a bankruptcy settlement game where two risk neutral debtors of equal seniority, i.e., whose claims rank pari passu, attempt to settle on a division of the bankrupt firm’s assets. When the Nash bargaining solution is applied, the following bizarre result is derived: the creditor with the lower debt claim receives a greater payoff than that received by the creditor with the higher debt claim. With the foregoing as motivation, the textbook discussion quickly turns to alternatives to the Nash bargaining solution, such as the Kalai-Smorodinsky solution procedure (1975).
Exposing the Myth of “Re-Investment Economics Trigger” in Investment Decisions
Sergey Vasnetsov, Lehman Brothers Inc., NY, NY
he interaction of capital investment and profits (causality and lead/lag factors) is the topic of major importance in fundamental and applied economics. A popular theory often used by industry consultants assumes the existence of a “re-investment economics trigger”, typically defined as 10% after-tax return on invested capital. According to this theory, upon reaching such point, a company will decide to invest capital in construction of new plants. If this is true, it is very important to predict such threshold point, as a turning point in the new investment cycle. Using a large diverse sample of companies over 17 years period (1985-2003), we found that there is no correlation between profitability and decisions of a large energy or petrochemical producer to invest in a new plant: the timing is much more liklely driven by specific corporate priorities, rather than a general “profit trigger” mechanism. Investment and profits are two vitally important factors on both macro and micro level. Indeed, this profits and investments represent the arguable the most important results of operations at a given time period, while forecasted future profits and investments are fundamental drivers of forward-looking business strategy, both at micro- and macroeconomic level. What drives a decision to build a large new production plant? Is there a common “rule of thumb” which would explain the recent history and predict the future developments? Finding such a rule would be quite valuable in forecasting the volatile commodity cycles for energy, chemicals, metals, paper products, as it is the large new capacity wave has typically played a major role in turning the global commodity cycle from its peak down towards the cyclical trough.
The Transnational Corporation, Corporate Social Responsibility and the ‘Outsourcing’ Debate
Marc T. Jones, Macquarie University, Sydney, Australia
Current popular debates in the United States and Australia on the topics of ‘jobless recoveries’ and the ‘outsourcing’ of skilled IT jobs to India (most conspicuously) evidence a confusion as to the institutional role of the business firm and its obligations to the broader stakeholder community, as well as to the more specific differences between outsourcing and the spatial restructuring of corporate value-chains. This paper will take up several issues in the hope of clarifying this confusion, including the essential nature of the business firm as an economic, political and social institution; the possibilities for social responsibility and stakeholder management in large internationalised firms; and the critical distinctions between domestic and international outsourcing and spatial restructuring. Data from the ‘outsourcing’ debate will be referenced to illustrate the differing logics/rationalities of relevant stakeholder groups. Current popular debates in the United States and Australia on the topics of ‘jobless recoveries’ and the ‘outsourcing’ of skilled IT jobs to India (most conspicuously) evidence a confusion as to the institutional role of the business firm and its obligations to the broader stakeholder community, as well as to the more specific differences between outsourcing and the spatial restructuring of corporate value-chains. This paper will take up several issues in the hope of clarifying this confusion, including the essential nature of the business firm as an economic, political and social institution; the possibilities for social responsibility and stakeholder management in large internationalised firms; and the critical distinctions between domestic and international outsourcing and spatial restructuring. Data from the ‘outsourcing’ debate will be referenced to illustrate the differing logics/rationalities of relevant stakeholder groups.
Managing Disequilibria in the ‘New Economy’
Dr. Mohammed Naim Chaker, University of Sharjah, United Arab Emirates
The ‘New Economy’ is characterized inter alia by proliferation of a wide array of information and communication technologies in all sectors (Rifkin, 1998). Businesses and governments are now investing in information technology and electronic commerce to improve productivity, reduce costs and attain greater heights of customer service. Consumers can now shop on the Internet because they find their choices fantastically increased. They have access to almost complete information when making purchasing decisions. Consumers are able to save time and find shopping more convenient as businesses serve their needs individually. Better information and greater selection, combined with lower operating costs for many Internet businesses may, in turn, trigger reductions in prices or improvements in quality. The sheer number of stores that can be visited online far exceeds even the most densely populated retail areas in industrial countries. There are also interesting parallel developments in other parts of the world, especially Europe, East Asia and the Middle East. The information and communication technologies have come to drive the engines of economic growth in these parts of the globe. It is true that Corporate America has contributed immensely to the emergence of the new world economy anchored in information and communication technologies.Tables1 and 2 show that the US was an important exporter of high-technology products in 1999 and one of the leading investors in high-technology products in various markets of the world.
A Different Look at “Pay for Performance”: Returns to Bench Strength in the NFL
Melville Cottrill, J.D., Ph. D., Southern Connecticut State University, New Haven, Connecticut
Gary Crakes, Ph.D., Southern Connecticut State University, New Haven, Connecticut
The determinant(s) of CEO compensation is one of the most studied subjects in the management literature. See for example, Deckop, “Determinants of Chief Executive Officer Compensation,” (1988) or O’Reilly, Main, Crystal, “CEO Compensation as Tournament and Social Comparison: A Tale of Two Theories” (1988). Many predictors, small coefficients, and curvilinear relationships can be summarized best by noting that the results are equivocal. Equally, and particularly in this day of governance scrutiny, the relationship between CEO compensation and organizational performance has received renewed attention. Locke (1980) has argued that money is the maximum motivator, while Crystal (1991) and Byrne (1991) take a more cynical view. More recently CNN (2000) has noted that the CEO pay gap (relative to the rank and file) continues to widen, while Reynolds (2004) argues that using wider definitions of remuneration results in a less simplistic story. This debate was a long time in the making and not likely to be settled soon. Nevertheless, turning to a different stream of literature, some propose that leadership effectiveness is mediated by “the led” (or followership) and the task (Fiedler (1967), Hersey and Blanchard (1974)).
Business, Combinatorial Theory and Decision-Making
Jose Villacís Gonzalez, Ph.D., San Pablo CEU University, Madrid, Spain
The most comprehensive definition of Economic Science is based on opportunity costs. Once opportunity costs are identified, then an appropriate decision (or range of decisions) is automatically defined: it is a daily activity of business and one which gives the economic reality some meaning. The theory of decision has been studied principally from a Microeconomics approach, and particularly from the point of view of the theory of the company, and of course from the point of view of game theory. And who can say that the investing activity is not a game? In this paper we will extend decision theory to the field of combinatorial theory. The order or the way in which goods or inputs or production factors are combined, is determined by the objectives. Such is the fundamental sense of combinatorial theory that we want to communicate here. This will be our starting point. From combinatorial theory we will move on to the field of decision theory, which according to our research is the activity that constitutes the final stage. Given certain objectives – which due to economic reasons cannot be all met – we must give up some of those objectives in order to achieve others. This activity involves making a decision; it means making a choice. A choice is a subjective approach that conditions the next action, which is the firm decision. We define these objectives and the means to reach them as a specific combination of factors on the one hand, and a specific combination of results on the other hand. This paper starts by dealing with two different premises:
The Future of Production Sharing with Foreign Partners in Slovenia
Boris Šuštar, Ph.D., University of Ljubljana, Ljubljana, Slovenia
Increasing transaction costs in today’s uncertain conditions demand a rationalization of relations between firms. The effective implementation of production sharing from the aspect of a transaction cost savings is required. The evaluation of different business elements of a production partnership represents a foundation for making decisions on cooperation, both for domestic and foreign firms. The future success of production sharing in Slovenia as the EU member state is based on a relatively equal awareness among partners regarding the question of how interesting a project is. Upcoming production sharing projects between developed and developing EU members therefore has to be planned in a way that allows the affirmation of one partner's interests, but not to the detriment of the other. That is to say, the prospect production sharing projects in Slovenia demand the harmonization of firm interests, which must first follow the goals of mutual business cooperation and, only after this, their individual targets, if maximum production partnership success is to be attained. The globalization of economic relations is creating numerous international markets by abolishing the borders between individual national markets and by affirming the international character of individual markets. Numerous integrated and disintegrated processes throughout the world are forcing those economic entities found in this tougher, internationally competitive environment to enter aggressively into international markets. This, above all, poses problems for those entities which are from emerging economies such as Slovenia.
Latecomer Strategies: Evidence from China’s Mobile Handset Manufacturing Sector
Lei Ding, George Mason University, Arlington, Virginia
Kingsley E. Haynes, George Mason University, Arlington, Virginia
Since the entry of Chinese domestic mobile handset manufacturers in 1998, Chinese domestic suppliers have successfully surpassed the market share of joint ventures (JVs) while direct imports have been largely phased out. By examining China’s mobile handset manufacturing sector as a whole and through case studies, we found several factors that contributed to the success of China’s domestic handset manufacturers which can be classified into three categories: market conditions, competition, and government’s support. With a population of over 1.3 billion, China has the largest handset market in the world and this market continues to grow at a rapid rate. At the end of 2003 there were an estimated 268 million mobile subscribers, and more than 5 million people signed up for cellular phones each month in 2003 (MII, 2004). Before 1999 China’s mobile handset market had been completely dominated by foreign brand products, such as Motorola, Nokia, and Ericsson. Because China promoted its “attracting and absorbing FDI” policies towards foreign mobile communications equipment providers, almost all major handset manufacturers established their joint ventures in China. As a result, all mobile phones sold in China were produced by foreign-owned enterprises or imported directly from abroad before 1998. Lagging scientific knowledge in local settings, poorly developed or nonexistent related industries, and other environmental elements in China constrained indigenous firms from moving first in China’s domestic market.
Insurance of Financial Disclosure: Auditors’ Independence, Competition, and Economic Welfare
Dr. Dan Palmon, Rutgers University, Newark, NJ
Dr. Ephraim F. Sudit, Rutgers University, Newark, NJ
The present system of regulating financial disclosures is supposed in theory to protect small investors. Doubtlessly, this is its major declared objective. In fact, this system protects everybody but the small investors. Disclosing firms are “protected” from standards too rigorous and auditing too penetrating. External auditors endowed with guaranteed demand, and are “protected” from external competition. Big investors can usually afford to supplement free financial information by direct contacts with disclosing firms and by purchasing financial analysis. Alas the small investor is provided with very basic financial information, which is often irrelevant, manipulative, and of little decision value. Furthermore, small investors have scant protection from losses resulting from misrepresentation of financial information. At most, they can sue disclosing firms and external auditors, using class action, with highly uncertain outcomes and, more often than not, meager individual compensations. To remedy this state of affairs we propose a system of Commercial Insurance of Financial Disclosures (CIFD). Under this system users of financial information purchase insurance policies from private insurers. These policies are designed to protect users from certain losses attributable to using financial information, which failed to conform to contractually defined standards. Insurance companies will likely purchase services assuring adherence to standards from assurance experts.
Environment Scanning for Strategic Information: Content Analysis from Malaysia
Manuel Yunggar, Ph.D., Northwestern State University of Louisiana, Natchitoches, LA
Scanning for information in the environment is essential for sound formulation of business strategy. This paper assesses the content of scanning generalized from data gathered in Malaysia during the period of the 5th Malaysia Plan. Specifically this paper addresses the following questions :- What kinds of information do the responding managers consider to be important? What kind of information do they acquire? What sources do they use? How are these choices affected by personal, organizational and environmental attributes? Findings are compared with previous studies done in the U.S. This paper attempts to shed more understanding of environmental scanning at the individual manager level by using data gathered from Malaysia during the 5th Malaysia Plan. Specifically the following questions are being addressed: What kind of information do the responding managers consider to be important? What kind of information they acquire? What sources do they use? And, are their choices affected by personal, organizational and environmental attributes. The findings are then compared with results of previous studies on scanning behavior of managers in the United States institutions to ascertain similarities or dissimilarities. Finally the information acquired are juxtaposed with the sources used to develop a profile of how external information flows into the organization.
A Linear Modeling Approach to a Cold Calling Process
Prem Kumar Kanthan, Jeannie Stockton, Jennifer Bach, and Dr. Mahesh Shankarmahesh
University of Missouri , St. Louis, MO
Jamie Dearham, Eagle Global Logistics, St. Louis, MO
This study investigates the significance of cold prospecting in telemarketing. A linear mathematical model was built to represent the cold calling process in a Logistics Industry. The significance of each of the independent factors, which contribute to an appointment during a cold call, was measured statistically through a multiple linear regression analysis. Also, a comparison of the re-engineered phases was made. This article also suggests the applications, limitations and future directions for such a modeling approach. Prospecting is significant in telemarketing to increase sales. Telemarketing is referred to as a systematic and continuous program of communicating with customers and prospects via telephone (Schneider 1985; Candoza and Shipp 1987). Harvel L. Poppel (1983), a notable person in marketing productivity reports that less than half of the typical sales representative’s prospecting time is productive and the rest of the time is based on low-probability prospecting calls. From a study by a group of researchers (VanDoren and Stickney 1990), it was concluded that too many unqualified prospects as the reason for the decrease in sales and skepticism among the sales force. Marvin A Jolson et al (1987) stress the importance of elements of persuasion over the phone. They also describe a telephone representative as a person who is soft spoken and makes little or no effort to extol the company or the features and benefits of their products being sold. In addition, Marvin A Jolson et al. (1987) note that having a sales person deliver information about a company increases prospecting. Cold calling process and direct mail appeal are types of outbound telemarketing. Telemarketing could be the only way to profitably serve a particular market segment.
Globalizing Malaysia’s Human Resources: Removing the Language Barrier
Manuel Yunggar, Ph.D., Northwestern State University of Louisiana, Natchitoches, LA
This paper attempts to assess the current concern in Malaysia on the adequacy or inadequacy of the national language Bahasa Melayu (BM) as an important vehicle towards achieving the country’s national objective - Vision 2020. Comments abound that the present level of mastery of the English language in Malaysia (seen as an international language of commerce and technology) is not up to international standard and therefore is deemed as substantial veil or deterrent to Malaysia’s international competitiveness worthy of government intervention. Is it a valid statement to say that “BM is not as ready to be used or considered as an international commercial and technical language” valid? Is it time that if Malaysia is to continue using solely BM as it does in the country, its efforts towards achieving Vision 2020 may be considerably impeded, and therefore BM usage is seen as a deterrence towards the soon ushering of this small nation into a developed country status in the target year 2020. Recently, the Mahathir leadership made a daring and decisive move to “lift” the usage of BM and announced the re-adoption of English in the teaching of sciences and mathematics in the country’s educational system. For many years, Malaysia is one of Southeast Asia’s most economically vibrant countries. It has been in the limelight as one of a handful success stories in the developing world mainly due to its decisive shift in economic related policy towards outward orientation especially in the late 1980s. .
Voluntary Disclosure and Corporate Governance in Malaysia: The Case of Financially Distressed Firms
Norita Mohd Nasir, Monash University Malaysia, Malaysia
Dr. Shamsul Nahar Abdullah, Ph.D., CPA, CMA, CA, Universiti Utara Malaysia, Malaysia
Voluntary disclosures have been extensively documented across markets, such as in the U.S., U.K. and Asian region. Previous studies on this issue have examined the impact of firm-specific characteristics and the extent of voluntary disclosures across markets. A more recent studies focus on the relationship between corporate governance structures and the extent of voluntary disclosures. This current study extends previous studies by examining the influence of financial status, namely financially distressed firms, in explaining the level of voluntary disclosures in Malaysia. We examined the annual reports of distressed and matched healthy firms for financial years 2000 and 2001, a post economic downturn period. Our findings show that financially distressed firms disclosed lower voluntary disclosures as compared to their matched healthy firms. This evidence contradicts previous evidence by Skinner (1994, 1997) who provides evidence showing firms with bad earnings news are more than twice as likely to pre-disclose the poor earnings performance than firms with good news. With regard to corporate governance variables, only board independence was found to have significant influence on the level of voluntary disclosures in the predicted direction, thus supports greater transparency. Audit committee independence, on the other hand, provides no evidence in association to the extent of voluntary disclosures. However, strong and consistent findings were found with regard to ownership patterns. Our findings reveal that outside ownership is positively and significantly associated with the extent of voluntary disclosures, consistent with those found by Hossain et al. (1994) and Chau and Gray (2002).
Downsizing as a Strategic Intervention
Nell Mirabal, St. Thomas University, Miami, FL
Dr. Robert DeYoung, St. Thomas University, Miami, FL
The effects of downsizing as a strategic intervention typically stem from organizations seeking to reduce the number of employees through layoffs, attrition, redeployment, early retirement and reorganization or de-layering. These reductions are generally a response to one or more of the following conditions: a response to mergers and acquisitions; revenue loss or loss of market share through technological and industrial change; the execution of new organizational structures; and social pressures attributed to the philosophy that smaller is better. The focus of this article will apply Cummings and Worley’s (2001) five application stages using downsizing as a strategic intervention, which examines organizational goals and objectives, overall assessment of the organization, relevant choices and decisions, the implementation stage, workforce reduction, survivor syndrome and organizational renewal and growth strategies. The authors will also examine the effects of downsizing on financial performance, corporate reputation for social performance and managerial commitment to strategic change. Downsizing is a business strategy designed to improve the financial standing of a firm by reducing and changing the structure of the workforce in order to improve operational results (Appelbaum, 2001).
The “ Economic Man” Model vs. the “Social Man “ Model of Human Conduct
- Behavioural Patterns in Interactive Processes: Findings from an Experimental Study –
Dr. Josef Neuert, University of Applied Sciences, Fulda, Germany
Managerial decision making and strategy building are in the centre of interest for economists, business administration researchers and business professionals. Such processes mostly deal with interactions between individuals and/or organisations. Human behaviour in those procedures has been regarded as rational and benefit-oriented within the mainstream economic theories. Nevertheless, there have been both theoretical analyses and empirical findings ever since, suggesting that individual and organisational conduct do not exactly mirror those patterns, but significantly disclose ‘emotional’ impacts and ‘social’ orientation, influencing the outcomes of negotiations and interactions. Moreover, it can be assumed that sociological and educational pre-orientation are playing a pre-eminent role for either more economic driven or more socially driven behaviour. The experimental investigation of this theorem is supposed to contribute to the furtherance of academic and scientific knowledge and its utilisation in business research, business practises, and business education. Interaction processes are in the centre of interest both on the academic and the professional levels. Interactions basically define disciplines like business administration, management and economics in the scientific area as well as management and leadership in a practical sense (see among others: Schneider, D. , 2001). The markets as the meeting points of supply and demand – the core element of free economies – are the fundamental locations which create interactions in a myriad of ways:
The Relationship between National Banking Industry’s Performance and Efficiency
Conrad J. Francis, Keiser College, FL
The banking industry provides the life blood of all economies and as such the study of them is critical to the understanding of all economies. Banks affect the creation of money, and influence the perception of the public as to how well the country is growing, and is an extension of government monetary policy. This study seeks to determine if there is a relationship between the performance of the banking industry of the United States and that of Japan. Financial intermediaries are critical to the economy of any country as they can affect the performance with the creation of money, influence the perception of the public as to how well the country is growing, and is an extension of government monetary policy. There are two kinds of financial intermediaries, one is a bank and the other is a non-bank (that accepts deposits of funds and only offers either checking accounts or commercial loans, but not both). Sinkey (2002) describes a bank as an organization, which provides debt restructuring, loan commitments, lines of credit, credit screening, credit rationing and the creation of liquidity. He further states that the dominant organizational form of a bank is called the bank holding company (BHC), which is an organization that owns one or more banks. According to Rose (2002) there are several kinds of non-banks including: credit unions, security brokers, check cashing firms, real estate companies, mutual fund organizations, and insurance companies. Not all are of equal importance to the economy or to the study of financial research.
Small U.K. Firms' Export Withdrawal and 'Re-Internationalisation' Decisions: A Longitudinal Study
Dr. Dave Crick, University of Central England, U.K.
The findings from a 4-year longitudinal study into the activities of small U.K. firms that had discontinued export activities are reported upon in this paper. Findings suggest that no single existing theory by itself could fully explain activities undertaken by management teams. The implication is that support providers should view internationalising firms in a 'holistic' manner in order to more effectively assist their international entrepreneurial activities. A growing body of literature has emerged on the subject of international entrepreneurship that McDougall and Oviatt (2000) view as 'a combination of innovative, proactive and risk-seeking behaviour that crosses national borders and is intended to create value in organisations'. In contributing to this area of research, this paper addresses Coviello and Jones' (2004) observation that a gap exists in the literature concerning longitudinal studies of small firms' internationalisation strategies. It reports on a longitudinal study into the activities of a group of firms that had, at the start of the study, discontinued export activities. Internationalisation strategies are investigated over a period of four years after the decision to discontinue exporting together their support requirements. Existing research has tended to report on the behaviour of firms at one point in time i.e. findings have arguably been somewhat static.
The Behavioral Effects of Legislation on Bank Performance and Efficiency
Conrad Francis, South University, FL
The banking industry plays a critical role in the economic, social and behavior of the society and therefore is an important area of study. The performance of the United States banking is studied and its performance before and after the passage of major legislation is statistically compared to determine if there are any changes that occurred. The behavior of the leadership of the banks is also documented and it leads the reader to reach conclusions as to what can take place when the leadership is involved with the formulation of the legislation. Financial intermediaries are critical to the economy of any country as they can affect the performance within an economy’s money supply, influence the perception of the public as to how well the country is growing, and is an extension of government fiscal policy. There are two kinds of financial intermediaries, one is a bank and the other is a non-bank (that accepts deposits of funds and only offers either checking accounts or commercial loans, but not both). Sinkey (2002) describes a bank as an organization, which provides debt restructuring, loan commitments, lines of credit, credit screening, credit rationing and the creation of liquidity. He further states that the dominant organizational form of a bank is called the bank holding company (BHC), which is an organization that owns one or more banks. According to Rose (2002) there are several kinds of non-banks including: credit unions, security brokers, check cashing firms, real estate companies, mutual fund organizations, and insurance companies. Not all are of equal importance to the economy or to the study of financial research.
Optimal Hedge Ratio Derivation in DJIA Spot and Futures Market: A Comparative Analysis of Linear and Non-linear Approaches
Sayantani Ghose, University of Rochester, Rochester, NY
The introduction of stock index futures has been one of the remarkable contributions to the available set of financial instruments. In addition to the liquidity, which is allowed by these contracts, stock index future is a key instrument for portfolio management and is frequently used by institutional investors and hedge funds for portfolio insurance and hedging. Normally the expected-utility maximization criterion leads to the optimal hedge strategy. However, significant differences have been observed in the hedge ratio depending on the estimation techniques. This paper uses updated daily data on the futures settlement prices on Dow Jones Industrial Average (DIJA) and the DJIA index closing prices to derive and compare these different techniques of obtaining the hedge ratio. It can be inferred from the results that the Error Correction Model offers the best possible representation and hence the most efficient hedge ratio. A futures contract is an obligation to deliver (or purchase) a pre-specified amount of a certain asset or commodity at a fixed time in future. Trading in futures contracts on any stock index was first introduced in 1982. The effectiveness of using futures contract as a hedging instrument has made it the focus of much research. These contracts offer the investor the opportunity to reduce the market risk associated with their portfolio and fulfill their objective of minimizing this risk for a given level of expected return. The issue that has attracted significant attention has been in relation to how to obtain the optimal hedge ratio. The concept of portfolio theory through hedging, which was introduced by Johnson (1960) was applied by Ederington (1979) to derive a risk-minimizing hedge ratio and a measure for its effectiveness.
Closing the Gap: Why Non-Profits Should Continue to “Date” Stakeholders Even After the Wedding
Jaciel Keltgen-Pierson, Augustana College, Sioux Falls, SD
In an effort to better understand the myriad community associations necessary to keep a non-profit organization functioning in a climate of scandal and suspicion, students at Augustana College, a Midwestern Christian liberal arts institution undertook an audit of the college’s relationships. Once the audit – which investigated relationships with employees, employers, neighbors, governing bodies, investors, alumni, churches, current students, prospective students and their parents, media, suppliers and strategic partners such as financial institutions – was completed, student teams progressed to developing a community relations blueprint for the college to build upon during strategic planning. Students were actually approaching stakeholder theory – a business performance tool compatible with a core objective of maximizing shareholder value by providing a framework for the systematic consideration of the interests of parties with which a firm has relationships – in a very practical way. In order to gather the data necessary for the audit, the professor teaching the advanced marketing course developed an advisory committee comprised of college leaders in the areas of admissions, student services, alumni relations, development, public relations, grant writing, human resources, academic affairs, and career development. The group provided contacts and background information relating to constituencies, relationship goals, current communication efforts, and other pertinent details. Student teams then began interviewing representative members of the various constituencies to determine gaps in current relationships, as identified by stakeholders, and after analyzing the results and considering options they had been studying throughout the semester, devised a 100-page plan to improve or cement those relationships, complete with sources, for college administrators to consider and/or adopt.
Effects of ISO9000 Certification on Organizations
Dr. C. P. Kartha, University of Michigan-Flint, Flint, MI
Global competition and demand for better quality requirements by customers in recent years resulted in an emerging need for countries to develop guidelines and standards for identifying and addressing quality issues. The International Organization for Standardization (ISO) in 1987 developed a set of quality standards known as ISO9000, subsequently updated and revised in 1994, as a model for quality assurance and quality management for organizations involved in design, development, production, installation and service. The purpose behind the deployment of ISO9000 was to simplify the international exchange of goods and services by requiring a common set of quality standards. The European Community nations adopted ISO9000 as the model for international standards for quality and required registration to these standards mandatory for doing business with other nations. In the mean time, the Big Three automobile manufacturers in the U.S. developed QS9000, an extended version of the ISO9000 standard, and required that all its suppliers obtain registration to these standards in order to qualify for new contracts as well as for renewing existing contracts. Typically an organization obtains ISO9000 registration before proceeding to work for the QS9000 certification. These developments generated immense interest in companies all over the world to actively begin the implementation of the various requirements in the standards to obtain certification. For most organizations, working towards certification was no longer an option but a necessity for survival in a competitive global market. ISO9000 Standard is a series of internationally accepted guidelines as to how organizations should set up their quality assurance systems.
Utilization of Asset Valuation of Health Maintenance Organizations to Define Economic Viability
Martha E. Jennings
Research has indicated the health care industry represents close to 14% of the gross national product, equating to approximately $1 trillion annually ( Mehra, S., Inman, R.A., & Tipton, J., 2002). For the past several decades, the heath care delivery system has been comprised primarily of health maintenance organizations, a concept of health care delivery that has proven itself to be effective in reducing health care dollars and slowing escalating costs. Approximately 70% of the health insured population is currently enrolled in some type of a managed health care system, with the balance consisting of traditional fee-for-service plans and the uninsured. Successful containment of health care costs, in addition to federal government endorsement, attributed to increasing numbers of health maintenance organizations over the past twenty years. Unfortunately, with the increase in the number of organizations, so have the incidences of their financial failure. Over 75 HMOs have failed financially since 1996, with numbers continuing to increase. The reasons for the growing numbers of bankrupt HMOs are multifaceted, creating devastating ramifications for all constituents. Early identification of HMO financial woes alerts the organization and its stakeholders of pending insolvency, allowing for corrective measures to be instituted.
When Restricting Trade Is Necessary: An Economic Explanation
Dr. Ying Kong, York University, Toronto, Canada
SEQ CHAPTER \h \r 1Most arguments in the world are that economists are more favourite free trade while some public favourite restricting trade. The arguments are largely based on the implicit assumption that the domestic import-competing industry is perfectly competitive. By relaxing this assumption, this paper demonstrates that economists may also support restricting trade when some conditions are met in an imperfectly competitive domestic import-competing industry. Using a cross market cost-benefit analysis, this paper provides a model that exams welfare changes in both imported good market and domestic like good market. The model demonstrates that restricting trade may be needed if there is a small import price change and a large cross elasticity of demand for the consumer. Free trade or restricting trade is a long time arguments not only among economists, business persons, politicians but also among general public opinions. Recent survey done by Princeton Survey Research Association International showed that 47% American believe that free trade is a good thing for the United Sates while 34% believe that free trade is a bed thing.(1) The most concern from public may be focused on “distribution effects “and “noneconomic arguments” of international trade.(2) International trade affects the distribution of income both within each country and among countries. Both effects generate constituencies for restricting trade. Also, domestic residents pay more attention to the elements beyond the narrow scope of economies by pointing out that a society typically values things such as national security and equity along with economic efficiency.
Deconstructing the Constructive Action: The Processes, Uses and Benefits of an Experientially Based
Pedagogical Model for Effective Business Education
Edward B. Kurpis, Metropolitan College of New York, NY
A unique pedagogical tool known as the Constructive Action ® (hereafter the “Constructive Action” or otherwise “CA”) was developed over forty years ago by pioneering New York educator Audrey Cohen, who formed a nationally acclaimed and accredited college in her name using the Constructive Action concept as a centerpiece for providing a distinctive experientially based education. The Constructive Action, among its many objectives, provides a sound pedagogical methodology for the encouragement of meaningful interaction between traditional academic teaching and professional experience, initially in the field of Human Services. Given its demonstrable success, the CA’s applicability to other fields is a natural extension. Currently the Metropolitan College of New York has extended the use of the Constructive Action method to its undergraduate and graduate business education programs with measurable results. This paper examines the theoretical underpinnings of the Construction Action method, specifically in graduate business education, and will delineate the various pedagogical processes that make up the CA, from its initial macro-environmental research perspectives to its micro-analytic developmental exercises. The author will discuss the applications in and benefits of promoting this form of dynamic and relevant business education that encompasses all fields of study, including important international business perspectives.
Simulating and Animating Account Delinquency Behaviors in a Finance Institution
Dr. Nipa Phojanamongkolkij, Northern Illinois University, DeKalb, IL
The development and validation of a discrete event simulation (DES) model for a finance institution are carried out in this paper. The studied company markets many different financial services; however, the model is developed only for the personal closed-end loan. Animation of this DES model is also implemented. When a business decision must be made, management users can visually observe the impact of the decision on the company financial performance without waiting for the actual implementation. In service industry, top management often faces situations where business decisions or strategies must be made in advance so that the annual profit goal can be met. This paper will focus on the financial industry, a finance institution XYZ in particular. XYZ markets many different services including mortgage loan, credit card loan, personal loan, and auto loan. Only personal loan will be focused in this study. This type of loan is called closed-end loan. The closed-end loan is initiated with the fixed loan amount that customers request. Once customers and the company have agreed upon the annual percentage rate (APR) and the length of the loan (36, 48, or 60 months), customers have to make a fixed monthly payment until the agreed loan length is reached. An example of this closed-end loan is known commercially as home equity loan or the second mortgage loan. A general loan application process starts with the customer filling a loan application.
The Learning Effectiveness of Local Firms of Managerial Knowledge in MNCs Network: A Research Model
Dr. Hai Feng Yan, East China University of Science and Technology, Taiwan
Dr. Po-Wei Pan, Hsuan Chuang University, Taiwan
Bin Shan Wu , Ling Tung College, Taiwan
Knowledge-based theory of firm regards the firm as aggregate of knowledge, and believes that distinctive knowledge is the key factor for the firm to gain competitive advantage. The new knowledge of an organization comes from either internal creation or the external acquisition. This article points out that MNC is an important external resource of managerial knowledge for local firms, and the long-term and stable network relationship formed with MNC in China becomes a substantial way for local firms to obtain such external knowledge. Based on clarifying the relevant themes, this article provides a research modal about local firms learning managerial knowledge from their foreign partners in MNCs network in China, and gives some recommendations for further research as well. By focusing upon knowledge as the most strategically important resource of the firm, some scholars are in the process of developing knowledge–based theory of firm (e.g.Grant, 1996; Spender, 1996; Conner and Prahalad, 1996). The acquisition of new organizational knowledge is increasingly becoming a managerial priority. As the global competitive environment continues to intensify, this priority takes on new significant. New knowledge provides the basis for organizational renewal and sustainable competitive advantage (Inkpen, 1998).
Corporate Governance and its Impact on the Economy
Shanthy Rachagan, LL.B., CLP, MBA, LLM, Monash University Malaysia, Malaysia
Due to the environment of concentrated shareholding in companies in Malaysia generally, there is a greater likelihood of reduced corporate governance which results as a consequence of the board and other executive officers being controlled by the concentrated shareholdings. Such concentrated shareholding, in the Malaysian context (and also other Asian countries), is possibly a direct consequence of the traditional family held companies which have been operating for many decades. The patriachical approach has continued to find its way into the corporate structure even where traditional family held private companies have grown and become public listed companies. The requirement for a narrow shareholding spread to achieve listing has not benefited the situation much. (1) Further, in line with our former Prime Minister’s Dr. Mahathir Mohammed’s explicit desire for the development of the Malay (Bumiputera – prince of the land) capitalists through government patronage via policies such as the NEP (New Economic Policy) and privatisation, a number of major conglomerates controlled by the Bumiputera with close links to the political elite emerged and developed rapidly during the 1980s. The ostensible reason for the award of government contracts to such businessmen was that these Bumiputeras had acquired the ‘expertise’ to build on these rents, although this was not usually the case.
A Two-Stage Hybrid Credit Scoring Model Using Artificial Neural Networks and Multivariate Adaptive Regression Splines
Tian-Shyug Lee, Fu-Jen Catholic University, Hsin-Chuang, Taipei, Taiwan
Jung Fang Chang, First International Telecommunication, Hsin-Chuang, Taipei, Taiwan
The objective of the proposed study is to explore the performance of credit scoring using a two-stage hybrid modeling procedure with artificial neural networks and multivariate adaptive regression splines (MARS). The rationale under the analyses is firstly to use MARS in building the credit scoring model, the obtained significant variables are then served as the input nodes of the neural networks model. To demonstrate the effectiveness and feasibility of the proposed modeling procedure, credit scoring tasks are performed on one bank housing loan dataset using cross validation approach. As the results reveal, the proposed hybrid approach outperforms the results using discriminant analysis, logistic regression, artificial neural networks and MARS and hence provides an alternative in handling credit scoring tasks.Credit risk evaluation decisions are crucial for financial institutions due to high risks associated with inappropriate credit decisions that may result in huge amount of losses. It is an even more important task today as financial institutions have been experiencing serious challenges and competition during the past decade. When considering the case regarding the application for a large loan, such as a mortgage or a construction loan, the lender tends to use the direct and individual scrutiny by a loan officer or even a committee. However, if hundreds of thousands, even millions of credit card or consumer loan applications need to be evaluated, the financial institutions will usually adopt models to assign scores to applicants rather than examining each one in detail. Hence various credit scoring models need to be developed for the purpose of efficient credit approval decisions.
The Impact of FDI in Emerging Markets
Abhishek Sharman, Indian Institute of Management Calcutta (IIMC), Kolkata, India
Karishma Bhalla, Indian Institute of Management Calcutta (IIMC), Kolkata, India
This paper is an attempt to understand the economic and regulatory framework which will help emerging economies extract the maximum benefit from Foreign Direct Investment (FDI). The paper concludes that FDI is more effective at the micro rather than the macro level. It helps service trade deficit in the short-run- and more importantly also leads to development of markets. However, in the long run policy makers should aim to direct FDI so as to increase technological capabilities, workforce skill, domestic income and consequently domestic savings - for historical trends show that savings to GDP ratio is a key indicator of a healthy transition of a country from a low per capita income country to a developed economy. A necessary condition for the same is the availability of sufficient stock of human capital in the host country that meets a minimum threshold which allows it to efficiently absorb and utilize the inflows of modern technology. Beyond this point FDI needs to be regulated because a country needs to preserve its comparative advantage and in a bid to do so preserve industries which may not be able to compete presently owing to a non-level playing field. At the macroeconomic level FDI has resoundingly helped emerging economies. It has raised outputs and productivity of sectors – raising national income while lowering prices and improving the quality and selection of services and products for consumers.
Explaining Foreign Direct Investment Flows to Developing Countries
Dr. Oluyele Akinkugbe, University of Botswana, Gaborone, Botswana
Dr. Pender Gbenedio, Benedict College, Columbia, SC
A rather stylistic conceptualization of the issues involved in the location of foreign investments in developing countries has been attempted in this paper. That is, foreign investors decide in the first instance whether or not to venture into a developing country. Secondly, they decide on the amount of resources to invest in the chosen countries. These two-part investment decisions we feel might not be adequately captured in the conventional multiple or even panel regression models as previously undertaken in a number of studies. In this regard a probit model was first estimated in order to examine the binary issue of whether or not to locate FDI in a developing country. In the second step, a panel regression model was employed to examine the factors that may explain the volume of FDI flows to selected countries. Our findings reveal some consistency in the behavior of aggregate foreign investors. The same set of variables–market, openness to international trade, infrastructure and a high rate of return on investment–are the significant decision variables in the two-part analysis. An important question which seems to have generated quite a bit of interest in recent times, among economists and policy makers alike has to do with why international investors may not have found some developing countries attractive as an investment destination; and what factors may to a reasonable extent explain the volatile nature of FDI flows to receiving ones. There was an upsurge in FDI flows to developing countries from the early 1990s.
Do Non-Audit Services (NAS) Affect the Audit Work Performed by a Regulating Auditor?
(A Review on Australian Accounting and Auditing Perspective)
Mohamed Nazim Bin Abdul Rahman, Monash University Malaysia
In recent years, corporate collapse is no longer an unusual phenomenon in many parts of the world. The worst is that the collapse has been regarded due to auditors’ intentional misdeeds that led to financial disastrous and fall of many gigantic corporations. The credibility of financial reporting has been one of the biggest issues in serious dilemma after the collapse of many giant companies like Enron, Worldcom, Parmalat, HIH (Australia), One-Tel, Harris Scarfe and many more. As a result of that, Sarbanes-Oxley Act 2002, United States is one example for its emergence to prohibit most of Non-Audit Services (NAS) provided by the same auditing firm. There are various reasons for prohibiting NAS. However, Australia through the Corporate Law Economic Reform Program (CLERP 9) has finalised not to prohibit NAS but to disclose it. The statement requires listed companies to prepare a NAS disclosure to be included in the annual report. The purpose of this paper is to look into the various aspects of NAS and the possible effect it may have on audit work. Accountants in public practice provide a variety of services. Traditionally, services provided by public accounting firms can be classified as either attest or non-attest (non-audit) services. Attest service include audit, review and sometimes agreed-upon procedures. They are normally those in which a professional accountant issues a written communication that express a conclusion about the reliability of a written assertion that is the responsibility of another party. (1)
Technopreneur Education and Incubation: Designing IT Technopreneurship Graduate Program
Sahadah Hj. Abdullah, Universiti Utara Malaysia, Malaysia
Dr. Zulkhairi Md. Dahalin, Universiti Utara Malaysia, Malaysia
Mohd. Syahrir Rahim, Universiti Utara Malaysia, Malaysia
This paper describes the design of a post-graduate program in Information Technology (IT) Technopreneurship that blends practice with theory with the primary objective of producing successful graduate IT technopreneurs. The program is designed based on close partnership between the university, the industry, and the government to ensure young and intelligent IT enthusiasts to obtain the necessary entrepreneurship knowledge and skills as well as to provide initial seed capital and adequate funding for start-offs. With the close industry linkage, business opportunities will be made available for the young technopreneuers to gain experience and exposure in the real-life environment as well as fulfilling part of the industry’s social obligation and support. The duration of the program is four semesters or two years leading to the Masters of Science in IT Technopreneurship. The program consists of four components i.e.; Self Development and Competencies through specialised technopreneurship development training, University-Industrial Linkage and intensive incubation phase to develop and commercialise IT products, Knowledge and Skill on IT and Business through Teaching Factory and Mentoring and/or solutions using the concept of Continuous Supportive System. Candidates will be selected among those who graduated with at least a 3.0 cumulative grade point average. They will have to go through a screening process in the form of an interview and aptitude test in order to get the right participants with the right attitude, having entrepreneurship characteristics, and those who possess high motivation, perseverance and interest.
An Examination of Organizational Citizenship Behavior (OCB) in an Academic Setting.
Do OCB’S Generalize to Student Performance and Satisfaction?
Willard G. Broucek, Northern State University, Aberdeen, SD
This paper examines the construct of Organizational Citizenship Behavior (OCB)(Organ, 1997) and extends its applicability to academic performance. The relationship between OCB, Student Satisfaction, Grade Point Average, and Life Satisfaction is discussed. Organ (1988) and his colleagues (Bateman & Organ, 1983; Smith, Organ, and Near, 1983) first used the term organizational citizenship behavior to describe work behavior that is discretionary, not directly or explicitly recognized by the formal reward system, and that, in the aggregate, promotes the effective functioning of the organization (Organ, 1988, p.4). Other terms for overlapping behavioral domains include prosocial organizational behavior (Brief & Motowildo, 1986), organizational spontaneity (George & Jones, 1997), and extrarole behavior (Van Dyne, Cummings, & McLean Parks, 1995). Contextual performance (Borman & Motowildo, 1993, 1997), activities that support the social and psychological context in which the organization's technical core is embedded, similarly overlaps with OCB though the latter has historically emphasized discretionary behavior that was not formally rewarded while the former does not. Organ redefined OCB as behavior that contributes "to the maintenance and enhancement of the social and psychological context that supports task performance" (Organ 1997, p.91) thus bringing the two concepts much closer together.
Analyzing and Designing the Transportation Planning Platform of the Collaborative Supply Chain
Herny Ker-Chang Chang, Chang Gung University, Taiwan
Bin Thiang Guang, Chang Gung University, Taiwan
The globalisation of markets and manufacturing has forced the severe management of supply chains, the competition of the business has unrestricted under national boundaries. The requirement of collaboration becomes very important to the current enterprises. In addition, the development and rapid growth of electronic marketplaces have gained much attention from both of the academia and the enterprise. They think of electronic marketplaces which will play important roles from now on electronic marketplaces can be the platform of sharing information among collaborative members. With the growing appearance of electronic marketplaces, the members in any collaborative team can create information visibility and capture the moments of information. By this way, a collaborative teamwork can enable all collaborative members of the supply chain to manage their business processes better. it would decrease the bullwhip effect which is resulted in lower information visibility. In this proposed work, we want to get some new ideas to create a collaborative operation platform where all members can practically interchange their idea and information to speedup the spirit of corporation. A Collaborative Transportation Management (CTM) will be designed and implemented using JAVA and J2EE to illustrate our idea. In order to shorten our work, we just illustrate part of our work. The globalisation of markets and manufacturing has forced the severe management of supply chains, the competition of the business has unrestricted under national boundaries (Rudberg et al.2003), the work of collaboration becomes important to the enterprise. Besides, the academia and the enterprise pay much attention to the development of electronic marketplaces, and think of electronic marketplaces which will play important roles from now on (Skjott-Larsen et al. 2003).
Business Administration: “Future-oriented Entrepreneurial Strategies Against the Background of Volatility”
Van Dinh Hong Vu, Foreign Trade University, Hochiminh City, Vietnam
The environment of today’s economy is more dynamic and uncertain than it ever was. The fundamental developments over the past few years such as the process of globalization or formation and communication technology have meant that changes take place more rapidly and therefore it is becoming increasingly difficult for management and employees to make forecasts with regard to future developments. This paper therefore would offer a place in which to observe this subject which is of strategic relevance in a complete way. The causes of increasing volatility will be analyzed throughout this paper and strategies will be presented on how to be successful despite or even because of these rapid changes taking place. To label the past two yeas or so as “a period of volatility” in capital market is an understatement. An unprecedented string of negative news, including financial scandals, has triggered a succession of downdrafts with an occasional climb. The result: an Ibbotson chart representing a cardiologist’s nightmare. Allegedly, such greater volatility has led to a greater number of incidents of financial crises, increased problems for monetary authorities in managing the financial system and additional challenges for managers in multinational enterprises. To master such volatility, business executives should have a new perspective on organization economics to analyze the essence of the company and company relationships. How to reach the right boundary of a company, how to manage the value generation process of an industry, and how to participate in the industrial competition?
Private Sector Financing on Economic Growth in Malaysia: Results from the Bounds Test
Santha Vaithilingam, Monash University Malaysia, Malaysia
This paper investigates the impact of the private sector financing role of commercial banks on economic growth in Malaysia for the period of 1976 to 1999. The short-run and long-run relationship between banks and the other conditioning variables on economic growth were estimated using a robust technique namely the Unrestricted Vector Autoregressive Model (UVAR) proposed by Pesaran et al. (2001). Based on the UVAR model, a new cointegration test known as the ‘bounds test’ was used to assess if the growth of the economy is cointegrated with the explanatory variables in the study. Due to the small sample size, the traditional cointegration tests (Engle-Granger, Johansen-Juselius) are not reliable, but ‘bound test’ reduces the shortcomings of small sample biasness. The results from this study find that there is a relationship between private sector financing by banks and economic growth and as such have important policy implications. The relationship between financial systems and growth has gained renewed importance of late with globalization, liberalization of the financial systems and the recent Asian financial crisis. In Malaysia, commercial banks make up a substantial component of the financial system (Table 1). In the year 2003, assets of both the banking and non-bank financial intermediaries had increased substantially compared to previous years but the bulk of the increase in assets within the banking system was due to stronger growth in assets of the commercial banks (BNM, 2003).
How Orchestras Measure Internal Performance Revisted
Dr. Rosalie C. Hallbauer, Florida International University, Miami, Florida
The age and size of these organizations differ but all have met a similar fate. Why? Can it be blamed on events since September 11, 2001, the problems with the economy that started in with the beginning of the market downturn prior to Sept. 11, or something more internal to the organizations themselves? While it is easy to blame the former, the latter two are the more likely culprits, exacerbated by September 11. “. . .despite the good times [the late1990’s] 10 symphonies declared bankruptcy or otherwise restructured in the past 15 years, according to the American Symphony Orchestra League.” (Herald-3) The San Jose Symphony tried to recover but failed and currently there are some plans to try to get the Florida Philharmonic restarted at a much lower budget and number of performances, the same idea as proposed for the San Jose Symphony. In an article written about the Boca Pops it was mentioned that, based on the previous year’s attendance (2000), it expanded its base into additional regions. (Herald-4) The signs of the market downturn existed prior to Sept. 11; the potential shortfalls in funding from the State of Florida were known before Sept. 11. It would seem that none of this was considered in the plans for expansion.
Residential Consumer Switching Rate vs. Restructuring Policy:
The Pennsylvania Experiment in Electric Power Market
Dr. Chien-Ping Chen, University of Houston-Victoria, Victoria, TX
Significant switching rates have been questioned as an artificial result of the above-generating-cost price to compare (shopping credit). This paper examines two Pennsylvania high-generating-cost utilities, which demonstrate totally opposite movements of residential switching rate under different restructuring policies, to explore how the price to compare, the competitive transition charge, and the critical mass effect of switching consumers determine the switching behavior. When the price to compare increases over time, no matter reflecting sufficiently the rising wholesale price or not, the marginal analysis concludes that a significant price reduction policy will induce an early stage high switching rate without critical mass effect in transition. Consumers will eventually switch back to the incumbent. In contrast, an effective required switching rate policy must be associated with both an artificial price cut in the early stage and a longer period of stranded cost recovery to accelerate the growth of switching rate with the critical mass effect. The long-run high switching rate without market price reduction comes from the policy design, not from the subsidy in shopping credits. Switching rates play no role to evaluate success or failure for the restructuring under both types of policy.
Analyzing Network Level Performance Measurement in SMES
Tero Vuorinen, University of Vaasa , Seinäjoki, Finland
Dr. Elina Varamäki, University of Vaasa , Seinäjoki, Finland
Marko Kohtamäki, University of Vaasa , Seinäjoki, Finland
Dr. Jukka Vesalainen, University of Vaasa , Seinäjoki, Finland
Dr. Timo Pihkala, Lappeenranta University of Technology, Lahti, Finland
The present study is based on two perspectives, by means of which we try to produce added value to discussion on networking. These perspectives are a system view and a view that considers networks as entities. Previous performance measurement systems have focused on the level of single enterprises. In the present pilot study, the purpose is to update the state of the art and to create a theoretical framework for a network-level performance measurement system. A network-level performance measurement system emphasizes win-win situations in the network between the leader enterprise and the other members of the network. In many cases in vertical networks, co-operation between the leader company and the other cooperative members, which usually are subcontractors, resembles more a zero sum game than win-win co-operation. Our assumption is that not even the leader company can succeed in the best possible way if the network around it is not performing well. The suggested framework for a performance measurement system is composed of the factors that enable action and success, of the processes, as well as of the productivity and profitability of activities. The issues enabling success are (1) the values and culture of the network, (2) resources, competences, as well as the (3) models of action in the networks. The profitability of activities can be divided into (4) the profitability of internal processes, (5) customer satisfaction and the (6) financial key ratios of the network. The focus of this paper is the three first parts which enables the success.
Corporate Behavior: Can Consumers and Capital Markets Help the Reform Process?
Maneesh Sharma, Ph.D., Indiana-Purdue University, Fort Wayne, Fort Wayne, IN
Corporate behavior has been in the limelight for a few years now. With issues raging from excessive compensation, inferior financial performance, misleading statements and even outright fraud, it is no wonder that the equity markets are pricing a higher risk premium. Though the performance of equity markets has suffered, this phenomenon has been a boon for activists who have long argued for reform in accounting and accountability. What makes this issue even more challenging is the fact that management must always deal with balancing interests of all stakeholders. This outcry has resulted into some substantial legislation such as the Sarbanes-Oxley (SOX) act. Even though the jury is out on whether SOX has accomplished what it was designed to do, namely, to provide more transparency and legitimacy to the numbers reported by the corporations, it is a step in the right direction, even if not THE step in the right direction. The impact of this fallout has been even more acute than in previous market downturns as more people have stake in the equity markets. Most households, either as a result of retirement accounts and or direct investing, participate in the markets.What evidence exists to indicate that corporate behavior has been less than stellar? Although such evidence may be difficult to generate, there is much anecdotal to this effect. An examination of some the legal cases pending and or being prosecuted include MCI, Enron, Adelphia, and more. But what of the argument that these cases are just outliers and most firms don’t behave, and indeed aren’t implicated. Here, the issue has to be better defined.
Earnings Management Surrounding Seasoned Capital Offerings: Analysis of Indian Firms
Yarram Subba Reddy, Monash University Malaysia, Malaysia
Bala Shanmugam, Monash University Malaysia, Malaysia
The present study examines the behavior of seasoned offering firms surrounding their issue period for the capital issues offered during the period 1995-96 to 1998-99. Analysis of earnings management practices of firms though show apparent differences in terms of discretionary current accruals between issuers and non-issuers as well as between debt issuers and equity issuers, these differences are not statistically significant.. Perhaps earnings management is all pervasive and is not just confined to seasoned offering firms in emerging markets unlike the markets in developed countries. Analysis of influence of earnings management on stock market performance of seasoned offerings shows insignificant role of discretionary current accruals in explaining post-issue stock returns. The process, pricing, stock market response to seasoned offerings of capital, and their long-run operating performance have been analyzed by several studies for corporate sector world-wide (Rangan 1997, Teoh et, al. 1998). Negative stock market reaction on announcement of seasoned equity offerings by firms has been extensively documented in literature. Various theories have been proposed to explain the behavior of stock market in response to capital offerings. Myers and Majluf (1984) attribute the adjustment in stock prices to the adverse selection problem faced by investors. When managers are better informed than investors, the managers are likely to offer seasoned equity when they think that the stock market has overvalued their stock. Investors expecting this would respond negatively to an announcement of seasoned equity offering.
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