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Volume 2 Issue 6 (November 2013)

Management and Administrative Sciences Review ISSN: 2308-1368 Volume: 2, Issue: 6 ( November 2013) © 2013 Academy of Business & Scientific Research

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Management and Administrative Sciences Review ISSN: 2308-1368 Volume: 2, Issue: 6 (November 2013) © 2013 Academy of Business & Scientific Research

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Management and Administrative Sciences Review (MASR) is double-blind peer review journal and

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Dr. Sungbae AN [email protected] Assistant Professor Singapore Management University, Singapore Mr. Rab Nawaz Lodhi [email protected] Lecturer COMSATS Institute of Information Technology (Sahiwal Campus), Pakistan Dr. CHANG Pao Li [email protected] Associate Professor Singapore Management University, Singapore Dr. Rosa Maria Dangelico [email protected] Assistant professor University of Rome – Sapienza, Italy Dr. Amit Kumar [email protected] Associate professor Prabhat Kumar College, India Dr. Md Nasir Daud [email protected] Associate professor University of Malaya, Malaysia Dr. Suzaina Kadir [email protected] Senior Lecturer National University of Singapore, Singapore Dr. Farhad Shafiepour Motlagh [email protected] Assistant professor Islamic Azad University, Mahallat, Iran










Dr. Ramsundar Bairagya [email protected] Assistant professor Sambhu Nath College, Birbhum West Bengal, India



Volume 2 Issue 6

TABLE OF CONTENTS

1. The Role of Women's Employment on Family Management..........................................622-631 Ameneh Malmir

2. Buyer Faithfulness in FMCG Sector of Pakistan…………………………………………….…632-639

Dr. Rashid Saeed, Qutab Sarfraz, Muhammad Arshad, Rab Nawaz Lodhi, Dr. Zahid Mahmood, Dr. Moeed Ahmed

3. Beneish Model as Effective Complement to the Application of SAS No. 99 in the Conduct of Audit in Nigeria ……………………………………………………………………………………………640-655 Nwoye Ugochukwu J., Okoye Emma I., and Oraka Azubuike O.

4. Presenting a Framework for Outsourcing in the Holding Companies……………………….656-663 Gholamreza Ghasemi, Javad Soltangoudarzi, and Maryam Soltangoudarzi

5. The Organizational Role in Career Development of Employees…………………………..….664-669 Dr. Rashid Saeed, Rab Nawaz Lodhi, Filza Abbas, Urooj Ishfaque, Fareha Dustgeer, Dr. Moeed Ahmed

6. Work-Family-Stress and Depression among Public Senior Secondary School Teachers…..670-681

John N. N. Ugoani, Ph.D

7. The Relationship between Organizational Learning and Organizational Commitment in Sport Organizations……....................................................................................................................682-688 Somayeh Usefi, Rasool Nazari, and Tayebeh Zargar

8. The Role of Communication in Organizational Change………………………………..……689-694 Dr. Rashid Saeed, Rab Nawaz Lodhi, Salman Ahmed, Masood-ur-Rehman, Fareha Dustgeer, Amna Sami


9. Volatility Spill-over between the Stock Market and the Foreign Exchange Market in Pakistan……………………………………………………………………………………………..695-704 Muhammad Zahid Khalil, Muhammad Usman, Imran Shafique

10. Investigating the Relationship between Intellectual Capitals and Organizational Effectiveness in

State Agencies of Kerman City…………………………………………………………..………705-714 Masoud Porkiani, Amin Nikpour, Somayyeh Nobarieidishe and Raheleh Chamanifard

11. Does Efficient Working Capital Management Enhance Profitability of Pakistani Firms?….715-720 Hamid Bashir and Waqar Ahmad

Management and Administrative Sciences Review www.absronline.org/masr ISSN: 2308-1368 Volume: 2, Issue: 6, Pages: 622-631 (November 2013) © 2013 Academy of Business & Scientific Research

*Corresponding author: Ameneh Malmir Lecturers, Islamic Azad University, Malayer Branch, Department of management, Malayer, Iran. E-Mail: [email protected]

622

Research Paper

The Role of Women's Employment on Family Management

Ameneh Malmir

Department of management, Malayer Branch, Islamic Azad University, Malayer, Iran

This study was conducted in female employment and its impact on family management. Regarding the employment status of women can be improved by taking advantage of the potential provided. Methods: The population study of women teachers in city schools is Kangavar. For this purpose, 150 samples were selected randomly. In this study, 136 questionnaires that measure citizens' view of the status of women have been used. The reliability of the questionnaire data, the Cronbach's alpha was equal to 83/0. After collecting data from SPSS 18 software was analyzed information gathered from the following results were: There was a significant positive relationship between social position and status of women. There was a significant positive correlation between social status and education of women and there was a significant positive correlation between social status and political participation of women in the study population.

Keywords: Women's employment; family management; social status; security;

INTRODUCTION

Employment and social rights for women outside the home than ever before and has brought many benefits, But with a review of the family life of working women who can get the job for them and other family members have problems as well. However, this is not just unique to Iran as well as in other countries(Bokore, 2009).

The women are as much important as serious and determined that it was a very delicate and subtle and the least negligence, simple negligence or stinging political slogan may look distressed, become distorted and destructive. From this perspective, the research effort will be to examine the economic, social and cultural.

Also, understanding the factors that underlie women's employment and participation in social and economic areas of the country's population is a

top priority. The most important factor is the education level of women's employment in the labor market(Harandi, J., 2008). Educated women are also attracted to the labor market needs is more investment. This paper is to examine the impact of women's employment on family management and security. The significance of this research is that it refers to the women's household management and child rearing, work out in the field have taken a step forward. In other words, the role of women in family management, social and economic role has been one of their activities. Addressing the role of women in employment and family management as an important factor in life, it is very necessary and important. The aim of this study was to investigate the relationship between marital status, education, political participation and attitudes toward women characters that are slang. During the last years the

Manag.Adm. Sci. Rev. ISSN: 2308-1368 Volume: 2, Issue: 6, Pages: 622-631

Ameneh Malmir

question has always been whether the students of women's studies feminist approach there. If there is such a difference between what is and what are its properties and methods common? If the purpose of the method of data collection methods, feminist or anti-feminist per se, is not no way. What distinguishes it from other studies, feminist studies, is the research question, the research hypotheses, the relationship between researcher and subject, theoretical frameworks and interpretation of research results.

This method often depends on the subject, but most feminists are reluctant to employ quantitative methods, believe that it looks like the object of quantitative methods in human subjects. Feminist researchers try to think from the perspective of the positivist sociology as a science away and according to the principle that research should be undertaken by women, for women and by women (Mohammad, 2010). The most feminists believe that women's voices are more qualitative methods have the capacity to reflect and provide the opportunity the world is understood from the perspective of the research subject. They believe that this could happen or should not keep your distance to the subject, consider myth as part of a research topic of its own thing; The involvement of the researcher not only inevitable that the researcher should be able to make itself relevant to the subject(Mohammad pour, 2010). Conversely, when women are entering the labor market, further work is outside working at home. Housework and child care is considered part of the female role. It is important to recognize the work related to housekeeping and home should be considered part of being a woman but it is a totally different issue related to maternal duties. Women are seen as an important aspect of maternal their life and those who know a certain creativity that makes it superior to women, that women are unique in the universe (Sadeghi, 2005). However, evidence shows that women work mainly in part-time work, low and very low income (Bokore, 2009) and the glass ceiling faced with a job promotion that will be imposed upon them by man structures (Yazdkhasti, Ahmadi, 2007). Can not be understood without considering the context of women's inequality in power (Mohammad

pour, 2010) According to the analysis of gender with other social factors can reveal deep patterns of gender relations in society, Patterns that sometimes seem invisible, but always surround us and shape our attitudes and behaviors (Mohammad pour, 2010). One of the studies that have been conducted among physicians who work in public sector hospitals in Punjab, Pakistan. This research shows that women's emotional needs and specialized doctor should be able to balance your career and your career progress. The career development among women, influenced by personal, cultural, and social context. The results show that status, family status, socio - economic factors underlying the lack of leadership and professional guidance for planning and motivating influence on career paths. Norms of family, cultural and social (especially family norms) are also effective career women. Women to improve leadership skills, communication skills and stress management needs to learn the particular skills (Arif, 2011) According to the investigation, administrators can use the leadership of women. They involve their employees in decision-making while men are the kinds of oppressive management that are useful for crisis situations. Of course democratic leadership style is the best type of leadership, they share the results with other staff and will include public involvement in the decision-making process (N. Nosike & S. Oguzor, 2011). Also, women who are leaving your current job for a new job, more than men, tend to be engaged in job search. They will be leaving his job after another job. Family reasons women have a significantly higher risk of expulsion (Heon Lee, 2012).

LITERATURE REVIEW

Mandatory Rotation of Audit Firms

Mandatory rotation of auditors involves rotation of audit firms after a fixed period of tenure (Carrera et al., 2007).Independence is the cornerstone of accountability. The challenge is that corporate management hires, fires and pays both their internal and external auditors. Auditors, therefore, often develop harmonious relationships with management to retain the job of the client (Adeyemi & Okpala, 2011). Calls for a mandatory

The Role of Women's Employment Research Paper

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rotation policy, therefore, traditionally emphasize its potential to restrict managerial threats to change “non- compliant auditors” (Craswell, 1988).

At the root of an audit engagement is the independence of the auditor. Lack of independence on the part of the auditor will colour his objectivity and cast aspersions on the credibility of his audited financial statements. The Company and Allied Matters Act (CAMA) of 1990 recognised this and made far- reaching arrangements to ensure the independence of the auditor. Such arrangements are covered in sections 357, 262 and 363 of the act.

Opinion seems to suggest that Nigerian auditors may not be truly independent. It is posited that some Nigerian auditors are unable to distance themselves from overbearing board or management so as not to incur their anger and put their appointment at risk (Onosode, 2001). Another reason adduced for apparent lack of independence of the Nigerian auditor is that an unsatisfied board will always find a way of effecting the removal of the auditor at the annual general meeting notwithstanding the provisions of CAMA 1990. It has also been suggested that the Nigerian Auditor is not psychologically free as a result of the fact that the distinction between shareholders and management has become so often blurred that the appointment, remuneration and dismissal of auditors is effectively decided by management, who are the very people auditors may wish to criticize in the course of their duties.

Those who argue for mandatory rotation of auditors believe that the idea has a lot to commend it. A major argument in favour of mandatory rotation of auditors is that it ensures that employees of the client firm and the audit firm will not get too acquainted (Barton, 2002; Asien, 2007; & Oscar et al., 2012). Other arguments in favour of mandatory rotation of auditors include:

i. Economy in implementation compared with other quality control measures.

ii. Results in “periodic fresh look at the institution” from an audit perspective to the benefit of investors, regulators and the public.

iii. Its implementation in Nigeria may avert a full blown regulatory interference in the affairs of the accounting profession in Nigeria.

iv. It increases the chances that errors of a previous firm will be detected and corrected.

v. It will increase competition between audit firms.

The major plank of the argument against mandatory rotation of audit firms is that it will result in increased cost to the audit firm and its client and consequently the public. Another major argument is that it will compromise quality if audit firms are changed rather frequently as the “learning effect will be lost” (Welch, 2011& Orlik, 2011). Other arguments against mandatory rotation of auditors include:

i. Choice of auditors should be a function of performance rather than on the need to satisfy a legal requirement.

ii. Loss of trust which rotation engenders iii. The field of auditors to choose from is

limited especially for the big Public limited companies in Nigeria that usually engage only the big four

iv. Natural turnover of Management also serves the purpose of rotation by ending lengthy auditor- client relationships.

v. Many countries all over the world are yet to embrace the idea of mandatory rotation of auditors

vi. There is no guarantee that weak auditors will still not make foolish decisions even with mandatory rotation of auditors in place

vii. It may have a negative impact on provision of non- audit services which are often assigned as a result of the brand name of firms involved in the audit.

The Central Bank of Nigeria (CBN) and Mandatory Rotation of Auditors

In 2010, the CBN reiterated its mandate that external auditors of banks should be rotated. It fixed the tenure of external auditors in a given


Ameneh Malmir

bank at a maximum period of ten years from date of appointment after which the audit firm shall not be reappointed in the bank until after a period of another 10 years. In fact mandatory rotation of auditors for Nigerian banks was introduced by CBN for the first time in 2006 following its policy of bank consolidation introduced in 2004, which saw the number of banks plummeting from 89 to 24 post- consolidations. At the time, bank distress was rife and often emasculated by fraudulent financial reporting. Nigerian auditors of banks were frequently indicted by the regulatory authorities for failure to report cases of fraud in the distressed banks (Otusanya & Lauwo, 2010). The aim was, therefore, to further sanitise the banking sector. It was hoped, by the regulatory authorities, that the auditors will be encouraged by the mandatory rotation policy to give the true reports about banks financial position (Ujah, 2006). The question of the effectiveness of mandatory rotation of auditors in Nigeria has, however, remained an empirical question apparently because of its relative newness.

Using cross sectional data gathered from annual reports of selected quoted companies in Nigeria, the relationship between audit tenure and audit quality was analysed utilizing the binary logit model estimation technique. The finding was that there is a negative relationship between audit tenure and audit quality (Oscar et al. 2012). However, a similar study on audit firm rotation and audit independence, using paired sample t- test found no association between audit independence and audit firm rotation (Adeyemi & Okpala, 2011). A study on the role of mandatory rotation of auditors in the South-South of Nigeria found a positive association between audit quality and mandatory rotation of auditors (Ebimobowei & Keretu, 2011). The relationship between mandatory rotation of auditors and audit quality in Southern Nigeria was also examined using binary logit model. A negative association was established (Onwuchekwa et al. 2012). Yet another study using cross sectional survey data found a negative relationship with long audit tenure and auditor independence in Nigeria (Adeyemi & Akinniyi, 2011). A similar study did not find an association between audit quality and mandatory rotation of audit firms (Adeyemi et al. 2012). It is

clear that the issue of audit quality and mandatory rotation of auditors in Nigeria is far from settled thus further justifying this study.

RESEARCH METHOD

Women's Employment In Iran

Some tips on building a community of social science to study in Iranian and Muslim women's issues shall be discussed in the following:

a. woman taking a "whole" with this look at all aspects of physical, mental, spiritual and social, he is considered mixed. Perception of women as existing the spiritual dimension of human faces (the successor of God on earth) and have a social time, opens new perspectives for the study of the social. The existing has a central role in family life, mental and emotional tribute to her family. Honor of existing the mother of his paradise are beneath them, and the angels of heaven.

b. Identifies and considers issues of research on the role of women in family and society, public problems and controversial issues, should be researched in the face, it becomes a full set or difficult issues with clarity.

Identify areas of conceptual, conceptualization and modeling of various conceptual approaches to women's issues, women's issues can be effective in detecting various combinations (Muhaddith Noori, 1986).

The results of a survey conducted in Tehran, age, marital status, having children, number of children, education level, field of study and migration lifetime employment rate of women with a higher education degree is a meaningful relationship. The probability of employment for female graduates than any other age group 49-35 years( Mahmudian, Rashvand, 2012).

Security and Women

Feeling safe is one of the basic human needs for social life. There are many things that can affect a sense of security in the community. Performance of the organizations that provide services to the public. For example, consistent with the findings


626

of the investigation, the role of women in Wireless Taxi increasing sense of financial security, physical and emotional women (Jamali, Shayegan, 2011). Can feel secure in terms of education, social status and financial condition may differ families (Pourmoazen, 2009). In one of the studies conducted among women in Tehran, cultural and social factors influence the sense of security has been studied in this population. These results indicate that the variable life skills, social capital, national identity, cultural capital and social - economic issues, social security, women feel that there is a significant relationship (and no others, 2011).

Questionnaire

The This paper presents a survey of descriptive or correlation research is to describe and interpret it. In this paper, the equivalent of approximately 250 teachers Kangavar city has selected a sample of 150. simple random sampling (soil, 2004, 251) was selected. Using Sampling Morgan (Earth, 2004, 276) was performed. The instrument used was a questionnaire which will include their views on employment. In this study, 136 questionnaires that measure citizens' view of the status of women has been used, the questionnaire is a 30-item questionnaire. Validity and reliability of the questionnaire was assessed on the basis of the data obtained in the present study, Cronbach's alpha equal to 83/0.

Hypotheses Development

The first hypothesis First hypothesis: There is a relationship between social position and status of women (female population).

Table 1 - Results of the first hypothesis of correlation

According to Table 1, as you can see there is a relationship between social status and marital status of women in the study population (R=0/56) a positive and significant relationship between the level 0/01.

The second hypothesis test. Second hypothesis: There is a relationship between social status and their education (female population).

Table 2 - Correlation of the results of the second hypothesis As you can see in Table 2 between social status and education of women in the study population 01/0 (01/0 = sig) there is a significant positive correlation (R=0/63).

The third hypothesis test Third hypothesis: There is a relationship between social status and political participation of women. Table 3 - Correlation of the results of the third hypothesis

As you can see in the above table between social status and political participation of women in the study sample 01/0 (01/0 = sig) there is a significant positive correlation (R=0/82).

The fourth hypothesis testing Hypothesis IV: There is a relationship between social status and attitudes toward research trait common to women than women . Table 4 - Descriptive results of the fourth hypothesis

As you can see in the above table between social status and Attitude towards folk characters of women in the study sample 01/0 (01/0 = sig) there is a significant positive correlation (R=0/97).

In other words, it means that women who had higher scores on the questionnaire and to society in general questionnaires have earned higher scores.

Table 5 - Regression predictor for social status

As you can see in the table above, the most common approach is able to predict the social status of political participation ,so this is an important component of political participation because of higher rates of political participation is a common attitude (97/0 = Beta).

RESULTS AND DISCUSSIONS

This article was found between female teachers in city schools was Kangavar following results. Findings of the study showed that the social status of women and their status (female population) are related, which means that married women have


Ameneh Malmir

better social status. However, according to research Harandi and Jamshidi (2008) Increase in annual revenues and earnings, other family man, has a considerable negative effect on the employment probability of married women. Attitudes towards women's employment over all impact on family and couple relationships and children would change, Couples harmony and unity as a manifestation of a basic necessity. Married women working outside the home has led to facilitate increase meet men and women between. Couple having a job and earning a task or set of tasks that are the responsibility of the family system. If a married woman needs to take jobs at risk competition with her family breadwinner comes to an issue which is harmful for the unity and harmony of the family. Then the female employment is important is its impact on children. Mother's absence from home and the resulting vacuum can not stay away from the emergence of community organizations and the private sector can complement government. Inevitable impact on his relationship with the husband and wife work with children, especially unaccompanied by women over their own destiny instead of leaving employment becomes more complex.

In fact, while women want men to compete in the livelihood of the family can not neglect to do so, yet they are obliged to do the work of two people. The findings also showed that there were two hypothesis about the status and education of women (population) is also positive and significant relationship. This study confirmed the hypothesis that the relationship between social status and education level show. The highly educated who knows how much more supportive of social status, these results are consistent with the findings of Jamali and Shayegan (2011). Findings from the third hypothesis that there is a significant positive relationship between social status and political participation of women. Components, but these components are less able to predict the social status of slang and attitude of the characters. Findings of the fourth hypothesis that there is a significant positive relationship between social status and women's attitudes toward

women in the research community. This finding is consistent with results Mousavi (2005).

Each of the variables on women's sense of emotional security, can be effective. Increased levels of education among women (Yazdkhasti, 2007) suggests the need for a class to have financial security. In fact, the need for financial security, one of the drivers of increased levels of education among women. Indicates the status of women is their sense of emotional security. In conclusion, we can say that social status, marital status, political participation, education and attitudes can affect women's sense of emotional security.

SUMMARY AND CONCLUSION

1 - recommended for women emotionally secure, according to marital status, political participation, popular attitudes and social position of the elite. 2 - Given that financial security depends on women's employment and it also depends on the level of education (Pvrmvzn, 2009, 101) and social status (No and others 2011, 45) They therefore recommended the employment of women. However, working women must be taken into consideration with regard to the role of mother and wife. Because in addition to her duties as wife and mother in the family takes over (because he is an emotional need) to be added to the unemployment roles in society (social and financial security needs). Due to technological advances in the field of working conditions can be provided at home via the Internet or other communications network. 3 - also recommended the creation of Social Security (through equal education opportunities or employment opportunities, equal) to increase the education level of women who need financial needs, social and emotional requirements. 4 - The role of women as wives and mothers in family and in society as workers, security, emotional, financial and social class, is the infrastructure for management roles. 5 - According to the results of the research component traits common attitude towards women's political participation component is able to predict the social status. As a result, it is recommended that school-age girls to change the


628

culture and the culture of investment. Cultural factors affecting the status of women, which in turn affect feelings of social security of the cortex.

REFERENCES

Arif, Seema. (2011), “Broken Wings: Issues Faced by Female Doctors in Pakistan Regarding Career Development”, International Journal of Academic Research in Business and Social Sciences, Vol. 1, pp. 79-101

Bokore, Nimo. (2009), “Female Survivors of African Wars Dealing with The Past and Present”, Journal of Sociological Research, Vol. 1, No. 1, pp. 1-13.

Fsaie Sadeghi, S.. (2005), challenged with maternal feminism, book female, age 7, p 28.

Heon Lee, Tae. (2012), “Gender Differences in Voluntary Turnover: Still a Paradox?”, International Business Research, Vol. 5, No. 10, pp. 19-28.

Harandi, Fatima. (2008), J.-F. "How to interact probability of employment of married women in rural and urban areas of individual and family characteristics", Journal of Knowledge and Development, Year XV, No. 23, pp. 191-205.

Iman, Mohammad Taghi. (2009), Basics of qualitative and quantitative research methods in social science paradigm, Qom, Research Science, second edition, p 428.

Jamali, Hagar. (2011), Shayegan, Fariba. "The Role of Women in Wireless Taxi Tehrani women feel safe," Police Management Studies, 6 (1), pp. 95-114.

Khaki, GR. (2004), Research Methods in Management, Tehran, Islamic Azad University, Center for Academic Publications, Third Edition, pp. 251 and 276.

Mahaddith Noori, Hossein. (1986), Mstdrk Alvsayl, Qom, Altras Rehabilitation Institute, al-Bayt (AS), p 180.

Mahmudian, Hussein. (2012), Rashvand, coral. "Higher education and graduate employment for women demographic factors affecting it," Women in Development and Policy, Volume 10, Issue 1, pp. 83-104.

Mohammad Pour, Ahmad. (2010), using the method of Tehran, sociologists Press, first edition.

Mohammad Pour, Ahmad. (2010), Against Method, Tehran, sociologists Press, first edition, pp. 64 and 66.

Mousavi, Sayed Kamal Uddin. (2005), "Time Dependent and cultural factors - social, with emphasis on issues affecting women's employment", Women's Studies, Year 3, No. 8, pp. 31-46

No, Mohsen. (2011), S. M., M.Farshadfar jasmine. "Social and cultural factors affecting women's sense of security: a case study of women living in regions (1 and 2), Tehran and regions (19, 20), south of Tehran," Social Security Studies, pp. 45-72

N. Nosike, Austin. (2011), S. Oguzor, Nkasiobi. “Understanding School Leadership and Management in Contemporary Nigeria”, International Journal of Academic Research in Business and Social Sciences, Vol. 1, pp. 145-151

Pvrmvzn, Ali Mohammed. (2009), "The relationship between social role of the police and their families a sense of security: a case study (north of Tehran)", Journal of law and order, social security number, third, second, p 101-126

Sadeghi, M.. (2004), Emadzadeh, Mustafa. "Economic Analysis of the factors affecting women's employment ', women's studies, Volume 2, Number 1, pp. 5-22


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Yazdkhasti, B. (2007), lawyer. "Activity and employment status of women in Iran with emphasis on the 1385 census", Journal - Women's Studies, First Year, Issue III


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APPENDIX

TABLES

Table 1: Results of the first hypothesis of correlation

Marital Status

Social status

Pearson correlation

coefficient **./56

Significant level ./01

Number 150

Table 2 - Correlation of the results of the second

Education

Social status

Pearson correlation

coefficient **./63


Number 150

Table 3 - Correlation of the results of the third

political participation

Social status

Pearson correlation

coefficient **./82


Number 150


Ameneh Malmir

Table 4 - Descriptive results of the fourth hypothesis

Attitude towards folk

characters

Social status

Pearson correlation

coefficient **./97


Number 150

Table 5 - Regression predictor for social status

Coefficient T

Coefficient rate Standard error

of the

coefficient


characters

0/97 0/07 55/09

political participation 0/82 1/4 17/63

Figure 1 - Model of Research

Social status

Marital Status

Education

Political Participation


characters


*Corresponding author: Dr. Rashid Saeed, Qutab Sarfraz COMSATS Institute of Information Technology Sahiwal, Pakistan.

E-Mail: [email protected]; [email protected]

632

Research Paper

Buyer Faithfulness in FMCG Sector of Pakistan

Dr. Rashid Saeed1*, Qutab Sarfraz2*, Muhammad Arshad3, Rab Nawaz Lodhi4, Dr. Zahid Mahmood5, Dr. Moeed Ahmed6

1. Head of Management Sciences Department, COMSATS Institute of Information Technology Sahiwal, Pakistan.

2. COMSATS Institute of Information Technology Sahiwal, Pakistan.

3. M.S Scholar , COMSATS Institute of Information Technology Sahiwal, Pakistan.

4. Lecturer, COMSATS Institute of Information Technology Sahiwal, Pakistan.

5. Professor, Bahria University Islamabad, Pakistan.

6. Professor, Bahauddin Zakariya University Sub Campus Sahiwal, Pakistan.

The purpose of this study was to determine the empirical relationship of the variable that is proposed, we find the influence of business status on buyer fondness and buyer faithfulness, reliability, and. In this study, we will contribute to the knowledge of how to keep them loyal customers through consumer goods Company in Pakistan satisfaction, conviction and business status. Theoretical framework suggests a relationship between the variables that have been proposed. Sample size was chosen for the study consists of 200 responses, the respondents were from the city of Rawalpindi, Islamabad, Pakistan. The correlation coefficient and multiple regressions were used to examine the relationship of the hypothesis. In regression analysis, buyer fondness, conviction and reputation of a company, you can see the result in a change of 79.0% in buyer faithfulness. There is a significant positive relationship even stronger conviction and buyer faithfulness. As a result, consumer goods companies in Pakistan indicates that in order to build buyer faithfulness, the company's reputation, buyer fondness, it is necessary to pay more attention to the conviction. Earl and time constraints limit generalization of the study. Keywords: Buyer faithfulness, FMCG Sector, Pakistan

INTRODUCTION

Then, quickly changing from one product to

another is not a consumer, buyer faithfulness is

more important in the consumer goods company

(consumer goods). A difficult race at this stage is

that in order to ensure the long term survival and

profitability of the company, loyal customers.

Therefore, the management of these companies to

find ways to attract potential customers retains

existing customers. Buyer faithfulness is proposed,

and it is still important to discuss a range of

subjects from literature and independent variables

mediated moderator. The purpose of this writing

is of variables and factors, the most important

story to contribute more to the development of

buyer faithfulness in the consumer goods sector. It

is validated by the actions of its customers, buyer


Dr. Rashid Saeed et al.

faithfulness; customers can be true and still be very

successful. Switch between corporate image and

buyer faithfulness with a cost, Islam (2008)

predicts a relationship of conviction. , However,

the switching costs only buyer faithfulness has a

strong relationship of conviction and the

independent variable of credibility or corporate

image, have some level of relationship with buyer

faithfulness, namely: Survey results however,

similar to the following, which indicates that all

the independent variables. Similarly, as a

landmark of behavioral loyalty, Mr. Chiou and

Droge (2006) stated that the relationship between

satisfaction and customer conviction. Entered into

a conviction, and Pervez Akber (2009), buyer

fondness has a significant positive relationship

with buyer faithfulness. Some authors argue that

buyer fondness, sales representatives and listen

have a direct impact on buyer faithfulness

(Ramsey and Sohi 1997) and the behavior of

confidence. Similarly, the foil and amines (2009),

was found to be the most important driver for

increasing buyer fondness buyer faithfulness.

Affect buyer faithfulness different at different

levels of reliability importance of the relationship,

satisfaction and image. It was found that there is a

factor of 4 (2007) Kuusik. Homgler and Gallay

(2008) is useful for finding quality, to achieve

buyer faithfulness in delivery. Lee and Xu (2008)

found that are related to each buyer faithfulness

satisfaction and other outcomes contribute to the

results together. Loyalty Dimensions Similarly, in

charge of the Press RIGHTS (2008) and Kiriko, in

another study, comfort and overall satisfaction,

and conviction, these factors can be improved by

improving buyer faithfulness (2006), reached the

conclusion of a positive relationship between

buyer faithfulness retention, satisfaction and Shin

revealed The main emphasis of this study is to find

an empirical relationship buyer faithfulness, buyer

fondness, credibility or corporate image. The aim

of this study is that the independent variables,

such as the following: How to know: which leads

to buyer faithfulness and brand image is the

dependent variable of buyer fondness and

conviction. When selecting a customer of Sahiwal,

this study was done in every day. In this paper

takes the decision making of managers working in

the company for consumer goods that can be and

how the impact of higher management buyer

faithfulness in consumer goods is a fast moving

task difficult for managers themselves. In this

article, beginning with an introduction to the

themes and theories behind the variables that lead

to the methodology, including the sample size of

the analysis procedure, sampling techniques and

data collection. The fourth part of the work is

based on the discussion of the results the

conclusions.

LITERATURE REVIEW

Buyer fondness is a measure of the goods and

services offered by the company if it meets

customer expectations. In other words, the extent

to which the offer is called over (Blanchard and

Galloway, 1994) and the product or service or

buyer fondness, meet the expectations of our

customers. Because I think you can increase buyer

faithfulness value added and for many companies

to achieve buyer fondness now, not only for the

joy of customers, companies, is the hard way are.

In addition, a reaction that is generated as a result

of the method to evaluate why if received,

including needs and desires and purchase Parvez

Akbar (2009), in connection with purchasing

decisions itself, expected, buyer fondness I

defined. She is the effect of the expected (Yang

Juan, 2007) and the point of buyer fondness

customers feel the feelings of happiness /

disappointment after evaluating the effectiveness

of the product he or specific cognitive.

Claimed that in his study (1997) that buyer

fondness and buyer faithfulness and correlate and

Rasmey Sohi. You can play an important role in

buyer fondness to improve long-term relationships

between companies and their customers, to

Buyer Faithfulness in FMCG Sector of Pakistan Research Paper

634

maintain sample researchers another buyer

fondness and buyer faithfulness predictor of

improvement (Haq and Amin, 2009) that has

delighted. That there is a direct relationship

between satisfaction and loyalty, Kuuisk (2007),

customers were satisfied, switch happening

suggested customers are dissatisfied with the

faithful of other providers. Buyer fondness is

capable of acting as a link between participation

and loyalty. Luarn, according to (2003) of the

forest, he found that brand loyalty obtain

(purchase) great attitude and behavior

demonstrated commitment fast / their consumers

happy / content. He said that learning from past

experience the satisfaction of the customer, the

consumer, to educate the main post purchase

behavior, including word of mouth, the complaint,

the author's intention and the repurchase of it and

use the product allegations of repurchase intention

and subsequent purchase is affected by the degree

of buyer fondness significantly mediate site

highlights as suggested.

Some authors as a way to identify the degree of

satisfaction that customer are satisfied with the

overall service provider. This shows the quality of

the service is to be perceived. Satisfaction, loyalty

means necessary but does not affect (Chirico and

Presti, 2008) in general. Was defined: "The

satisfaction those feelings of disappointment

resulting from the comparison (or outcome)

performance relative to the expectations of his or

pleasure, is product acceptance" (2006) Singh. With

respect to the achievement of some of the

requirements, satisfaction, indicating whether it is

a movement of reaction to the distinction in the

provision of services to which approach or client

intended customers, which is sandwiched

ambition and hope. However, the effect has been

proposed, other times the effect has not been

found and is supported empirically times, for

buyer fondness studies conducted by (2008) PIRC

is in buyer faithfulness I have shown that there is a

general consensus on the impact. According to the

satisfaction (1996), change their loyalty and

productivity in relation to customer Hallowell. He

showed it in the form of this model: Go to the

category of loyal customers, satisfied customers, is

taking the final profitability. Another study

suggests that relate to each other and actively

welcome buyer faithfulness. Moreover, the rate of

profit, customer retention and market share could

be improved by increasing buyer fondness

(Ponirin, Scott & Hite, 2009) has suggested that

Conviction

Conviction has become a major predecessor’s

buyer faithfulness (Akbar and Parvez, 2009).

Confidence can be a source of building conviction

among customers. Moreover, conviction is

important, and for the construction and long term

maintenance of the association (Islam, 2008). Belief

can only assume the value of this service, but also

can convert the uncertainty of buying a service or

product (Chiou & Drugs,

2006). Conviction is essential for building and

maintaining long-term partnerships (Akbar and

Parvez, 2009). Ramsey and Sohi (1997) also

reached conclusions that are consistent with

previous findings. Kuuisk (2007) examined the

convictioned brand that leads to buyer faithfulness

and confidence creates business associations,

which are much appreciated. Brand conviction has

a direct relationship to purchase intent and loyalty

subjective. Loyalty also suggested confidence is

achieved (Luarn & Lin, 2003). Conviction creates a

significant relationship between loyalty and

commitment. According to other researchers,

conviction determines how the client is based on

the reliability of the supplier. It is the vendor's

ability, as perceived by the customer to ensure

reliable service in terms of contractual rules.

Conviction is associated with the supplier's ability

to solve problems with less inconvenience as

possible for a customer i (Chirico and Presti, 2008).

Another study found that confidence Pirc has a

positive influence towards buyer faithfulness (Pirc,

2008).



Business status

The client based on reputation (CBR) and customer

evaluation "in general, based on their reactions to

these company products, services, communication

activities, interactions with the Company and / or

their representatives or stakeholders, known

corporate activities. "Companies that have a good

reputation easily build conviction and loyalty

among its customers, and this commitment to play

the role of mediator between the client

identification and behavioral intentions (KEH and

Xie, 2009). Research has shown that good business

status and image has a positive effect on their

consumers that increases the consumer’s

faithfulness towards the company. Such

illustrations and status of the company will

provide economic benefits to the society. Positive

image of the company is necessary because

customer perceive the image of the company

during purchase. A negative business status can

show low return volumes or economic benefits for

the company.

Buyer faithfulness

Customer choice to choose one brand over others

one by one the demanding needs are described as

buyer faithfulness (Chirico & Presti, 2008). Loyalty

is not only a description of the behavioral aspects

of repeat customers, but also the transport

provider (Park, 2008). Buyer faithfulness test buyer

fondness (Ponirin, Scott, and Heidt, 2009),

conviction (Rosemary & Sohi, 1997), corporate

image (Islam, 2008) and the company's reputation

(Tsai & Yang 2010; Nguyen & LeBlanc 2001;

Shamma & Hassan

2009 study of Walsh and Beatty (2007), further

evidence of the importance of the reputation of the

companies to gain buyer faithfulness and

economic benefits. Corporate devotion is

significantly influenced by the reputation of the

company in business (Souiden, Kassim & Hong,

2006). Bartikowski and Walsh (2011) shows that a

positive business status is positive and direct

impact on customers after increasing loyalty to the

company.

THEORETICAL FRAMEWORK

FIGURE 1 HERE

H1: Buyer fondness has a direct impact on buyer

faithfulness.

H2: Customer conviction has a direct impact on buyer

faithfulness.

H3: Business status has a direct effect on buyer

faithfulness.

METHODOLOGY

Participants and Settings

The participants that were selected for this

research were 300. Structured questionnaires were

used as a tool for research .200 questionnaires were

returned and the rate of response was 67 %.

Questionnaires were used as a tool because they

are inexpensive and easy to understand by the

respondents.

Data gathering

Data was gathered by questionnaires that were not

influenced by the settings. Data was gathered by

recognition of age, gender and nominal scale.

RESULTS AND DISCUSSION

Test data for this research paper was obtained

from SPSS v.20 for windows operating system.

Gathered data was analyzed to make reliability

test. Interval scale was used for data gathering

from respondents .The standards range from

strongly agree to strongly disagree The Cronbach

alpha for each variable in the following table:

TABLE 1 HERE

Examined buyer faithfulness and satisfaction, and

customer confidence and company reputation in

terms of reliability and accepted by all. The

acceptance and buyer faithfulness and conviction

less compared to others.

TABLE 2 HERE


636

You can get an idea of the data with the help of

descriptive analysis contained in the table above.

The researcher may do so by dialing the central

tendency and dispersion. I mean, range, standard

deviation and variance of the data provides a good

barometer of how participants responded to the

questionnaire items and provide an idea of the

goodness of the elements and measures. Group

was calculated from the data for each variable in

the above table, which helped in the data, suggests

that some of the variable as is in a range of scale.

For buyer fondness and the data are among; (3.3 to

4.7), which mean that most respondents agreed

questions together in the fence. Confidence was

one; (3.3 to 4.2) again and this means that the

sample had been agreed so far. For the reputation

of the company, and the calculated range (3.4 to

4.2), most people back and agreed to some extent.

In the end we had a buyer faithfulness (3.5 to 4.1)

in the sense that the participants, most of them

new neutral. Therefore, we can say in general that

are agreed most respondents and somewhat

neutral in matters of collecting data for each

variable.

TABLE 3 HERE

Pearson's correlation was used to analyze the data

in the table above. According to the table above,

there is a positive relationship between buyer

faithfulness (CL) and buyer fondness (CS), and

buyer faithfulness and conviction (TR), buyer

faithfulness and the reputation of the company

(CR). There is a weak positive relationship of

buyer faithfulness with buyer fondness compared

with other variables.

TABLE 4 HERE

To test this hypothesis we used search multiple

regression analysis. The results can be seen to be

obtained by applying multiple regression

technique of three independent variables in the

table above. R is the ratio of the three independent

variables and buyer faithfulness. R-square is the

contrast. This model summary shows that there is

a relationship between 79.0% variable for our

independent and dependent variables of three.

TABLE 5 HERE

The value of F as shown in the table above to be

605.521%, which means that the best model has

been installed much of this. Must be the F value is

more than 12% of the model to be installed. This

was a great value at a great level of 0.000 and is

indicated by the value of F, because its value was

over 12%.

TABLE 6 HERE

Relationship is independent and dependent

variables for the value of t. It shows the number of

independent variables impact on buyer

faithfulness (ie the dependent variable). In this

research study as the value of t high confidence,

and showed that this has an impact on buyer

faithfulness relatively. As seen in the table above

have the highest variable t is also the largest beta

(rate of change), which means that these variables

to achieve a greater change in the dependent

variable. This means that all assumptions are

accepted.

CONCLUSION

The purpose of this research was to see or

determine the relationship between buyer

faithfulness, business status, and conviction and

buyer fondness. Buyer faithfulness was selected

as the dependent variable and the relationship

with the independent variables are shown

through the questionnaires. There is 79%

correlation of buyer faithfulness with other

independent variables that means null hypothesis

is accepted and alternate hypothesis is rejected.

This means buyer faithfulness cannot be achieved

by improving customer confidence, satisfaction

and company reputation.

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Lent, R. W., & Brown, S. D. (2006). "Integrating person and situation perspectives on work satisfaction: a social cognitive view," Journal of vocational behavior, Vol. 69, pp. 263-247.

lingham, L. (2000). "Career development and organizational training".

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Maurice, M. G. (1999). " Reconceptualizing career change: career development perspective", Career development international, Vol. 4 Iss: 6 pp. 305-311.

Rafi, N. (2013). Explanation of antecedents affecting supply chain management adoption and execution. International Journal of Operations and Logistics Management, 2 (3), 57-70.

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638

APPENDIX

Table 1: Reliability (alpha) of variables

Variable Cronbach’s Alpha Buyer faithfulness 0.664

Buyer fondness 0.700 Conviction 0.633 Business status 0.727

Table 2: Descriptive Statistics

Variables Mean Std. Deviation Variance Buyer fondness 3.9800 .72308 .523

Conviction 3.7609 .46523 .216 Business status 3.8082 .36929 .136

Buyer faithfulness 3.8181 .30432 .093

Table 3: Correlation Results

CL CS TR CR

CL 1

CS .532** 1 TR

CR

.766**

.912**

.675**

.757**

1

.726**

1

**Correlation is significant at the .01 level (2-tailed).

Table 4: Regression Analyses

R R -Square Adjusted R-Square

.799 .790 .783

Buyer faithfulness, buyer fondness, conviction, business status



Table 5: Variance Analyses (ANOVA)

Sum of Squares df Mean Square F Significance

17.320 5 3.464 605.521 .000(a)

1.110 194 .006

18.429 199

Table 6: Coefficients t-value

Variables Beta t Significance Buyer faithfulness 7.775 .000

Buyer fondness .048 2.741 .001 Conviction .083 3.761 .000 Business status .013 1.882 .000

Figure 1: Hypothesized Model

Buyer fondness

Buyer Faithfulness

Business status

Conviction


*Corresponding author: Nwoye Ugochukwu J. Doctoral Research Student, Department of Accountancy, NnamdiAzikiwe University, Awka, Nigeria.

E-Mail: [email protected] 640

Research Paper

Beneish Model as Effective Complement to the Application of SAS No. 99 in the Conduct of Audit in Nigeria

Nwoye Ugochukwu J.1*, Okoye Emma I.2, and Oraka Azubuike O.3

1. Doctoral Research Student,, Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria.

2. Professor, Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria.

3. Lecturer, Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria.

This paper gives due consideration to determining the contribution made by SAS 99 towards improving the skills of Nigerian Auditors in the detection of fraud in Financial Statements of corporate organisations, while laying emphasis on the extent to which the Beneish Model could further strengthen Auditors likelihood to detecting such manipulations in the Financial Statements. The research was descriptively and historically designed. 100 respondents comprising Auditors, Accountants in the Industries and the Accounting Academics in Anambra and Enugu State were infinitely determined using the Topman’s formula. Data from secondary sources comprising Audited Annual Reports of the first five most capitalised manufacturing companies in Nigeria for the years 2002-2006 (in Cadbury, for model confirmatory test purpose) and 2006-2010 were used to complement this work. Inputs from the questionnaire distributed and the Annual Reports and Accounts, were analysed with the aid of SPSS software package using the Two way ANOVA statistical technique, and the Beneish Model. The analyses result showed that SAS 99 will significantly contributed to the deterrence and detection of fraud by Auditors in Nigeria, especially where complemented with the Beneish model. Thus, the Model should be introduced into the Nigeria Audit System as one of the prescribed analytical Audit techniques to aid External Auditors perform the relevant substantive tests where necessary so as to effectively curtail the rising incidence of fraud among corporate organisations in Nigeria. Keywords: Annual Reports and Accounts, Audit analytical techniques, Beneish Model, Engagement team, External Auditors, Financial Statements, Fraud Detection, Manufacturing Companies, SAS No. 99, Substantive tests,

INTRODUCTION

One of the most difficult issues facing the Auditing profession is that there are no auditing procedures that can provide absolute assurance in detecting all fraudulent financial reporting (Bishop and Wells, 2010). As a result, Auditors have historically

attempted to avoid the responsibility for fraud detection, but unsuccessfully. Before Sarbanes-Oxley and despite SAS 82, detecting fraud was not a primary auditing objective and appears to only have been uncovered by chance in the ordinary


Nwoye et al.

course of the audit. In a perfect world, Auditors would concentrate primarily on prevention– not detection of fraud.

Indeed, fraud has been a big problem in many companies in recent years. The integrity of the Nigerian Accounting profession has, as a result, been questioned. The reputation of many giant Audit firms in Nigeria such as Akintola Williams & Delloite, Pricewaterhouse Coopers etc, has been greatly undermined, considering their shocking involvement in incidence of fraudulent financial reporting in the country. The aftermath effects of their negligence and unethical conducts has resulted in the witnessed distressed state and collapse of some Nigeria banks and other organisations such as Cadbury Nigeria Plc, Afribank Nigeria Plc, etc.

The need to give better guidance to External Auditors to uncover fraud in a timely manner, and restore public confidence in the Accounting profession, led the Auditing Standard Board of the AICPA to issue the Statement of Auditing Standard No 99 (SAS 99) in December 15, 2002 (Shunlan , 2005). This was also in direct response to the Panel on Auditing Effectiveness (PoAE)’s recommendations and the high profile accounting scandals of the past years, especially in 2001 with special reference to the ENRON scandal in the United States, (which to the extreme, shook the hearts of many promising and prospective investors), Royal Ahold (largely referred to as Euro’s Enron) .and the likes of WorldCom, Tyco etc (Shunlan, 2005). It was certainly a response that laid great or increased emphasis on fraud prevention, detection, and deterrence connected with recent corporate failures, and it significantly changes how licensed practicing Auditors/Chartered Accountants in Nigeria must consider fraud in their audits of Financial Statements.

It is worthy of note that the endless effort of relevant but concerned Accounting Professional bodies such as the American Institute of Certified Public Accountants (AICPA) towards curtailing the increasing cases of scandalous Financial Statement reporting, may have afterall, yielded positive result, considering the tremendous sequence of amendments that virtually led to the

birth of SAS 99 in 2002 (from SAS 53 in 1988 and SAS 82 in 1997).

Yet Auditors, are not short of the fact that the detection of manipulated Financial Statements using normal Audit procedures is apprehensively becoming an incredibly difficult task (Porter and Cameron, 1987; Coderre, 1999 cited in Cynthia, 2005). Utilizing the fraud risk factors as prescribed by SAS 99 may not readily at all times reveal possible areas of fictitious manipulation. That is why the call for effective methods to identifying earnings manipulation in the Financial Statement has remained a consistent outcry among owners of companies, which has since heightened along with the rising incidence of Accounting scandals (Prevoo, 2007).

For stakeholders who are aware of the limitations of a normal Audit exercise, they believe that standard Auditing procedures are no doubt insufficient enough to really detect and deter fraud in Financial reports. These limitations thus suggest the need for additional effective analytical audit procedures for the effective detection of earnings management practices (Spathis, 2002). External Auditors need effective model(s), ratios or statistical techniques to augment the various Audit analytical procedures usually performed in the cause of their Audit assignment. They need tested ratios that possess the capability of pointing to areas in the Financial Statement prone to manipulation, thus strengthening the substantive tests usually performed on the figures and balances of the Financial Statements,.

The report of the Association of Certified Fraud Examiners (ACFE), USA in 2004, also attests to the above belief, as it has positively urged her members, Certified Public Accountants, to adopt the Beneish's ratios otherwise known as the ―Beneish or Probit Model‖ in the performance of Audits, in order to enable them effectively implement the requirements of SAS 99, that they may be reasonably assured that Financial Statements are free from material misstatement (Cynthia, 2005 ). Professor Messod D. Beneish had in i997 through one of his publications practically displayed some financial ratios he referred to as ―5-factored variables (later 8-factored variables in 1999)”. These provide Auditors with a better

Beneish Model as Effective Complement to the Application of SAS 99 Research Paper

642

understanding of what fraud entails, exposing them skillfully to those model indicators and fraud risk factors that constitute and contribute to fraud perpetration in the Financial Statements of corporate organizations in Nigeria.

Thus, the paper intends to clearly determine the effect of the Standard on the general audit performance of Auditors in Nigeria, especially in the area of fraud detection, giving due considerations to determining the extent to which the Beneish Model would strengthen Nigerian Auditors’ effective detection of fraud in the Financial Statements of manufacturing companies in Nigeria.

These led to the following research questions:

1. To what extent has SAS 99 improved the Auditors’ performance in the detection and deterrence of fraud in Nigeria?

2. To what extent can the Beneish Model effectively improve Nigerian Auditors’ detection of fraud in the Financial Statements?

Below are the hypotheses that resulted from the above research questions:

a. Ho: Provisions of SAS 99 have not significantly contributed to the deterrence and detection of fraud by Auditors in the audit of corporate organizations in Nigeria.

b. Ho: The Beneish Model will not effectively improve Nigerian Auditors’ detection of fraud in the Financial Statements.

LITERATURE REVIEW

Overview on SAS 99

While fraud remains something that cannot be completely eliminated, steps can be taken in order to detect it in a timely manner before it causes serious consequences. The increasing trend of corporate scandals typically, has led to the continuous changes in legislation (Oliver, 2007).

SAS 99 is a collection of standards that supercede Statement of Auditing Standard (SAS) No. 82. Consideration of Fraud in Financial Statement Audit. It

is worthy of note that the emergence of SAS No. 99 was to correct some of the shortcomings of SAS No. 82. This has led some to argue that the ―future demand‖ for auditing services will be much dependent upon the Auditors’ capability to ―detect and deter fraud‖ (Carpenter 2007, Wilks & Zimbleman 2004, Elliot 2002). Others believe that adding forensic skills to the audit process assists in fulfilling the expectation gap because clients and shareholders believe these procedures are already being performed (Zikmund & O’Reilly-Allen, 2007, Coenen 2006).

The Standard provides guidance to improve the likelihood that Auditors will detect fraudulent financial reporting (AICPA 2002, 2003 and Cassell et al, 2011), and supplies more structure around the consideration of fraud than the previous fraud standards, SAS No. 53 and SAS No. 82 (AICPA 1988, 1997 and Mactosh et al, 2010).

According to Zimbardo, (2009), SAS 99 contains a multitude of changes to SAS 82, which it supersedes. As with SAS 82, SAS 99’s primary mechanism to deter and detect fraud is through an elevated “professional skepticism” among Auditors, but also enhances the required Audit procedures. The Standard begins by generally describing fraud and the fraud triangle. This provides Auditors with a better understanding of what fraud entails (as against an error), and gives an overview of the factors that contribute to fraud (primarily incentives/pressures, opportunity, and rationalization/attitude).

At the most basic level, Conan et al, (2009) stressed that Auditors cannot detect fraud if they are unable to distinguish it from errors. This overview in the Standard helps to alleviate the problem. It is also likely that ―red flags‖ were or may have been noticed but inexperienced Auditors did not comprehend the magnitude of what they uncovered. SAS 99 set forth a much more details framework for Auditors to follow to systematically uproot fraud. They further opined that the most significant requirement in SAS 99 is that all audits must have a comprehensive ―brainstorming session” on the topic of fraud in the planning phase. This brainstorming session provides an outlet for experienced Auditors to chronicle their prior


Nwoye et al.

experiences with the client to less experienced engagement members and provide examples of ways in which fraud could theoretically be perpetrated by the client..

By understanding the risks of the client, weaknesses can be assessed and the engagement team can identify accounts that are vulnerable to manipulation. With this knowledge, Auditors can develop a much more appropriate audit program that is better tailored to the client’s unique risks.

In general, SAS 99, aside focused on increasing the awareness of fraud, genuinely preaches the message of enhanced brainstorming session and improved professional skepticism (questioning mind) among Auditors towards making reliable independent professional judgment during and/or at the end of the audit exercise/assignment.

THEORETICAL REVIEW

Brainstorming among Auditors

Auditors are required by SAS No. 99, Consideration of Fraud in a Financial Statement Audit, to conduct a ―brainstorming‖ session in every audit. Beasley and Jenkins (2007), believes that Its (SAS 99) purpose is twofold, namely: to consider fraud risks that may be present, and to emphasize the importance of professional skepticism throughout the entire audit process.

To Cotton (2010), the purpose of brainstorming is simply geared towards getting as many ideas as possible from a group of people in the possible shortest time. According to him, quantity and not quality, is the order of the day. It does not matter if the ideas are thought to be unworkable, or crazy, or outlandish by anybody within the group. Sometimes, these ideas are the very ones that are adopted into other forms that solve the problem adequately.

Brazel (2008) agree with this opinion as expressed above, affirming further that Auditors consider fraud in a multi-phase manner. First, Auditors obtain information to identify risks of material misstatement due to fraud (e.g., incentives). Using such information, Auditors brainstorm to identify fraud risk factors and to synthesize this information to develop a fraud risk assessment.

Finally, Auditors develop a response to their fraud risk assessments such as assigning personnel with more experience or specialized skills to the audit or modifying the nature, timing, and extent of audit procedures.

More so, it should be noted that the fact that frauds are difficult to find and are hidden by individuals who perpetrate them, Auditors should attempt to identify risk factors that are associated with the occurrence of fraud. These risk factors are commonly categorized along three dimensions of the fraud triangle: incentives, opportunities, and rationalization (AICPA 2002). Auditors synthesize their understanding of these risk factors with other information (e.g., preliminary analytical procedures) to develop a fraud risk assessment (AICPA 2002).

SAS No. 99 requires Auditors to react to higher fraud risk assessments by designing audit procedures to obtain more reliable evidence.

When audit is carefully and properly planned and managed, brainstorming can lead to many high-quality ideas about possible fraud risks, audit team members would not likely generate individually. A brainstorming session that ignores best practices, however, might quickly give way to inefficiencies and distractions that ultimately could muddy the audit team’s ability to focus on relevant fraud risks. That kind of deterioration can hinder key audit decisions, leading the team down dangerous paths—for example, to incorrect conclusions concerning which fraud risks are present, confusion on how to respond to a disjointed list of identified risk issues or lack of ―buy-in‖ to the brainstorming process (Beaslay et al, 2007).

It is worthy of note that Auditors are much more likely to correctly identify fraud risk conditions if the audit team engages in open-ended, nontraditional considerations of them. Research reviews by researchers with obtained data from numerous stakeholders, such as Forensic Accountants, Internal Auditors, External Auditors and other fraud experts, have reaffirmed the benefits of Auditors engaging in such discussions. Just the difficulty Auditors face in assessing fraud risks partially stems from the fact that most of them have never encountered a material fraud


644

during their careers; thus, they may be less effective when assessing fraud risks on their own, which makes group exploration all the more valuable in identifying them. A barrier to disseminating critical information can be the engagement partner’s or manager’s failure to share information about a client’s honesty and integrity with the engagement team. So, in part, brainstorming sessions prompt the more experienced Auditors to share their insights with less experienced team members and, in turn, encourage those who are less experienced but have recent first-hand knowledge of client processes to provide their insights to the senior members (Beasley et al 2007).

THE BENEISH MODEL

Because the Balance Sheet, Income Statement and Statement of Cash Flows are interrelated, frauds can always pop out when certain numbers do not make sense (Joseph, 2001).

Created by Messod D. Beneish(1999), the M-Score is a mathematical model that uses eight financial ratios to identify whether a company has manipulated its earnings. The variables are constructed from the company’s Financial Statements and create a score to describe the degree to which the earnings have been manipulated. In many ways, it is similar to the Altman Z-Score, but it is focused on detecting earnings manipulation rather than bankruptcy.

This model has a methodology through which falsified Financial Statements are found out as classifying indicators on the manipulation of financial information (Güray et al, 2005). The ratios that made up the model can really help External Auditors, Forensic Accountants/experts and Certified Fraud Examiners flag possible problem areas in the Financial Statement, considering its ability to distinguish and discriminate between manipulators and non-manipulators (Prevoo, 2007), especially as it has been successfully deployed by many researchers in assessing the Financial Statements of companies in the USA including the likes of ENRON, Worldcom, ZZZZ Best etc.

According to Cynthia, (2005), Certified Fraud Examiners appointed by clients to investigate a suspected fraud, can use these tools to help maintain proper focus in their investigations. The variables in the model are designed to capture either the Financial Statement distortions that can result from manipulation or preconditions that might prompt companies to engage in such activity (Burcu, & Güray, 2011).

The ratios measure sales growth, the quality of assets and gross margins, the progression of receivables versus sales, and that ratio of general and administrative expense. The probability of earnings manipulation goes higher with unusual increases in receivables, deteriorating gross margins, decreasing asset quality, sales growth, and increasing accruals. According to Beneish (1999), the results usually point to where there is most likely a problem.

METHODOLOGY

As a survey and analytical research design, the study is based on both primary and secondary sources of information. Aside the primary sources which constitute the use of questionnaire, the secondary sources included published Annual Reports and Audited Accounts of the first-five manufacturing companies in Nigeria, that made the list of the Nigeria Stock Exchange most capitalized companies in the NSE 2011/2012 FactBook.

The sample size of 100 had been infinitely determined using the Topman’s formula for determining the sample size of an infinite population.

n = Z2 (P)(Q)

e2

n = 1.962(0.93)(0.07)

(0.052)

n = 100.0

This was evenly distributed among the three selected respondent subgroups in the two states covered using:

Total Sample size


Nwoye et al.

No of subgroups x No of states/region covered

= 100

3x2 = 16.6 or 17 questionnaire per subgroup

Data received from 91 respondents (46 and 45 questionnaire returned) in Anambra and Enugu States, comprising External and Internal Auditors (Unizik Bursary, selected ICAN and ANAN members in both states), Accountants practicing in companies and the Accounting Academics (in Nnamdi Azikiwe Univeristy, Awka, Anambra State University, Enugu State University of Science and Technology), and obtained through a 5 point Likert scale structured questionnaire, were maximized in testing the first hypothesis using the Two Way ANOVA statistical tool through the SPSS 17.0 statistical software package.

Thus, the published Annual Reports and Audited Accounts of Dangote Cement, Nigeria Breweries, Guinness Nig. Plc, Nestle Nig.Plc, Dangote Sugar Refinery for the years 2006-2010, were selected for the effective application of the Beneish Model.

Based on the eight factor variables of the model that gives a score, we have the model as:

M Score = -4.840 + 0.920 x DSRI + 0.528 x GMI + 0.404 x AQ + 0.892 x SGI + 0.115 x DEPI - 0.172 x SGAI - 0.327 x LVGI + 4.697 x TATA

Where: Days Sales Receivable Index (DSRI)

DSRI = (Net Receivablest / Salest) / Net Receivablest-1 / Salest-1)

Gross Margin Index GMI = [(Salest-1 – Cost Of Goods Soldt-1) / Salest-1] / [(Salest – Cost Of Goods Soldt) / Salest]

Asset Quality Index (AQI) is: AQI = [1 - (Current Assetst + Plant, Property & Equipmentt + Securitiest) / Total Assetst] / [1 - ((Current Assetst-1 + Plant, Property & Equipmentt-

1 + Securitiest-1) / Total Assetst-1)]

Sales Growth Index (SGI) is: SGI = Salest / Salest-1

Depreciation Index (DEPI) is: DEPI = (Depreciationt-1/ (Plant, Property & Equipmentt-1 + Depreciationt-1)) / (Depreciationt / (Plant, Property & Equipmentt + Depreciationt))

SG&A Expense Index (SGAI) is: SGAI = (Selling General & Administrative Expenset / Salest) / (Selling General & Administrative Expenset-1 / Salest-1)

Leverage index (LVGI) is: LVGI = [(Current Liabilitiest + Total Long Term Debtt) / Total Assetst] / [(Current Liabilitiest-1 + Total Long Term Debtt-1) / Total Assetst-1]

Total Accruals to Total Assets (TATA) is: TATA = (Income from Continuing Operationst - Cash Flows from Operationst) / Total Assetst

DATA ANALYSIS AND FINDINGS

Adopting the Two Way ANOVA, hypothesis one was tested with the aid of SPSS 17.0.

Ho: SAS 99 has not significantly improved on the deterrence and detection of fraud by Auditors in the audit of corporate organizations in Nigeria.

Model Interpretation

Descriptive Statistics: we see in table 2 (under appendix I) that the mean statistics of the seven questions testing the hypothsis (with the least of them scoring a mean of 3.4286- question five) are higher than 3.00, and thus qualified for usage in testing the hypothesis.

Tests of Between-Subjects Effects: This helps us determine whether an interaction effect exist between the independent variables used in this study, while also considering the significance of such interaction. Thus, going through the row ―Location * Group‖ under the last column ―Sig‖ in table 5, we tend to establish this by ascertaining whether the score is less than or equal to .05. Since the SPSS output in the analysis is higher (.927), it then means that there is no significant difference in the effect of location on how Auditors ability to detect and deter fraud in Nigeria, has been improved by SAS 99 over the years. Further restricting this to the individual independent


646

variables in the study (location and group) towards appreciating the main effect of each of the independent variables, we discovered that neither location (Enugu and Anambra States) nor group (External Auditors, practicing Accountants in the Industries, and the Accounting academics) has any significant main effect since their individual scores under the ―F‖ column (.061 and 1.761) are greater than the .05.

Levene's Test of Equality of Error Variances: Utilizing the score of the ―Sig‖ column (.0862) which represents the Pcalc (as clearly depicted in table 4), we then apply the decision rule below:

Reject the null hypothesis, if Pcalc> .05, otherwise accept and reject the alternate hypothesis.

Since Pcalc(.862) is greater than .05, we reject the null hypothesis and accept the alternate hypothesis. This means that the Provisions of SAS 99 has significantly improved on the deterrence and detection of fraud by Auditors in the audit of corporate organizations in Nigeria.

Hypothesis Two

Ho: The Beneish Model will not effectively improve Nigerian Auditors’detection of fraud in the Financial Statements.

Using the Beneish Model, a preliminary test analysis was carried out on the Financial Statements of Cadbury Nigeria Plc for the periods the beverage giant was ovally and jointly indicted of fraudulent financial reporting by the Nigerian Security Exchange Commission (SEC), and the Administrative Proceedings Committee (APC) of the Federal House of Representative. The positive outcome of this analyses for the years 2002 – 2006 (M-scores of -1.9115, -0.8290, -1.8350, -1.8996, and -1.4638) which correlated 98% plus in reality with the allegations made against the board and Auditor of Cadbury Nigeria Plc (since all M-scores obtained were massively greater than -2.22), served as the very corner stone for the effective utilisation of the Model in testing hypothesis two. Table 1 and figure 1 clearly depicts the above the outcome of the analyses carried out and their

consequent representation in bar charts for better appreciation of the interpretations made in this study.

Implication of Cadbury’s Indicators: The M Scores or better called “the manipulation index” obtained from the above analysis, would no doubt, appear amazing enough especially as bar charts are deployed in this work for better understanding of the implications of the results so obtained from this analysis, even in the cases of big firms that have always attracted the attention, respect and interest of investors in the stock market.

The reality of the outcome of the analysis carried out above on Cadbury Nigeria Plc’s Annual Reports and Accounts for the years 2002 – 2006, the very period the company overstated its income by N13 billion, may not be ignored for any reason. The M scores (less negative value than -2.22; that is, values greater than -2.22) for these years (2002-2006) showed a strong likelihood of Cadbury manipulating figures of its Financial Statements. That is why none of the darker bars came closer to the dotted margin straight line cutting off from the point marked ―-2.22‖ to the very tip of the M-score decision rule bar. This area is referred to as the ―Manipulation Region‖; the very region where the likelihood that companies manipulated their Financial Statements are high or strong, depending on the size of the M-score obtained. But any M-score outside this region (that is, if the bars protruded beyond the dotted straightline) will only imply that such Financial Statements are possibly free from material misstatements that could undermine the true and fairness of such financial information so published. Cadbury’s DSRI, SGI, DEPI and SGAI indicators for the 5 years, as shown in table 1, readily attest to this findings (see table 1 and figure 1 under appendix I and II respectively).

Thus, using the following decision indicators, reliable highlights to the implications of the Beneish Model’s outcome have been clearly portrayed.

DSRI > 1 = Possible revenue inflation.


Nwoye et al.

GMI > 1 = Gross margin is deteriorating and company is more likely to manipulate earnings.

AQI >1 = Tendencies of capitalizing and deferring costs that should have been expensed.

SGI > or too < 1 = firms under possible pressure manipulate earnings to keep up appearances.

DEPI > 1 = Tendencies of Assets being depreciated at a slower rate to boost earnings.

SGAI < 1 = Company possible Manipulation of earnings to defer costs, especially when coefficient is negative.

TATA > 1 = Accruals possibly used to manipulate earnings.

LVGI > 1 = Reflecting pictures of Increase in leverage.

Beneish Model Final Decision Rule

M Score > -2.22 ( a positive value or less negative value than this) = Strong likelihood of Manipulation.

M Score < -2.22 ( a higher negative value than this) = No manipulation region.

COMMITTING TYPE I AND II ERROR

Absolute care must be taken by fraud detection experts when making conclusive decision on the years with M-scores signifying No manipulation tendency. This is because, this could possibly lead them to commit either type 1 error (possibility of viewing a manipulator company as a non manipulator) or type 2 error (possibility of viewing a non manipulator company as a manipulator). Incidentally, Daniel Beneish had earlier revealed in his publication in 1999 that more of type 1 error is usually committed by users of this model than the type 2 error. Hence, further efforts must be made by the model users to closely examining the indicators of the 8 factored variables against their above individual decision rule, even on non manipulation M-scores indicators before drawing their final report on the state of the company’s financial reports.

INDICATORS OF THE FIRST-FIVE TOP MANUFACTURING COMPANIES, 2011/2012.

1. Dangote Cement Plc (view table 7, figure 2)

Implications:

M-Scores for the years 2006, 2008, 2009 and 2010 (-1.58017, 8.279724, 3.288882, & 1.724123) strongly fall within the manipulation region.

Above M-Scores are all greater than the company’s Mean Manipulation Index (MMI) of 1.666921.

Presence of red flags is very enormous and alarming.

Shows that the individual indicators of the 8-factored variables (pointers) need be studied closely.

2. Nigeria Breweries Plc (view table 8, figure 3)

Implications:

M-scores indicators for 2006, 2007 and 2010 fall within the earnings manipulation region.

2008 and 2009 indicators maintained a non manipulation status.

A high likelihood of manipulated financial records exists in 2006 and 2010 (-0.9450 and -1.7204).

3. Guinness Nigeria Plc (view table 9, figure 4)

Implications:

Except in the year 2010, a strong likelihood to manipulate exist in the company’s financial records for the years covered.

Where convincing explanations backed up by authentic documented evidence(s) are not given by the company, it will then be wise for the independent professional Auditor to assume that the company’s 2006-2009 Financial Statements were possible products of manipulation.


648

Company’s DSRI, SGI and SGAI indicators for the years covered should also serve as sensitive reference point for fraud examiners.

4. Nestle Foods Nigeria Plc (view table 10, figure 5)

Implications:

A strong likelihood of manipulated earnings exist in all five years covered (2006 – 2010), especially in 2008 with M-Scores of -0.6950.

Indicators of Day’s Sales Receivable Index (DSRI) and Sales Growth Index (SGI) for all 5 years exceed the 1.000 benchmark except in 2009 where DSRI was 0.7593. The same applies to the Depreciation Index (DEPI) except in 2006.

Tendencies that company adopted slower rates of depreciation to enable it improve on earnings.

5. Dangote Sugar Refinery Plc (view table 11, figure 6).

Implications:

Except in 2006 where her M-score is -4.07439, the financial disclosures of Dangote Sugar Refinery Plc appear to be questionable.

Indicators of DEPI, SGAI, & LVGI (3.2709, 1.3835, & 2.5263) leaves possible evidence that the company might have been under possible pressure at the end of 2006 as reflected in 2007 indicator.

DEPI of 3.2709 possibly implies that the company revised assets useful life assumptions upwards or adopted income friendly depreciation method(s). See Appendix I for indicators of 8-factored variables.

OPINION JUDGEMENT

Based on the above demonstration and indicators of the Beneish model, we come to terms that the model, if objectively applied, will effectively boost and improve Auditors’ chances of detecting and

deterring fraud in the Financial Statements of manufacturing companies in Nigeria.

CONCLUSION

The fight against fraud in corporate Financial Statements, should no longer be treated as the sole responsibilities of both the Internal and External Auditors working in both the private and public establishments. Fraud deterrence in the Financial Statements of Corporate organisations in Nigeria should hence be treated as the collateral responsibilities of all stakeholders (the shareholders, the government, financial regulatory agencies, financial crimes agencies etc). The adherence of Nigeria Auditors to and the effective implementation of the guidelines of the SAS 99 in the Nigeria Audit process, would not only, strengthen the Auditors knowledge of fraud in the Financial Statement of corporate organisations, but would, no doubt, contribute to her detection and deterrence of fraud, especially as they deploy fraud sensitive models like the Beneish Models when carrying out their various analytical Audit procedures towards encouraging the continual publication of fraud-free Financial Statements among Nigeria manufacturing corporate organisations.

RECOMMENDATIONS

Accounting regulatory bodies in Nigeria such as the newly constituted Financial Reporting Council (FRC), should quickly handle the challenges of ineffective oversight on audit practice in Nigeria, issues of non-compliance to existing auditing, accounting and relevant fraud standards/pronouncements, as well as unethical practises among Auditors in Nigeria,.

Aside inculcating the model in the teaching of Auditing and Forensic Accounting in tertiary institutions, the Beneish Model should also be introduced into the Nigeria Audit System as one of the recommended analytical Audit techniques to aid External Auditors perform the necessary substantive tests when and where relevant, in order to effectively curtail the rising incidence of fraud among corporate organisations in Nigeria.


Nwoye et al.

REFERENCE

AICPA, (1988). The Auditor's Responsibility to Detect and Report Errors and Irregularities.Statement on Auditing Standards, New York, NY.

Beasley, M.S. & Jenkin, G.J. (2007). A Primer for Brainstorming Fraud Risks, available at https://www.aicpa.org/PUBS/jofa/dec2003/beasley.htm (accessed 16 February, 2011)

Beneish, M. D., (1999), The Detection of Earnings Manipulation, Financial Analysts Journal, 55(5), 24-36.

Bishop, T.J. and Wells, J.T. (2010). Breaking Tradition In The Auditing Profession, available at http://www.fraud-magazine.com/article.aspx?id=4294967866 (accessed 16 February, 2011).

Brazel, J.F., Carpenter T.D. and Jenkin, J.G. (2007). A Field Investigation of Auditors’ Use of Brainstorming in the Consideration of Fraud, USA.

Burcu, D. & Güray, K. (2011). The Detection of Earnings Manipulation: The Three Phase Cutting Plane Algorithm using Mathematical Programming, Turkey.

Carpenter, T.D. (2007). Audit Team Brainstorming, Fraud Risk Identification, and Fraud Risk Assessment: Implication of SAS No. 99, Accounting Review, 82(5), 1119-1140

Cassell, C.A., Drake, M.S. and Rasmussen, S.J. (2011). Short Interest as a Signal of Audit Risk, Contomporary Accounting Research. 28(4), 1278-1297

Coenen, T.L. (2006) Why Didn’t Our Auditors Find the Fraud? Wisconsin Law Journal, January 25, 1-3.

Conan, A.C., Steve. A.W., Chad, A.O. and Zimbelman, M. (2009). Fraud Examination, 3rd ed, Louiseville: Transcontinental

Cynthia, H. (2005, March/April). Analysis ratios for detecting Financial Statement fraud, ACFE Fraud Magazine.

Elliott, R.K. (2002). Twenty-first century assurance: Auditing, A Journal of Practice & Theory, 21(1), 139-146.

Güray, K., Yasemin, K.B. & Cemal, K. (2005). Detecting the Manipulation of Financial Information by Using Artificial Neural Network Models, Turkey.

Joseph, T.W. (2001, August). The numbers raise a red flag, Texas: ACFE.

Mactosh, M.O., Francis, W.M. and Ongocho, S. (2010). Public Trust On Auditors And The Auditing Profession Among Cooperative Societies InKisii, Kenya: African Journal of Business & Management (AJBUMA),1, 274-281.

Prevoo, L.J.B. (2007). Detecting Earnings Management: A Critical Assessment of the Beneish Model, Student International Business, Maastricht

Shunlan, L. (2005). SAS 99 and Fraud Detection, Knoxville: University of Tennessee Honors Thesis Project, available at http://trace.tennessee.edu/utk_chanhonoproj/881

Wilks, J.T., & Zimbleman, M.F. (2004). Using Game Theory and Strategic Reasoning Concepts to Prevent and Detect Fraud, Accounting Horizons, 18(3), 173-184.

Zikmund, P.E. & O’Reilly-Allen, M. (2007). I'm an Auditor, Darn It, Not an Investigator, Right? Pennsylvania CPA Journal, 78(3), 28-31.

Zimbardo, P. (2009), SAS No. 99 and the Panel on Audit Effectiveness Recommendations Regarding Fraud and Forensics, available at http://seekingalpha.com/instablog/443555-paul-zimbardo/40650-sas-no-99-the- panel-on-audit-effectiveness-recommendations-regarding-fraud-and-forensics (accessed 16 February, 2011).

https://www.aicpa.org/PUBS/jofa/dec2003/beasley.htm

https://www.aicpa.org/PUBS/jofa/dec2003/beasley.htm

http://www.fraud-magazine.com/article.aspx?id=4294967866

http://www.fraud-magazine.com/article.aspx?id=4294967866

http://trace.tennessee.edu/utk_chanhonoproj/881

http://trace.tennessee.edu/utk_chanhonoproj/881

http://seekingalpha.com/instablog/443555-paul-zimbardo/40650-sas-no-99-the-%09panel-on-audit-effectiveness-recommendations-regarding-fraud-and-forensics





650

APPENDIX I

TABLES

Table 1: Questionnaire Data Descriptive Statistics

S/N QUESTIONS SA A UD D SD TOTAL

1. The adoption of SAS 99 will result in a positive change and improvement in the Auditor’s performance, increasing the likelihood that Auditors would detect material misstatement due to fraud.

(54)

270

(22)

88

(5)

15

(5)

10

(5)

5

{91)

388

2. The fraud detection technique operational in Nigeria Audit, is far ineffective compared to those of SAS 99 at deterring and preventing fraud.

(54)

270

(17)

68

(5)

15

(5)

10

(10)

10

(91)

373

3. There is probable indication that the future demand for Auditing services, will be dependent on the Auditor’s capability to detect and deter fraud

(39)

195

(24)

96

(9)

27

(7)

14

(12)

12

(91)

344

4. Auditing firms following the guidelines of SAS 99 during Audit, sends market signals that would have a positive impact on the Audit clients, on how they value the firm’s expertise.

(55)

275

(21)

84

(2)

6

(8)

16

(5)

5

(91)

386

5 The heightened state of corruption in Nigeria may undermined the effective adoption and application of SAS 99 towards deterring fraud.

(36)

180

(16)

64

(11)

33

(7)

14

(22)

22

(91)

313

6. The Introduction of Brainstorming session in Audit was to make Auditors proactive in fraud detection, compared to her known reactive Audit role.

(45)

225

(22)

88

(14)

42

(6)

12

(4)

4

(91)

371

7. Auditors, in most cases, have had difficulty identifying fraud. Brainstorming as defined by SAS 99, addresses these difficulties sufficiently.

(59)

295

(16)

64

(5)

15

(6)

12

(5)

5

(91)

391

SOURCE: Field Survey, 2012

5 4 3 2 1


Nwoye et al.

Table 2: Descriptive Statistics

N Minimum Maximum Mean Std. Deviation Variance

Statistic Statistic Statistic Statistic Std. Error Statistic Statistic

Q1 91 1.00 5.00 4.2637 .11986 1.14344 1.307

Q2 91 1.00 5.00 4.0989 .14327 1.36671 1.868

Q3 91 1.00 5.00 3.7802 .14809 1.41266 1.996

Q4 91 1.00 5.00 4.2418 .12535 1.19574 1.430

Q5 91 1.00 5.00 3.4286 .16913 1.61344 2.603

Q6 91 1.00 5.00 4.0769 .12027 1.14727 1.316

Q7 91 1.00 5.00 4.2967 .12354 1.17846 1.389

State 91 1.00 2.00 1.4945 .05270 .50274 .253

respondents 91 1.00 3.00 1.9890 .08629 .82320 .678

Valid N (listwise) 91

Table 3: Between-Subjects Factors

Value Label N

State 1.00 Anambra State 46

2.00 Enugu State 45

Respondents 1.00 Auditors 31

2.00 Accountants 30

3.00 Accounting Acad./Res. 30

Table 4: Levene's Test of Equality of Error Variancesa

Dependent Variable:COMPUTE TOT1=VAR00003 + VAR00004 + VAR00005 + VAR00006 + VAR00007 + VAR00008 + VAR00009

F df1 df2 Sig.

.379 5 85 .862

Tests the null hypothesis that the error variance of the dependent variable is equal across groups.

a. Design: Intercept + Location + Group + Location * Group


652

Table 5 Tests of Between-Subjects Effects

Dependent Variable:COMPUTE TOT1=VAR00003 + VAR00004 + VAR00005 + VAR00006 + VAR00007 + VAR00008 + VAR00009

Source Type III Sum of Squares Df Mean Square F Sig.

Corrected Model 239.287a 5 47.857 .750 .588

Intercept 72191.494 1 72191.494 1132.042 .000

Location 3.863 1 3.863 .061 .806

Group 224.576 2 112.288 1.761 .178

Location * Group 9.698 2 4.849 .076 .927

Error 5420.537 85 63.771

Total 77959.000 91

Corrected Total 5659.824 90

a. R Squared = .042 (Adjusted R Squared = -.014)

PRELIMINARY AND CONFIRMATORY APPLICATION OF THE MODEL

Table 6: Cadbury Nigeria Plc- Fraud Period (2002 – 2006)

DSRI GMI AQI SGI DEPI SGAI LVGI TATA M SCORE

2002 0.9570 0.9073 1.6034 1.1975 1.2724 1.1947 0.6717 0.1541 -1.9115

2003 1.8205 1.0692 0.9941 1.2574 0.9414 0.9759 1.0391 0.2575 -0.8290

2004 1.2121 0.9620 1.5270 1.0826 1.4594 1.1166 1.3518 0.1546 -1.8350

2005 1.3285 1.0707 0.7919 1.3665 1.1005 1.0629 1.1744 0.1513 -1.8996

2006 0.5552 0.9383 2.2177 0.5939 2.6412 2.4221 1.3897 0.3304 -1.4638

MEAN 1.1747 0.9895 1.4268 1.0996 1.4830 1.3544 1.1253 0.2095 -1.5878

SOURCES: Annual Reports and Accounts, 2002-2006

Table 7: Dangote Cement Plc


2006 1.1392 1.1292 1.1564 1.5054 1.219 1.0579 0.6621 0.0137 -1.58017

2007 0.7287 0.9724 0.5378 0.9078 1.1525 -1.1754 1.0635 -0.0708 -3.37796

2008 12.622 1.0125 0.1839 3.0061 1.1664 -0.7161 0.9548 -0.3167 8.279724

2009 0.4532 0.8038 14.522 2.1279 0.4687 -1.0965 0.7058 -0.0239 3.288882

2010 0.2367 1.0677 1.5536 5.7856 0.9793 -0.4568 0.8532 0.0511 1.724123

MEAN 3.036 0.9971 3.5907 2.6666 0.9972 -0.4774 0.8479 -0.0693 1.666921

SOURCES: Annual Reports and Accounts, 2006-2010.


Nwoye et al.

Table 8: Nigeria Breweries Plc


2006 3.2360 0.9681 0.8956 1.0773 0.7850 1.0429 0.9991 -0.1070 -0.9450

2007 1.1138 0.9698 0.7360 1.2946 0.2778 0.9007 0.9927 0.0230 -2.1911

2008 0.4201 1.0866 0.8915 1.3017 1.0441 0.8219 1.3185 -0.0301 -2.9518

2009 0.8592 1.0605 0.9677 1.1289 0.9570 0.8766 0.8177 -0.0439 -2.6052

2010 1.4823 0.9799 0.9664 1.1319 0.9969 1.1047 0.9935 0.0510 -1.7204

MEAN 1.4223 1.0130 0.8914 1.1869 0.8122 0.9494 1.0243 -0.0214 -2.0828


Table 9: Guinness Nigeria Plc


2006 2.2090 1.0160 0.8449 1.1450 0.8587 1.0585 1.0248 -0.1173 -1.8759

2007 1.8646 1.0651 0.8502 1.1605 0.8831 0.8760 0.8607 -0.0146 -1.5865

2008 1.3333 0.9308 1.1914 1.1109 1.0139 1.0766 0.9231 0.0165 -1.9429

2009 0.8604 1.0144 0.9826 1.2888 0.8846 1.0239 1.1099 0.1081 -1.8978

2010 1.0053 1.0968 0.9338 1.2268 0.9106 1.0233 1.0220 -0.0829 -2.6578

MEAN 1.4545 1.0246 0.9586 1.1864 0.9102 1.0117 0.9881 -0.0180 -1.9922


Table 10: Nestle Foods Nigeria Plc


2006 1.5507 1.0060 0.9606 1.1190 0.9905 1.1028 0.7405 0.0444 -1.6061

2007 1.3533 1.0385 1.2462 1.1459 1.1230 0.9919 1.0647 0.0282 -1.7787

2008 1.7175 0.9327 0.9067 1.1752 1.0580 0.9281 0.9770 0.2170 -0.6950

2009 0.7593 0.9518 0.6896 1.3203 1.3550 1.1203 1.1254 0.0807 -2.2099

2010 1.5180 0.9477 1.0688 1.2109 1.2182 1.1315 0.9701 0.0594 -1.5250

MEAN 1.3798 0.9753 0.9744 1.1943 1.1489 1.0549 0.9755 0.0859 -1.9875


Table 11: Dangote Sugar Refinery Plc


2006 0.8832 0.5795 0.9797 0.9628 3.2709 1.3835 2.5263 -0.1966 -4.07439

2007 1.0642 1.0838 1.0615 1.0003 0.6738 0.8709 1.054 0.3847 -0.58445

2008 0.7405 1.5193 0.3865 1.0214 0.7982 1.3444 0.7162 0.1381 -2.01678

2009 0.9963 1.2526 1.3183 1.0921 0.7485 0.6501 0.7242 0.3149 -0.54453

2010 0.9211 1.1088 0.9365 1.0191 1.3728 1.0623 1.2552 0.1603 -1.80504

MEAN 0.8832 0.5795 0.9797 0.9628 3.2709 1.3835 2.5263 -0.1966 -4.07439



654

APPENDIX II

FIG. 1: Cadbury Nigeria Plc M-Scores at a glance comparatively.

FIG. 2: Dangote Cement Plc M-Scores for years 2006-2010.

FIG. 3: Nigeria Breweries Plc M-Scores for years 2006-2010.

-2.5

-2

-1.5

-1

-0.5

0

2002 2003 2004 2005 2006 Decision

Cadbrury's Fraud Period: 2002-2006

2002

2003

2004

2005

2006

Decision

Manipulation Region

Non manipulation Region

-5

0

5

10

Dangote Cement Plc M-Score 2006

2007

2008

2009

2010

Beneish Rule

Manipulation Region

-3

-2

-1

0

Nigeria Breweries Plc M-Score 2006

2007

2008

2009

2010

DECISIONNon Manipulation Region


Nwoye et al.

FIG. 4: Guinness Nigeria Plc M-Scores for years 2006-2010.

FIG. 5: Nestle Nigeria Plc M-Scores for years 2006-2010.

FIG. 6: Dangote Sugar Refinery Plc M-Scores for years 2006-2010.

-3

-2

-1

0

Guinness Nigeria Plc M-Score

2006

2007

2008

2009

2010

DECISION

Manipulation Region

Non Manipulation Region

-3

-2

-1

0

Nestle Nigeria Plc M-Score 2006

2007

2008

2009

2010

DECISION

Manipulation Region


-6

-4

-2

0

DANGOTE SUGAR REFINERY PLC M-SCORE

2006

2007

2008

2009

2010

Beneish Rule

-6

-4

-2

0

Dangote Sugar Refinery Plc M-Score

2006

2007

2008

2009

2010

Beneish Rule



*Corresponding author: Gholamreza Ghasemi, Department of Management, Payame Noor University, PO BOX 19395-3697, Tehran, Iran. E-Mail: [email protected]

656

Research Paper

Presenting a Framework for Outsourcing in the Holding Companies

Gholamreza Ghasemi1*, Javad Soltangoudarzi2, and Maryam Soltangoudarzi3

1. Department of Management, Payame Noor University, PO BOX 19395-3697, Tehran, Iran.

2&3. Department of Management, Aligoudarz Branch, Islamic Azad University, Aligoudarz, Iran.

Outsourcing is defined as transferring some of internal activities of an organization and assignment of decision rights to the supplier, out of organization based on the contract. In recent years, some companies have outsourced some of their activities to professional organizations in order to improve the quality of products and services as well as focus on the main competitive benefits and maximize the effectiveness of the organization's activities in general. Outsourcing is a good way through providing the necessary features could be useful tool for saving time and cost, while improving the quality and releasing of resources. As this device has demonstrated its effectiveness in many companies, it was facing the failure in reaching the goals in some cases. But the importance of this task is more in holding companies which are composed of several companies due to the important activities and roles of these organizations. In addition to identifying different aspects of outsourcing in the holding companies, we provide a framework for outsourcing of these companies, are examine the advantages and disadvantages of outsourcing in these companies at the end of this study.

Keywords: Framework; Holding companies; Outsourcing; Manager;

INTRODUCTION

Outsourcing as a device for developing the organizations and improving the efficiency in terms of miniaturization, have considered by executives and managers of organizations and has been implemented in different forms in recent years. But so far, the issue of outsourcing often has been presented and evaluated generally, so outsourcing is not provided to a specific pattern (Saghafi, 2008). Outsourcing as a simple executable and economic device, finds more applications every day. Commercial and industrial executives while trying to use an outsourcing strategy, are facing a variety of conceptual issues in practice. Both executives and their consultants have tried to identify these issues in order to take advantage of outsourcing more effectively, while considerable

academic researching the field of outsourcing manufacturing activities and others are available. But unfortunately, few scientific studies have been done in the field of outsourcing services and service activities. An important topic is considered for those involved in using the outsourcing in business is that a company decides to outsource what activity or do the activity itself. The problem senior managers are faced with is not the use of outsourcing, but the action that should be outsourced and it requires that outsourcing strategies be defined clearly. In this study we have tried to provide a framework for outsourcing as well as present new plans for outsourcing model, developing by focusing on the fundamental concepts, so that the management can decide

Manag. Adm. Sci. Rev. ISSN: 2308-1368 Volume: 2, Issue: 6, Pages: 656-663

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easily through it about type, amount and assignment of activities. Therefore it is able to determine what activities should be outsourced and which ones should be performed in the organization (Eghtedari, 2009).

Outsourcing to a particular concept of word means that one organization has given out part of its main tasks and activities which are in the value chain of the organization, but for any reason (Including lack of sufficient expert in that department, large time consuming, requiring staff to focus on other areas, any other organization whose core activities of the minor task in the organization is required and ...) and it takes over the responsibility for the management and delivery of the product itself (Bazyar, 2004).

The current complex business world, organizations with many different abilities(financial capacity, technical capacity, human resources, technological capabilities, and...) instability of market environments as well as companies attempt to gain a greater share from the market and the possibility of entering into new and profitable commercial activities, has led up to the concept of integration and group companies to optimal use of each other's capabilities and activities, as the holding companies are common in this field (Talebi, 2007; Qayyum, Ali, & Shazad, 2013).

Thus mighty organizations tend to work in holding companies and enjoy each other's abilities. Thereby through overcoming their problems, they can compete in the global arena at higher levels of activity. Organizations around the world are also looking for techniques and methods to preserve and develop their competitive benefits. Outsourcing has presented itself as one of these approaches in recent years. Some companies in order to improve the quality of services and products, have attempted to outsource certain activities because of reducing the cost and time, focusing on the main competitive advantages, and generally increasing the effectiveness of organizations. It seems that companies outsourcing their operations to other professional, can focus better on activities that create more added value and thereby maximize the effectiveness of their activities. Investigations show that increase in outsourcing can lead to lower costs

as well as reducing the need for investment in facilities, equipment and manpower. This is exactly what holding companies are looking for. Holding organizations can be defined as a group of companies which a company in them includes the ownership and management, or just managing over all companies may be considered as holdings (Jafar-Abadi, 2005).

Conditions and requirements for outsourcing

What do companies feel are necessary for someone to do part of their operational processes? Answer to this question seems pretty obvious in the first place, but a little contemplation makes clear the importance of the following main points. Outsourcing is a reasonable action if for any reason the factors outside of company can be charged that each stage of the value chain, keeping other factors such as quality, functionality, delivery terms, customization, with lower the costs. It seems that the only reason for turning to outsourcing should be sought in the economic context. But can we claim that all suitable positions and all gains and losses would be recognized by the company executives at any moment? If so, how can we interpret the positive impact of companies’ management changes? Studying different companies that have experienced major changes on management, indicates that all executives was not always aware and conscious about the profit or loss factors in the company. The answer to this question that whether a company can recognize the economic advantages in all phases of its value chain activities, as well as if necessary leave part of it to others, he needs mastering specified field of business conditions, knowledge of internal capabilities, identifying variables and market position and the constituent of its value chain and actually continued operation of the general structure, in situations where there are no economic reasons for this orientation(Bazyar, 2004). Studies show that according to the expectations of corporate executives, the main force increases interest of management to more tenure of value chain enterprises or performance of process, by making sure to avoid any unwanted conditions or risks. Such thought clearly indicates that the company identifies itself as the best in manufacturing operations. In this conditions we

Presenting a Framework for Outsourcing in the Holding Companies Research Paper

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have to face the question, how can we provide the managers confident? Here, a great point is glaring that it is the definition of” a mechanism and a logical, correct, scientific, and administrative model in order to entrust on safety contract to another. Assuming organization ability to define its requirements and knowledge of what it want to leave to others and awareness of the selection criteria about contractor desired, selecting the contractor accompanied the organization and the person who will leave the product, becomes more important. The outsourcing association is considered several reasons for outsourcing based on studies done in different countries and companies as follows:

Reduction and controlling operating costs, improving the organizational focus on specific issues, acquiring capabilities that put the organization among the top companies, releasing internal organizational resources in order to use at other sectors, lack of internal accessing to the resources within the organization, achieving the benefits of experienced engineering, determining the uncontrollable and non-management issues, capital attracting sources, sharing risks (Shahraki, 2010).

Categories of outsourcing

The outsourcing process describes the application of thought to make better use of the resources available to an institute. This process first formed in the factories that were produced the required components, and then extend to the collection buildings, and small companies were formed in the form of clusters, to provide the services as well as collections parts for major companies. The supply chain as discipline and logistic or procurement supply with a focus on relationships and communications and using information systems are formed to improve the quality. Nowadays production of information is as part of this process. Large and international software companies, yield their software products or parts of them to smaller companies. Today outsourcing of services has been expanded. Among the services, we can note these cases: Labor supply, financial services, maintenance services, transportation services, places and building

maintenance services, purchasing and supply services, educational services, safety and protection equipment services (Shokri, 2008).These services have a wide range. Each institute according to its basic and facilities, provides prioritization outsourcing. Considering some of areas that were mentioned, outsourcing process is formed according to the requirements.

Outsourcing in holding companies

Outsourcing focuses on two strategic directions is trying to develop competitive advantages:

First, by focusing on main sources and investments of the organization which is referred to as the core activities; and the second, by outsourcing the activities that are not needed strategically neither the organization has any particular capabilities in that field. Outsourcing increases organization capital return, so it maintains and develops the effective activities in the business competitive advantages. This act as a barrier against current and future competitors. Also they have maximum use of resources, innovation and foreign investment, and finally better services, quality and cost is created for the customers (Shahidi and Mohammadian, 2007). Before doing any serious action toward outsourcing, it is essential that its specific programs and general approach be taken into consideration. The program of management should enjoy fully support and participation of all people who are affected by it. Outsourcing is an efficient way to reduce costs and improve the quality and services as well as the release of organizational capital; Although Outsourcing is not as a sure issue that leads to success. First, it is necessary to investigate whether or not it is appropriate for outsourcing of organizational success. Organization readiness can be investigate in accordance with requirements such as those that comes in follow:

Determination of items that can be improved by Outsourcing is, such as cost, capabilities and management focus.

Determine the questions to be answered before proceeding with outsourcing;


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including considerations related to market capabilities and limitations contained in group bargaining and negotiations.

Verify and confirm the efficiency and cost effectiveness of outsourcing in order to achieve competitive advantages.

Moreover, in order to assess these requirements and determining whether the outsourcing is in good condition organization, certain questions must be considered: Do the existing services and activities have uncontrollable problems which are difficult to correct within the organization? Have the framework of activities been defined correctly? Does the outsourcing provide a better combination of services, quality and cost to perform activities within the organization?

After obtaining organization readiness for outsourcing, the next step is to determine activities are potentially the best option for outsourcing. Most of these activities constitutes an organizational support, which is not considered as a key factor in competitive advantage. These activities are often daily routines, even if they are technically complicated.

Providing a framework for outsourcing in companies

Due to the complexity of assessing the organization readiness for outsourcing, analysis of options and movements in the outsourcing process, using a systematic approach seems to be beneficial. A useful and practical approach is often consists of six steps that will answer these questions: Does it seems reasonable to outsource? What is the reason for outsourcing justification? In fact, the initial assessment should include analysis of costs and services associated with the comment of management about the problems and possibilities of assumed outsourcing. Are the organizational goals achievable? In this stage, the goal is to assess the impact of outsourcing on the organization's current strategies. As a result, the organization's abilities to achieve these goals must be assessed and analyzed. Is the organization prepared? Organizational readiness for outsourcing, influenced by factors such as

personnel and organizational structure, management style and the ability to manage contracts. What are the options for outsourcing? First, the possibility of doing the desired activity in an efficient state and effectiveness of the organization in terms of cost and simplicity should be investigated. If not possible, it is essential to supply choices available and conduct the activities are determined. How is request structure for assignment cooperation activities to external sources? What characteristics would be ideal for a supplier? What capabilities should be they expected to? After making a list of suppliers, we may request information from them. What are negotiating strategies and tactics? This includes activities such as scope, cost and pricing issues, changes and termination of contracts, and structure of the negotiations team. Like other improvement techniques, outsourcing also has some advantages and disadvantages that disadvantages are depending on other things such as specific industry, organization records and abilities to outsourcing process be done successfully. Applying outsourcing has many benefits that of course are associated with the quality of products and service to the customers. Some of these benefits are listed in the following.

The organization is no longer limited to its abilities; but it also can use the ability to create new ideas, that it didn’t have its capacity. Each supplier has a human resources and specialist in his expertise in the field. That can help the organization to make more professional capabilities. Suppliers have specialized equipment to deliver the services that it can offer better services and lower prices to customers. Outsourcing can bring flexibility to the organization; especially in gaining and maintaining the advanced technology as it is rapidly developing.

The productivity of the suppliers’ employees often increases; considering that assigned activities are part of central activities of the supplier organization, these people try to use the opportunities to promote their job. Unlike internal experts, the outside experts don’t need to take the time on learning the required concepts to do the assigned work. In fact, they individuals who have the knowledge and experience to meet the needs of


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the organization and most of times, achieving the scientific level of outside experts in the field of outsourcing is difficult for those are within the organization. People who are employed permanently in the organization, find an opportunity to improve and enhance their skills by interacting with experts outside the organization. Transmission of knowledge in the long term, will cause to improve the quality and efficiency of their job at organization (Ali-Babaei, 2002).

Outsourcing of some activities will provide the organization a great opportunity; while it also faces the organization up to risks. Main management concerns can be summarized in the following three items:

Lack of key skills in the organization: For example, an organization that has outsourced some of its activities, after a while realizes that supplier is unable to meet its expectations. After that, the organization doesn’t have adequate and knowledge and skills to perform the necessary tasks associated with the work of being outsourced. Thus, understanding the fundamental capabilities and requirements is necessary to do the desired activity.

Lack of communication between the activities and operations: It is possible that relationship between professionals’ skills and in different sectors and parts of organizations meets some problems because of outsourcing of some activities. In addition, it may reduce the transmission of flexibility, capabilities and skills within the organization.

Lack of control over suppliers: Maybe a supplier attempt to provide its knowledge to competitors after enhance his professional capabilities, by using organization supports. It is clear that the organization should ensure commitment and credit providers while attracting their satisfaction (Eghtedari, 2009).

Presenting a model for Outsourcing in the holding companies

Companies’ decisions on outsourcing activities can be considered as part of non-structured decision-making. This is due to the emergence of new technologies and strategies. When organizations uncertainty face the supply chain with the rapid changes in technology, they aren’t able to predict the future conditions and the use of standard mechanisms for coordination of activities. As mentioned above, a problem which managers are encountered with is not the use of outsourcing ,but it is to determine services that should be outsourcing. so, it requires that outsourcing strategies be clearly defined. In such a case, select appropriate model for organizations, according to their own specific conditions is very important. In other words, the wrong choice of outsourcing activities, will result in increased costs, reduced security and etc (Akrami and Karimi, 2006).

In the proposed model, first in the part of knowledge, through identifying the benefits of outsourcing and in direct with the organization's core goals and strategies, the importance and necessity of outsourcing is determined to the organization. Then in design part, those activities and processes that have the potential and ability to be outsourcing, are identified based on evaluation criteria. In the final phase by secondary assessment and according to environmental standards, if the activities and processes in outsourcing, benefits the organization will be determined. Look at the Figure 1. Outsourcing steps in the proposed model, where also are in examined the model of sample, are discussed in three main stages as follows:

Knowledge

As you see in the figure, in this stage considering main strategies and organizational goals and with regard to reasons to benefits for the organization, the first stage of the decision-making takes place. Other words, organization would realize the necessity and importance of outsourcing and the first step of decision is left behind.

Design

After creating awareness and decision to outsourcing, it turns to the areas and activities that there is the possibility of outsourcing on them


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essentially. To diagnosis the internal potential of activities for outsourcing, based on the model mentioned above, the followings are considered key indicators:

Standardization: To what extent is the desired activity standardized?

Capability or core competence: Does the activity related to the capabilities and core competencies?

The degree of compliance with the core business: to what extent the activity related to the core business of the organization?

Complexity: Does the activity have lots of complexity?

Cost and performance analysis: Does is costly for the organization to do the activity?

Resolution: how much is it severable from the other activities?

Risk assessment: to what extent is the risk of outsourcing activities?

Mentioned variables as a primary filter provides the possibility of assess the organization activities and identify nature of their inherent potential to be outsourcing.

Selection

Since outsourcing is not a separate and independent process and requires a network of organizations acting together, hence considerations must be taken out of the organization. the following standards have been used at this stage to assess the external potential of activities available for outsourcing in organization:

The legal aspects: Is outsourcing of selected the activity legal?

The market considerations: Is there any service provider at the market?

Ability to manage providers: How much is the organization ability to manage service providers?

In the proposed model, whatever the activity has the high internal and external potential for

outsourcing, activities would be more appropriate for outsourcing.

RESULTS AND DISCUSSION (SUMMARY)

In general, we can say that besides cost and benefit considerations on decision support, strategic issues, financial assessment, efficiency and the risk associated with provider reliability, promotion and delivery times are considered as well. When all these factors are intended together, the decision for outsourcing can be a very complex and sensitive determination which affect the profitability and competitive success. Thus, the conditions for organizational preparation in holding companies on outsourcing decisions are more important because of the role and activity of these organizations. It is necessary to mention here that in companies that do it want to have outsourcing services should be done by an expert, and their activities are limited to the services. Also the services receiver company should be able to set the activity so has the ability of being controlled, and provide facilities in order to monitor affairs. Activities that are not centered on organizational core activities should be outsourced and only tasks that are related to the subject of organizational main activities, or it might be better in prices and conditions, can be done within a set. Unfortunately, managers are looking at outsourcing without enough awareness and a proper perspective; as some think if they have to cede it out, that work wouldn’t have been done right and it will be performed with lower quality and higher costs. While if the employer properly addressed to work and has control over it, the quality of service increases.

CONCLUSION

If the activity has both internal and external high potential and be appropriate, it is recommended for outsourcing. It is recommended to increase the internal potential and then outsourced it, if the work does not have suitable internal potential for outsourcing. Whether the activity has suitable external potential for being outsourced, it is recommended to stay within the organization. In the condition that activities both in terms of internal and external potential are in sufficient and


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low, we will recommend increasing the internal organizational capabilities.

REFERENCES

Akrami, H., & Karimi, B., (2006). Outsourcing, selected studies in various fields and provide a theoretical framework and systematic approach. A case study. The Second Logistics and Supply Chain Conference, Tehran, Iran.

Ali-Babaei, M., (2002). Study the characteristics and performance of the holding company. Al-Zahra University, Tehran, Iran.

Bazyar, A., (2004). Study of dimensions and approach of the outsourcing issue. First National Conference on Logistics and Supply Chain.

Eghtedari, N., (2009). Selection the appropriate managerial style to the design strategy of the company holding. The Fourth International Conference of Strategic Management.

Eghtedari, N., (2008). Explaining the strategic model for reviewing the effectiveness of holding companies. Third International Conference on Strategic Management. Shahid Beheshti University, Tehran, Iran.

Jafar-Abadi, A., (2005). Decision model of outsourcing problem to improve the productivity and profitability of the organization and its various dimensions. Sixth Conference on Quality and Productivity in Electric Industry. Satkab Company, Tehran, Iran.

Qayyum, M. N., Ali, M., & Shazad, K. (2013). The Impact of Supply Chain Management Practices on the Financial Performance of the Organization. International Journal of Operations and Logistics Management, 2(2), 22-40.

Saghafi, F., (2008). Provide a model for outsourced of research projects. Sharif University of Technology. First Strategic Project Management Conference.

Shahidi, F., & Mohammadian, A., (2007). A systematic model to determine the strategic outsourcing activities. The Second International Conference on Strategic Management Research Institute for Strategic Studies.

Shahraki, M.R., (2010). Outsourcing, success and entrepreneurship. Islamic Azad University, Zahedan, Department of Industrial Engineering.

Shokri, M., (2008). Framework for the development of standards for information technology outsourcing projects in large organizations, The Fifth International Conference on Information and Communication Technology.

Talebi, D., (2007). Factors affecting the decision to outsource. The Fifth National Industrial Engineering Conference. Tehran, Iran.


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APPENDIX

Figures

Figure 1: Outsourcing steps in the proposed model


*Corresponding author: Dr. Rashid Saeed, Filza Abbas COMSATS Institute of Information Technology Sahiwal, Pakistan.


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Research Paper

The Organizational Role in Career Development of Employees

Dr. Rashid Saeed1*, Rab Nawaz Lodhi2, Filza Abbas3*, Urooj Ishfaque4, Fareha Dustgeer5, Dr. Moeed Ahmed6




4&5. M.S Scholar, COMSATS Institute of Information Technology Sahiwal, Pakistan.

6. Professor, Bahauddin Zakariya University Sub Campus Sahiwal, Pakistan.

Purpose: To check the impact of organizational role in career development of an employee. Training and proper career counselling provided by the organization is the main tool for enhancing the career of employees. Design/Methodology/Approach: Quantitative study was conducted in Education sector of Pakistan. Sample of 100 employees of different universities and colleges located in Punjab province were selected. The survey was conducted through the questionnaire. Regression and Correlation was run to analyse the data. Findings: Findings reveals that positive and significant relation exists between Organizational role and career development. Limitations/Implications: Sample size was short due to time constraints. Large sample size can be taken. In order to check the relationship between organizational role and career development Social Cognitive Career Model (SCCT) can be studied. Originality/value: To check the organizational role in career development of employees. Organizations can play important role to satisfy employees in their careers. Keywords: Organizational role, Career development, Pakistan

INTRODUCTION

Business environment has significantly changed

the people career attitude towards organizational

performance and career development. Due to these

changes organizations are restructuring and

downsizing that has contributed to more flexible

career development environment. As a result

individuals will be able to self-manage their

careers (Arthur, Khapova, & Wilderom, 2005).

Career development is the process in which

employee goals are compared with the business

needs. It enhances the job performance of an

employee.

Career development of employees chains the

development of an organization. Career

development can be achieved by organizational

support. Organization can support employees in


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their career development by providing them

proper guidance and training (lingham, 2000) .This

research will try to define

Does the organizational support have impact on career

development?

Is this impact positive or negative?

What measures can be taken to improve career

development activities?

This research has been done to find out that

organizations actually support the career

development in different countries like USA (Janet,

Ronald, & Randall, 2009), Australia (Lisa &

Shelley, 2007) Canada (Maurice, 1999). .In Pakistan

this research has not been implemented on full

time employees in education sector.

LITERATURE REVIEW

Career development of employees is challenging

for any organization. To meet this challenge

organizations support the employees to develop

their career that leads to career satisfaction. The

organization positively affects the career

development of an individual. Most of the

organizations perform supportive role instead of

directive role to enable the employees to achieve

the success in their careers. Organizations can

adopt different strategies to retain the employees

and make them satisfied with their jobs (Baruch,

2006) Not only the organizational support is

important for career development but employee

own role is also important (Baruch, 2006).

Organizational career management also

contributes towards the employee career (Baruch,

2006) Employee career satisfaction will identify

whether the investment made in supporting the

career development activities is beneficial to

organization and helps to design better career

development programmers for the employees

(Lent & Brown, 2006).

Robert C. and Merchant Jr. conducted a research

on Altamonte Police Department to determine the

role of an organization for career development. For

this they collect data from 100 police officers who

had left the Altamonte Springs Police Department

due to some reasons. From research they found

that the major reason of resigning was lack of

experience, training and Career counseling.

Training helps employees to acquire the required

knowledge and skills to enhance the job

performance. As we are in 21st century and it is

necessary for every organization to focus on

employee career development needs so that they

can increase their productive efficiency. (Robert &

Merchant, 2007)

Janet B. Kellet, Ronald H. Humphrey, Randall G.

Sleeth (2009) conducted a research to test the

collective work performance on individual task

performance. Supportive organizational role

affects the individual careers as well as the team

careers. This research identifies that team work is

important at workplace as it enhances the self-

efficacy of an employee and his\her career

development. The sample of 81 women and 66

men was taken they were grouped together and

tasks were given. The results were judged on the

team performance which was more impressive

than individual performance. It was concluded

that team work at organizational level contributes

to the career development. (Janet, Ronald, &

Randall, 2009)

Zeb Jan (2010) studied on career development in

learning organizations. That study determines the

impact of organizational role in individual

capacity development. For this they used different

models to study the impact. Important model was

Senge’s Learning Organization Model. In this

model five concepts were focused (Personal

mastery, Mental models, Team building, Shared

vision and System thinking) (Jan, 2010)

Organizational sponsorship is also necessary for

the career development. Belinda Renee Barnett and

Lisa Bradley (2007) conducted a research on the

impact of organizational support for the career

development. For purpose of conducting this

research Organizational career management was

studied. It includes the process and career

The Organizational Role in Career Development Research Paper

666

developing programmers through which an

organization can support the career of their

employees. To find out the results they conducted

a survey on public and private sector employees.

This research determines that the organizational

role is positively related to the career development

and career satisfaction. (Barnett & Bradley, 2007)

In this competitive environment it is difficult for

the organizations to provide the competent skills

which are necessary to attract the employees by

giving them career satisfaction through career

counseling, challenges and different incentives. It

is difficult as well as costly. But it can be achieved

if the organizations properly support the

employees in developing their careers. For the

individuals working in the educational sector

career development is much important as they

have to meet the student’s satisfaction also. This

study will suggest how the organizations can play

role in career development of employees by

providing them training and career counseling.

Research Objectives

1. The objective of this research is to

determine the and clear the role of an

organization in career development of

employees.

2. To find out the steps for career

development.

THEORETICAL FRAMEWORK:

In this theoretical framework there are two

variables Organizational Support and Career

Development. Career development (Dependent

variable) is dependent on organizational support

(Independent variable).

Hypothesis

Belinda Renee Barnett and Lisa Bradley (2007)

conducted a research on the impact of

organizational support for the career development.

To find out the results they conducted a survey on

public and private sector employees. This research

determines that the organizational role is

positively related to the career development and

career satisfaction (Barnett & Bradley, 2007; Rafi,

2013).

Robert C. and Merchant Jr. conducted a research

on Altamonte Police Department to determine the

role of an organization for career development. For

this they collect data from 100 police officers who

had left the Altamonte Springs Police Department

due to some reasons

Training and career counseling helps employees to

acquire the required knowledge and skills to

enhance the job performance. So every

organization should focus on employee career

development needs so that they can increase their

productive efficiency.

H: Organization can positively affect the career

development of an individual.

METHODOLOGY

The positivist approach was used because

literature that have reviewed, shows that this

study have been conducted in different sector and

in different context but yet has not been conducted

quantitatively or qualitatively in education sector

of Pakistan so quantitative method will be used to

analyze the data.

Data collection method

Education sector of Punjab province was chosen as

target population due to time and money

constraints. Career development is important in

every sector. Career development is the only

weapon through which the employees can be

satisfied from their jobs and can produce the

productive environment and better performance.

Education is the best sector to test this model. CIIT,

Punjab College, DPS and MC High School were

Organizational Role

(IDV)

Career Development

(DV)


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chosen as sample frame. Survey was conducted

through questionnaire on 100 employees. Sample

was selected by convenience sampling. Three days

were taken to collect data from different

universities located in different cities of Punjab

province.

Operational Definition of variables

Organization role: Organization plays an important

role in developing the career of employee through

the following ways.

Career counseling: Career counseling is the process

or guideline that enables the people to develop in

their careers. It is the personalized process that

helps to explore the career options and clarify the

process to be adopted for attaining the desired

goals. (Francis & Margret, 2007)

Training: Training is the process organized by the

organization to enhance the performance of

employee’s. Different training and development

programs are conducted to raise the capabilities of

employees for better outcome and career

development.

Training is a process of improvement in which

employee capacity for job is improved by solving

their problem and exploring their full potential

and high quality would be attained by efficient use

of talent and employee ability (Wilkinson &

Willmott, 1994).

Career development: Career development is the stage

of planning and implementing the steps and

actions required to achieve the career goals. It also

involves the learning new skills and abilities to

excel in the career. (Baugh & Suvillivan, 2005)

Data Analysis

In order to check the overall reliability Cronbach’s

alpha was used. Bar chart was used to check

sample characteristics. Regression and correlation

were used to analyze the data. There was only one

dependent and one independent variable in the

study. Correlation assumption was tested through

Durbin Watson test and scatter plots.

Table

Variables Dimensions Elements References

Organization

Role

Training

Career

Counseling

Staff training

Training

outcomes

Staff capacity

development

(Francis &

Margret,

2007)

(Wilkinson

& Willmott,

1994)

Career

Development

Career

enhancing

activities

Formal Support

from

organization

Recognition

Staff

development

(Baugh &

Suvillivan,

2005)

As there was no moderating variable in the study

therefore only the effect of organizational role on

Career development was checked.

Y=β0+β1X1+e

Above given equation is used to check the impact

of Organizational role on Career development

Y=Dependent variable

= constant variable

β1=Value of independent variable

X1=Independent variable

FINDINGS

Reliability

The overall reliability of the instrument is .682

Descriptive analysis

The bar chart shows that 63% respondents were

male and 37% were female. The standard deviation

is 47% and variance is 27%.

Correlation

Scatter plot was used to check the Correlation

between the organizational role and career

development. It is shown that there is positive

relationship between the variables. Positive

correlation exists between organizational role and

The Organizational Role in Career Development Research Paper

668

career development with .382**value and was

significant at .000.

Table: Correlations Correlations

Independent_

variable

Dependent

_ variable

Independe

nt_ variable

Pearson

Correlation

1 .382**

Sig. (2-tailed) .000

N 100 100

Dependent

_ variable

Pearson

Correlation

.382** 1

Sig. (2-tailed) .000

N 100 100

**. Correlation is significant at the 0.01 level (2-tailed).

Table: Regression results Coefficients

Model Un-

standardized

Coefficients

Standardiz

ed

Coefficient

s

T Sig.

B Std.

Error

Beta

1 (Constant) 1.468 .175 8.

37

0

.000

Independ

ent_

variable

.313 .076 .382 4.

09

0

.000

a. Dependent Variable: Dependent_ variable

Regression

The R value shows the regression. Organizational

role is .338 with significance level of .000 that

shows there is positive relationship between the

organizational role and career development. R

shows total change occurred in dependent variable

due to independent variable. It is significant

because p<0.01. The value of Durbin Watson test is

1.774 thus the possibility of autocorrelation is

reduced, so we can run this test.

Coefficient of regression

Beta value of organizational role is .313 with t

value 4.090 with significance level .000. It means

by 1 unit change in organizational role causes 31%

change in career development.

Limitations and Future directions:

1. The sample size may limit the

generalizability of the findings. Large

sample size can be taken in future to study

the relationship between organizational

role and career development.

2. Further study can be conducted to test the

relationship of career development

outcomes and perceptions of justice with

the employees of an organization (Adelle,

Lisa, & Leisa, 2004).

CONCLUSION

Organizations play an important role in the career

development of the employees. In order to know

the relationship between the organizational role

and career development a research was conducted

in the education sector of Pakistan. Sample size of

100 people was chosen through convenience

sampling. Data was analyzed through SPSS20

version software. Regression, correlation and beta

value was determined. Positive relation was found

in both the variables.

From the whole research it was concluded that an

organization can positively affect the career of an

employee. Training and career counseling by the

organization are important elements. If the

organization conducts proper training sessions

and career counseling programs it would help the

employees to develop in their careers. If

organizations focus on investing in the career of

their employees in return they will also get the

benefit of trained and satisfied employees.


Saeed et al.

REFERENCE

Adelle, J. B., Lisa, M. B., & Leisa, D. S. (2004). " Career Development for going beyond the call of duty: is it perceived as fair?", Career Development International, Vol. 9 Iss 4 pp. 391-405.

Arthur, M. B., Khapova, S. N., & Wilderom, C. M. (2005). "Career success in a boundry less carer world, Journal of organizational behavior", Vol. 26 No. 2, pp.177-202.

Barnett, B. R., & Bradley, L. (2007). " The impact of organizational support for the career development on career satisfaction", Career development international, Vol. 12 Iss: 7 pp. 617-636.

Baruch, Y. (2006). " Career development in organiztions and beyond: blancing traditional and contemporary view points", Human Resource Management Review, Vol.16, pp. 125-138.

Baugh, G., & Suvillivan, E. S. (2005). "Mentoring and career development", Career development International, Vol. 10 Iss: 6pp. 425-428.

Francis, & Margret. (2007). "Career counseling".

Jan, Z. (2010). " Career development in learning organizations ".

Janet, B. K., Ronald, H. H., & Randall, G. S. (2009). "Career development, collective effficacy, and individual task performance", Career Development International, Vol.14Iss: 6 pp.534-546.

Lent, R. W., & Brown, S. D. (2006). "Integrating person and situation perspectives on work satisfaction: a social cognitive view," Journal of vocational behavior, Vol. 69, pp. 263-247.

lingham, L. (2000). "Career development and organizational training".

Lisa, D. S., & Shelley, R. D. (2007). " Exploring the development of a protean career orientation: values and images violations", Career Development International, Vol. 12 Iss: 6 pp. 545-564.

Maurice, M. G. (1999). " Reconceptualizing career change: career development perspective", Career development international, Vol. 4 Iss: 6 pp. 305-311.

Rafi, N. (2013). Explanation of antecedents affecting supply chain management adoption and execution. International Journal of Operations and Logistics Management, 2 (3), 57-70.

Robert, C., & Merchant, J. (2007).

Shahraki, A., Konarizadeh, M., Paghaleh, M. J., & Zarei, M. (2011). HRM effects on TQM. Business Management Dynamics, 3, 01-12.

Wilkinson, A., & Willmott, H. (1994). Making quality critical:New perspective on organizational change.

Yuauf, Y., Gunasekaran, A., & Dan, G. (2007). Implementation of TQM in China and Organization Performance: An I mpirical Investigation . Total Quality Management, 509-530.


*Corresponding author: John N. N. Ugoani, Coordinator, College of Management and Social Sciences, Department of Management Sciences , Rhema University 153-155, Aba Owerri Road, Aba, Abia State, Nigeria. E-Mail: [email protected]

670

Research Paper

Work-Family-Stress and Depression among Public Senior Secondary School Teachers

John N. N. Ugoani, Ph.D

Coordinator, College of Management and Social Sciences, Department of Management Sciences , Rhema

University 153-155, Aba Owerri Road, Aba, Abia State, Nigeria.

Pressures from family, work and other environmental factors frequently lead to stress and depression among individuals. This study was designed to assess the effects of work-family-stress among public senior secondary school teachers in Nigeria and propose remedial strategies. Work-family-stress is a type of stress that may be task-based, role-based, interpersonal-based, physical-based, social-based and intrapersonal-based. The survey research design was used while a questionnaire on a 5 point Likert format as well as personal interviews was used for data collection. Data analysis was done using tables, frequencies, percentages, and linear correlation analysis. It was found that Nigerian teachers face depression due to work-family-stress. Five recommendations were made based on the result of the study.

Keywords: burnout, depersonalization, “ukwumangos” work-family-depression, interwoven, environment, equilibrium, classrooms, equilibrium, dysfunctional conflict;

INTRODUCTION

Stress is inextricably interwoven with life and it only ceases as life itself ceases. All living things; man, plant, and animal are in a constant state of dynamic interactions with their environments. Within the interactions man tries to modify his environment while his environment equally tries to modify him and in the process man experiences a kind of tension or stress in the environment (Levinson, 1970). According to Newman and Newman (1981) man sees his environment as everything outside the boundaries created by his fingers. This environment consists of a mixture of physical, social and organizational structures that affect a man by pressures and demands. Man

keeps trying to maintain his equilibrium from the pressures of all these forces all the time. (Cooper, & Payne, 1980, Cooper, 1982). Role stress refers to the work or family “conditions” that are associated with feelings of role strain or distress. The term “conditions” has the advantage of referring to role aspects that are either stressful i.e negative or enhancing, i.e positive. Role stress is now viewed as one of the many potential outcomes of stressful work-family conditions. According to Matterson and Ivancevich (1987)”, stress in individuals is defined as any interference that disturbs a person’s healthy, mental, and physical wellbeing”, it occurs when the body is required to perform beyond its


John N. N. Ugoani

normal range of capabilities. Stress is subject to multiple definitions. Some see it as that which man experiences when he is under pressure and feels enable to cope with the situation. Also, stress is a state that occurs when we perceive events to strain our coping capacity that threaten our well being. From this definition, it can be, argued that what determines the stresses of a situation, is the person’s evaluation of the events relative to the person’s ability. Baron (1986) has defined stress as the physical, psychological and behavioural reactions experienced by individuals in situations whereby they feel that their ability to cope may soon be overwhelmed. (Yoloye, 1971, Wood and Wood 1999, Bar-On, 1988). Basically, stress refers to those external factors that, lead to the wear and tear in the body, which are called external stressors. In this study the term stress will be used interchangeably to mean the body’s reactions to external reactions or the cause of such reactions. Very often, the word stress connotes something negative but this is not always true. Many positive and exciting life events such as marriage, the birth of a child, inheriting of a huge sum of money, buying a new home, a job promotion, and relations – create stress. Consequently, Selye (1978) has differentiated what he termed eustress (good stress), from distress (bad stress). Eustress activates people to work more seriously, effectively and efficiently. For example, people working or preparing for their wedding, work more conscientiously and for longer hours without getting tired, easily. Distress on the other hand, impedes performances and lowers productivity. For example, a female teacher whose husband or child is on hospital admission for a serious surgery, will exhibit diminished performance and even absenteeism. According to Sigleman and Shaffer (1991) the extent to which people experience stress and its potentially damaging effects depends on both the kinds of events they encounter and the way in which they appraise them. This appraisal can make the difference between coping and collapsing (Thackerary, 1979, Maslach, 1982, Maslach & Jackson, 1982, Beehr, 1994, French, 1973). Stress at work can cause teachers to be less effective in the performance of their roles in schools, for example a teacher who has not been paid his or her salaries cannot meet

family demands and therefore may not be in a good frame of mind to articulate ideas for transferring knowledge. It is common knowledge in Nigeria that the issue of teachers pay has remained a major problem over the years. For example in 1947 The Nigerian Union of Teachers (NUT) under the leadership of the late Rev. I. O. Ransome-Kuti gave notice of strike to press home their demand for the harmonization of the salaries of teachers in mission schools with those of the government schools. Up till today the problems have not been fully addressed. What we have today is the sight of teachers frequently loitering under mango trees with files day in day out for screening exercises: promotion exercise, indigene exercise, and so many uncoordinated exercises that do not yield any useful results nor have any positive impact on the teachers. Some of the challenges facing the teachers are in cases, the fact that the majority of them do not even know how their pay is calculated neither do they get any feedback from the supervising government agencies other than routine official visits to check attendance and lesson notes. A situation where a teacher was issued with a promotion letter and such a letter would not be valid for pay implementation for as many as five (5) years can only be stressful. So many of such notional promotion letters were seen during field work. In many cases letters of appointment would be issued to teachers by one government official and only for such a letter to be withdrawn by another official. In such cases the teachers involved return to the labour market without sufficient explanations. Such situations suggest lack of control. Teachers whose pay are almost always in arrear, at least in some States or are grossly under paid in the case of private schools, can ill afford to cover their family needs including means of transportation of their own. The implication is that these teachers labourously find it stressful making it daily to and from their schools, especially those located in remote areas where the road network is zero, especially in the case of public schools. Having accepted that their reward is in heaven teachers now live with the phobia of receiving their reward at their grave sides, in the form of lengthy funeral orations because the reward from heaven is beyond them. There is a relationship between the

Work-Family-Stress and Depression Research Paper

672

wellbeing of a teacher and his or her performance in the school with which he or she is associated, and according to Wright (1975) since management involves people, and wellbeing is related to effectiveness, then governments must be concerned about the wellbeing of teachers, whether in public or private schools. The quality of government decision can make or mar the standards of teaching and learning in schools and reduce or increase the level of stress among teachers. The Nigerian teacher is buffeted by stressors from his family, school, interaction with his fellow human beings e.g. school supervisors, peers, subordinates, etc, and from his general environment, such as the unpredictability of public transportation which interferes with his/her reporting to school. Definitely Nigerian teachers have neither chosen death nor a continued miserable existence as a goal in life. Therefore they must be helped through clear and standardized government education policies on pay and pay systems, appraisal processes, training and retraining programmes good work/physical environment, to survive and work effectively in a reasonably happy state in Nigeria. Since stress is omnipresent in work places people and organizations such as government education authorities should be concerned about how to manage it more effectively. Muchinsky (1997) argues that since we cannot have stress-free work environments the only option left to us is how to reduce the presence of stressor rather than reducing the presence of stress at work. Individuals and organizations can manage stress through good time management, role management, as well as good education policies. (McGrath, 1976, Adair, 1984, Beehr, and Franz, 1987, Fashoyin, 2007, Nelson & Quick, 2003, Beehr and Newman, 1978). This is imperative because lack of adequate rest, lack of adequate pay, and lack of adequate delegation will not only result in emotional problems for the teacher but also in intellectual inadequacy, and in physical retardation. The physical features of a school – teacher are highly correlated with his wellbeing, his attitudes in social situations, his intellectual performance and his emotional disposition. (Durojaiye, 2008). Mclean (1980) maintains that stress at work is indicative of the notion that literally anything can be termed stressful, if the

individual’s vulneratibility is extraordinarily high and a supportive environment unavailable. In Nigeria today, the percentage of male teachers when compared to the percentage of female teachers is high, while the stock of illiterate persons is high. According to Ekene-okoro (2013) the formal minister of Education (Ezekwesili) recently revealed that Nigeria has 56 million stock of illiterate persons. In an evolutionary world view, the basic thing to do in order to change the urgly trend would be to make the teaching profession less stressful so as to promote knowledge dissemination. Statement of the problem

The Nigerian teacher has a history of work-family stress arising from the late payment of salaries and worse still under remuneration when compared with other workers in the society. In 1947, to press for harmonization of the pay of teachers in government and the voluntary organizations the NUT gave notice of strike. Till today Nigerian teachers still face serious work-family-stress arising from difficulties in meeting family and other societal needs. Because teachers are not adequately remunerated they are often neglected and the cumulative effect is inferiority complex and stress which eventually leads to depression. Also the fact that teachers often hold seminars and briefings under tree shadows can result to safety and health problems. Hypotheses

To guide the study, these hypotheses were formulated and tested at 0.01 level of significance. Ho: There is no significant relationship between work-family-stress and depression among public senior secondary school teachers. Hi: There is significant relationship between work-family-stress and depression among public senior secondary school teachers. Areas of study

The study was limited to the public senior secondary school teachers in Aba Zone of Abia State, Ngeria, comprising Aba North, Aba South,


John N. N. Ugoani

Obingwa, Osisioma, Ugwunagbo, Ukwa East and Ukwa West Local Government Areas. LITERATURE REVIEW

The individual performs different roles in the society and because of the conflicting nature of these roles the incidence of stress is always ever present. Pressures come from the work environment, family sources, the society and so on that bring out stressful conditions and lead to depression eventually. Stress has a variety of meanings. Even the stress experts do not agree on its definition. Stress carries a negative connotation if it involves something to be avoided. Stress is the unconscious preparation to fight or flee that a person experiences when faced with any demand that appears stressful. An individual is likely to experience stress when unable to cope with task demands, societal demands, and lack of internal locus of control (Nelson & Quick, 2003). Work stress can be shown by a model.

FIGURE 1 HERE

From this model it could be imagined that teachers may be experiencing stress due to intensification of work. With the changing work environment, teachers may be experiencing anxiety, work-overload, loss of control, pressure, long hours of work and insufficient personal time and rest. Such experiences are likely to encourage a re-assessment of values in teachers and there is evidence that younger teachers are not willing to sacrifice their personal time for the world of teaching. The stress situation is the product of a stressor or stressors. This is the person or event that triggers a stress response. The stress situation brings about distress or strain which refers to the adverse psychological physical, behavioural, and organizational consequences that may occur as a result of stress events. (Cannon, 1935). Lazarus (1966) was more concerned with the psychological effect of stress. He de-emphasized the medical and physiological aspects, emphasizing instead the psychological and cognitive aspects of the stress response. He saw stress as a result of a person’s environment, interaction, and he emphasized the person’s cognitive appraisal in classifying persons or events as stressful or not. He posits that what is stressful for one person may not be stressful for another and

that perception and cognitive appraisal are important processes in determining what is stressful, and a person’s organizational status can shape such perception. For example, a teacher would most likely be stressed by an unfriendly supervisor from the local education authority or by a family member whose need cannot be met due to inadequate pay. Also a teacher unable to do his/her work effectively due to lack of work over load and poor environment and also not recognized in society is highly likely to experience stress. Today in Nigeria teachers are seen almost always on a daily basis gathering under mango trees. (Ukwumangos) showing their letters of first appointment, letters of last promotion, evidence of local government or state of origin, credentials, evidence of marital status, nominal roll, age certificates, among other documents and counter instructions from different officers even in the same government. A situation of this nature compounded by ever confusing and conflicting expectations of a person in a social role creates stress for the teacher. Levison (1978) believes that two elements of the personality interact to cause stress. The first element is the ego-ideal-the embodiment of a person’s perfect self. The second element is the self-image - how the person really sees himself or herself, both positively and negatively. According to him the ego –ideal encompasses admirable attributes of parental personalities wished for and or imaginable qualities a person would like to possess, and the absence of any negative or distasteful qualities. Stress results from the discrepancy between the idealized self-ego and the real self-image; the greater the discrepancy, the more stress a person experiences. This psychoanalytic theory helps us to understand the role of unconscious personality factors as causes of stress within an individual. When related to the Nigerian teachers who is highly underpaid, hardly meets family needs, whose reward is said to be only in “heaven”, and therefore not recognized here on earth, usually ridiculed by society because of income poverty, they will ever be in a state of stress and miserable depression, as represented by this model in figure 1. A good person-environment fit occurs when a person’s skills and abilities match a clearly defined, consistent set of role expectations. This


674

results in a lack of stress for the person. Stress occurs when the role expectations are confusing and/or conflicting, or when a person’s skills and abilities are not able to meet the demands of the social role. He emphasizes that after a period of stress the individual will experience depression, which is the adverse psychological, physical, and behavioural consequences of stress. Effects of stress are most apparent in the relationship between stress and performance. At low levels of stress, employees may not be sufficiently alert, challenged, or involved to perform at their best. At excessive levels of stress, employees, including school teachers are too agitated, aroused or threatened to perform at their best. This appears to be the problem of the Nigerian teacher as depression is a mental illness that can affect both body and mind. (Hellriegel Slocum & Woodman, 2001). Teachers will not feel competent to satisfy their needs and reach their goals when they are perpetually marooned on an uncompleted classroom, and neither will they be effective. Teachers working conditions require better attention because education plays a very important role in alleviating poverty and providing opportunities for individuals to wriggle out of the shackles of ignorance and disease. In many instances, Nigeria work places are so poorly designed that they place workers under constant unrelieved stress and further they make it impossible for most organizations to reach their optimal productivity levels. Stressful work place conditions associated with the Nigerian teacher includes but not limited to lower job satisfaction, high job related tension, greater boredom and lower self- confidence. Other stress indicators are related to role ambiguity, depressed mood, lower self-esteem, life dissatisfaction, job dissatisfaction, low motivation to work, and intention to leave the job. In fact, in Nigeria today, male teachers are disappearing, leaving the “noble’’ profession to be populated by over 70 percent by female teachers. Nepotism in the public service is common in the teaching profession. In a developing country like Nigeria, individuals holding political and public appointments are often expected by tradition to take “care” of their “kith and kin” and in the attempt to do so they resort to bestowing preferential treatment on their relations even if this goes against the norms associated with the public

service. For example, the Federal Government of Nigeria (1979) identified nepotism as a social evil in the public service and described it as the outcome of excessive family, local and ethnic loyalties competing with and often taking precedence over loyalties to state or nation. To minimize stress being “ our brothers keeper” should not be misconstrued for favouritism or partiality as now being witnessed in the posting of school heads in some parts of Nigeria ( Uwazurike, 1991, Federal Government of Nigeria, 1979) METHODOLOGY

The descriptive survey method was used for the study. Table 1 showed that Aba zone has 63 public secondary schools with 1105 teachers in the senior secondary section, constituting the population of study. A sample size of 294 teachers was derived from the study population, using Yamane’s (1967) formula. Table 2 showed the sample size of each area of study, determined by the use of Bowley’s proportional allocation statistical technique. Questionnaire was designed using five points Likert scale format and tested for validility. A pilot study, involving 74 teachers was conducted and the data subjected to Cronbach’s Alpha technique to determine the reliability of the research instrument. A reliability coefficient of 0.91 was estimated showing very good internal consistency of the measuring instrument. Interviews were held with some principals of the senior secondary schools in Aba zone, directors / supervisors of schools and teachers. To analyze the data generated, tables, percentages and linear correlation analysis, using SPSS, version 17 were employed. Recommendations and conclusion were made based on the findings of the study.

Table 1 Here Table 1 showed that 28 percent of the teachers in the public senior secondary schools in Aba Zone were males while 72 percent were females.

Table 2 Here The 294 copies of questionnaire distributed to the teachers in the public senior secondary schools in Aba Zone in accordance with the distribution in table 2 were all retrieved, indicting a 100 percent response rate.


John N. N. Ugoani

Table 3 Here Table 3 showed the educational qualifications of the teacher- respondents involved in the study. About 60 percent of the teachers had bachelors degrees or equivalent, while 31.0 percent were holders of masters degrees. A small proportion of the teachers, 9 percent, possessed the Nigerian certificate in education/ national diploma certificates. It was observed that highly qualified teachers were engaged in the public senior secondary schools in Aba zone.

Table 4 Here Table 4 revealed that 83 percent of the teachers were within their active years of service (21-50years) while 17 percent were approaching the retirement age.

Table 5 Here From table 5, 20 percent of the teacher respondents agreed that work.family - stress has no association with depression while 80 percent differed in this opinion. The X and Y scores in table 5, were analyzed using version 17, and the result was presented in table 6.

Table 6 Here Table 6 presented the linear correlation analysis of the data and the Pearson coefficient of correlation, r, was computed as 0.993 at 00.1 level of significance (2-tailed). The value of the correlation coefficient indicted strong positive association between work-family-stress and depression. The null hypothesis which stated that there is no significant relationship between work-family-stress and depression was rejected. The alternative hypothesis was upheld with the conclusion that there is significant relationship between work-family-stress and depression among the public senior secondary school teachers in the Aba zone of Abia State. The coefficient of determination, r2=(0.993)2 or 0.9860 interpreted the relationship more clearly. The implication is that 98.60 percent of the depression experienced by the public senior secondary school teachers in Aba zone is explained or accounted for, by work-family-stress. Based on this result therefore, it was concluded that there is work-family stress among Nigerian Teachers. The present result supports the age long agitation of

teachers for enhanced pay both in the private and public sectors in Nigeria. (Fashoyin, 2007). Even till date, the NUT is still doing “battle” with various state governments in Nigeria to press for the implementation of the Teachers Salary Scale (TSS) that would enhance the teacher- pay. Poor teacher-pay is a major source of work-family-stress. Poor pay results in the inability to meet family needs and it can lead to lack of concentration, absenteeism, work-family-stress, and ultimately depression among school teachers. This result supports the common view in Nigeria that teachers reward is in “heaven”. SCOPE FOR FURTHER RESEARCH

Further research should focus on the adverse psychological effects of stress on the health of teachers to see if it can help in reducing the death of teachers while in service. RECOMMENDATIONS

1. The Federal Government of Nigeria should take necessary steps to ensure that the various state governments implement the Teachers Salary Scale (TSS). This will go a long way in alleviating the inequality in teachers pay when compared with other government establishments. The pay structure in private schools should also be at par with those of government schools, to avoid the stress of inferiority complex. 2. The issue of professionalizing the teaching vocation should be pursued to logical conclusion. This will reduce the present tendency whereby people jump from the “market square” into the “classrooms” and vice-versa. This has led to the current situation whereby you see long queues of men and women under stressful conditions trying to obtain affidavits of age to enter the teaching profession, even when they knew that they have little to offer. 3. The physical work environment is too poor in some places. Teachers still teach in uncompleted buildings, despite huge annual budgets. Some of the local education offices still conduct interviews for teachers under mango trees (“Ukwumangos”). This is a form of depersonalization that easily leads to burnout. The situation should be inverted to help improve performance levels, and reduce stress at work.


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4. Education supervisors should not only be concerned with marking attendance registers and lesson notes. They should plan to retrain teachers on the principles of delegation of duties. This will help them to purge themselves of work overload and reduce stress at work and at home. 5. Teachers should cultivate the ideas of collaboration with colleagues and planning well for work-family roles. This will help them a great deal in reducing work-family-stress. CONCLUSIONS

Work-family-stress occurs when an individual perceives an environmental demand as being substantially out of balance with the individual’s capabilities (McGrath, 1976). Stress in work places manifests through task demands, physical demands, interpersonal demands, intrapersonal conflicts, role demands, as well as social and psychological stress associated with the human being also referred to as life stressors. Life stressors may come in the form of divorce, death of children, children’s misbehaviour, infertility, insecurity, depersonalization, frustration and burnout. Three (3) major categories of possible responses to work-family stress such as physiological, psychological and behavioural responses are recognizable. Effects of work-family stress in these areas are increased blood pressure, heart rate, sweating, anger, anxiety, depression, nervousness, decreased performance, absenteeism, higher turnover rate, higher alcohol, and other drug abuses among other negative effects. For example, a teacher under stress cannot articulate ideas which will lead to effective teaching and learning processes. Obviously when a teacher’s pay is inadequate to cover work-family-needs such a teacher cannot be innovative and highly productive, but wrong attitudes such as absenteeism and fraud may manifest. This study found that work-family-stress among teachers in Nigeria arises mainly from poor role-demands and other occupational hazards that lead to depression and dysfunctional conflict. REFERENCES

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Wright, H.B, (1975), ''Executive Ease and Disease

''Essex. Grower Press Ltd.

Wright, T.A. and Cropanzano, R. (1998),

''Emotional exhaust as a Predictor of Job

Performance and Voluntary Turnover''.

Journal of Applied Psychology, 486 – 493.

Yoloye, E.A, (1971), ''The effect of school on the

performance of Bilingual students in test of

intelligence''. Research in Education. Pp:

25 – 30.

Zedeck, S, (1992), ''Work, Families and

Organizations''. San Francisco, Jossey – Bass. Bokore, Nimo. (2009), “Female Survivors of African Wars Dealing with The Past and Present”, Journal of Sociological Research, Vol. 1, No. 1, pp. 1-13.

AUTHOR’S BIOGRAPHY

Dr. Ugoani is a lecturer and

coordinator, College of

Management and Social Sciences,

Rhema University, Aba. He

teaches courses on business,

management, production

management, human resource

management, psychology,

industrial psychology, and industrial relations. He

supervised the development of his College’s, curriculum

through NUC- accreditation in 2013. He has some

scholarly publications with downloads and abstract

views over 303 and 1677 respectively and listed among

Ten Top Authors by Social Science Research Network.

Before entering academia, he worked in FirstBank and

gained industrial experience and Senior Manager.


John N. N. Ugoani

APPENDIX

FIGURE 1

Figure 1 : Psychometric Model of work-family -stress and depression Work stress

Work stress

Work

Pressure

Depression Work-family

Stress

Family

Pressure

Environmental

Pressure

Source: Author 2013

Table 1: Distribution of Public Senior Secondary Schools and Teachers in Aba Zone.

Areas of Study Number of

Secondary

Schools

Population of Teachers

Total Number of Teachers

Male

Female

Aba North 7 44 121 165

Aba South 8 50 197 247

Obingwa 18 69 110 179

Osisioma 10 56 215 271

Ugwunagbo 5 17 49 66

Ukwa East 9 41 42 83

Ukwa West 6 31 63 94

Total 63 308 (28%)

797 (72%)

1105

Source: Government of Abia State of Nigeria. List of post-primary institutions in Aba Zone, 2013.


680

Table 2: Sample Size of Teachers in Public Secondary Schools in Aba Zone.

Area Of Study Sample Size Male Female

Total Sample Size

Aba North 12 32 44

Aba South 13 53 66

Obingwa 18 29 47

Osisioma 15 57 72

Ugwunagbo 5 13 18

Ukwa East 11 11 22

Ukwa West 8 17 25

Total 82 212 294

Source: Field Survey, 2013.

Table 3: Literacy Levels of Teachers in the Public senior Secondary Schools in Aba Zone.

Qualifications Teachers

Total Percentage

Male Female

M.Ed, MSc, MBA, PGDE 25 66 91 31.00

B.Ed. BSc, BA, HND 49 128 177 60.00

NCE, ND, etc 8 18 26 9.00

Total

82 212 294 100.00

Source: field Survey, 2013.

Table 4: Age Distribution of the Teachers in the Public Senior Secondary Schools in Aba Zone.

Age Range

Teachers

Total Percentage

Male

Female

21-30 18 45 63 21.00

31-40 39 69 108 37.00

41-50 14 58 72 25.00

51 & above

11 40 51 17.00

Total 82 212 294 100.00 Source: field survey, 2013.


John N. N. Ugoani

Table 5: Analysis of Responses

Study Areas No. of Teacher - respondents (Agree)

X Scores (Agree)

No.of Teacher- RespodentS (Disagree)

Y Scores (Disagre e)

Total No. of Teachers

Aba North 9 41 35 70 44

Aba South 13 59 53 106 66

Obingwa 9 41 38 76 47

Osisioma 14 63 58 116 72

Ugwunagbo 3 14 15 30 18

Ukwa East 5 23 17 34 22

Ukwa West 5 23 20 40 25

Total 58 (20%)

264 236 (80%)

472 294

Source: field survey, 2013

Table 6: Correlations.

X-scores Y-scores

X-scores Pearson correlation Sig. (2-tailed) N

1 7

0.993** .000 7

Y-scors Pearson correlation Sig, (2-tailed) N

0.993** .000 7

1 7

** correlation is significant at 0.01 level (2-tailed) Source: field survey, 2013


*Corresponding author: Rasool Nazari, Assistant Professor, Faculty of Physical Education and Sport Sciences, Islamic Azad University, Isfahan (Khorasgan) Branch, Iran.

E-Mail: [email protected] 682

Research Paper

The Relationship between Organizational Learning and Organizational Commitment in Sport Organizations

Somayeh Usefi1, Rasool Nazari2*, and Tayebeh Zargar3

1. Islamic Azad University, sciences and research Kurdistan Branch, Iran. 2. Assistant Professor, Faculty of Physical Education and Sport Sciences, Islamic Azad University,

Isfahan (Khorasgan) Branch, Iran 3. Assistant Professor, Faculty of Physical Education and Sport Sciences, Islamic Azad University,

South Tehran Branch, Iran

The Purpose of this paper is investigating the relationship between organizational learning and organizational commitment in sports organizations in Kurdistan Province. This study is a descriptive correlation survey. Statistical population involving in the present study were all the staff members of the Kurdistan sports organizations. Using the simple random sampling method and Kerjesy and Morgan table, 105 participants were selected as the sample of this study. Organizational learning and organizational commitment questionnaires were used to collect the related and necessary data. The Reliability coefficients of these questionnaires were 0.83 and 0.85 respectively. To do data analysis several tests including Pearson Correlated Coefficient and multiple regressions analysis were used. The results showed that there is a positive and significant relationship between organizational learning and organizational commitment of the sports organizations staff members in Kurdistan province(r = 0.33). The results of the multiple regressions analysis also indicated that among the different aspects of organizational learning, the knowledge sharing aspect has the most correlation with continuous organizational commitment of the staff members. Thus, organizational learning has an impact on organizational commitment in sports organizations.

Keywords: Organizational Learning, Organizational Commitment, Sports Organizations,

INTRODUCTION

Organizations worked in constant and steady settings and conditions in the past and their managers were able to plan in reliable circumstances through predicting and anticipating their future events (Ghahramani, 2009). In spite of constantly changing environmental factors, persistence, development and mobility in the organization depend on broad understanding of the environmental factors. Knowledge in fact stimulates understanding developmentand being knowledgeable and paying more attention to this

fact has a growing active role in the development of organizations and communities. In order to represent a good image of organizations and communities which greatly utilize knowledge in their full cycle terms such as learning organization and in a large scale learning community and learning nations are used. Learning organization is a developed modified pattern for organizations and a new modern way to think about organization in the knowledgeage (Zahedi, etal., 2011). Organizational learning is one of the main


Somayeh Usefi et al

instruments which is used by learning organization to cope with emerging challenges in order to be prepared to make changes and createaccountability,a sense of responsibility and to define future commercial problems and acquiring competition advantage(Chuan Wu, 2010). Organizational learning is the best recommendation to increase organizational speed in today's unpredictable world. Organizational learning is the process of acquiring, producing, distributing, interpreting, and maintaining knowledge and information in organizations to be adjusted successfully to the ever-changing circumstances. In fact, organizational learning correlates significantly with organizational performance. If it is not possible to achieve organizational learning, organizational performance decreases and organizations lose their efficiency and effectiveness. Organizational commitment is themain variablein evaluating organizational life which provides the necessary motivation, the logical tendency and the necessity for the organizational employment and engagement in any organizations (Azin, 2010). Commitment generally consists of three types:"Affective commitment"refers to an individual emotional attachment to and dependence on the related organization. "Continuous commitment"refers tothe staff tendency to remain in the organization which is stimulated by expenditures and losses resulting from leaving the organization and also due to the rewards for staying in an organization and not leaving there. "Normative commitment" reflects thestaff responsibilityto stay in the organization as one of its staff members (Mosadegh Rad, 2008). Considering the fact that being updated and consistent with social, economic and cultural developments are among the main concerns of today'sorganizations, organizational learning is one of the main variables in the process of developing and updatingthe organization.Also, considering the importance of organizational commitment as a variable associated with organizations and organizational goals,organizational learning and creating a learning organization seems to affect the staff organizational commitment considerably. Boodlaie etal. (2010) argue that the relationship between psychological ability and organizational

commitment are informed by the organizational trust and learningsignificantly. Mehrabi et al., (2013) argue that staff organizational commitment is significantly associated with all the organizational learning levels including individual learning, organizational learning and environmental learning. Vang (2005) points out that all the components of learning organization (team learning, systematic thinking, organizational culture and cooperative leadership) correlate with organizational commitment. Che Rose et al (2009) in their study found out that organizational learning is significantly associated with the organizational commitment and staffperformance andthere is a significant relationship between organizational commitment and some variables such as age, experience,education and gender. Najaf Aghaie et al. (2012) in a study titled "The relationship between organizational learning and organizational commitment" among staff membersof sports organizationsfound outthat there is a significant relationship between organizational learning and also organizational commitmentand organizational learning correlate more significantly with two aspects of commitment namely normative and continuous commitment. Sports organizations have always been interested in making development in different ways. So, in order to adapt to ever-increasing, rapid, complex and uncertain changes in the environment and identifying potential opportunities in sport, we need creative, capable and committed staff. Although using competitive advantages depend greatly on the organization features, the organization staff members and their knowledge and commitment certainly play a vital and crucial role in this regard. Therefore, identifying efficient properties in engaging and promoting staff in appropriate context is the first priority and the most important step in today's organizations. Since policy making, planning, conducting and monitoring in sport organizations are the responsibility of sport organizations and play a crucial role in improving the process of acquiring, creating, the amount of distributing and developing knowledgein the spot of Kurdistanprovince, staff members' learning and commitment can affect improving the implementation of the plans. Thus, this study aims

Organizational Learning and Organizational Commitment Research Paper

684

at investigating the relationship between organizational learning and organizational commitment in sport organizations in Kurdistan province.

METHODOLOGY

The present study is a descriptive correlation survey.Statistical population includes all the staff members of the sport organizations in Kurdistan province including those in the sport and youth departments and offices andalso those in the sport boards. Among these staff members 105 participants were selected randomly through simple random sampling method and also using Kerjesyand Morgan table. Data collection process was done by using two kinds of questionnaires : 31-question standard organizational learning questionnaire of Gomez et al. including seven dimensions of common perception , organizational culture, cooperative working and learning, sharing knowledge, systematic thinking, cooperative leadership, and also 24-question developing staff competences and organizational commitment questionnaire of Lina et al (2007) in three subscales of affective, normative and continuous commitment. The content and face validity of the questionnaires were determined through experts'commentsand the questionnaires reliability coefficients was determined by using Cronbach's Alpha Coefficient. Coefficients of the questionnaires were 0.83 and 0.85 respectively. To do the inferential statistics, Kolmogorov-Smirnov tests were used to distinguish the normal distribution of the data, Pearson Correlation Coefficient was used to determine the relationship among the components and Multiple Regression

Analysis was also used to determine the relative share of each variable in the predicting process. Also, data analysis was performed by using SPSSSoftware, Version 19. Results Based on descriptive indexes, 75% of participants were male and 25% were female. More than 46% of participants were under 30 years of age and about 50% had bachelor degrees. 60% of participants have worked in the organization for 5 to 10 years.

TABLE 1 HERE

As shown in table 1, in determining the relationship between organizational learning and organizational commitment of the selected sport organizations of Kurdistan the correlation coefficient was 0.339 and P value 0.000. Considering the fact that P<0.05, nullhypothesis is rejected and the research hypothesis is approved. In other words, there is a significant relationship between the organizational learning and the organizational commitment in the selected sport organizations in Kurdistan province.

TABLE 2 HERE

Table 2 shows the relationship between the organizational learning and each dimension of the organizational commitment using Pearson Correlation Coefficient. As the table shows, organizational learning indicates a significant relationship at the level of 5% of each dimension of organizational commitment (affective commitment, continuous commitment and

normative commitment). It also shows correlation matrix between the dimensions of the organizational learning and the organizational commitment among which share dimension shows the highest correlation with the continuous commitment.

TABLE 3 HERE Finally, using regression test, we investigate how much organizational learning dimensions can predict organizational commitment in sport organizations of Kurdistan. The summary of regression model shows that multiple correlation coefficient among staff organizational learning dimensions and their organizational commitment

is R2=0.301. This indicates that organizational learning dimensions can predict 30% of the variance of the organizational commitment changes.

TABLE 4 HERE regression coefficient among organizational learning dimensions and organizational commitment showed that among organizational learning dimensions only share dimension with the beta value 0.301 could make a significant prediction of the organizational commitment. In the other word, although only the organizational learning could explain organizational commitmentsignificantly, each share dimension


Somayeh Usefi et al

contribution could justify this explanations and illustrations in terms of investigating the relative share of each dimension.

DISCUSSIN AND CONCLUSION

Sport organizations are purposeful institutions which tend to progress in different ways during a specific period of time. Certainly, the organization staff and their knowledge and commitment play a vital role in this regard because staff learning and commitment are effective in implementing plans. Considering this fact, this study aims at investigating the relationship between the organizational learning and the staff organizational commitment in sport organizations in Kurdistan province.It can be concluded that there is a significant relationship between the organizational learning and the organizational commitment in sport organizations of Kurdistan. The findings of the present study are consistent with the findings of Najaf Aghaei (2012) and Mehrabi et al. (2013). These researchers concluded that organizational learning strategies affect organizational commitmentdirectly or indirectly. All the organizations try to utilize the provided opportunities through organizational learning including acquiring, simulating and distributing knowledge in improving staff performance and commitment. So, it can be concluded that organizational learning plays an important role in organizational commitment and performance. The more the staff members of an organization are informed of the organization perspectives, the better understanding of the informational and communicative data are developed and they may better perceive the organization policies and strategies. On the other hand, when the learning culture is promoted and staff member have more motivation for cooperative working and learning , they are provided with more opportunities to perform challenging tasks to develop their competencies ,enforcing organizational learning promotes and develops staff member commitment of the organizations. Also, the results show that there is a significant relationship between organizational learning and affective commitment in sport organization of Kurdistan province. The results are inconsistent with that of Najaf Aghaie et al.(2012) and are consistent with that of Atak (2011) concluding that organizational learning

shows more significant correlation with affective commitment. Considering the fact that identification through organization happens when individual's values are more consistent with the organizational values in a way that the individuals are able to internalize the organization values. An organization can create this perspective in its employees through revising and improving its subjective values and norms and utilizing communicative mechanism such as negotiation and agreement, developing decision making culture or common accountability conditions and establishing mutual trust because positive mental conditions leads to a successful performance and the individual's development. Also, an organization can provide its employees with its values or expectations verbally or in a written form for them to become adapted with the values and feel a sense of pride resulting from identification with the organization. The results show that there is a significant relationship between the organizational learning and the continuous commitment in sport organizations in Kurdistan province. The results of this section of the study are consistent with those of Yaghoobi et al (2003) and Najaf Aghaie et al (2012) and are inconsistent with that of Atak (2011). Continuous commitment includes individual awareness of the expenditures and losses resulting from leaving the organization. The more the organization pays attention to employees working and occupational problems, the more they show tendency and eagerness towards their occupations. Thus, related units, authorities and even managers should identify problems of their employees to encourage them feel a sense of belonging towards the organization. On the other hand, employees should be trained and they should be provided with the knowledge resulting in the accountability of the employees. So after acquiring the necessary training and competences, they should be allowed to make decisions about their occupational duties. Continuous commitment emerges when they are allowed to make decisions about staying in or leaving the organization. The results of the present study on the relationship between the organizational learning and the normative commitment in sports organizations of Kurdistan province show that there is a significant relationship between these two variables. The


686

results are consistent with the results of the studies done by Boodlaei et al (2010), Yaghoobi et al (2010), Najaf Aghaei et al (2012) and are inconsistent with the results of the study done by Atak(2011).Normative commitment is the obligatory relationship between employees' accountability and staying in the organization. To do so an organization should involve its employees through engaging them in decision making processes and developing cooperative decision making and enforcing the sense of group working in its employees in addition to informing them of the costs of training to improve their performance. Employees who feel that they are more supported on the part of their organizationshavealso more responsibility to respond to their organizational supports. Therefore, an organization and its related units specifically its managers should greatly stimulate a sense of accountability in their staff members. Results show that the organizational learning dimensions have predicted 30% of the variance of thee organizational learning changes. The results are consistent with that of Boodlaie et al (2010), Yaghoobi et al (2010), Najaf Aghaei et al (2012) and CheRose et al. (2009). Also the Correlation Matrix between dimensions of the organizational learning and the organizational commitment shows that among dimensions of the organizational learning, sharing knowledge has the highest correlation with the continuous commitment. It can be concluded that although generating knowledge, innovation and creativity are crucial elements,

creativity and acquiring knowledge cannot solely account for considering an organization as a leaning one. They should share the knowledge and utilize it in their performances. Therefore, managers should perceive the importance of learning and they should promote a culture in which acquiring, creating, transferring and sharing knowledge are considered as basic values in the organization. It is clear that creating such a culture along with other variables like common perspective, cooperative working, systematic views and providing contexts with lots of learning opportunities in sport organizations, trust and accountability eventually leads to promoting employees competences and in turn it increases the employees' commitment. To facilitate the process of needing to share knowledge,it seems to be necessary to useclear language to transfer knowledge, determine rewards for sharing knowledge and support organizational culture to share and transfer knowledge. Thus, managers of sports organizations should value their staff members based on their knowledge features and their attempts to transfer it. To do so,adaptingthe organization with the suitable and appropriate salary system of payment is among the most important measurements that stimulates staff members of any organization to create and distribute knowledge in one hand and increases their continuous commitmenton the other hand.

REFERENCES

Atak, M. (2011). A Research on the Relation between Organizational Commitment and Learning Organization. African Journal of Business Management. 5(14), pp. 5612-5616 Azeen, S, M. (2010). " Job Satisfaction and Organization Commitment among Employees in the Sultanate of Oman", Scientific Research Psychology, 1(295) Boodlaei, H.; Kooshki Jahromi, A.R.; Sattari Nasab, R. (2010) Learning and Organizational Trust, Connectors of Psychological Capabilities and Organizational Commitment, The process of Management and Development. (54) 41-58 Che Rose, R. Kumar. Gua Pak.O.(2009). The Effect of Organizational Learning on

Organizational Commitment, Job Satisfaction and Work Performance. The Journal of Applied Business Research . 25(6) Chuan Wu. CH. (2010). “System perspective of knowledge management organizational learning and organizational innovation”. Expert systems with application, (37) 1096-1103 Ghahramani, M.(1388). Organizational Learning Management, Tehran, Martyr Beheshti University Publications Lina,L. Aukse, Endriulaitiene and Loreta, Gustainiene(2007).Individual Correlations of Organizational Commitment and Intention to Leave the Organization. Baltic Journal of Management. (2) 196-212. Mehrabi,J.Jadidi.(2013) The Relationship between Organizational Commitment and


Somayeh Usefi et al

Organizational Learning(Boroojerd Telecommunication Company as Case Study) International Journal of Academic Research in Business and Social Sciences.3(1) Mosadegh Rad,A.M. Febrile. F. Rosenberg.D. (2008). Study of the Relationship between Job Satisfaction, Organization Commitment and Turnover intention among hospital employees. Health Services Management Research. 21 (4). Najaf Aghaei1, A. Shahrbanian, SH.(2012). Relationship between learning organization and organizational commitment among employees of Sport and Youth Head Office of western provinces of Iran. European Journal of Sports and Exercise Science. 1 (3):59-69. Teimoornejad, H. ; Sarihi , R. (2010) , The Effect of Organizational Learning on the Psychological Capabilities and the Organizational Commitment of the Employees of the Economics and Treasury Ministry ,Quarterly Magazine of Management and Improving Evolution (62)37-59 Wang. X.(2005). Relationships among Organizational Learning culture, Job satisfaction and Organizational Commitment in Chinese state-owned and Privately-owned Enterprises. Minnesota: University of Minnesota. Yaghoobi, M. Raeisi, A. Afshar, M. (2010). The Relationship between the Learning Organization and Organizational Commitment among Nursing Managers in Educational Hospitals of Isfahan University of Medical l Sciences in 2008-9 IJNMR/Spring; 15(2). Zahedi. ; Boodlaei ,H. ; Sattari Nasab, R.; Kooshki Jahromi, A.R (2011).Analysis of the Relationship between Psychological Potential and Organizational Commitment, Quarterly of Parks and Rosh Centers,. (24).59-69


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APPENDIX

TABLES

Table 1: the relationship between organizational learning and organizational commitment in sports organizations

Table 2: The relationship between the organizational learning and the organizational commitment dimensions in sports organizations

independent variable

Dependent variable

Organizational Learning

Affective commitment Continuous commitment Normative commitment

N R Sig N R Sig N R Sig

105 .292* 0.003 105 0.226 0.004 105 0.217 0.026

Table 3: summary of the regression pattern

Index R R2 The standard error (SD)

Organizational learning 0.091 0.301 15. 751

Table 4: The regression coefficients of organizational learning and organizational commitment

Variable frequency Correlation coefficient Sig

Organizational learning 105 0.339 0.000

Organizational commitment 105

Organizational learning dimensions

Non-standardized coefficients

Standard coefficient

t Sig

B Std. Error Beta

Constant value 64.675 4.968 ----- 13.020 0.000

Share 1.310 0.409 0.301 3.204 0.002


*Corresponding author: Dr. Rashid Saeed, Salman Ahmed COMSATS Institute of Information Technology Sahiwal, Pakistan.


689

Research Paper

The Role of Communication in Organizational Change

Dr. Rashid Saeed1*, Rab Nawaz Lodhi2 Salman Ahmed3*, Masood-ur-Rehman4, Fareha Dustgeer5, Amna Sami6




4, 5&6. M.S Scholar, COMSATS Institute of Information Technology Sahiwal, Pakistan.

Purpose: We perform this research to come to know that either communication has any effect on organizational change or not if it has any effect then what is the level of influence of the communication in organizational change. It is found that there is a very little research takes place on this topic. Design/Methodology: In this research I use questionnaire to check that what people have in their mind regarding this topic. It is a quantitative research so quantitative data is used to describe the result of this research. We use three measures of Penley and Hawkins (1985) and three dimension of Ekvall’s questionnaire. Findings: In this research we find that communication has great effect on organizational change and it directly affects the organizational change. Mean if communication skills in the organization is good then it is very easy to bring change in that organization. Keywords: Organizational role, Career development, Pakistan

INTRODUCTION

In this research I am going to check the effect of

communication on organization change. The

organizational communication is the most effective

way to augment the working of any organization.

There is not any doubt in this concept. From the

ten of years, and especially in the 1980s, many

authors and research workers have publish a large

number of research papers on this topic (F.Marque,

2010). Basically communication is a two way

process of sending and receiving the message to

convey ones concept (Salem, 2008).

Satisfactory level in organizational communication

is definitely related to actual job performance and

productivity, job loyalty, and job satisfaction

(F.Marque, 2010).

The implementation of effective communication

process in any organization is not an easy task.

According to a research implementing

communication systems, into any organization,

that are efficient, effective and timely is

challenging (Paul, 2004). The communication in

any change is very important. According to the

rules of communication, even though we have

The Role of Communication in Organizational Change Research Paper

690

least knowledge but when we are communicating

to others it must be conveyed the clear and

complete meaning. Without it the tendency is for

those affected to fill in the gaps and make

assumptions. In sensitive issues and matters face

to face communication is the key to success.

Electronic media and written notices don‟t convey

the actual meaning of any message as compared to

personal or face to face interaction.

Mutual consultation and proper communication is

very essential to bring or implement any type of

change in organizations. Without communication

the force to bring a change creates a wide gap

between the purpose of message and

understanding by the receiver (Fraser, 2010).

A review based study „„A change for the better‟‟,

by Judith Fraser, principal consultant at Oakridge

Training and Consulting, PottShrigley,

Macclesfield, UK, and Catherine Hemming, who is

based at the Contour Housing Group, Salford

Quays, Salford, UK. This study declares that

understanding is the most important pillar of

bringing a change in organization. But the

irritating factor for a manager is the low

understanding capacity of the receiver.

From 1980s a number of strategies have been

framed for managers to bring changes. Despite of

such a number of strategies only a very few

managers adopted these ways to implement a

change in organizations (H. Seijts & Roberts, 2011).

An important focus of CM has been on

overcoming resistance to change (Atilgan &

Mccullen, 2011). The human psychological factors

like fear and reluctance about the change should

be kept in mind (Reis & Pena, 2001). Kotter and

Schlesinger (1979) have famously identified the

following six general approaches to dealing with

resistance to change by positively influencing

employees:

I. Education and Communication

II. Participation and Involvement

III. Facilitation and Support

IV. Manipulation and Cooptation

V. Negotiation and Agreement

VI. Explicit and Implicit coercion

For example, after conducting a survey of 250

managers within a large telecommunications

company, Lines (2004) concludes that there is a

“strong positive relationship between participation

and goal achievement and organizational

commitment, and a strong negative relationship

with resistance”.

The dynamics of organizational change may be

seen as an essentially linear series of planned

events – for example, Levin‟s (1951) unfreeze –

change – refreeze model. Change may be open

ended, ongoing and adaptive responding to

changing circumstances (Smith, 2011).

The success rate of effective change is not

encouraging. This situation make the other

managers non initiative and hesitant towards

organizational change. While embarking on

change initiatives may achieve transformational

results there appears to be an equally strong

likelihood of outright failure or, at best, only

moderate result for effort (Smith, 2011).

Objective of study

Purpose of the study is:

I. To check the role of communication during

organizational change

LITERATURE REVIEW

As we now organizational change has an

important role for an organization. For an effective

change it is compulsory to explain the change to

our employees. Because without them

involvement of employees manager cannot make

the change successful. Effective communication

helps us to explain the change and help them to

understand. It also helps manger to involve

employees in to different change activities. So for

the efficient result of organizational change we

cannot ignore the effective communication.

Organizational Change


Saeed et al.

“The only thing constant within organizations is

the continual change of these organizations.” This

is the most familiar and well known phrase of

organizational literature. Despite of all the efforts

to bring changes the results are not encouraging. It

is estimated that more than50% change programs

are facing the failure which is opposite to the

expected results (Bennebroek Gravenhorst et al.,

1999). There are a lot of reasons for the failure of

organizational change efforts. Role of

communication, organizational culture, the timing

of the change effort, and the role of change-agents

are the more common reasons (Bennebroek

Gravenhorst et al., 1999). But in this paper I am

going to focus on the role of communication in the

process of organizational change.

Communication

Communication is the most important tool to bring

change in the organization more effectively

(DiFonzo and Bordia, 2004; Lewis and Seibold,

1998; Schweiger and Denisi, 1991).

Robertson et al. state that the dependency of the

organizational change is positively related to the

employee‟s behavior. Communication plays a vital

role in making the change efforts fruitful.

Communication satisfaction is defined by Downs

and Adrian (2004) as “the personal satisfaction

inherent in successfully communicating to

someone or in successfully being communicated

with” (as stated in Bambacas & Patrickson, 2008).

To explain the detail of change very clearly to the

employees is the first step of change before

bringing it directly within the organization. By

explaining the detail of change the high level of

involvement of employees can be gained. In

evaluating the effectiveness of a change,

involvement and participation play an important

role. Involvement, getting the employees feedback

about the change and the good leadership of

managers are the encouraging factors for the

effective results of organizational change

(Heracleous, 2002).

According to Francis (1989) organizational

communication commonly has two goals (as stated

in J.L. Elving, 2005). The 1st goal of organizational

communication is to explain the employees about

their job and the issues of the organization.

Roughly, a distinction can be made between

organizational communication as a mean to

provide information (“communicatio”) and

organizational communication as a mean to create

a community spirit (“communicare”); Francis,

1989; DeRidder, 2003)

The organizational goal can be achieved only by

the proper and effective communication process. It

paved away all the hurdles in the way of success

(Vuuren, Jong, & R. Seydel, 2006).

In previous work researcher make researcher to

check the effect of communication on organization

change and they have their different point of

views. Now we check the role of communication in

organizational change through different research

tools and techniques.

Research Gap

Wim J.L. Elving explains in his study that how

communication effects the organization during

change and how it overcomes the hurdles which

arise during change. This study is placed in

Netherland. But there is little work takes placed by

the researcher of Pakistan especially in Sahiwal.

This is a qualitative research. The research

performed by me is a quantitative research and the

data is collected from the Sahiwal.

Advantages of study

This study will tells us, what the role of

communication is during organizational change. It

also helps manager to come to know about the

importance of communication during change. By

seeing the importance of communication, they can

improve their communication skills to prevent the

resistance against change.


692

THEORETICAL FRAMEWORK

1. Communication (Independent variable)

2. Organizational change (Dependent

variable)

Hypothesis

I. Alternative Hypothesis:

Communication have vital role in organizational

change

II. Null Hypothesis:

Communication has no effect on organizational

change.

METHODOLOGY

Data collection method

As we know previous researches are qualitative.

So in previous researches data is collected through

qualitative approach and all the results are

collected from qualitative data. But in this

research I will check the effect of communication

in organizational change by using quantitative

approach.

Questionnaire is made by me for this research. In

this questionnaire I used three measure of Ekvall‟s

situational outlook questionnaire which is

challenge/involvement, trust, conflict. These three

measures are related to our dependent variable

which is organizational change.

For independent variable we have used three of

five dimension of communication by (Penely&

Hawkins, 1985). Which are Task communication,

Performance communication and Communication

responsiveness?

We collect data from the people of different private

and government organizational sector by giving

questionnaire to them and my interested area is

sahiwal. It is easily assessable to me.

Data analysis method

The sample of 100 people is taken from private and

public organization in Sahiwal. Mostly subjects are

from officer grade and very few are students.

Questionnaire clearly differentiates the

communication and organizational change.

To measure the different statistical measurement

we use different statistical tools one of them is

statistical package for social sciences (SPSS). With

the help of this software we find the different

statistical values for example demographic

information, stander deviation, mean, correlation

and regression

Gender

From 200 respondents 95 were male which is

contributing 47.5% to the sample size, 105 were

female which is contributing 52.5% to the sample

size. Frequency Percent

Male 95 47.5

Female 105 52.5

Total 200 100

Age

The sample received was divided into four age

groups. The first age group is under-20 year, the

second group was 20-24 year, the third group was

25-28 and fourth group was more than 28. There

were 46 subjects lie in first group, 86 were lie in

second group, 33 were lie in third and 35 were lie

in fourth group. Frequency Percentage

Under20 46 23.0

20-24 86 43.0

25-28 33 16.5

More then 28 35 17.5

Total 200 100

Qualification

There were four major categories of qualification,

Intermediate, Graduation, Master and MS or more.

There were 58 respondent related to Intermediate

group, 61 respondent related to Graduation, 38

Organizational

change

Communication


Saeed et al.

respondent related to master and 43 respondent

were related to MS or more.

Frequency Percentage

Intermediate 58 29.0

Graduation 61 30.5

Master 38 19.0

MS or More 43 21.5

Total 200 100

Descriptive Statistics N Mean SD

Communication 200 2.6220 .87799

Organizational change 200 2.3887 .79169

Total 200

According to Descriptive state test in (SPSS) we

come to know about the mean value of 2.6220. Its

mean that peoples admit that communication play

a vital role in organizational change.

This test explain that people agrees with a mean of

2.6220 that communication effects organizational

change. Mean communication effects the

organizational change.

This test will explain also explain peoples agree

with the mean of 2.3887that organizational change

is compulsory for an organization and

communication has effect on it.

Correlation analysis Communication Organizational

change

Communication

Personal correlation

Sig.(2-Tailed)

N

1

200

.715”

.0000

200

Organizational

change

Personal correlation

Sig.(2-Tailed)

N

.715”

.0000

200

1

200

The correlation analysis is use to check the

relationship of our dependent and independent

variable. This analysis shows that communication

has Strong positive relationship with the

organizational change which is our dependent

variable with the value of (.715”).

Regression analysis

Model Summery

Model R R square Adjusted

R

Std. Error of

the Estimate

1 .715a .512 .509 .55445

As the value of the R square is >.512, so we can

easily explain that our model is good because it

has value > than.5 in regression analysis.

ANOVA

Model Sum

of

squar

e

Df Mean

squar

e

F Sig.

Regressio

n

63.845 1 63.84

5

207.68

4

.000a

Residual 60.868 19

8

0.307

Total 124.71

2

19

9

Coefficients

Model Un-

standardized

Coefficients

Standardize

d

Coefficients

t Sig.

B Std.

Error

Beta

Constant .697 .124 5.634 .00

Communication .645 .045 .715 14.411 .00

Here the value of Beta is .715 so it is a very

acceptable model.

CONCLUSION:

This research is performed to check the role of

communication during change in different

organization of Pakistan especially in Sahiwal. As

this is a quantitative research so I collect data from

the organization by myself to check this effect.

Data is collected in the form of questionnaire from

the sample of 100 respondents. We use the three

measures of Penley and Hawkins (1985) and three

dimension of Ekvall‟s questionnaire.


694

The research explains that there is a positive

relationship between communication and

organizational change. Even the values show that

it has a weak relation but we cannot ignore it

during change.

LIMITATION OF RESEARCH

Communication is not only the single essential for

the success of change in the organization (Wim J.L.

Elving, 2005). There are many other factors that

play important role in the organizational change.

The size of the sample is 100 which are not enough

to fulfill the results. Sample from education sector

is also one of the major limitations of this research.

Time constrain is not enough to perform the study

on such a waste topic. There may be some other

factors contributing to the successful

organizational change. The small sample size of

the study and taking the sample from one

organization only is also one of the limitations.

REFERENCE

Adelle, J. B., Lisa, M. B., & Leisa, D. S. (2004). " Atilgan, C., & Mccullen, P. (2011). Improving supply change performance through auditing: a changemanagement prospective. Supply Change Management: An International Journal, 11-19.

Bambacas, M., & Patrickson, M. (2008). Interpersonal communication skills that enhance organisational commitment. Journal of Communication Management, 51-72.

F.Marque, J. (2010). Enhancing the quality of organizational communication: A presentation of reflection-based criteria. Journal of Communication Management, 47-58.

Fincham, R., & Rhodes, P. (2005). Principles of Organizational Behaviour. New York: Oxford University Press.

Fraser, J. (2010). A change for the better. Strategic HR Review, 25-31.

H. Seijts, G., & Roberts, M. (2011). The impact of employee perceptions on change in a municipal government. Leadership & Organization Development Journal, 190-213.

Hackulous. (2002). “The contribution of a discursive view in understanding and managing. strategic change, 253262.

Heracleous, L. (2002). The contribution of a discursive view in understanding and managing organizational change. Strategic Change, 253-262.

J.L. Elving, W. (2005). The role of communication in organizational change. Corporate Communications: An International Journal, 129-138.

Paul, J. D. (2004). Effective communication strategies in a franchise organization. Corporate Communications: An International Journal, 276 - 282.

Reis, D., & Pena, L. (2001). Reengineering the motivation to work. Management Decision, 666-675.

Salem, P. (2008). The seven communication reasons organizations do not change. Corporate Communications: An International Journal, 333-348.

Smith, I. (2011). Organizational quality and organizational change. Library Management, 111-128.

Vuuren, M. v., Jong, M. D., & R. Seydel, E. (2006). Direct and indirect effects of supervisor communication on organizational commitment. Corporate Communications: An International Journal, 116-128.


*Corresponding author: Muhamad Zahid Khalil, College of Commerce, Government College University, Faisalabad, Pakistan. E-Mail: [email protected]

695

Research Paper

Volatility Spill-over between the Stock Market and the Foreign Exchange Market in Pakistan

Muhammad Zahid Khalil1*, Muhammad Usman2, Imran Shafique3

1&2. College of Commerce, Government College University, Faisalabad, Pakistan.

3. Independent Researcher from Pakistan

This paper investigates the instability overflow within stock market and the foreign exchange

market in Pakistan. We used GARCH and EGARCH technique for the long term association

and the instability overflow is formed. The expected consequences from co-amalgamation

examination demonstrate that there is no lasting association connecting the two marketplaces.

The consequences from the instability forming demonstrate that the performances of together

the stock exchange and the foreign exchange markets are interconnected. The takings of one

market are influenced by the instability of the new market. Specifically, the takings of the stock

market are responsive to the takings and the instability of the foreign exchange market.

Alternatively, takings in the foreign exchange market are denoting relapse which are

influenced by the instability of stock market takings. There is a significant association within

the instability of the foreign exchange market and the instability of takings in the stock market.

Keywords: Mandatory Foreign Exchange Return, Pakistan, EGARCH, Stock Market

Returns, Stock Market, Forex Market, Volatility Spill-over,

INTRODUCTION

This paper explains the affect of instability

between foreign market and (SM) stock market

into Pakistan. To measure this, we used ARCH

and GARCH techniques in long term relationship

of the instability effect formed via two variables.

The first open the stock market and second is

flexible system of exchange rate. Bullish market in

which price of most shares are raising and bear

market in which price of share is low and many

people selling them. The exchange market rates

show the volatility in 1998, rupees value decreased

against dollar from PRs. 43.19 per dollar.

The foreign market and the stock market efficiency

as well as recognized by Dornbusch and fisher in

(1980), Branson in (1983) and Franklin in

(1983).Pakistan has three stock exchange markets

first is Karachi stock market 1947, second is Lahore

stock market in 1974 and third is Islamabad stock

market in 1997. Initially Karachi stock market

started function with ninety members and thirteen

listed companies. In 1971 there were 318

companies listed in Karachi stock exchange. Due to

the political effect partition of East Pakistan in

1971, then 60 companies were delisted in Karachi

stock exchange. In 1974 Govt. of Pakistan allowed

Volatility spill over between the stock market and the forex market Research Paper

696

open foreign currency account. The Karachi stock

exchange reaction is positive at the end of that year

and 542 companies were listed in Karachi stock

market. The Karachi stock market had third

position in the world 1991.

The Karachi stock market introduced digital

trading system that is KDTS (Karachi digital

trading system) to offer a right and cost efficient

market place to the investors. As a result, the

Karachi stock exchange first ranks in world in

2003.To test the performance economy authors

used skewness, Kurtosis and Jarque-Bera tests. To

test the stationary data authors used Augmented

Dickey Fuller test of unit roots. For the analysis of

stock exchange market and foreign market return

authors used daily basis data from January 1997 to

February 2013. Authors conducted Co-integration

analysis before conducting GARCH model. This

step decided error correction included in model or

not. The co-integration analysis is not show a long

term relationship among the return of stock

market and foreign rate of exchange. Volatility

model show the interlink stock market and foreign

exchange rate. A powerful relationship is in

volatility of foreign market and in volatility of

return in stock exchange market.

LITERATURE REVIEW

These three stock markets in Pakistan are

Islamabad Stock market, Karachi Stock market and

Lahore Stock market. Establishing dates are these

markets in 1997, 1947, and 1974 accordingly. ISE is

controlled by SECP (Security and Exchange

Commission of Pakistan) which was found on

1997. It has thrived the CLA (Corporate Law

Authority) founded on 1994. The major and chief

stock exchange among all stock exchanges is KSE.

There were thirteen listed firms and ninety

members when KSE began its operations. The

expansion of EM (Equity Market) for the duration

of 1960s was manufacturing strategies followed by

the govt. of Pakistan. 318 firms have increased as

listed in 1971.Due to the political crises in 1970,

East Pakistan separated from western Pakistan as a

separate identity. Due to the poorer economic

conditions and war against India divided Pakistan

into two parts. The result of this division is the

emergence of new country under the name of

Bangladesh which was East Pakistan. In 1971 after

the partition of Pakistan, sixty firms have unlisted

from KSE. All the financial organizations and

private segment firms were nationalized in 1973 to

1974. Division has removed from the country due

to this nationalization policy.

In 1985 to 1986 the policy of nationalization has

overturn. The policy of privatization or

denationalization of financial organizations and

private segment firms has been adopted. There

were modifications in the strategies and operations

of SM (Stock Market) in 1990.the starting of 1991

important assess were receive comprising the

market opening to the foreign investors. Eliminate

of problem to reply on continue investment, gain,

and bonus; deregulate of financial system and

permit commercial financial institution in private

segment. The government of Pakistan removed the

barriers and permeation of Pakistanis to open

overseas currency accounts.

Positive react of Karachi stock exchange to this

access and 542 listed firms are increase of this year.

The bullish tendency was examined in the 1st year.

In 1991 the performance of Karachi stock exchange

was arrived in 3rd position. The performance of

stock market was 3rd position later than Columbia

and Argentina in 1991.the new firms were listed

for this period that assist to raise income of share

and market money. The market developed

appreciably in the form of activity and volume.

The result shows that gross domestic product raise

from 7% to approximately 18% in the 1st year of

liberalization and promote to 26% after second

years.

In 1995 market equities were disturbed and

economic position had also become depressed due

to the local political crisis in Pakistan. Normal

monthly return still very low and US dollar


Khalil et al.

arrived at 266.2 million, while whole market

capitalization falls from 24.4% to US dollar 9.3

billion at last year. The KSE has shown progress

during 1997 to 1998. Listed capital of Karachi stock

exchange had risen to 208.7 billion while the return

of share greater than twice from 5,607 million

share for the period of 1996 to 1997 to 11336 in

1998. The Karachi stock exchange founded a

default firms counter during 1997.The number of

firms were decreased 126 on eliminate the default

in 1998.Or suggest moving shares by the

supporters. The KSE (Karachi stock exchange)

established an automated trading system in order

to offer a transparent, proficient and the minimum

cost for the financiers in market place. In 2000 the

listed firms are increased 762 due to changed

measures. In adding up the market capitalization

and capital listed are 394,445.6 million and

229,314.7 million in that order. After substantial

fluctuations it the finished at 23.7% in 2003. On

other way the growth in action showed the trading

value and outcome ratio incredible.

Since behind in 1990 the return ratio was

exceptional and rose to approximately 500% in

2003. At this stage Pakistan 1st ranks in the world

in conditions of outcomes ratio. The Karachi stock

exchange (KSE) has been best performance market

in the world in last two years. SBP (State Bank of

Pakistan) under the FER (foreign exchange

regulation) act 1947 is liable to formulate and make

the exchange rate strategy and control foreign

market. All for profit banks are authorized trader

of overseas exchange. State bank of Pakistan (SBP)

set dollar rate in which selling and buying US

(United States) dollars from the certified dealers.

All foreign exchange transaction is procedure

through certified dealers and authorized money

changers at agreed rate. Pakistan foreign market

(FM) system has disappeared through modify

during last 4th decades. Pak currency was

relationship with British pound sterling before

1970. In 1971 the Pakistan currency value was no

relation from britsh pound and US (united state) $

rate of 4.77 Rupees per dollar. Pakistan currency

value was decreased by 56.8% in form of gold in

1972 to 1973. In addition Pakistan currency value

increase 4.6% were also introduced. Pakistani

rupees were trading at 11/Dollar.

In 1981pakistan change FER (fixed exchange rate)

system to manage float structure. In 1991

announced complete exchange package and

improve payment system. Under this package

permit of citizen of Pakistani to open foreign

currency account in the Pakistani bank. Pakistan is

also allowed to foreign investor to open foreign

currency account through authorized dealers.

Pakistani currency was made exchangeable to

international currency in 1991.Government of

Pakistan was issue license to the firms according to

act. Government of Pakistan has accepted the

responsibility according to article (viii) section

two, three and four of IMF (international monetary

fund) in 1994, in which Pakistani rupees

exchangeable on current foreign transactions.

The system of multiple exchange rate was

implementing in 1998.These three types of

exchange rate first is (FIBR) floating inter Bank

exchange rate, second is official exchange rate and

last is combines the FIBR and official rates. In

(SBP) state bank of Pakistan for trading of bonds

banks permitted to use own rates for exchange

8t8exchange rate were modify into unify exchange

rate system pegged with united state currency. In

unify system of exchange rate rupee was allowed

to fluctuate within certain bands that is 52.11 to

52.31/dollar. Secondly bands from removed due to

this rupee become easy to float. It involves that

exchange rate is decided by market forces. Foreign

exchange investment is mechanically impact of

exchange rate because domestic currency into US

(united state) dollar has before now established

direct relation between US (United States) dollar

return and exchange rate. Some scholars argue that

movement of exchange rate offer a narrow and no

explanation in investment decision for the US

sponsor. (See Jorion 1990-1991, Amihud, 1993;


698

Batove and Bodnar, 1994; Bernard and Galati, 2000;

and Griffin and Stulz, 2001)

Although another argument stock return into $US

are important influence with exchange rate

variation.(see Roll 1992;Ferson and

Harvey,1993;Dumas and Solnik 1995:Chow et

al,1997; Choi et al.,1998;Desantis and Gerard,

1998;Doukas et al.1999;and Petro et al,2002).while

models and practical methods different

extensively. This study shows that relationship

between foreign and stock exchange market use

first moment in analysis and ignore the second

moment.

A best understanding role of second moments in

which international stock and foreign exchange

market are important to the foreign investors

because any change in cross market and variances

correlation in international markets due to

movement of exchange rate is much difficult to

select the best possible investment strategy. Some

study focus on relationship b/w foreign and stock

exchange market uses 2nd moment. Bartov (1996)

observe the linkage b/w stock return and foreign

exchange rate volatility for multinational

organization of the United States and find the

positive relationship b/w stock return and foreign

exchange rate volatilities.Stulz and karolyi (1996)

observe the effect of foreign exchange volatility

and Japanese and US (united states) stock market

relationship and result show that foreign stock

market is an important positive effect on volatility

and Japanese and US market relationship. Riding

and Bodart (1999) observe the effect on Germen

stock exchange rate variation on volatility of stock

market and relationship b/w Germen stock

exchange and selected EU markets (Italy, France,

Sweden, Belgium and UK).they discover no

powerful proof that high exchange rate volatility

raise in stock market variability. They

demonstrated that there is strong relationship

between German market and exchange market

when German market decrease and exchange rate

was volatile. Although these studies shows that

exchange rates effect on foreign stock market.

The previous study demonstrated that Asian

marketplace using data have gained greatly

different results. According to the Granger et al.

(2000) investigation demonstrates that correlation

among foreign and stock exchange market of nine

AC (Asian countries) for the duration of financial

crises in Asian countries. They establish foreign

market that lead and effect on stock market such as

Thailand and Japan, Stock exchange market that

lead in the Taiwan, the correlation is opposite

direction in Indonesia, Malaysia, Philippines and

South Korea, and no relation be in Singapore.

According to Doong et al. (2005) Data use in the six

AC and found that no long term relationship in

these markets. Pan et al. (2007) establish that the

correlation between foreign and stock exchange

markets in AC because depending on different

states and time.Ajayi & mougoue (1996) show a

positive long term and negative short term effect

of stock value on local currency value. Yu (1997)

studied Tokyo, Singapore and Hong Kong markets

by using data on daily basis for the period of 1983

to 1994.they find bidirectional correlation in Tokyo

and no reason in Singapore market place and find

that varies in the exchange rates granger reason

change in the stock price.

RESEARCH METHOD

Data Collection

For this study we used time series data on daily

basis (Secondary Data). We took KSE hundred

index and Foreign Exchange Rate from web site.

We used data from 1997 to 2013

Measures and Data Analysis

We used E-views software for data analysis

purpose. This research used time series

econometrics methods. Initially, data properties of

time series are examined specifically return of

stock market are not allocated generally; they

normally supposed extremely Kurtic and we


Khalil et al.

hypothesize that they are Leptokurtic the financial

time series. We applied skewness analyses, and to

test hypothesis we used Kurtosis and Jarque-Bera

tests. To test the stationary of the data we used

Augmented Dickey Fuller (ADF) test of unit roots

(Dickey & Fuller, 1981). The instability of the

returns of stock and returns of exchange is

examined by plotting the data. We used two step

methods Engle & Granger (1987) to examine the

survival of co assimilates association in the

exchange rate and the prices of stock market. In an

initial point we guess the long run equation and

then apply ADF test on the residual from the co

assimilate equation. We take foreign exchange rate

as independent variable and KSE hundred indexes

as a dependent variable. We calculate unit root for

testing the data either stationary or non stationary

on the basis of level and first difference. For

calculating the unit root we used Augmented

Dickey-Fuller Test. When we tested exchange rate

(ER) and stock price (SP) on the basis of level, its

probability is higher than the one, five and ten

percent levels. It defines that data is non

stationary. Furthermore, we tested ER and SP

through ADFT on the basis of first difference.

Probability of ER and SP is less than one, five and

ten percent levels which defines that data is

stationary. Because the stock prices propensity is

reversely associated with modifications in the

instability of stock, so, instability of spill-over

consequence within the two markets, and those are

foreign exchange market and stock market and is

expected by utilizing ARCH-GARCH techniques

projected by Engle (1982). The straightforward

GARCH (p, q) form can never detain the leverage

consequence. We used ARCH and GARCH

methods for testing either the data is significant or

non significant.


Table-1 demonstrated the figures. There are

significant results of ER and SP through ARCH

and GARCH methods. R2 value is 0.997 which is

positive and defines that our model is fit and there

is strong relationship between ER and SP.

Insert Table 1: ARCH and GARCH Method

Results are displayed in Table-2.For testing lag

length we used VAR Lag Order Selection Criteria.

Our lag length is six and its value is 13.821.

Insert Table 2: VAR Lag Order Selection Criteria

Whole descriptive statistics are presented in Table-

3.We used descriptive analysis for ER and SP.

These statistics includes Mean, Median, Range, SD,

Skewness, Kurtosis, Jarque-Bera, and Probability.

Descriptive analysis showed that our data is

stationary and can be used for analysis and

decision making.

Insert Table 3: Descriptive Analysis

Correlation e analysis is presented in Table-4

respectively. Further, we used correlation for

testing the relationship of variables (ER and SP).

There is a strong positive relationship between

each other.

Insert Table 4: Correlation Analysis

Charts are presented in appendix for exchange rate

and stock price.

We used Johanson/co-integration test for testing

hypothesis of ER and SP. Co-integration test

rejected the hypothesis and showed that there is no

long term relationship between ER and SP. Values

are presented in table-5.

Insert Table 5: Co-integration Test

We used Pairwise Granger Causality Tests for

testing causal relationship. Both have no causal

relationship between each other. Further

explanations are given in table-6.

Insert Table 6: Granger Causality Test


We have examined that connection of SM and FEM

in Pakistan using daily bases data from January

1997 to February 2013. First, we used ARCH and

GARCH methods. Results of these methods are

significant. Then we used co-integration analysis


700

and results explained that no long term

relationship between ER and SP. one market

outcomes influenced by instability of other market.

Specifically stock market’s outcomes sensitive to

the outcomes and the instability of FEM.

Alternatively FEM outcomes are the ways relapse

and FEM outcomes influenced by the instability of

stock market outcomes. There is significant

positive association between ER instability and

instability of SM. It entails the survival of

instability between all Pakistan markets.

REFERENCES

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between Stock Markets and the Foreign Exchange

Market. Prajnan, 30(1), 17-29.

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maximum likelihood Estimation and

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Branson, W. H. (1983). Macroeconomic

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Dickey, D. A., & Fuller, W. A. (1981). Likelihood

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with a Unit Root. Econometrica, 49(4).

Dornbusch, R., & Fisher, S. (1980). Exchange Rates

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Analysis of Blue Chip Stocks. (NBER Working

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and Testing. Econometrica, 55, 251–76.

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Testing the Impact of News on Volatility. Journal of

Finance, 11, 1749–1178.

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Prices. Journal of Business, 38, 34–105.

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Khalil et al.

APPENDIX

TABLES

Table 1. ARCH and GARCH Method

Variable Coefficient Std. Error z-Statistic Prob. C 56.20 5.53 10.14 0.00 AR(1) 0.71 0.012 54.94 0.00 AR(2) 0.26 0.013 19.78 0.00 Variance Equation C 33.70 1.34 25.13 0.00 RESID(-1)^2 -1.26 0.09 -12.85 0.00 GARCH(-1) -0.79 0.04 -19.37 0.00 R-squared 0.99 Mean dependent var 64.93 Adjusted R-squared 0.99 S.D. dependent var 14.23 S.E. of regression 0.71 Akaike info criterion 4.78 Sum squared resid 1922 Schwarz criterion 4.79 Log likelihood -9082 Hannan-Quinn criter. 4.79 Durbin-Watson stat 1.60 Inverted AR Roots .98 -.27 TABLE-2 VAR Lag Order Selection Criteria

Lag LogL LR FPE AIC SC HQ

0 - 51646 NA 2.34e+09 27.24 27.25 27.24

1

- 26816 49620.30 4793.04 14.15 14.16 14.15

2 - 26503 624.7818 4072.48 13.98 14.00 13.99

3 - 26412 181.9979 3889.44 13.94 13.96 13.94

4 - 26345 133.4431 3762.53 13.90 13.93 13.91

5 - 26150 389.5785 3401.23 13.80 13.84 13.82

6 - 26092 115.8046 3305.53 13.77 13.82191* 13.79432*

7 - 26087 9.050546 3304.58 13.77 13.82 13.79

8 - 26081 11.57274* 3301.427* 13.77786* 13.83 13.79

* indicates lag order selected by the criterion LR: sequential modified LR test statistic (each test at 5% level)


702

FPE: Final prediction error AIC: Akaike information criterion SC: Schwarz information criterion HQ: Hannan-Quinn information criterion

Table-3 Descriptive Analysis

ER SP

Mean 64.94 6841.616

Median 59.82 6949.880

Maximum 97.50 17288.07

Minimum 40.40 765.7300

Std. Dev. 14.24 4835.639

Table-4 Correlation Analysis

SP ER

SP 1.000000 0.709917

ER 0.709917 1.000000

Table-5 Co-integration test

ypothesized Trace 0.05 No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None 0.001370 6.283639 15.49471 0.6620 At most 1 0.000286 1.083439 3.841466 0.2979

Trace test indicates no cointegration at the 0.05 level * denotes rejection of the hypothesis at the 0.05 level **MacKinnon-Haug-Michelis (1999) p-values Unrestricted Cointegration Rank Test (Maximum Eigenvalue) Hypothesized Max-Eigen 0.05 No. of CE(s) Eigenvalue Statistic Critical Value Prob.** None 0.001370 5.200200 14.26460 0.7164 At most 1 0.000286 1.083439 3.841466 0.2979 Max-eigenvalue test indicates no cointegration at the 0.05 level * denotes rejection of the hypothesis at the 0.05 level **MacKinnon-Haug-Michelis (1999) p-values Unrestricted Cointegrating Coefficients (normalized by b'*S11*b=I): SP ER -0.000203 -0.002239 0.000213 -0.099885 Unrestricted Adjustment Coefficients (alpha): D(SP) 3.236252 -1.057122 D(ER) 0.011129 0.007401


Khalil et al.

1 Cointegrating Equation(s): Log likelihood -26095.18 Normalized cointegrating coefficients (standard error in parentheses) SP ER 1.000000 11.03483 (152.652) Adjustment coefficients (standard error in parentheses) D(SP) -0.000657 (0.00035) D(ER) -2.26E-06 (1.8E-06)

Table-6 Granger Causality Tests

Null Hypothesis: Obs F-Statistic Prob.

ER does not Granger Cause SP 3793 1.18483 0.3112

SP does not Granger Cause ER 0.65420 0.6868

Chart No.1

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704

Chart NO. 2

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*Corresponding author: Somayyeh Nobarieidishe, Master Student of Commercial Management, Department of Management, East Azarbaijan Science and Research Branch, Islamic Azad University, Tabriz, Iran.

E-Mail: [email protected]

705

Research Paper

Investigating the Relationship between Intellectual Capitals and Organizational Effectiveness in State Agencies of Kerman City

Masoud Porkiani1, Amin Nikpour2, Somayyeh Nobarieidishe3* and Raheleh Chamanifard4

1. Assistant Professor, Department of Management, Kerman Branch, Islamic Azad University, Kerman, Iran

2&4. PhD Student of Public Management, Department of Management, Science and Research Branch, Islamic

Azad University, Kerman, Iran

3. Master Student of Commercial Management, Department of Management, East Azarbaijan Science and Research

Branch, Islamic Azad University, Tabriz, Iran

Intellectual capital is the new issue that has been proposed theoretically in recent years

globally. But since it is considered as valuable source for countries and organizations its rate of

growth and development is rapidly changing to an index in the development of countries. The

purpose of this study is to investigate the relationship between intellectual capitals and

organizational effectiveness in state agencies of Kerman city. The study is descriptive and

correlation research that has been conducted to survey. The study population consisted of

employees in state agencies of Kerman city and sampling is systematic classification. 330

subjects were selected as a sample of the study. In order to analyze the data is used descriptive

and inferential statistics and the intellectual capital and organizational effectiveness

questionnaires are used to collect the required data. The findings indicate that there is a

significant relationship between intellectual capitals and its sub variables as human capital,

structural capital and customer capital with organizational effectiveness and also there is a

significant relationship between intellectual capitals and organizational effectiveness and

demographic variables.

Keywords: Human capital, Structure capital, Customer capital, Organizational

effectiveness, Productivity,

INTRODUCTION

During the recent years, combination of

companies’ asset in the relationship between

tangible and intangible assets has changed

considerably. These changes have led to in

procedures have emerged to investigation the

wealth of organizations in the intellectual and

knowledge assets (Sullivan & Sullivan, 2000).

Also this trend has led to the organizations

understand more the importance of its intangible

assets management and name it as their

competitive advantages. Many owners and

Intellectual Capitals and Organizational Effectiveness Research Paper

706

managers of the companies believe that the ability

to create and use of the in tangible assets will be

provide a core competence for the organization

(kannan & Aulbur, 2004).

Intangible assets can always be searched in the

organizations’ employees’ intellectual capital and

intellectual capital can affect in various aspects of

the organizations (Nikoomaram & Eshaqi, 2010)

Intellectual capital are defined as a group of

knowledge assets that are dedicated to an

organizations and are considered as the

characteristics of an organization and it leads to

improve the organization competitive position

significantly by to add the value for the

organization’s key beneficiaries (Marr, 2004).

Intellectual capital is asset that measures the

organization's ability to create wealth. The asset

has not objective and physical nature and it is an

intangible asset that is obtained through the use of

the related assets with human resources,

organizational performance and relationships

outside of the organization. All of these features

cause to make the value is obtained. Because it is a

completely internal phenomenon is not

merchantability (Rose & Barron, 2005).

Intellectual capital is the representative set of

intangible assets that as well as known as

knowledge assets. These assets are distinct from

physical assets such as property, machinery and

equipment or inventory and financial assets such

as receivables, investments and cash. Also it is

important increasingly as a key source of their

competitive strategies (Sudarsanam et al, 2006).

Intellectual capital is not just understanding and

diagnosis or explaining the implicit value of an

organization but its purpose is also moving

diagnosis results or explaining the implicit value to

the new value (Chu et al, 2006).

Intellectual capital is the knowledge, information,

intellectual asset and experience that can be used

for creating wealth (Nazari & Herremans, 2007).

Intellectual capital is the information and

knowledge applied to work to create value (Ileanu

& Tanasoiu, 2008).

Intellectual capital consists of customer capital,

human capital, structural capital (Bontis, 1998).

1- Human capital: Represents inventory the

knowledge of human in an organization (Bontis et

al, 2002).

2- Structural capital: Includes all non-human

reservoirs of knowledge in the organization that

encompass databases, organizational charts,

constructions administrative processes, strategies

and generally whatever its value for organization

is higher than the material value (Rose et al, 1998).

3- Customer capital: The main issue is that existing

knowledge in marketing channels and relations

with customer and demonstrates that an

organization’s potential ability of an intangible

factors external to the organization. Customer

capital can be classified as marketing capability,

market intensity, and customer loyalty (Chen et al,

2004).

Organizational effectiveness is defined as the

extent to which the organization accomplishes its

goals (Cameron, 1981).

Organizational effectiveness evaluation model

based on the organization’s internal processes

includes the following dimensions (Daft, 1992):

1- There is a very rich culture and a strong and

favorable climate in the organization;

2- The spirit of cooperation, loyalty to the group

and teamwork;

3- Trust, confidence, understanding and mutual

relationship between employees and organization

management;

4- Decision beside information resources

regardless of whether where the information

resources are located in the organization chart;

5- Having the strong communication in the

horizontal and vertical levels of the organization,

sympathy and solidarity with the members of the

organization in affairs;


Porkiani et al.

6- To reward the managers with proportional to

subordinates performance, growth and

development and the creation of an efficiently

working group;

7- Mutual relation (interaction) between the

organization’s members and solving the problems.

Intellectual capital in innovation, productivity,

growth, business competitiveness and economic

performance has main and increasingly important

(Lim & Dallimore, 2004).

The intellectual capital increases the opportunities

of the organization (Sudarsanam et al, 2006).

The intellectual capital likes the roots of a tree

whose life is dependent on root, and it is hidden in

the soil, remains the company’s success depends

on a source that is a hidden source (Arenas &

Lavanderos, 2008).

In fact could say that the increasingly success and

effectiveness and productivity of any company or

organization is depend the knowledge and

intellectual capital.

Regard to what we discussed, hypotheses of this

research are:

Main hypothesis

- There is a relationship between intellectual

capitals and organizational effectiveness in state

agencies in Kerman city.

Secondary hypotheses

1- There is a relationship between human capital

and organizational effectiveness in state agencies

of Kerman city.

2- There is a relationship between structure capital


of Kerman city.

3- There is a relationship between customer capital


of Kerman city.

4- There is a relationship between intellectual

capitals and organizational effectiveness and

demographic variables (age, sex, work experience,

education) in state agencies of Kerman city.

RESEARCH BACKGROUND

Research in the field of intellectual capital was

begun in 1990 and is mainly related to raise

awareness about the existence and value of

intangible assets in organization and classification

models development of intellectual capital (Marr

et al, 2003).

Goodman & Penning (1977) conducted research

about the effectiveness of and according to this

research, they concluded that the effectiveness of

the organization affected by three main variables

which are partly controlled by manager: A)

Organizational characteristics: such as structure

and technology. B) Environmental characteristics:

such as economic and market conditions. C) The

characteristics of employees: such as job

performance and education.

Bontis (1998) did the research titled “Intellectual

capital: an exploratory study and review models

and measures of intellectual capital in Canada”.

This research showed that there is a mutual

relationship between the components of

intellectual capital and all three capital of human,

structural and customer capital have good impact

on trade performance.

Bontis et al (2000) did in a study entitled

“Investigating the relationship between intellectual

capital and quality of service and non-service

industries in Malaysia” that showed these results:

there are mutual relationships between the

components of intellectual capitals and these

capitals effect relatively modest about twenty to

thirty percent on services quality and customer

perception.

In 2005, in the similar study with Malaysia study

that was taken in Taiwan’s it industry and the

relationship between intellectual capital and

performance was analyzed in a series of scientific

models that confirmed Malaysia research results

(wang & chang, 2005).

Several studies conducted by Bontis (2001) shows

that the organizations with a high intellectual

capital have high organizational justice,


708

competitive advantage, and corporate culture.

Also between the human capital and productivity,

organizational commitment, as well as social

capital and intellectual capital that all of them

cause to improve the performance and

organization’s members behavior, there are

positive relationship.

Badrabadi & Akbarpour (2013) in a study entitled

“A study on the effect of intellectual capital and

organizational learning process on organizational

performance” concluded that intellectual capital

has impact on organizational performance.

Bashiri & Divangahi (2013) in a study entitled “The

relationship between intellectual capitals and

productivity in the education organization”

concluded that there is a significant relationship

between intellectual capitals and organizational

productivity.

CONCEPTUAL MODEL OF RESEARCH

FIGURE 1 HERE

RESEARCH METHODOLOGY

This research is descriptive and correlative, and

Kendall test is used to identify correlation

coefficient. It is a field research and is done in a

survey way. The population of the study is all

employees of public agencies in Kerman city. The

numbers of employees during the research were

2287 and by using Cochran’s formula and satisfied

proportional sampling method from this number,

330 people were selected as volume of sample. Of

these total number more than 50 percent are male

and more than 60 percent have a master of degree

and more than 50 percent of them are over 15 years

work experience and more than 70 percent of these

people are over 30 years old. Table 1 shows the

volume of community and statistical sample:

TABLE 1 HERE

In this study, two questionnaires were used to

collect the required data. The first questionnaire

was designed by the researcher and is for the

intellectual capitals and it measures intellectual

capital through its dimensions is: human capital,

structural capital, customer capital and includes 19

questions. The second questionnaire was designed

by the researcher and measures organizational

effectiveness through the dimension based on

internal processes and includes 26 questions.

Tables 2 and 3 show questions related to different

aspects of two variables of intellectual capital and

organizational effectiveness:

TABLE 2 HERE

TABLE 3 HERE

A) Validity: To determine the validity of the

intellectual capital and organizational effectiveness

questionnaires content validity test have been used

(experts’ opinion). Intellectual capital

questionnaire were calculated 0.83 and

organizational effectiveness level 0.9.

B) Reliability: The reliability of the questionnaires

by test and re-test method were calculated

respectively 0.87 and 0.84.

In order to analyze the data descriptive and

inferential statistics (correlation test) was used.

Data after entry into computer were analyzed via

SPSS software.

RESEARCH FINDINGS

TABLE 4 HERE

Study research’s hypotheses:

Main hypothesis

- There is a relationship between intellectual

capitals and organizational effectiveness in state

agencies of Kerman city.

Regarding to table 4, Kendall’s correlation is 0.439

and correlation in significance level is 0.01, it

means that there is a relationship between

intellectual capitals and organizational

effectiveness in state agencies of Kerman city and

as Kendall’s correlation is positive so there is a

positive relationship between intellectual capitals

and organizational effectiveness.

Secondary hypotheses


Porkiani et al.

1- There is a relationship between human capital


of Kerman city.


and correlation in significant level 0.01, It means

that there is a relationship between human capital


of Kerman city and as Kendall’s correlation is

positive so there is a positive relationship between

human capital and organizational effectiveness.

2- There is a relationship between structure capital


of Kerman city.


and correlation in significant level 0.01, It means

that there is a relationship between structure

capital and organizational effectiveness in state

agencies of Kerman city and as Kendall’s

correlation is positive so there is a positive

relationship between structure capital and

organizational effectiveness.

3- There is a relationship between customer capital


of Kerman city.


and correlation in significant level is 0.01, it means

that there is a relationship between customer

capital and organizational effectiveness in state

agencies of Kerman city and as Kendall’s

correlation is positive so there is a positive

relationship between customer capital and

organizational effectiveness.

TABLE 5 HERE

- Data in table 5 shows that there is a relationship

between intellectual capitals and organizational

effectiveness, and demographic variables (age, sex,

work experience, education) in state agencies of

Kerman city.

- According to correlation coefficients in table 5,

the highest correlation between organizational

effectiveness and intellectual capital can be seen in

male group.


the highest correlation can be seen in graduate

level M.A and upper


the highest correlation can be seen in level 11-20

years’ experience.


the highest correlation in age level can be seen in

less than 40 years old.

In order to rank the predictor variables was used

Friedman rank test, which is discussed in table 6:

TABLE 6 HERE

As is clear from table 6, human capital factor has

had the highest rank between the variables of

intellectual capital and customer capital and

structure capital were located in the next ranks.

CONCLUSION

The findings of the study regarding that there is a

significant relationship between the components of

intellectual capital and organizational effectiveness

has been verified. The findings were compared

and analyzed with conclusions and results of the

different studies which are as follows:

The findings indicate that there is a relationship

between human capital and organizational

effectiveness. The finding results are coordinated

with research findings of Penning & Goodman

(1977).

Goodman & Penning in own investigation

concluded that the characteristics of employees:

such as job performance, amount of education, and

knowledge effects on the organizational

effectiveness.

Also, Stewart (1997), Nazari & Herremans (2007)

are considered the human capital as creativity

Strategic source to the organization.

The other finding of the study about the

relationship between structure capital and

organizational effectiveness are coordinated with

research findings of Penning & Goodman (1977),

McGill (2006).


710

Goodman & Penning in their study concluded that

the characteristics of the organization such as

structure and technology impact on organizational

effectiveness.

McGill believes that structure capital includes

proprietary software, computer programs,

databases, organizational structure and operation

of patent, trademark and other similar assets

support productivity in the organization.

Other finding of the study about the relationship

between customer capital and organizational

effectiveness are coordinated with the findings of

Anderson et al (1994), Halowell (1996), Richheld

(1996), Silvester & Cross (2000), Nan & Zhong-

ming (2007).

The studies by Anderson et al, Halowell, Richheld,

Silvester & Cross show that there is a positive

relationship between customer loyalty and

companies’ profitability (Leverin & Liljander,

2006). Nan & Zhong-ming in their study

concluded that there is a significant relationship

between social capital and organizational

effectiveness.

REFERENCES

Arenas, T., & Lavanderos, L. (2008). Intellectual

capital: object or process?. Journal of Intellectual

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Badrabadi, H. H., & Akbarpour. T. (2013). A study

on the effect of intellectual capital and

organizational learning process on organizational

performance. African Journal of Business

Management, 7(16), 1470-1485.

Bashiri, M., & Divangahi, M. (2013). The

relationship between intellectual capitals and

productivity in the education organization.

International Journal of Economics, Finance and

Management, 2(4), 297-302.

Bontis, N. (1998). Intellectual capital: an

exploratory study that develops measures and

models. Management Decision, 36(2), 63-76.

Bontis, N., Keow, W. C. C., & Richardson, S. (2000).

Intellectual capital and Business performance in

Malaysian industries. Journal of Intellectual Capital,

1(1), 85-100.

Bonitos, N. (2001). Managing Organizational

Knowledge by Diagnosing Intellectual Capital: Framing

and Advancing the State of the Field. USA: Idea

Group Publishing.

Bontis, N., Crossan, M., & Hulland, j. (2002).

Managing an organizational leaning system by

aligning stocks and flows. Journal of Management

Studies, 39(4), 437-466.

Cameron, K. S. (1981). Domains of organizational

effectiveness in colleges and universities. Academy

of Management Journal, 24(1), 25-47.

Chen, J., Zhu, Z., & Xie, H. Y. (2004). Measuring

intellectual capital: a new model and empirical

Study. Journal of Intellectual Capital, 5(1), 195-212.

Chu, P. Y., Ling, Y. L., Hsiung, H. H., & Liu, T. Y.

(2006). Intellectual capital: an empirical study of

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Daft, R. L. (1992). Organization Theory and Design.

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Goodman, R., & Penning, F. (1977). Problem Solving

and Conferences: leadership Methods and Skills. New

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Kannan, G., & Aulbur, W. G. (2004). Intellectual

capital: measurement effectiveness. Journal of

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Leverin, A., & Liljander, V. (2006). Does

relationship marketing improve customer

relationship satisfaction and loyalty?. International

Journal of Bank Marketing, 24(4), 232-251.

Lim, L. L. K., & Dallimore, P. (2004). Intellectual

capital: management attitude in service industries.

Journal of Intellectual Capital, 5(1), 181-194.

Marr, B., Gray, D., & Neely, A. (2003). Why do firm

measure their intellectual capital?. Journal of

Intellectual Capital, 4(4), 441-464.

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A Study of Organizational Knowledge Transfer. Ph.D.

Dissertation. California: Touro University.

Nan, S., & Zhong-ming, W. (2007). Social capital,

entrepreneurial orientation and organizational

effectiveness: an empirical study of high-tech ventures.

International Conference on Management Science

and Engineering, China, Harbin, Aug 20-22, 2007.

Nazari, J. A., & Herremans, I. M. (2007). Extended

VAIC model: measuring intellectual capital

components. Journal of Intellectual Capital, 8(4), 595-

609.

Nikoomaram, H., & Eshaqi, F. (2010). Relationship

between effect of intellectual capital on

Performance of value and growth companies listed

in Tehran stock exchange (TSE). Financial

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Roos, G., Roos, J., Dragonetti, N. C., & Edvinsson,

L. (1998). Intellectual Capital-Navigating In New

Business Landscape. New York: University Press.

Rose & Barron (2005). The effect of disclosing

intellectual capital (The core asset for the third

millennium economic entities) on the internal and

external financial statements. Users.

Stewart, T. (1997). Intellectual Capital: the New

Wealth of Organization. New York:

Doleday/Currency.

Sudarsanam, S., Sorwar, G., & Marr, B. (2006). Real

options and the impact of intellectual capital on

corporate value. Journal of Intellectual Capital, 7(3),

291-308.

Sullivan, J. P. H., & Sullivan. S. P. H. (2000).

Valuing intangiblecompanies: an intellectual

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http://sid.ir/en/ViewPaper.asp?ID=208247&vRadif=7&vWriter=NIKOOMARAM%20HASHEM,ESHAQI%20FATEMEH&vJournal=FINANCIAL+KNOWLEDGE+OF+SECURITY+ANALYSIS+%28FINANCIAL+STUDIES%29&vDate=SUMMER%202010&vVolume=3&vNo=6&vStart=133&vEnd=163





712

APPENDIX

Table 1: Statistical population and sample size of employees in state agencies of Kerman city

Row Title of organization Volume of

community

Volume of

sample

1 Economic affairs and finance organization 115 17

2 Industries, mines and business organization 261 38

3 Martyr foundation and veterans affairs organization 293 42

4 Rural cooperative organization 97 14

5 Jihad agriculture organization 1343 194

6 Housing and urban development organization 163 23

7 Collecting and selling possessions property organization 9 1

8 National youth organization 6 1

Total 2287 330

Table 2: Dimensions of intellectual capital and how to evaluate

Row Intellectual capital’s dimensions Question’s number

1 Human capital 1-2-3-4-5-6-7-8-9-10

2 Structure capital 11-12-13-14

3 Customer capital 15-16-17-18-19

Table 3: Dimension of organizational effectiveness and how to evaluate

Row Organizational effectiveness’s dimensions Question’s number

1 Based on the organization’s internal

processes

1-2-3-4-5-6-7-8-9-10-11-12-13-14-15-

16-17-18-19-20-21-22-23-24-25-26

Table 4: Evaluate correlation of predictor variable and response variable

Predictor variable Response variable Frequency

Kendall

Correlation

coefficient

Significance

level

Human capital Organizational

effectiveness 300 0.467 0.000

Structure capital Organizational



Porkiani et al.

Customer capital Organizational


Intellectual

capitals

Organizational


Table 5: Assessment of correlation between intellectual capitals and organizational effectiveness according to

demographic variables

Kendall K df G2

Statistics

P

Amount

Organizational

effectiveness

Intellectual

capitals

Measuring

indicators

Variable

High Average Low

0.49

3

2

1

4

12

17

11.87

35.37

49.63

0.000

0.000

0.000

- 2 2 Low

Male

Sex

29 17 5 Average

85 29 6 High

0.37

2 4 0 Low

Female

11 8 7 Average

58 12 1 High

0.36

3

2

1

4

12

17

2.96

61.57

479.78

0.000

0.000

0.000

1 4 4 Low Less than

M.A

Educatio

n

18 7 4 Average

67 14 2 High

0.42

1 6 4 Low M.A and

upper 21 18 7 Average

78 30 2 High

0.38

3

2

1

4

12

17

8.67

69.29

522.98

0.000

0.000

0.000

2 2 0 Low Less than

10 years

Work

experienc

e

23 17 10 Average

68 26 8 High

0.53

2 1 4 Low

11-20 years 13 11 4 Average

51 18 1 High

0.44

0 2 2 Low More than

20 years 9 4 4 Average

33 8 2 High

0.33

3

2

4

12

7.71

56.17

0.000

0.000

4 4 1 Low Less than

40 years

old

Age

36 24 16 Average

92 40 12 High

2 0 2 Low 40 years


714

0.28 1 17 327.42 0.000 13 11 6 Average old and

upper

64 16 0 High

Table 6: Ranking predictor variables

Rank Mean Variables

1 3.61 Human capital

2 2.43 Customer capital

3 2.27 Structure capital

Figure 1: Conceptual model of research

Predictor variable

Intellectual capitals

Human capital

Structure capital

Customer capital

Response variable

Organizational effectiveness

Based on the organization’s

internal processes

Mediating variables

Age

Sex

Work experience

Education


*Corresponding author: Hamid Bashir, Asst. Company Secretary, Sialkot International Airport, Sialkot-Pakistan. E-Mail: [email protected]

715

Research Paper

Does Efficient Working Capital Management Enhance Profitability of

Pakistani Firms?

Hamid Bashir1*and Waqar Ahmad2

1. Asst. Company Secretary, Sialkot International Airport, Sialkot-Pakistan.

2. Faculty of Management Sciences, University of Central Punjab, Lahore-Pakistan.

The current paper aspires to explore further the impact of working capital management on

profitability by considering recent statistics. For the stated purpose, a sample of 100 non-

financial firms listed on Karachi Stock Exchange (KSE) for the period of 2005-2009 is

considered. Inventory turnover in days (ITID), Average Collection period (ACP) and

Average Payment period (APP) are used as components of working capital. Having used

net profit after tax as a measure of profitability, study results show that managers can

enhance profits of the firms by mounting ITID and APP to an optimal level. The

improved ITID increases sales of the firm while distended APP makes available the

opportunity of short term investment.

Key words: working capital, profitability, VIF Test, Panel data techniques,

Pakistan

INTRODUCTION

Two types of debates prevail in the academic field regarding the impact of working capital on profitability. According to the first group of thought only fixed capital is responsible for profit generation whereas, working capital may have negative relationship with profitability. Second group argues that unless and until a minimum level of investment is not made in working capital a firm cannot achieve its prime objective of profitability. They support their argument with the fact that working capital comprises of current assets and current liabilities of the firm and without sustaining an optimal level of working capital smooth functioning of a firm cannot be possible.

Working capital plays a vital role as it affects directly to the profitability and liquidity of the firm. Horne and Wachowicz (2004) reported that excess of current assets in a firm reduces the profitability whereas shortage of current assets enhances the probability of insolvency. Eljelly (2004) suggested that through efficient working capital management firm can make best possible investment in current assets and pay off its obligations timely.

Profit maximization is the prime objective of any business but the importance of liquidity cannot be ignored. If a firm increases its current assets it increases its liquidity but at the same time

Does Efficient Working Capital Management enhance Profitability? Research Paper

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decreases the profitability. Both these objectives of profitability and liquidity are important so one objective cannot not be achieved at the cost of other. If the importance of profit is ignored firm cannot run for a longer period and if we try to overlook the importance of liquidity it may enhance the probability of insolvency and bankruptcy. Both the objectives are crucial and can be achieved through efficient management of working capital. Shin and Soenen (1998) stated that objectives of profitability and liquidity can be achieved through efficient management of working capital.

Mangers should analyze the optimal level of working capital to maximize the objective of profitability. Long et al (1993) and Deloof and Jegers (1996) documented that the problem of stock-out can be prevented through adequate inventory stock and sales of the firm can be enhanced through efficient credit trade policy. They concluded that credit policy allows the customers to analyze the quality of the product before making payment whereas late payment to supplier allows the firms to invest for short time and provides the opportunity to analyze the quality of bought products. Cash conversion cycle is used as the most popular measure of working capital. Conversion cycle is the difference between the payment of purchases and collection of sales. Profitability might be increased through long cash conversion cycle as it increases the sales of the firm. Profitability may be reduced when cost of investment crosses the benefits of investment in working capital.

The above discussion prescribing the importance and impacts of working capital management leads us towards the question of whether efficient management of working capital enhances the profitability of Pakistani non-financial firms? In order to empirically investigate the impact of working capital and its components on profitability, a sample of 100 non-financial firms for the period of 2005-2009 is taken under consideration.

The current study will validate the results of previous studies as well as the current study will contribute in following ways. First, it will validate the results of previous studies on same topic

especially to the results of Rehman and Nasr (2007), a well known research in Pakistan on the topic of working capital. Secondly, advanced Panel data techniques are used to analyze the impacts of working capital on profitability.

Section two provides brief literature from previous studies. Third section of the study describes methodology used for investigating the relationship between working capital and profitability. Section four comprises of the empirically results and discussion. Fifth section concludes the whole study.

LITERATURE REVIEW

Topic of working capital has been analyzed by many researchers in different environments and countries. The previous studies show mix results regarding the impact of working capital on profitability as discussed above that there are two groups of thoughts. According to first group there is a negative relationship between working capital and profitability while second group argues that without making investment in working capital a firm cannot achieve its prime objective of profitability.

Deloof (2003) studied a sample of 1009 non-financial Belgium firms for the period of 1992-1996 to investigate the impacts of working capital on profitability. His results showed negative relationship among profitability, Average Collection Period (ACP), Average Payment Period (APP) and Inventory Turnover in Days (ITID). He suggested that managers can enhance shareholder’s value by reducing ACP while long APP will provide an opportunity to invest for short time. Ghosh and Maji (2003) investigated a sample of Indian cement firms for the period of 1992-93 to 2001-02 to check the efficiency of working capital management. Instead of traditional working capital ratios they used special indices such as performance, utilization and overall efficiency indices. Study results showed that some of the observed firms showed healthier efficiency during that period.

Eljelly (2004) examined a sample of 929 Saudi Arabian firms to check the impacts of working capital on profitability. His results showed


Bashir and Ahmad

negative relationship between working capital and profitability.

Mangers should manage current assets and liabilities in a way that make enable to pay off the liabilities on time and mitigate the chances of over and under investment. Filbeck and Krueger (2005) reported that financial managers can bring value to firms by organizing well its receivables, payables and inventories. Their results showed positive and significant relationship between ACP and profitability.

Lazaridis and Tryfonidis (2006) documented that managers can enhance the profits of firm by keeping each component of working capital on an optimal level and appropriate handling of CCC. They used a sample of 131 listed firms on Athens Stock Exchange (ASE) for the period of 2001-2004 and their results showed significant relationship between operating profit and CCC and its components. Falope and Ajilore (2009) investigated a sample of 50 Nigerian firms for the period of 1996-2005. Their results showed strong negative relationship between profitability and ACP, APP, ITID and CCC. Mathuva (2009) used a sample of 30 listed firms of Nairobi for the period of 1993-2008 to check the impact of components of working capital on profitability of firm. His results showed significant negative relationship between ACP and profitability while a strong positive relationship was observed between APP, ITID and profitability.

Rehman and Nasr (2007) took a sample of 94 non-financial firms of Pakistan for the period of 1999-2004 to investigate the effects of working capital and its components on profitability. Their results showed that profitability decreases with the increase in CCC and they suggested managers can enhance shareholder’s value by reducing CCC to minimum level.

The above literature presents different types of impacts of working capital management on profitability for different countries. The current study investigates the impact of working capital and its components on profitability for Pakistani firms.

RESEARCH METHOD

Data and Sampling

Current study aims to investigate the impact of working capital management on profitability. In doing so, a balanced panel data of 100 non financial firms for the period of 2005-2009 is considered. Data of the variables used in this study is collected from annual reports of the firms.

Variables of the Study

Mainly the focus of current study is on profitability, working capital and liquidity but some control variables are also included to control the impact of other factors. Profitability and liquidity are measured through net profit after tax and current ratio respectively. Whereas, Inventory turnover in days (ITID), Average collection period (ACP) and Average payment Period (APP) are used as a components of working capital.

Profitability (PRO) = (Profit before tax / total assets)

Inventory turnover in days (ITID) = (inventory * 365 / Cost of goods sold)

Average collection period (ACP) = (Ac/ Receivables * Number of days in a year (365) / Sales )

Average Payment Period (APP) = (Ac/ payable * 365 / credit purchases)

Current Ratio (CR) = (Current assets/current liabilities)

Size (SZ) = (Natural Logarithm of sales)

Leverage (LEV) = (Total debts / total assets)


Descriptive Statistics

Table 1 presents the descriptive statistics for 100 non-financial Pakistani listed firms. It shows mean, median, standard deviation, maximum and minimum values for variables of interest.

Table: 1 Descriptive Statistics: See Appendix

Mean value of profitability is 8.3% which shows that on average firms are profitable. The mean value of 74.230 of ITID shows that on average firms take 74 days to convert their inventory into sales. On average, firms take 93 days to collect


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their receivables and pay their liabilities on average in 545 days. The considerable difference between ACP and APP shows that firms of the sample collect their receivables far before the payment of their liabilities which means that firms have an opportunity of short term investment. On average, liquidity measure with mean value of 1.52 shows favorable results. Average size (logged) of the firms is 8.3 while on average firms usage of leverage is 1.71.

Correlation Analysis

Table 2 presents coefficients of correlation between profitability and independent variables. Starting from ITID, the negative coefficients of ITID (-0.125) and ACP (-0.183) show that ITID and ACP are negatively correlated with profitability.

Table 2: Correlation Analysis: See Appendix

Whereas, positive coefficient (0.087) of APP shows positive relationship between APP and profitability. Current ratio (liquidity) and size are positively correlated with positive coefficients of 0.081 and 0.307 respectively. The negative coefficient of leverage (-0.213) shows that leverage has negative relationship with profitability of firms of the sample.

Further, the Variance Inflation Factor (VIF) is used to check the problem of multicolinearity. Test results show that values of all variables lies between 1.02 to 3.62 which are lesser than 10. It means that there is no problem of co-linearity.

REGRESSION ANALYSIS

Model used for the study

To empirically investigate the impact of working capital management on profitability, following model is used:-

Eq. 1

Where, PRO is dependant variable, α is the constant coefficient and β is the coefficient of components of working capital. ג denotes to

coefficient of control variables and ɛ is the error term.

Econometric Methodology

Sample of current study is comprised of panel data in which element of heterogeneity is must Baltagi (2009). Hence, simple OLS regression is not suitable for panel data as it does not take into account the element of heterogeneity. Lagrange Multiplier (LM) test is applied to test the assumption of Baltagi (2009). Test results reject the null hypothesis of zero variances across entities and suggested that simple OLS model is not suitable for the current study. Further, Hausman Specification Test is used to choose between Random effect and Fixed effect models. Results of Hausman Specification test rejects the hypothesis of no correlation between individual effect and other regressors of the study. Results of Hausman Specification test are presented in Regression table. Test shows that Fixed effect model is more appropriate and reliable technique for the current sample.

Results of Regression analysis

Table 4 presents the results of regression analysis for the impacts of working capital management on profitability. All the coefficients of components of working capital show positive relationship with profitability but this relationship is only significant for APP and ITID. The positive coefficient of ITID (0.00020) shows that profitability increases along with increase in ITID. This relationship is in accordance to theory and earlier studies as profitability of firm is directly related to sales. Further, positive and significant coefficient of APP (0.00007) shows that profitability of a firms increases as it’s the payment period of firm increases. This relationship is also in accordance to the prior studies. The enlarged payment period of a firm allows the firm to earn profits by making short term investments.

Table 3: Regression Analysis: See Appendix

The positive coefficient of CR shows positive relationship with profitability but this relationship carries no significance. Size with positive and significant coefficient (0.053) shows that size of the firms is positively correlated with profitability


Bashir and Ahmad

while leverage has significant negative impact on profitability of firms.


Current study investigates the impact of working capital management on profitability of Pakistani non-financial firms for the period of 2005-2009. Average collection period, Average payment period and Inventory turnover in days are used as components of working capital while current ratio is taken as a measure of liquidity. Results of the current study are in supportive to the prior literature of positive relationship between profitability and working capital management. Almost all the components of working capital shows positive and statistically significant relationship with profitability. It means that efficient working capital management plays an imperative role for the enhancement of profitability of the firms. REFERENCES

Baltagi, B. H. (2009). A companion to Econometric analysis of panel data. John Wiley & Sons.

Deloof, M. and Jegers, M. (1996). Trade credit, product Quality, and Intra Group Trade: Some European Evidence. Financial Management, 25 (3), 33-43.

Deloof, M. (2003). Does Working Capital Management Affects Profitability of Belgian Firms?. Journal of Business Finance & Accounting,30 (3 & 4), 573 – 587.

Eljelly, A. (2004). Liquidity-Profitability Tradeoff: An empirical Investigation in an Emerging Market. International Journal of Commerce & Management,14 (2), 48 – 61.

Falope O. and Ajilore O. (2009). Working capital management and corporate profitability: Evidence from panel data analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 3, 73-84.

Ghosh, S. K. and Maji, S. G. (2003). Working Capital Management Efficiency: A study on the Indian Cement Industry. The Institute of Cost and Works Accountants of India.

Lazaridis I. and Tryfonidis D. (2006). Relationship between working capital management and profitability of listed companies in the Athens stock exchange. Journal of Financial Management and Analysis, 19, 26-25.

Long, Michael. S, Malitz. Lleen. B, and Ravid, S. Abraham, (1993). Trade Credit, Quality Guarantees, and Product Marketability. Financial Management,117 – 127.

Mathuva D. (2009). The influence of working capital management components on corporate profitability: A survey on Kenyan listed firms. Research Journal of Business Management, 3, 1-11.

Raheman A. and Nasr M. (2007). Working Capital Management And Profitability – Case Of Pakistani Firms. International Review of Business Research Papers, 3 (1), 279-300.

Shin, H.H. and Soenen, L. (1998). Efficiency of Working Capital Management and Corporate Profitability. Financial Practice and Education, 8 (2), 37-45.


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APPENDIX

TABLES Table: 1 Descriptive Statistics

Variables No. Mean Std. Dev Median Min Max

PRO 500 0.083 0.166 0.059 -0.588 1.143

ITID 500 74.230 99.564 49.718 0.136 992.984

ACP 500 93.885 100.941 65.826 3.539 828.492

APP 500 545.084 276.524 510.306 45.790 1807.728

C.R 500 1.521 2.361 1.104 0.010 42.790

SZ 500 8.366 2.056 8.479 1.335 13.326

LEV 500 1.719 2.922 1.109 -0.104 43.756

Table 2: Correlation Analysis

PRO ITID ACP APP C.R SZ LEV VIF

ITID -0.125 1

1.25

ACP -0.183 0.149 1

1.13

APP 0.087 -0.017 -0.052 1

1.30

C.R 0.081 0.118 0.160 0.044 1

3.62

SZ 0.307 -0.377 -0.281 0.043 -0.064 1

2.25

LEV -0.213 0.024 -0.049 0.114 -0.086 0.030 1 1.02

Table 3: Regression Analysis

Variable Coefficient t-Statistic Prob.

C -0.41329 -3.48098 0.00060

ITID 0.00020 2.71094 0.00700

ACP 0.00001 0.11904 0.90530

APP 0.00007 2.89393 0.00400

CR 0.00317 1.25636 0.20970

SZ 0.05311 4.01901 0.00010

LEV -0.00498 -2.52465 0.01200

R-squared 0.69901 Adjusted R-squared 0.61489 Hausman Specification test

Chi Sq. Statistics-d.f. 15.69-6 Prob. 0.015

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