asynchronous online undergraduate business degree programs in

 Sam Houston State University College of Business Administration Smith‐Hutson Business Building Huntsville, Texas, USA Fifth Annual General Business Conference Proceedings April 19‐20, 2013 Proceedings Editor: Steve Nenninger, Ph.D. ISSN 2153‐9367 Volume IV Member of The Texas State University System Table of Contents
Papers are listed in the order presented.
Message from the Proceedings Editor ........................................................................................ 5
Family Business Research: An Examination of the Last 14 Years of Published Research
Teresa V. Menzies, Brock University, Ontario, Canada
Farrah Amikons, Brock University, Ontario, Canada
Jennifer Lococo, Brock University, Ontario, Canada ..................................................... 6
Connecting with Students Through Facebook: The Impact of Creating a Social Media
Marketing Plan for Academic Libraries
Chelsea Lorenz, Wartburg College, Iowa ..................................................................... 20
A Factorial Analysis of Gender and Rank on Business School Faculty’s Salaries as a Gauge for
Dissatisfaction
Reginald L. Bell, Prairie View A&M University, Texas
Robert J. Meier, Fort Hays State University, Kansas
Wally Guyot, Fort Hays State University, Kansas ....................................................... 33
A Comprehensive Theoretical Framework for Understanding Moral Behavior in Organizations
Timothy Ewest, Wartburg College, Iowa ..................................................................... 47
Fiscal Deficit, Money Supply and Inflation in Nepal
Nar Bahadur Bista, University of Warsaw, Poland ...................................................... 48
The Future of De Novo Banks
James B. Bexley, Sam Houston State University, Texas .............................................. 60
Does Hedging Reduce Risk?
Garland Simmons, Stephen F. Austin State University, Texas .................................... 61
Asynchronous Online Undergraduate Business Degree Programs in Traditional Regional
Colleges: Costs and Benefits
M. Keith Wright, University of Houston – Downtown, Texas ..................................... 73
What’s Continuous Improvement? Strategies for Developing – First Do – Then Learn
Chynette Nealy, University of Houston – Downtown, Texas ...................................... 89
International Sanctions Placed on Iran
Daniel Rodriguez, Sam Houston State University, Texas
Charles Moore, Sam Houston State University, Texas................................................. 92
2
Illicit Funds Flows from Developing Countries
Mark Leipnik, Sam Houston State University, Texas
James Ritter, Sam Houston State University, Texas................................................... 102
Auditing for Usefulness: A New Concern?
Carl Brewer, Sam Houston State University, Texas
Alice Ketchand, Sam Houston State University, Texas
Jan Taylor Morris, Sam Houston State University, Texas.......................................... 139
CPA Examination Performance of Candidates from Community College Accounting Programs
Gordon Heslop, Texas A&M University – Commerce, Texas
Byungil Kim, Texas A&M University – Commerce, Texas ...................................... 140
Reverse Convertibles Prices: Evidence from Secondary Market Trading
Timothy B. Michael, University of Houston – Clear Lake, Texas
Stephen J. Cotton, University of Houston – Clear Lake, Texas
Ivelina Pavlova, University of Houston – Clear Lake, Texas
Jeffrey Whitworth, University of Houston – Clear Lake, Texas ................................ 148
Online Business Students: Multimedia Principles to Promote Meaningful e-Learning
Courtney Kernek, Texas A&M University – Commerce, Texas
Leslie Toombs, Texas A&M University – Commerce, Texas
Charlotte Larkin, Texas A&M University – Commerce, Texas ................................. 164
Is There an Ideal Group Size? : Preparing Undergraduates for Successful Entry into the ‘Real
World’ of Business
Carol Wright, Stephen F. Austin State University, Texas
C. Henry Dunn. Stephen F. Austin State University, Texas ....................................... 166
Undergraduate Students Writing About Finance: Preparation & Assessment
Timothy B. Michael, University of Houston – Clear Lake, Texas
Melissa A. Williams, University of Houston – Clear Lake, Texas............................. 173
New Methods to Teach Information System Development
Vance Etnyre, University of Houston – Clear Lake, Texas ........................................ 197
An Analysis of Business Characteristics through Geocaching
Kevin Thomas Groth, Wartburg College, Iowa .......................................................... 198
Personality and Perceptions of Effective Leadership - Differences between Men and Women
James E. Eastham, Our Lady of the Lake University, Texas
Rocio Harrelson, Our Lady of the Lake University, Texas
Ben Cavazos, Our Lady of the Lake University, Texas
Mark T. Green, Our Lady of the Lake University, Texas........................................... 212
3
Assessing Student Critical Thinking Skills for Online Quantitative Courses
Annette Hebble, Trident University International, California
Mina Richards, Trident University International, California...................................... 214
Emotional Intelligence Driven Qualitative Market Research
Manish Sharma, Delhi Technological University, India
Pritam B. Sharma, Delhi Technological University, India
Shikha N. Khera, Delhi Technological University, India .......................................... 225
Analyzing Supervisory Communication Strategies: An Application of Message Design Logics
Theory
Geraldine Hynes, Sam Houston State University, Texas
Kathryn S. ONeill, Sam Houston State University, Texas
Heather R. Wilson, Sam Houston State University, Texas ........................................ 226
The Relationship Between Adolescent Personality and Leadership
Lucinda Parmer, Universtiy of Houston - Downtown, Texas ................................... 230
How do Perceived Usefulness of E-textbook-and-homework Systems Correlate with Students’
Personality Traits of Introversion and Thinking?
Joseph S. Mollick, Texas A&M University - Corpus Christi, Texas
Robert Cutshall, Texas A&M University - Corpus Christi, Texas ............................. 243
Job Stress and Job Performance Among Employees in Private Banking Sector in Istanbul:
Examining the Moderating Role of Emotional Intelligence
Uğur Yozgat, Marmara University, Turkey
Elif Bilginoğlu, Marmara University, Turkey
Orkun Demirbağ, Marmara University, Turkey
R. Hande Serim Bahadınlı, Marmara University, Turkey .......................................... 257
Corpus Christi Estate Planning Council Faces Challenges
Karen A. Loveland, Texas A&M University – Corpus Christi, Texas
Eugene Bland, Texas A&M University – Corpus Christi, Texas ............................... 268
4
Message from the Proceedings Editor
Welcome to the fifth issue of the Proceedings of the Sam Houston State University
General Business Conference. This issue includes twenty-seven of the papers presented at this
year’s conference spanning a wide range of topics, including finance, leadership,
communication, marketing, accounting, international business, and online teaching methods,
just to name a few.
I would like to thank all the authors for the high quality papers. Obviously, without
you there would be no conference. I also appreciate the support for this conference from the
Conference Chair, Laura Sullivan and from the Program Chair, Bala Maniam. It is a privilege
for all of us at Sam Houston State to host outstanding researchers and teachers from around the
globe.
It has been my pleasure to serve as proceedings editor for the past four years. In this
role, I have had the opportunity to read each of the papers as they are received, and I enjoy
becoming more familiar with the research conducted in areas outside my specific discipline.
While we each are dedicated to our areas of expertise, it’s refreshing to be a part of an
interdisciplinary conference.
We hope you take advantage of the wide variety of topics discussed over our two days
of presentations and that you will discover new ideas which you can use in a variety of ways at
your home institutions.
Steve Nenninger, Ph.D.
Assistant Professor of Finance
Proceeding Editor
5
FAMILY BUSINESS RESEARCH: AN EXAMINATION
OF THE LAST 14 YEARS OF PUBLISHED RESEARCH
Teresa V. Menzies
Brock University
Farrah Amikons
Brock University
Jennifer Lococo
Brock University
ABSTRACT
This paper reviews, from a unique perspective, family business research published in
the Family Business Review journal (the major journal in the field) over the 14 year time
period 1998-2011. The study examines methodology (conceptual, empirical, sample size) and
data source, by country, and also the topics of the papers and theories utilized. Finding show
that empirical papers, mostly from the US dominate but studies from 30 other countries are
also found in the FBR. Succession is still the main topic studied and Agency Theory is the most
commonly used. However, an additional 48 topics and 20 theories were found to be used with
new theories and topics being introduced mostly over recent years. This paper provides a
useful tool to assist with future research by identifying popular, emerging and underresearched topics and theories. Our condensation and analysis of many years of research is a
valuable guide for researchers, a teaching tool for use with students studying family business,
and also an information source for consultants and advisors to family businesses.
INTRODUCTION
A majority of businesses can be classified as “family businesses”. For example, in the
US, research shows that family businesses contribute 64% of GDP and employ 62% of the
workforce (Astrachan & Shanker, 2003). A broad definition of family business requires “there
be some family participation in the business and that the family have control over the business’
strategic direction” (Astrachan & Shanker, 2003, pp. 211-212). The prevalence of family
businesses means that for regional and national economic growth, it is important to find ways
to enhance performance. Moreover, it is important for families in business, that they optimize
opportunities for business growth and longevity, as well as ensuring harmonious relationships
amongst family, both in and out of the business. The academic field of family business
considers all these issues, with the leading topic being succession (Chua, Chrisman & Sharma,
2003). However, estimates indicate that only two-thirds of family businesses survive to the
6
second generation, and far fewer advance to the third generation and beyond (Poza &
Daugherty, 2014).
The importance of assisting families in business to deal with the particular issues
relating to the overlap of family and business is commonly recognized as an important field of
study. However, the field is still in the early stages of development as shown by the large
number of reviews that have been published over the last almost two decades. For example,
Dyer and Sanchez (1998) looked at the evolution of the family business field from 1988 to
1997. Bird, Welsch, Astrachan, and Pistrui (2002) examined the foundations of the field in the
1980s and trends in the late 90s to 2001. Sharma (2004) conducted a comprehensive review of
family business research and derived a four part categorization (individual, group, organization
and society). Zahra and Sharma (2004) and Casillas and Acedo (2007) used past research to
predict future trends in family business research. Debicki, Matherne, Kellermanns, and
Chrisman (2009) examined 30 management journals to determine family business topics and
trends. Chrisman, Kellermanns, Chan and Liano (2010) reviewed by analyzing the top 25
family business published papers. Furthermore, during 2012 several reviews were published in
the Family Business Review Journal summarizing 25 years of research accomplishments since
the journal’s creation. This paper builds on the work of previous reviews of family business.
The objectives of this study are to (1) examine the methodology (conceptual, empirical,
sample size etc.) and source (by country) of a major portion of family business research
(almost 1.5 decades of FBR publications); and (2) to determine the topics, and theories used in
the papers. Our study is the most comprehensive review to date of family business
publications. The rationale is to provide a useful research tool to assist with future research by
identifying popular, emerging and under-researched topics and theories. Our condensation and
analysis of many years of research is a valuable guide for researchers, a teaching tool for use
with students studying family business, and also an information source for consultants and
advisors to family businesses. This paper represents a work-in-progress, from a unique
perspective, looking at family business research over a considerable time period (1998-2011),
via an analysis of published papers in the major journal in the field, the Family Business
Review.
BACKGROUND
The Family Business Review Journal (FBR), launched in 1988, is the main journal in
Family Business and thus reviews of the field often examine this journal. However, recently a
second journal has been launched in 2010, the Journal of Family Business Strategy, and since
then the Journal of Family Business Management. In addition, Family Business papers are
published in a wide range of other academic, peer reviewed journals. Chrisman et al. (2010)
examined the intellectual foundations of current research in family business by identifying, and
then reviewing, the 25 most influential articles, based on frequency of citation, over a six year
period. The journals they examined were Entrepreneurship Theory and Practice (ETP) (20032008), Family Business Review (FBR) (2005-2008), Journal of Business Venturing (JBV)
(2003-2008) and Journal of Small Business Management (JSBM) (2003-2008). The 25 papers
7
were found in a much broader range of journals. These included Academy of Management
Journal (2 papers), Journal of Finance (2 papers), Journal of Financial Economics (2 papers),
Journal of Law and Economics (1 paper), Journal of Management (1 paper), Organizational
Dynamics (1 paper), and Organization Science (1 paper), as well as Entrepreneurship Theory
and Practice (6 papers), Family Business Review (6 papers), and Journal of Business
Venturing (3 papers).
Debicki et al. (2009) reviewed journals and authors of family business papers and
derived a list of 30 journals which had published 291 articles on family business over the
period 2001 to 2007. They determined that 47% had been published in the Family Business
Review Journal with the runner up being ETP with 15%.
Growth in Popularity
The popularity and the quality of family business research is increasing, evidenced by
the increasing number of academic journals and the increasing citation impact factor. The topic
is of extreme relevance to assisting families in business. However, the teaching of family
business courses has tended to lag behind. However, textbooks have been published on the
specific topic which facilitates the teaching of the subject (e.g. Poza & Daugherty, 2014 [4th
Ed.]). This heralds that a field has become sufficiently popular at universities to attract standalone courses. For example, a 2009 Canadian country-wide survey of courses offered in
Faculties of Business found that Family Business was taught as a separate course in only 26%
of undergraduate programs (Menzies, 2009).
Dyer and Sánchez (1998), is often quoted as an early and influential review that
examined publications to date in the FBR. They looked at 186 papers in the FBR from 1988 to
1997, examining three areas: (1) paper topic(s) (2) authorship (e.g. academics, consultants),
and (3) implications for future research. Not unexpectedly they found that essays,
commentaries and practical applications accounted for about a third of papers. Family business
management predominated as the main topic of papers, authored mainly by academics. They
labeled the FBR research they reviewed as similar to a “murky swamp” (p. 295). (Karl Popper
[1968] describes science and associated theories as being built above a “swamp” [p.111]).
Dyer and Sánchez urged that “Now is the time to begin adding the bricks and the mortar … as
we construct our “field of family business building” (p. 295).
An FBR review that considered a longer time span (1988 to 2005) set out to identify
whether family business research was developing as a distinct field within the general
management literature (Casillas & Acedo, 2007). Dyer and Sánchez (1998) as well as Casillas
and Acedo (2007) use Kuhn’s (1970) term “paradigm” in the sense that family business needs
to develop a distinctiveness if it is to be recognized as a separate academic area of study.
Casillas and Acedo’s (2007) review concluded that the FBR papers were fragmented and
lacked consensus, but that family business research was developing at the frontier “by
enlarging the number of approaches used for understanding” (p.141).
Bird et al. (2002); looked at family business research in the 1980s to study emergence
of the discipline and the 1997 to 2001 papers to gauge maturity of the discipline over that
8
period. An interesting finding was that no publications with less than a sample size of 100
respondents (so we can assume many qualitative studies) appeared in either ETP or JBV,
whereas 90% of the <100 sample size appeared in the FBR and 10% in JSBM. For sample
sizes >100, 75% of the studies were published in FBR, 11% in JSBM, 9% in ETP and 4% in
JBV. They inferred from this that sample size matters when it comes to publication in quality
journals. Zahra and Sharma (2004) looked at six trends in Family Business Research and
provided suggestions to step outside these trends to further advance the field. Sharma, (2004)
conducted an in-depth analysis of journal articles published in the Family Business Review
using four levels: individual, interpersonal/group, organizational, and societal/environmental.
Regarding type of paper, Empirical or Conceptual, Chrisman et al. (2010) in their review of the
25 most cited family business academic articles in journals between 2003 and 2008 found that
11 (44%) were empirical, while 14 (56%) were conceptual (including literature reviews and
definition discussions). Thus the increasing popularity of the academic domain of family
business has been well documented.
Topics
With the aim of encouraging researchers to focus more on theoretical perspectives,Yu,
Lumpkin, Sorenson, and Brigham (2012), developed a taxonomy of dependent variables based
on those found in 257 empirical family business studies from 1998 - 2009. They developed a
listing of 34 topics (dependent variables) and then went on to carefully group them into
clusters, as follows: Governance (7 of 34 topics, 21%, ) Family business roles (6, 18%), Family
dynamics (5, 15%), Strategy (5, 15%), Succession (5, 15%), Social and economic impact (4,
12%), and Performance (2, 6%). These authors go on to subdivide these topics into short or
long term and then into business or family topics, and as one would expect there is overlap.
(The frequency refers to categorization by topic, not by frequency of the topic being published
in papers.)
Regarding family business research by topic, Litz, Pearson and Litchfield’s (2012)
survey of over 80 family business scholars opinions regarding the current situation in family
business research, showed that currently the main topics were succession and governance, and
as one person said “succession issues have been studied to death” (p. 11). Regarding future
directions it was urged that there be a less positivist bent and a call for understanding success
factors, also for a focus on family influence, greater cross-cultural studies, and so on.
Much of the Family Business domain revolves around issues of planning and executing
ownership succession/transition. This topic is of immense interest to most families in business
(Chua, Chrisman & Sharma, 2003; Danco, 1982; Davis, 1968; Davis & Harveston, 1998).
Succession issues, in many instances are complex and often remain unplanned, and when
attempted are often unsuccessful. Gersick, Lansberg, Desjardines & Dunn (1999) state that
“understanding the structure of transitions” (p. 287), is the most salient interjection for
academics and advisors to assist families with ownership succession issues. It seems that over
the last decade research has been following the advice of Gersick et al.
9
Theoretical Approaches
The utilization of theories is an obligatory base for any paradigm or emergent body of
knowledge. Thus the extent and range of theoretical perspectives is another way in which we
can study the development and distinctiveness of a field of inquiry. With regards to theories,
Systems Theory is perhaps the most commonly associated with family business theory
building. The three-circle diagram (Gersick, Davis, McCollom Hampton, & Landsberg, 1997),
is a useful way in which to visualize the linkages between Family, Management and
Ownership, and the overlap that exists often between some or all of these stakeholders.
Similarly, life-cycle, or systems theory has been adopted to investigate succession in family
business (Dunn, 1999; Gersick et al., 1997). Agency Theory is very commonly used in
discussing families in business. This theory has been used to explore many aspects relating to
the survival of family firms (Mustakallio, Autio & Zahra, 2002; Tsai, Hung, Kuo & Kuo, 2006;
Vilaseca, 2002; Zahra, 2005).
The Resource-Based view of the firm is used to examine the competitive advantages
inherent to family businesses (Cabrera-Suarez, Saá-Perez & Garcia-Almeida, 2001;
Habbershon & Williams, 1999). The Stewardship Perspective, whereby the business is seen as
an extension of self is an important way to view family businesses according to Poza and
Daugherty (2014). Agency Theory and Resource Based View of the firm (RBV) were the two
main theories found by Chrisman et al. (2010) when they reviewed the 25 most cited family
business academic articles in journals between 2003 and 2008. Of the empirical papers, eight
(73%), and four (29%) of the conceptual papers utilized Agency Theory, with an additional
conceptual paper using both Agency (so 36%) and RBV. None of the empirical papers within
the 25 sample, used RBV, but five (36%) of the conceptual were RBV and that becomes 43%
if we include the paper that used both Agency and RBV theoretical frameworks. Additional
theories/perspectives in the survey of 25 papers include the Theory of the Firm, Strategic
Management, Sociology, and Organizational Theory.
James, Jennings and Breitkreuz (2012) analyzed theoretical approaches in family
business publications between 1985 and 2010 and found that there is a “dominance” of
business related theories (Agency Theory and RBV), and that family science theories
(structural functionalism and symbolic interactionism) are being overlooked. Sharma,
Chrisman, and Gersick (2012) concur that the two main theories are Agency and RBC, but also
state that other theoretical perspectives are finding their way into family business papers, e.g.
“Contingency Theory, Transaction Cost Economics, Stewardship Theory, Prospect Theory,
Stakeholder Theory and Institutional Theory” (P. 11).
Litz et al., (2012) surveyed over 80 family business scholars regarding where the field
was currently and where it should be headed. Findings showed that currently the field has
developed to include more theory-based research, using Agency, Stewardship and RBV, but
that there needs to be new theoretical frameworks utilized in the future, for example, family
therapy and social psychology theories.
10
METHODOLOGY
Our study investigates a 14 year period of published papers in the FBR journal. We will
shortly complete our data analysis for the year 2012 and include this additional data in our final
paper, which will be a 15 year analysis.
This study began in 2008 with a literature review, conducted online through the ABI
online database which provided access to all copies of the FBR for the ten-year period 1998 to
the last issue of 2007. The co-authors of this study include a senior student researcher (Jennifer
Lococo) who worked on stage 1 of this project. A paper summarizing stage one was presented
by the first author at the Small Business Institute Conference in Florida in 2011. Subsequently,
to complete the analysis of the 2008 to 2011 FBR articles (stage 2), a senior student researcher
(Farrah Amikons) joined our team. For stage two of the study, the online database, SAGE
Journals was used to access articles from the FBR for the four-year period of 2008 to 2011.
(Both student researchers had completed and excelled in an undergraduate course in family
business taught by the first author.)
For both stage one and two of this study, the first step was to identify whether the paper
was empirical or conceptual, as illustrated in Figure 1. In the case of an empirical paper, the
country from where the data was collected and the sample size were recorded. The next step
was to identify the major topic(s) of the paper and ancillary topic(s), as well as the major
theory(s) and ancillary perspective(s)/topic(s). For the conceptual papers, the major topic(s),
major theory(s) and ancillary perspective(s)/topic(s) were also recorded. Once the data for the
four years was recorded, major topics and theories were analyzed to identify any synergies that
existed. (Ancillary topics, theories and synergies are not reported in this paper.)
Each article included in the FBR journal, over the period 1998 to 2011 was examined
for the following information: research method/type, sample size, research sample country,
time lag between research and publication date (subsequently not analyzed as the information
was missing in most studies), major and subsidiary topic(s), and theory(s). Each paper was
analyzed in detail, not just the abstracts of the study. Book reviews, commentaries and
interviews were not included. An empirical paper is defined as an article that has collected
primary or secondary data for the purpose of analyzing and reporting results. A conceptual
paper is defined as a paper that has the purpose of presenting an in-depth analysis of a topic or
theory, not to present a study.
Each article included in the FBR journal, over the period 1998 to 2011 was examined
for the following information: research method/type, sample size, research sample country,
time lag between research and publication date (subsequently not analyzed as the information
was missing in most studies), major and subsidiary topic(s), and theory(s). Each paper was
analyzed in detail, not just the abstracts of the study. Book reviews, commentaries and
interviews were not included. An empirical paper is defined as an article that has collected
primary or secondary data for the purpose of analyzing and reporting results. A conceptual
paper is defined as a paper that has the purpose of presenting an in-depth analysis of a topic or
theory, not to present a study
11
An excel spreadsheet was utilized for recording of data and analysis of results.
Categories were agreed upon by the first author and one of the student researchers. Inter-rater
reliability of analyzed papers was observed.
Figure 1: Methodology Used to Analyze Articles Published in the FBR
RESULTS
Articles in the FBR between the beginning of 1998 and end of 2011 were included in
our study. Over this time period, a total of 278 papers were published within the FBR, 208
(75%) were empirical papers and the remaining 70 (25%) papers were conceptual.
Country of Origin for Data
Table 1 demonstrates the range of countries where empirical data from the 208 studies
was derived. Information about family businesses in the United States is the most common
source of data for FBR articles. Unfortunately, 36 data sets did not label the source country.
There are 8 papers where the data sets were conducted over two countries and 4 papers
collected data on a global scale.
Sample Size
The range of the sample size, which varies greatly, can be seen in Table 2. The sample
size ranged from 1 to 10,000, due to qualitative as opposed to quantitative methodologies. The
majority, 78 (38%) of the 208, of the empirical articles used a sample size that ranged from
101-500, followed by a data set of less than 10, which 50 (24%) empirical papers used. The
majority of papers that used a sample size of less than 10 performed longitudinal case studies
of firms. A total of 37 (18%) papers used a sample size between 11 and 99. There were 25
(12%) papers that used a data set of 501-1000 and 16 (8%) that used a sample size more than
1000. Of the 208, only two empirical papers used secondary data to complete their paper,
which are not included in the table.
12
Table 1
EMPIRICAL STUDIES BY COUNTRY (IF REPORTED) AS PUBLISHED IN THE
FAMILY BUSINESS REVIEW JOURNAL BETWEEN 1998-2011
Sample derived from the following Countries
No. by country
United States
71
Spain
19
Canada
14
Australia, China,
10
Belgium
7
China, Finland, Sweden
6
United Kingdom
5
Germany, India, Italy,
4
Chile, Taiwan
3
Austria, Brazil, France, Lebanon, Netherlands, Norway, Philippines,
2
Africa, Argentina, Brussels, Denmark, Ireland, Lithuania, Portugal,
1
Scotland, Switzerland
Table 2
SAMPLE SIZE, IF REPORTED, OF EMPIRICAL STUDIES PUBLISHED IN FAMILY
BUSINESS REVIEW JOURNAL BETWEEN 1998-2007 (N=150)
<10
50 (24%)
11-99
37 (18%)
101-500
78 (38%)
501-1000
25 (12%)
>1000
16 (8%)
Major Topics
The incidence of topics contained within the published papers in FBR over the period
1998 to 2011, are shown in Table 3. The most popular topic is succession, which appeared in a
total of 63 articles. Of these, 47 (75%) were empirical and 16 (25%) conceptual. The next most
popular topic is Governance with 21 papers, Commitment with 16 papers, Finance with 14
papers, Culture, and Women with 13 papers each. These represent the studied at the top of the
frequency table. However, there are a further 43 topics that are the major topic area of research
contained within from nine studies to just one or two.
Table 3
FBR ARTICLES BY TOPIC 1998 – 2011, CONCEPTUAL OR EMPIRICAL
BY INCIDENCE
Topic/Theory
Total
Empirical
Conceptual
Succession
63
47
16
Governance
21
18
3
Commitment
16
14
2
Finance
14
9
5
13
Culture
13
9
4
Women
13
11
2
Ownership
9
8
1
Theory Building
8
3
5
Relationships
7
6
1
Consulting
6
1
5
Control
5
5
-
Family Business Field
5
2
3
Power
5
4
1
Firm Performance
4
3
1
Market Orientation
4
4
-
Accounting
3
3
-
Estate Planning
3
1
2
New Venture Creation
3
2
1
Auditing
2
1
1
Entrepreneurial Orientation
2
2
-
Family Branding
2
1
1
Internationalization
2
2
-
Mergers and Acquisitions
2
2
-
Values
2
1
1
Work-Family Balance
2
-
2
Board Of Directors
1
1
-
Business Strategy
1
1
-
Cycle of Trust
1
-
1
Downsizing
1
1
-
Earnings Management
1
1
-
Entrepreneurial Behavior
1
1
-
Ethical Intensity
1
1
-
Ethnicity
1
-
1
Evolutionary Psychology
1
-
1
F-PEC Scale
1
1
Family Orientation
1
-
1
Growth
1
1
-
Incidence
1
1
Journal Review
1
-
1
Leadership
1
1
-
Life Insurance
1
-
1
14
Non-Family Managers
1
-
1
Possession Attachment
1
-
1
Professionalism
1
1
-
Public Policy
1
-
1
Role Salience
1
1
-
Identification & Salience
1
-
1
Trust
1
-
1
Valuation
1
-
1
Major Theories
The incidence of theories contained within the published papers in FBR over the period
1998 to 2011, is shown in Table 4. The most commonly discussed theories are Agency Theory
which was the major theory or topic in a total of 39 articles. Of these, 31 (79%) were empirical
and 8 (11%) conceptual. Family Capital Theory which includes human, social and financial
capital, was the principal or sole theory in 17 studies, and almost equally split between
empirical and conceptual studies. RBV was contained in 13 studies, 70% empirical and only
30% conceptual whereas systems theory was found in 10 studies, half empirical and half
conceptual. Stewardship Theory, was present in 8 studies, 88% empirical and only one study
conceptual. These five main theoretical areas were found in 87 studies published in the FBR
between 1998 and 2011. The remaining 16 theories were found in 19 studies.
Table 4
FBR ARTICLES BY THEORY1998 – 2011,
CONCEPTUAL OR EMPIRICAL BY INCIDENCE
Topic/Theory
Total
Empirical
Conceptual
Agency Theory
39
31
8
Family Capital Theory
17
9
8
Resource-Based Theory
13
9
4
Systems Theory
10
5
5
Stewardship Theory
8
7
1
Grounded Theory
3
3
-
Social Identity Theory
2
2
-
Behavioral Theory
1
1
-
Bibliometric Theory
1
1
-
Corporate Identity Theory
1
1
-
Cultural Theory
1
1
-
Evolutionary Theory
1
-
1
Holistic Systems Theory
1
1
-
Institutionalization Theory
1
1
-
15
Organizational Life Cycle Theory
1
1
-
Personality Theory
1
1
-
Self-Efficacy Theory
1
1
-
Stage Model Theory
1
1
-
Stakeholder Theory
1
-
1
Transactional Cost Theory
1
-
1
Transformational Leadership
Theory
1
1
-
CONCLUSION
This comprehensive review of studies in the FBR, over a 14 year period, shows that the
field is advancing in scope and rigor. Findings show that empirical articles dominate and use a
variety of research methods. The majority of articles are written by academics in the United
States and concern US firms. However, a good indication of growth in Family Business
research is the increasing number of countries where data is taken from. It is important to
continue to study new regions for a better understanding of the field.
Agency theory continues to dominate as the most popular theory. Family capital theory
is the second most discussed theory followed closely by RBV, Systems, and Stewardship
Theory. There are, however, a broad range of theories that are finding their way into the FBR
papers. Through the analysis of theories, shown in Table 4, there are 14 theories that appear
once in the journal. These theories tend to be from more recent papers. This trend shows that
authors are starting to find new theories to bring into the field that have not previously been
discussed, therefore, further advancing the field.
In terms of topics the succession process is the most popular but interest has been
broadened to include many more business and family related issues. In terms of the
advancement of the field, the incidence of Succession in articles is not a good sign. In order for
the field to progress, other topics need to be focused on and developed. Through the analysis of
topics, shown in Table 3, there are 24 topics that appear once in the journal. These topics are
from more recent papers, which could be seen as a good sign. This trend, just as with new
theories, shows that authors are starting to find new topics to bring into the field that have not
previously been discussed, therefore, also advancing the field.
There is an increasing emphasis on theory building in all areas of family business. This
growing emphasis on theory building is a significant achievement in the field of family
business, which began with case study approaches.
If we consider conceptual papers, they are very commonly about succession topics,
while the theories in conceptual papers tend to talk about Agency, Family Capital, Systems and
RBV. If we examine the balance between scholars conceptualizing about a topic(s) or theory(s)
or topics and theories, we can see some interesting trends. Further analysis will be required to
determine whether the conceptualizations precede, or follow the papers, that investigate the
topic or utilize the theory. However, it appears that conceptualization papers are clustered in
16
large numbers alongside the empirical papers by topic and theory. Scholars need to encourage
greater diversity in topic by developing conceptualizations that can then lead to good empirical
studies in new topic areas, utilizing new theoretical frameworks.
In conclusion, one of the most important trends observed is that the topics and theories
are being brought from other fields into Family Business. Another important trend is the focus
on family aspects of business rather than business interactions. Our findings are a useful tool
for determining future research questions, theoretical frameworks and associated methodology.
Also, we provide useful information for researchers, students and family business advisors.
Overall, this research has importance for summarizing past research and indicating future
directions.
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19
CONNECTING WITH STUDENTS THROUGH
FACEBOOK: THE IMPACT OF CREATING A SOCIAL
MEDIA MARKETING PLAN FOR ACADEMIC
LIBRARIES
Chelsea Lorenz
Wartburg College
ABSTRACT
The expansion of technology in academic libraries and the decrease in physical items
needed or available reveals the movement toward service-based organizations, where
marketing and reaching out to users through social media may be useful in order to stay
relevant for college students. This analysis examines the impact of integrating a marketing
plan focused on social media in academic libraries, and explores the idea of marketing and
outreach becoming more of a necessity as academic libraries transition to service-based
organizations. Examining the current library trends indicates an opportunity for academic
libraries to better cater to the needs and wants of users through developing marketing plans.
Although marketing plans are generally associated with for-profit businesses, the basic
components can be applied to non-profit organizations, and specifically academic libraries.
Social media, and especially Facebook, may act as a promotional and communication tool to
connect with students. After reviewing the benefits of using Facebook in an academic library
setting including communication, cost effectiveness, and brand awareness, as well as the
negative aspects including negative attitudes, time, and communication challenges, it is evident
that integrating Facebook into a marketing plan within an academic library is an achievable
goal. Success is dependent on several key factors including training staff to effectively use
Facebook, making sure enough time is given to develop the page, and continually finding ways
to best connect with students in a reliable, convenient way. Flexibility and adaptation are also
necessary in staying current with college students, as social media is constantly changing and
improving.
INTRODUCTION AND BACKGROUND
As technology changes and develops, academic libraries face decisions regarding
marketing and outreach to students (ACRL, 2012). Today’s library is about more than just
physical books and items available. Many items such as journal articles, newspapers, and
statistics are now available online through databases and may be accessed with minimal effort.
Search engines such as Google provide access to almost unlimited amounts of information.
Libraries, and the information available to its users, have changed significantly over history
(ACRL, 2012).
The expansion of technology in academic libraries and the decrease in physical items
needed or available reveals the movement toward service-based organizations, where
marketing and reaching out to users through social media may be useful in order to stay
20
relevant for college students. For the purposes of this analysis, it is important to review the
definition of service organizations. The service sector within a business context includes
individuals and businesses that produce services instead of physical goods (Scott, 2009).
Within the United States, the service sector includes education, finance, communications,
health care, and many other fields (Scott, 2009). Because libraries are beginning to offer more
services rather than physical items for students, academic libraries fall under the definition of
the service sector. This change poses several questions including: How would the integration
of a marketing plan focused on social media impact academic libraries? Is marketing and
outreach becoming more of a necessity as academic libraries transition to service-based
organizations?
In order to answer these questions, this analysis will look at current academic library
trends, define a marketing plan, and discuss connections of a marketing plan with the trends in
academic libraries. Next, the use of social media, with a focus on Facebook, will be discussed
for college-age students, as well as how Facebook can specifically be applied to marketing
plans. Positive and negative effects of Facebook usage on academic libraries and specific
examples will be provided. Finally, implications and conclusions will be drawn based on the
research provided.
CURRENT ACADEMIC LIBRARY TRENDS
Examining the current library trends will reveal the direction that the library is headed
in the future. Some of the major relevant trends include the expansion of information
technology, user behaviors and expectations, changes or cuts in library budgets, and the
movement toward libraries becoming mostly service-oriented organizations (ACRL, 2012).
The first trend deals with an expansion of information technology. Students constantly
desire to have access to information through social media and technology at any time or place
(ACRL, 2012, p. 313). In a 2011 study of undergraduates, results found that 55% of
undergraduates own smart phones, 62% own iPods, 21% have a tablet. Over two thirds of these
undergraduates use these items for academic reasons. In addition, 59% use these items to get
information online, and 24% access library resources (ACRL, 2012, p. 314). The majority of
students have technology that enables them to access library materials online, with about one
fourth of these undergraduates using these devices to access materials available from library
websites (ACRL, 2012, p. 314). Another technological trend that is affecting libraries is the
increased usage of smart phones. 52% of smart phone owners are 18-29, and 28% of users
utilize their smart phones for most of their online activity (Smith, 2011, p. 6, 14). As students
are moving further toward accessing materials online, libraries are developing new ways to
cater to students’ needs in the future.
Another trend faced by academic libraries focuses on user behaviors and expectations.
Convenience plays a major role in the study usage of library materials and in looking for
information. The current challenge for libraries is to provide immediate information and
sources for research in order to compete with more convenient search engines such as Google
(ACRL, 2012). Students need librarians to be more available through social media, chat and
text services, as these are mediums that students use most often. Because students use more
technological devices, libraries are finding it necessary to provide better access to their
collections and services to students (Breeding, 2012). Mathews explains, “The process begins
21
when we stop pretending that we know what students want and instead genuinely attempt to
understand their needs and preferences – and speak to them in their language” (2009, p. 2).
An additional trend that is affecting academic libraries is the significant changes or cuts
in library budgets. Just as the United States’ economy has been suffering, the overall library
economy also is affected by major budget cuts that may never be completely restored
(Breeding, 2012) Academic libraries continue to reduce hours, decrease purchases of books,
journals and other materials, and also may be forced to lay off staff members (Mantel, 2011).
A combination of the economic recession of 2008 and less funding from the federal level led to
cuts in budgets (Bosch, 2011). During that time period and up until now, serial prices continue
to increase at an alarming rate. Serial prices increased by six percent in 2012, compared to the
2.9 percent increase in the Consumer Price Index (Bosch, 2012). This shows that serials
inflation goes far above general price inflation. In a survey conducted in February 2012, 69
percent of libraries reported that their budgets for the year remained the same or decreased
(Bosch, 2012). Because of increased prices, many librarians have to cut programs or eliminate
the availability of serials to online or print only (Bosch, 2011).
A final important trend in the world of academic libraries is the movement toward
becoming mostly service-oriented organizations. Within the past several years, many articles
and books focus on the topic of marketing within an academic library. The movement from
physical books and materials to eBooks and journal articles found through online databases
demonstrates a change in the focus of the academic library, especially as students’ needs
change as well. As of 2010, 21% of college students demand an increase in customer service,
while 29% of students request that services be added or updated (OCLC). More often, students
need guidance to find credible information. 43% of students recognize that information from
libraries is more credible than from search engines, however, 83% of students begin their
information search on search engines (OCLC, 2010). Search engines such as Google Scholar
also often limit what access is available to informational articles. For example, an article found
on Google Scholar may cost $20 to access, while it may be accessed through a library database
for free. As books are becoming less prominent in libraries, the service of helping students find
credible and trustworthy sources of information becomes more important.
These current library trends indicate a movement of academic libraries toward servicebased organizations where reaching out to users through the use of technology is becoming
more important. Creating a marketing plan provides an opportunity for academic libraries to
better cater to the needs and wants of users.
DEVELOPING A MARKETING PLAN
A marketing plan should fit in with the strategic plan of the organization as a whole.
Once an organization has established a strategic plan and analyzed the environment, then a
marketing plan may begin to take form. A marketing plan consists of situation analysis, market
segmentation, selecting a market strategy or strategies, and finally analyzing the market mix of
the decision (Bangs, 1998).
In the case of an academic library, a marketing orientation is best defined as “the
adoption by an organization of a customer focus” (Robinson, 2011, p. 6). Creating a customer
focus and truly becoming market oriented requires the establishment of a marketing plan. A
marketing plan not only creates a customer focus, but also becomes integrated into the overall
strategic planning process (Robinson, 2011). Rowe explains that marketing “entails a process
22
of creating an effective exchange relationship between the products and services of a library
and its current and potential users” (2009, p. 37).
The first step is to examine the environment through situational analysis. It is important
to realize that the environment affects the success of marketing programs within an
organization (Rowe, 2009). Situation analysis evaluates the organization, customers,
competitors, and the external and internal environment (Bangs, 1998). This begins by looking
at the specific goal and analyzing the individual products and services offered (Bangs, 1998).
Next, the customers are evaluated to discover how they perceive the organizations’ value of
products and services. This is important because an organization must know how products or
services are perceived in order to make the good marketing decisions (Bangs, 1998).
Competitors are also evaluated in order to learn about their strengths and weaknesses, as well
as find a way to hold the competitive advantage (Bangs, 1998). The assessment of the external
environment looks at political, economic, social, and technological aspects and the positive or
negative impacts on the organization. An assessment of the internal environment within the
organization provides a clear picture of the organization’s current position and ways in which it
can improve. The SWOT analysis technique assesses the internal strengths and weaknesses, as
well as the existing external opportunities and the threats faced (Rowe, 2009). The
environmental analysis provides an overview of what is happening within and outside of the
organization, which in turn aids in defining specific marketing strategies.
Once the external and internal environments of the organization are assessed, market
segmentation may take place. This can be the most controversial and difficult part of the plan,
because it requires identifying specific customers that will most likely respond to the
organization’s products or services (Rowe, 2009). The market may be split based on
geographics, psychographics (a customer’s inner-feelings and tendency to behave in certain
ways), or demographics such as age, gender, income-level, occupation, and so on (McDonald,
2009). In the case of academic libraries, sample segments may consist of first generation
college students compared to other students, faculty compared to students, or segments
comparing students based on years in college (Rowe, 2009).
The next step is to develop a marketing strategy based on looking at the situational
analysis and market segmentation. Once a strategy is chosen, the marketing mix is analyzed,
which includes product/service, price, place, and promotion (Bangs, 1998). Products and
services are analyzed for their benefits to customers as well as perceived value. Pricing
strategy is evaluated, especially focusing on market penetration and the market’s sensitivity to
price changes. Place is analyzed based on location, physical or virtual, of the organization.
Finally, promotion is examined for advertising, public relations, promotional programs, and the
budget for marketing related expenses (Bangs, 1998).
Although marketing plans are generally associated with for-profit businesses,
these basic components can be applied to non-profit organizations, and specifically academic
libraries (Rowe, 2009).
CONNECTIONS OF MARKETING PLAN WITH ACADEMIC LIBRARIES
Marketing within the setting of an academic library is not a new concept. However, the
idea has faced criticism mostly from librarians. In order to show the current use of marketing
in academic libraries, this section will discuss the past and present uses of marketing compared
23
to the business marketing plan, the obstacles and challenges faced by developing a marketing
plan, and current marketing plans present in academic libraries.
There has been an increased interest in marketing within academic libraries, especially
after the International Federation of Library Associations and Institutions developed a new
section on Management and Marketing in 1997 (Parker, 2007). Many academic libraries have
started to use marketing techniques, but can their objectives and goals be considered part of a
marketing plan? According to Parker, very few libraries have reached a marketing orientation,
as marketing is viewed as a set of tactical activities instead of part of the overall strategic
perspective. Also, marketing is seen as having an external and competitive focus, which
according to some librarians is not appropriate in an academic library environment (Parker,
2007).
Marketing techniques and strategic plans are often interconnected, and marketing
strategies are developed, but without necessarily following the structure of a marketing plan.
For example, the George T. Harrell Health Sciences Library outlined a new mission and core
values. The library also completed a SWOT analysis and developed a five-year strategic plan.
However, the library did not follow a marketing plan, but instead merely developed a few
marketing strategies (Robinson, 2011). Rowe and Britz provide a more detailed framework for
developing a marketing plan directly related to academic libraries. The components of a
marketing plan according to Rowe and Britz include a statement of mission, situational
analysis, market analysis and segmentation, developing a marketing strategy, and analyzing the
marketing mix (2009). The marketing mix is defined using the 4C’s instead of the 4P’s:
customer value, convenience for the user, cost to the user, and communication (2009). The
4C’s appear to cater more toward service-based organizations, rather than businesses that
primarily market products. However, there are many similarities between the two concepts. For
example, customer value corresponds to product and cost to the user corresponds directly with
price. Convenience and communication cater more specifically to services rather than
products, but correlate directly to place and promotion. The 4C’s provide a model of the
marketing mix that directly relates to marketing plans for libraries, but it appears to be one of
the few articles available on the subject.
When developing a marketing plan, academic libraries face challenges and obstacles,
especially as this is a fairly new idea to be applied in a library setting. One major obstacle is
pushing past librarians’ attitudes toward introducing marketing into an academic library
setting. Many librarians do not fully support the idea of marketing and also do not have an
understanding of what marketing involves (Parker, 2007). In a study of librarians from
different settings, the college and university libraries had the lowest positive marketing
attitudes compared to public, school, and special libraries (Parker, 2007). Another barrier is
librarians viewing staff expertise to be more important than students’ perceived needs. In this
case, librarians develop more of a selling orientation rather than a marketing orientation
(Parker, 2007). Lastly, most librarians do not have a business background, so have a limited
involvement with and understanding of marketing (Parker, 2007). Because of these obstacles,
libraries have not fully embraced using a marketing plan as a tool to better serve students’
needs.
Within a marketing plan for academic libraries, one promotional or communication tool
that may be used is Facebook and social media. Before applying Facebook to the use of a
marketing plan within an academic library, it is important to examine the current trends in
social media usage, especially for college-age students.
24
THE USE OF SOCIAL MEDIA AND FACEBOOK BY COLLEGE-AGE STUDENTS
The use of social media by college students has significantly increased over the past
several years (Rosa, 2010). In recent years, social media has begun to be interconnected with
social networking because of the blend between sites such as Facebook and Twitter with media
such as YouTube. Social networking sites including MySpace, Facebook, and Twitter provide
students with the ability to communicate with others through the medium of the Internet.
Social networking may best be defined as, “web-based services that allow individuals to
construct a public or semipublic profile within a bounded system, articulate a list of other users
with whom they share a connection, and view and traverse their list of connections and those
made by others within the system” (BRASS, 2011). In essence, students connect with other
users, which usually consist of family, friends, or acquaintances, and may even include
businesses or groups. Over the past several years, there has been a significant increase in the
usage of social media, especially for college-aged individuals. It is essential to explore the
trends in social media, as well as introduce Facebook as a medium for use in a marketing plan.
One of the major trends includes using social media for academic purposes. In a study
completed by California State University San Marcos (CSUSM), results found that 90% of
students that had both a MySpace and Facebook page used it to communicate with other
individuals about classes, school, or professors (Chu, 2008). This recent trend indicates that
college students do not merely use social networking for personal reasons, but also for
coursework.
Another trend includes that social media is used by businesses as a way to reach out to
the community. Khan (2012) states that social media allows businesses and organizations to
inform individuals in the community with information they need through a very convenient
and accessible medium. Individuals that may not actively seek out information are instead
provided with an easier way to find answers. Mansfield (2012) adds that if an organization
does not have a presence on a social networking site such as Facebook, then it is virtually
nonexistent with the hundreds of millions of people that utilize the site worldwide.
A final important trend to note is the movement toward using social media from mobile
devices. With the huge increase in the ownership of smartphones, more often individuals are
utilizing mobile social networking tools, location-based communities, or photo-sharing
applications (Mansfield, 2012). Because of this, organizations are beginning to modify
outreach to include marketing to individuals through mobile applications. For example, more
people on Facebook use the site from mobile devices than desktops. Facebook also has a
location-based service that was launched in 2012 where users can check in their smartphones
to indicate where they are located (Mansfield, 2012). Morgan Stanley analysts predict that
mobile internet users will outnumber internet desktop users by 2015, numbering up to 1.6
billion users (Meeker, 2010).
One of the most popular social networking sites is Facebook. Following are some of the
reasons why Facebook is appropriate for use in a marketing plan within an academic library
setting. These reasons include Facebook’s outreach to users around the world, the trends in
demographics, and the way that individuals utilize Facebook.
Since launched in 2006, Facebook now reaches over one billion monthly active users
(One Billion, 2012). The site has also expanded to mobile users. As of September 2012, 600
million Facebook users accessed the site through mobile devices (One Billion). As a result,
Facebook now reaches more individuals than any other social networking site. The Pew
25
Research Center found that 92% of social networking site users are on Facebook, which is an
overwhelming majority (Rainie, 2011). Of these users, about 52% utilize the site every day.
Over time, the median age of Facebook users has decreased from 26 in August of 2008 to 22 in
September of 2012 (One Billion), which indicates that the majority of users fall into the
category of college-age individuals. More specifically, according to a current Gallup poll, 73%
of adults ages 18-29 have a Facebook page (Morales, 2011). It is evident from these statistics
that many college students use Facebook to stay connected to others, often using the site daily.
Now that it is evident that college-age individuals utilize Facebook often, the question
remains about how Facebook is utilized. In a normal day, 15% of Facebook users update their
status, 22% comment on another’s status, 20% comment of photos uploaded by users, 26%
“like” others’ content, and 10% send private messages (Rainie, 2011). This indicates that
students utilize Facebook for a variety of reasons, which shows that there are many ways that
libraries can connect with students and market services.
THE APPLICATION OF FACEBOOK TO MARKETING PLANS IN AN ACADEMIC
LIBRARY SETTING
Now that the current trends in social media and specifically Facebook have been
discussed, it is important to investigate how Facebook can be applied to a marketing plan,
especially within an academic library setting. This section will discuss how Facebook can be
applied to the marketing plan described previously, within the categories of situation analysis,
market segmentation, selecting a market strategy, and finally analyzing the market mix of the
decision.
The first aspect of a marketing plan is completing situational analysis through the use
of SWOT and PEST analysis to examine the external and internal environment. An academic
library may look specifically at the internal strengths and weaknesses of using social
networking, as well as opportunities and threats provided by this specific technology. For
example, the previous examination of trends in social media revealed a movement toward
individuals utilizing Facebook in an academic setting. Also, because of Facebook’s widespread
popularity, this may indicate a great opportunity for academic libraries. However, there may
also be threats such as the time and knowledge needed to keep up with current technology
trends, as well as other networking sites such as Twitter that provide competition to Facebook.
It is also important to investigate the role of the library as a whole as related to the
environment. According to Woodward (2009), this includes how the library fits into the
academic community, the attitudes of the college administration toward the library, and the
needs of users. PEST analysis examines political, economic, social, and technological aspects,
which are important to think about in relation to the use of social media within a library.
Environmental conditions are important to analyze in order to give a clear picture of the library
and its surroundings, as well as provide a picture of the future, and what challenges the library
may face (Woodward, 2009). Libraries may also examine the social media accounts of other
similar libraries in order to see what types of posts are successful, how often people post on
their wall, and how many fans or followers the library has (Petit, 2011).
Facebook may also be incorporated into market segmentation. Besides examining
geographics, psychographics, and demographics, a library specifically may examine the usage
of Facebook or social media and openness to connecting with the library for academic
purposes, as well as information literacy skills (Rowe, 2009). An academic library may
26
subdivide the market into categories based on the diverse needs of beginning undergraduate
students, graduate students working on dissertations, faculty members, and community
members (Woodward, 2009). Determining what users need will help to provide the most useful
content. For example, Mathews (2009) recommends to not just create a storefront to sell library
products, but instead to integrate helpful library staff into the social network in order to
respond and promote library services as students need them. Defining a specific market
segment helps to focus the content and specific goals and objectives of the Facebook page.
According to current social media trends discussed previously, the market segment that may be
most successful for Facebook is focusing on undergraduate students, especially within their
first year.
Once a specific market segment is chosen, then the academic library may define a
market strategy. Within the overall market strategy, Facebook may be used as a promotional
and communicational tool with students by promoting library services, reaching a certain level
of “likes”, increased usage of library products such as databases, and many others. Other
specific objectives could include encouraging and facilitating the participation of users in the
services offered by the library, improving user experience, increasing the visibility and positive
image of the library (Mathews, 2009). Also involved in developing Facebook as a promotional
tool within a marketing plan is deciding who will be responsible for the social media outreach
as a whole or how tasks will be divided, what tools will best be utilized to fulfill objectives,
and managing the online communication with users (Romero, 2011). However, within an
academic library setting, marketing components should be flexible, especially with the rapid
development of technology (Romero, 2011).
Finally, the marketing mix is analyzed once Facebook or social media presence is
established and tactics are evaluated for their effectiveness. The marketing mix is defined by
businesses as the 4Ps, which consist of product, price, place and promotion. However, in
nonprofit organizations and specifically libraries, another definition of the marketing mix
consists of the 4Cs, which include customer value, convenience for the user, cost to the user,
and communication. Within a marketing plan focused on utilizing Facebook, customer value
may be evaluated through surveys and specifically examining what type of social media users
currently use as well as what the users are currently saying about the library and social media
(Petit, 2011). Convenience for the user may be examined by looking at students’ views on
social media within a library setting and how the social media will make student requests and
questions easier and more convenient to answer (Petit, 2011). Facebook has no cost to the user,
which makes it a good option in this category. Finally, if Facebook is utilized effectively then
communication will be improved between students and librarians (Petit, 2011).
A marketing plan provides a framework for the adoption of Facebook into the academic
library. Going through the process to create a marketing plan helps to provide a written plan to
follow in order to fulfill objectives and tasks in an organized way, as well as provide a
continual reminder of the market strategy (Romero, 2011). However, flexibility is crucial as
technology constantly changes and academic libraries may find more effective ways to reach
out to students.
POSITIVE EFFECTS OF FACEBOOK USE ON ACADEMIC LIBRARIES
After reviewing the use of Facebook specifically in marketing plans for academic
libraries, it is evident that using social media provides both positive and negative impacts on
27
the academic library as a whole. Facebook usage positively affects libraries through increasing
communication with students, providing a cost effective way of marketing available services,
and increasing brand awareness.
Communication
One benefit of using Facebook within a marketing plan for an academic library is
increasing communication between librarians and students. Chu (2008) explains that social
networking sites allow students a more convenient and less risky way to ask librarians for help.
Librarians also become more visible, approachable, and relatable to students (Mathews, 2009).
Facebook can act as an extension of the library webpage rather than a substitute, which allows
students to access the same information, but from a site that they are more comfortable with
(Mathews, 2009). Adding a Facebook page may also strengthen ties between librarians and
students, as well as establish new connections (Chu, 2008). Marketing goes far beyond
advertising, as students often look for authenticity and content right at the time they need it,
which is another positive impact of utilizing Facebook within academic libraries (BRASS,
2011).
Cost Effectiveness
An additional benefit of Facebook is that it is a cost effective marketing tool. Any
library can easily create a Facebook account at no cost besides staff time to maintain the site,
and the technology is easy to use (Petit, 2011). Facebook advertisements may also be used as
another marketing tool at a low-cost and effective approach at targeting specific market
segments (Chu, 2008).
Brand Awareness
Another positive impact of utilizing Facebook is increasing brand awareness and
establishing an online presence that relates to college students. Social networking sites such as
Facebook may be used as a way to promote library services and events, as well as establishing
a known image or brand for the library (Chu, 2008). Additionally, Facebook can easily be
integrated with other marketing tools such as e-mail, newsletters, and websites (BRASS,
2011). Libraries can also utilize Facebook to promote certain available services. For example,
The University of Michigan Libraries at Ann Arbor developed a catalog application along with
a JSTOR database search tool (Mathews, 2009). Other apps that may be used for Facebook
include note-sharing software, group project planning tools, and citation tools (Mathews,
2009). Although academic libraries have a captive audience, it is important to retain interest
and further connect to students.
One example of social media success within libraries is the New York Public Library
menu project. In April 2011, the library began recruiting volunteers to help upload 10,000
menus digitally from its historical restaurant menus collections to make the menus searchable
through the catalog. The project was promoted only through social media sites such as
Facebook and Twitter. After 3 months, volunteers were able to transcribe over 450,000 dishes
from 8,500 menus (Petit, 2011). This is one of the best examples of how a library can utilize
social media to promote library services or projects.
28
NEGATIVE EFFECTS OF FACEBOOK USE ON ACADEMIC LIBRARIES
Although there are many positive impacts of establishing a social media presence
through Facebook in an academic library setting, librarians face several challenges and
negative effects. The most significant challenges include overcoming the negative attitudes of
librarians, the time needed to implement and continually update social media, and being able to
successfully connect with students.
Negative Attitudes
One of the major challenges currently faced by libraries is overcoming the often
negative attitudes that library staff have toward marketing and social media within the context
of the library. Marketing is not a new concept within an academic library setting, but very few
libraries have fully achieved a marketing orientation that involves creating a detailed marketing
plan (Parker, 2007). One quote that best summarizes the negative attitudes explains:
All too often the concept of marketing leaves a bad taste in the mouths of librarians.
We associate it too much with for-profit institutions, the process of making money for
money’s sake, and the efforts to convince people to use unneeded services or products.
(p. 322)
Often librarians view a marketing orientation as implying an external and competitive focus
(Parker, 2007). Because of this, library marketing has often been limited to short-term
marketing activities. As a result, libraries have not been able to move past the outdated brand
image of libraries being seen as merely storehouses of books (Parker, 2007).
Time
Another significant challenge faced by libraries when creating a Facebook profile is to
have enough time to continually update and utilize the technology with a successful outcome.
One indirect cost faced by utilizing Facebook includes staff time to maintain the site (Petit,
2011). The time spent on social media may take away from other important activities. Library
staff members are often overbooked with daily schedules that do not allow flexibility to make
time to update social media (Parker, 2007). Social networking also often takes time to catch the
attention of students, which may discourage those who are developing the Facebook page
(Petit, 2011).
Communication with Students
The final challenge to libraries is successfully communicating with students through
Facebook. Even when a library’s Facebook page has many fans, there is not a guarantee that
users will utilize the site to make requests or ask reference questions (Petit, 2011). Also,
libraries may develop great marketing plans for Facebook, but they must follow through and
provide interaction and feedback continually in order to continue to receive benefits (BRASS,
2011). In the past, most library decisions about programs, services and collections available
have been made based on staff expertise rather than users’ needs.
29
IMPLICATIONS AND CONCLUSIONS
This analysis examined several questions including: How would the integration of a
marketing plan focused on social media impact academic libraries? Is marketing and outreach
becoming more of a necessity as academic libraries transition to service-based organizations?
In order to answer these questions numerous issues were examined including current library
trends, the development of a marketing plan and its use within an academic library setting,
social media trends, and finally the positive and negative impacts of integrating Facebook and
social media into a marketing plan for an academic library.
The top four current trends within academic libraries include the expansion of
information technology, user behaviors and expectations, changes or cuts in library budgets,
and the movement toward libraries becoming mostly service-oriented organizations. These
current library trends indicate a movement of academic libraries toward service-based
organizations where reaching out to users through the use of technology is becoming more
important. Creating a marketing plan provides an opportunity for academic libraries to better
cater to the needs and wants of users.
A marketing plan consists of situation analysis, market segmentation, selecting a
market strategy, and finally analyzing the market mix of the decision. Although marketing
plans are generally associated with for-profit businesses, these basic components can be
applied to non-profit organizations, and specifically academic libraries. Currently within the
academic library, marketing techniques and strategic plans are often interconnected, and
marketing strategies are developed, but without necessarily following the structure of a
marketing plan. Marketing is not a new topic within libraries, but most libraries do not fully
develop a marketing plan to guide their actions. Marketing plans within an academic library
setting also face criticism as many librarians have negative attitudes toward the subject.
Another current trend within the academic library is the use of social media. Facebook
specifically is now being used by libraries as a marketing tool, but is rarely integrated into a
marketing plan. Social media trends include using social media for academic purposes, using
social media to reach out to the community, and the movement toward using social media from
mobile devices. Because the majority of college students utilize Facebook on a daily basis, this
specific form of social networking may be applied to a marketing plan. Before utilizing
Facebook as a marketing tool, it is important to follow the steps of a marketing plan in order to
analyze the internal and external environment in regards to social media as well as choose a
specific strategy with certain objectives and goals. From the research provided, it is evident
that applying Facebook to a marketing plan can be done.
Utilizing Facebook as a marketing tool within an academic library provides both
positive and negative consequences. Facebook usage positively affects libraries through
increasing communication with students, providing a cost effective way of marketing available
services, and increasing brand awareness. Some of the challenges or barriers that affect
academic libraries include overcoming the negative attitudes of librarians, the time needed to
implement and continually update social media, and being able to successfully connect with
students.
After examining the evidence, one can conclude that integrating Facebook into a
marketing plan within an academic library is an achievable goal, however many obstacles may
get in the way throughout the process. Success is dependent on several key factors including
training staff to effectively use Facebook, making sure enough time is given to develop the
30
page, and continually finding ways to best connect with students in a relatable, convenient
way. As seen by previous examples, when a library fails to address these challenges, Facebook
is not as successful.
One final question remains: How can success of social media use within an academic
library be measured? The extent of a fan base on a Facebook page does not necessarily indicate
success. Instead, utilizing surveys and questionnaires to receive continual feedback may be an
effective way to create a successful Facebook page that is able to meet continually changing
and fluctuating students’ needs. If Facebook usage is tied to a strategic goal then it will also be
easier to measure. Flexibility and adaptation to change are key in staying current with college
students. Social media is constantly changing and improving, which means that libraries will
need to monitor what medium best serves students’ needs. In future years, Facebook may be
obsolete, so libraries need to be familiar with current trends.
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32
A FACTORIAL ANALYSIS OF GENDER AND RANK
ON BUSINESS SCHOOL FACULTY’S SALARIES AS A
GAUGE FOR DISSATISFACTION
Reginald L. Bell
Prairie View A&M University
Robert J. Meier
Fort Hays State University
Wally Guyot
Fort Hays State University
ABSTRACT
Business faculty salaries from 13 institutions of higher learning across 5 states were
collected via collegiatetimes.com, a public salary database. Those data included faculty
members’ gender, rank, and teaching field. A gender difference (p <.01) was found when four
null hypotheses were tested. Chi-square was used to ascertain whether differences existed
between relative frequency of occurrence of male and female faculty and ranks. Two-Way
Analysis of Variance, with a 2 x 4 factorial design, was used to test for main effects and
interaction effects when gender and ranks were the independent variables and salary was the
dependent variable. Although women earn less than men across all academic ranks, the
magnitudes in salary increases were non-significant with an interaction effect of p = .779.
Therefore, female business school faculty might not be subject to more dissatisfaction than men
when salary is used as a gauge for female dissatisfaction. Recommendations are made for the
benefit of business faculty, department chairs, and deans.
INTRODUCTION
University professors differ in many ways from other workers, including highly
educated professional workers. University administrators can devise more effective strategies
for recruiting and retention if they have the knowledge of the determinants of university
professors’ job satisfaction (Johnsrud & Heck, 1994; Seifert & Umbach, 2008; Smart, 1990;
and Weiler, 1985). According to Herzberg, Mausner and Snyderman (1959), and Herzberg
(1964), motivation and dissatisfaction are different factors. Herzberg (1964) included salary
among the list of hygiene factors, i.e., fringe benefits, status, job security, and salary. The
absence of these factors results in dissatisfaction. For example, when fringe benefits, status, job
security, and salary are not present there is more dissatisfaction; however, when they are
present there is less dissatisfaction, but this does not translate into more satisfaction because
satisfaction and dissatisfaction are different constructs, theoretically independent of one
another.
33
With respect to studies in the literature about the impact of hygiene factors in the
workplace, Burke, Duncan, Krall, and Spencer (2005) reported on gender differences in faculty
pay and salary compression. They found that annual fixed-dollar merit increases and similar
starting salaries contributed to comparable salary growth rates for all faculty. However, they
found the male faculty earnings advantage was traced to higher rank and years of service.
Additionally, they found that the literature was divided on whether the often observed lower
pay of senior faculty is deserved. Moreover, they found that merit pay rises with additional
years of seniority and that the seniority penalty was rooted in cost-of-living adjustments that
failed to keep pace with market trends. The findings illustrated how the seniority penalty can
be linked to budget considerations rather than the lower productivity of senior staff.
Renzuilli, Grant, and Kathuria (2006) compared the gender pay gap at predominantly
white institutions (PWIs) with the gap at historically Black colleges and universities (HBCUs).
They found that HBCUs seemed to have a smaller gap but that pay for all faculty at HBCUs
was lower than in PWIs. Secondly, the gap was significantly smaller in the rank of associate
professors. Third, the gap was smaller at the associate rank because men make less money in
HBCUs than they do in PWIs. Fourth, elite HBCUs are more similar to PWIs than to HBCUs
in terms of their gender pay gap. Race, class, and gender effects must be taken into account to
understand patterns of wage equity across these institutions. The greater gender equity at
HBCUs was apparent because of the absence of the “men’s bonus,” which was prevalent in
PWIs and elite HBCUs.
Umbach (2007) studied gender equity in the academic labor market. He found that
faculty in disciplines characterized by relatively low demand, high teaching loads, and low
amounts of research funding earned less than do faculty in other disciplines. Additionally,
after controlling for an array of individual and disciplinary characteristics, women faculty were
found to earn less than their male peers.
Travis, Gross, and Johnson (2009) conducted a case study of faculty salaries at one
university. The results indicated that both regression and simulation methods provided
evidence of a sizable pay gap associated with gender, even after controlling for rank, academic
field, and years of service. The gap occurred in fields traditionally viewed as female as well as
science fields with typically lower female representation.
Bell and Joyce (2011) conducted a study using data made available through the
Missouri Secretary of State’s Office, via its website, to test for differences in salaries as a
hygiene factor among business faculty teaching at ten Missouri State funded universities. OneWay ANOVA tests showed means differed significantly between gender and among ranks,
with p < .01 in most cases. Female faculty overall earned 15% less than their male
counterparts.
However, other research suggests that factors other than race and gender may have a
greater impact on salary. A study by Fairweather (2005) found that in the late 1980s and early
1990s, among all faculty activities, research consistently showed that publishing and other
forms of scholarly productivity were the strongest positive predictors of faculty pay. The
paper reported that after more than a decade of institutional and state policies enacted to
enhance the value of teaching, the results showed that spending more time on teaching still
meant lower pay.
A study by Toutkoushian, Bellas, and Moore (2007) showed that gender, race or
ethnicity, and marital status still mattered in determining faculty salary, but they did not exhibit
34
many interaction effects. In general, faculty of color appeared to have at least achieved parity
with white faculty and may enjoy a salary advantage.
Melguizo and Strober (2007) examined faculty salaries and the maximization of
prestige. Spending more time on teaching was found to have no effect on salary, even in
comprehensive universities and liberal arts colleges. The findings suggested that other types of
institutions were emulating research institutions in their pursuit of prestige. Looking at faculty
salaries through this lens raised serious questions about the implications of the current reward
system in higher education.
Faculty Salaries as Hygiene
According to Balkin and Gomez-Meji (2002), when male management professors
received a smaller pay raise than anticipated, they tended to resign from their positions more so
than their female colleagues. Quitting one’s job over money is clearly a sign of dissatisfaction.
Comm and Mathaisel (2003) found that satisfied employees are important for organizational
performance. They argued that employee satisfaction in higher education regarding workload,
salary, and benefits can be used to improve academic quality; nonetheless, they reported that
among faculty at a private college, most do not believe they are fairly compensated.
A study by Terpstra and Honoree (2004) reported that faculty were most satisfied in
their work and pay when teaching and research are given equal weight. Additionally, they
found that institutions that primarily emphasize teaching fared poorly in terms of faculty
teaching effectiveness, research performance, job, and pay satisfaction.
Bender and Heywood’s study (2006) compared job satisfaction among university
faculty, nonacademic researchers, and managers. They found that the more highly educated
often are more dissatisfied with their jobs thus confounding any comparison of university
professors with general occupational categories. The Bender and Heywood study showed that
for both males and females, the relationship of pay to job satisfaction was statistically
significant in both private business and in universities. Based on data from the U.S.
Department of Education’s 2005 Fall Staff Survey, Hurtado and DeAngelo (2009) reported
that teaching load was a slightly stronger predictor than salary when it came to retention of
senior women.
Crothers, Hughes, Schmitt, Theodore, Lipinski, and Bloomquist, et al. (2010) reported
a difference in job satisfaction negotiation techniques of male and female faculty members.
They reported that female faculty members earned significantly less than male faculty
members, even when they controlled for years of experience. Females also reported a negative
attribute of failed negotiations that they associated with their gender and vice versa when
negotiations were successful.
Research Purpose
Based on the aforementioned research, salary appears to be a hygiene factor that can be
used to gauge dissatisfaction. Thus, the magnitude of salary distributions across ranks and
between genders could be a corollary with dissatisfaction among female business school
faculty members. Our purpose for conducting this study is to test whether men and women
differ in salary (main effect), whether there is a difference in ranks regarding salary (main
35
effect), and if the magnitude of salary increases across ranks is different for male and female
faculty members (the interaction effect).
METHODS AND RESULTS
Business faculty salaries from 13 institutions of higher learning across 5 states were
collected via collegiatetimes.com, a public salary database. The rank and gender information
was verified by visiting the websites of the 13 institutions. Faculty members had written
biographical sketches and referred to themselves as he or she and most also showed photos.
They also listed their ranks in those bios. The data analyzed included faculty members’ gender,
rank, and teaching field. A gender difference (p <.01) was found when four null hypotheses
were tested. Chi-square was used to ascertain whether differences existed between relative
frequency of occurrence of male and female faculty and ranks. Two-Way Analysis of
Variance, with a 2 x 4 factorial design, was used to test for main effects and interaction effects
when gender and ranks were the independent variables and salary was the dependent variable.
The demographics and other independent descriptive variables (gender, rank, etc.,) are
included in Table 1.
TABLE 1
FREQUENCY AND PERCENT FOR DEMOGRAPHIC VARIABLES
Frequency Percent Cumulative Percent
Texas Southern University
43
5.4
5.4
Institution
Texas Tech University
85
10.6
16.0
Texas A&M University
154
19.2
35.2
SUNY-Buffalo
78
9.7
44.9
SUNY-SB
19
2.4
47.3
UC at Riverside
33
4.1
51.4
UC at Irvine
22
2.7
54.1
George Mason
63
7.9
62.0
Old Dominion
67
8.4
70.3
Virginia Tech
105
13.1
83.4
University of Virginia
55
6.9
90.3
Miami University
6
.7
91.0
The Ohio State University
72
9.0
100.0
Total
802
100.0
Male
604
75.3
75.3
Gender
Female
198
24.7
100.0
Total
802
100.0
Instructor
152
19.0
19.0
Rank
Assistant Professor
191
23.8
42.8
Associate Professor
198
24.7
67.5
Full Professor
261
32.5
100.0
Total
802
100.0
California
55
6.9
6.9
State
New York
97
12.1
19.0
Ohio
78
9.7
28.7
Texas
282
35.2
63.8
Virginia
290
36.2
100.0
Total
802
100.0
185
23.1
23.1
Teaching Field Accounting
36
Finance
Management
Marketing
MIS
Business Administration
Other
Total
Missing
Total
129
139
107
40
47
154
801
1
802
16.1
17.3
13.3
5.0
5.9
19.2
99.9
.1
100.0
39.2
56.6
69.9
74.9
80.8
100.0
We analyzed the data in this study with SPSS 18.0. It is easy to request a Goodman and
Kruskal tau be generated when running a Chi-Square Test in SPSS 18.0. Goodman and
Kruskal (1972) developed a useful mathematical method that enables a researcher to predict,
for example, if a male murderer is more likely to use a gun or a knife to commit a murder, or if
a female murderer is more likely to use poison than a gun (Levin & Fox, 2000). To further
investigate the differences in nominal-by-nominal variables and differences in salaries
produced by content analysis, the following four hypotheses were written and tested using Chisquare Tests, Goodman and Kruskal tau and Two-Way ANOVA Tests, with a 2x4 factorial
design.
Four Null Hypotheses
H1:
Male and female faculty members do not differ in their relative frequency or
percentage among the academic ranks as instructor, assistant professor,
associate professor and full professor.
H2:
Means for faculty salaries do not differ between male and female faculty
members.
H3:
Means for faculty salaries do not differ among the academic ranks of instructor,
assistant professor, associate professor and full professor.
H4:
Means for the magnitude of faculty salaries do not differ between male and
female faculty regardless of their rank as instructor, assistant professor,
associate professor and full professor.
Chi-Square Test Results
We rejected H1, with p = .000. Male and female faculty members differ in their relative
frequency or percentage among the academic ranks. Statistical test results are shown in Table
2. For instructor, the female observed count exceeded the female expected count 59/37.5 or
nearly 60%. For assistant professor, the female observed count exceeded the female expected
count 65/47.2 or nearly 38%. For associate professor, the male observed count exceeded the
male expected count 154/149.1 or just over 3%. For full professor, the male observed count
exceeded the male expected count 231/196.6 or just over 17%. Conversely, females were 11%
below the associate professor expected count and 115% below the full professor expected
count.
37
Goodman and Kruskal tau shows rank as independent variable predicts 6.3 percent of
the variance (error) in gender, when gender is the dependent variable. On the other hand, when
gender is the independent variable it only predicts 2.2 percent of the dependent variable rank.
Thus, rank is more predictive of the rank of a male or female than vice versa. Table 2
illustrates that female faculty are significantly crowded in the lower level ranks of instructor
and assistant professor while male faculty are significantly crowded in the upper ranks of
associate professor and full professor. This is consistent with the recent literature (Bell and
Joyce, 2011; Burke, et al, 2005; Travis, et al, 2009). Gender predicts that female faculty
members will be concentrated at the lower ranks of instructor and assistant professor, while it
predicts that male faculty members will be concentrated more often at the higher ranks of
associate and full professors.
TABLE 2
CROSS-TABULATION FOR RANK * GENDER
Gender
Male
Female
Total
Rank
Instructor
Count
93
***59
152
Expected Count
114.5
37.5
152.0
% of Total
11.6%
7.4%
19.0%
Assistant Professor
Count
126
***65
191
Expected Count
143.8
47.2
191.0
% of Total
15.7%
8.1%
23.8%
Associate Professor
Count
***154
44
198
Expected Count
149.1
48.9
198.0
% of Total
19.2%
5.5%
24.7%
Full Professor
Count
***231
30
261
Expected Count
196.6
64.4
261.0
% of Total
28.8%
3.7%
32.5%
Total
Count
604
198
802
Expected Count
604.0
198.0
802.0
% of Total
75.3%
24.7%
100.0%
Value
df
Asymp. Sig. (2-sided)
Chi-Square Tests
Pearson Chi-Square
50.368a
3
***.000
Likelihood Ratio
52.475
3
.000
Linear-by-Linear Association
49.120
1
.000
N of Valid Cases
802
a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 37.53.
Asymp. Std. Approx. Approx.
Directional Measures
Value
Errora
Tb
Sig.
Nominal by
Lambda
Symmetric
.047
.013
3.620
.000
Nominal
Rank Dependent
.065
.017
3.620
.000
Gender Dependent
.000
.000
.c
.c
Goodman and Kruskal tau
Rank Dependent
.022
.006
.000d
Gender Dependent
.063
.016
.000d
a. Not assuming the null hypothesis.
b. Using the asymptotic standard error assuming the null hypothesis.
c. Cannot be computed because the asymptotic standard error equals zero.
d. Based on chi-square approximation
38
Two-Way ANOVA Tests Results
We failed to reject H2, with F (1, 794) = 2.149, p = .143; means for faculty salaries do
not differ between male and female faculty members. Tests of Between-Subjects Effects are
shown in Table 3. Although the male mean is higher than the female mean across all ranks, the
model does not show these means differ significantly. The finding is contrary to what is
reported in the literature. Although female faculty members earn less than men in general,
business school female faculty members are statistically the same as male faculty regarding
salaries.
We rejected H3, with F (3, 794) = 130.087, p = .000; means for faculty salaries differ
among the academic ranks of instructor, assistant professor, associate professor and full
professor. This finding is very consistent with the literature and is therefore not surprising.
Tests of Between-Subjects Effects are shown in Table 3. Rank is not surprisingly different
because hierarchy implies higher compensation. In our model of 802 faculty members from 13
institutions representing five US States, the only exception to this was for associate professors
who earn $6,057.46 less than assistant professors, but the mean difference was non-significant
in the Tukey’s HSD Post Hoc Comparison. The other ranks increased in salary in nearly a
stair-step pattern as they should.
We failed to reject H4, with F (3, 794) = .364, p = .779; means for the magnitude of
faculty salaries do not differ between male and female faculty regardless of their rank as
instructor, assistant professor, associate professor and full professor. Tests of BetweenSubjects Effects are shown in Table 3. The interaction effect was non-significant. This is a
surprise because based on the literature women earn less than men in business schools and
across the ranks. Nevertheless, the so called “men’s bonus” reported by Renzuilli, et al, (2006)
seems to have dissipated over the years. This is a very important finding and means a great
deal in terms of gauging the dissatisfaction levels of female business faculty members.
Estimated means and pairwise comparisons tables are located in the Appendix.
TABLE 3
UNIVARIATE ANALYSIS OF VARIANCE WITH DEPENDENT VARIABLE: SALARY
Gender
Rank
Mean
Std. Deviation
N
Male
Instructor
$51,182.10
$40,211.46
Assist. Prof.
$131,202.88
$34,662.98
Assoc. Prof.
$124,401.84
$35,449.14
Full Prof
$168,973.49
$65,843.85
Total
$131,593.14
$63,356.26
Female
Instructor
$50,151.39
$25,077.01
Assist. Prof.
$125,751.38
$31,946.07
dimension1
Assoc. Prof.
$120,437.50
$35,908.74
Full Prof
$155,619.83
$66,733.80
Total
$106,568.77
$54,201.03
Total
Instructor
$50,782.02
$35,028.13
Assist. Prof.
$129,347.66
$33,777.91
Assoc. Prof.
$123,520.88
$35,498.61
Full Prof
$167,438.59
$65,955.35
Total
$125,415.06
$62,136.01
Levene's Test of Equality of Error Variancesa Dependent Variable: Salary
F
df1
df2
Sig.
16.162
7
794
39
93
126
154
231
604
59
65
44
30
198
152
191
198
261
802
.000
Tests the null hypothesis that the error variance of the dependent variable is equal across groups.
a. Design: Intercept + Gender + Rank + Gender * Rank
Tests of Between-Subjects Effects, Dependent Variable: Salary
Source
Type III Sum of
Squares
df
Mean Square
F
Sig.
Corrected Model
1.318E12
7
1.883E11
84.226
.000
Intercept
7.300E12
1
7.300E12
3265.747
.000
Gender
4.804E9
1
4.804E9
2.149
.143
Rank
8.723E11
3
2.908E11
130.087
***.000
Gender * Rank
2.439E9
3
8.131E8
.364
.779
Error
1.775E12
794
2.235E9
Total
1.571E13
802
Corrected Total
3.093E12
801
a. R Squared = .426 (Adjusted R Squared = .421)
Partial Eta
Squared
.426
.804
.003
.330
.001
SUMMARY AND DISCUSSION
The literature review revealed that various studies had been conducted regarding
faculty satisfaction and salary differences according to rank, gender, and teaching field. Our
study’s contribution to the literature is derived from a multistate study of business school
faculty salaries according to gender and academic rank. These results can assist administrators
in devising strategies for recruiting and retention. The literature suggests there are three
variables that affect the hygiene of salaries: gender, rank and the job security of tenure (Bell
and Joyce, 2011). Women are less likely to receive the same salaries as men, regardless of
rank, thus, for women salaries is less hygienic. The states where professors teach might also
impact the level of pay. Rank has been shown to determine the level of pay and thus the level
of the salary hygiene. Nevertheless, if salary is to improve hygiene (less dissatisfaction), there
should be no meaningful differences between the means of male and female business faculty
and ranks should differ but only according to seniority and not lower-level ranks exceeding the
pay of higher ranking female faculty members. In other words, there should not be huge
magnitudes of difference at the various levels of rank if the salary hygiene is present. The plot
shown in Figure 1 is the best way to understand the dynamics of our findings; the 2x4 factorial
design is plotted by rank (1= instructor, 2= assistant professor, 3= associate professor, 4= full
professor) and gender (1= male, 2= female) and makes it clear as to why the interaction effect
was non-significant, with a p = .779.
40
FIGURE 1
PROFILE PLOTS FOR GENDER * RANK
Even though our Levene’s Test of Equality of Error Variance was significant (p =
.000), we are not concerned about a Type I error, because the p-value for rank was significant
well below p< .001. Also, in the fixed effects sampling frame, women are just not represented
as well as men in collegiate schools of business. Females represented roughly 25% of our
sample of 802 faculty members (198/802 x 100). Despite this fact, our findings appear to show
equity in the magnitude of salary increases as males and females rise through the academic
ranks. Crothers, et al (2010) found women in higher education institutions to be less satisfied
with their negotiation skills when negotiations were not in their favor, nevertheless, female
business faculty members working in the 13 business schools in our sample of 802 faculty
members don’t seem to have any deficiency in negotiating salaries.
Female full professors had higher salaries than male associate professors for the most
part, etc. We did not find any meaningful difference in the interaction between males and
females as they migrated through the four levels of rank. Therefore, hygiene theory would
suggest that female and male faculty members, both of whom are associate professors, should
be earning statistically the same incomes. And, they are. Recall that ranks were different at the
p = .000 level of significance. We found this to be true for all ranks, even though associate
professors earn slightly less than assistant professors, women associate professors do not earn
significantly less than their male counterparts at this same level of rank. We argue that when
salary is a hygiene factor that controls dissatisfaction among rank and between gender,
business schools are hygienic. Theoretically, women should be no more dissatisfied than men
regarding their salaries.
41
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Travis, C., Gross, L., & Johnson, B. (2009). Tracking the gender pay gap: A case study. Psychology of Women
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43
APPENDIX
Estimated Marginal Means
1. Gender
Estimates
Dependent Variable: Salary
Gender
Mean
Male
118940.078
Female
112990.027
dimension1
Std. Error
2030.462
3514.067
95% Confidence Interval
Lower Bound
Upper Bound
114954.369
122925.786
106092.067
119887.987
Pairwise Comparisons
Dependent Variable: Salary
(I) Gender
(J) Gender
95% Confidence Interval for Differencea
Mean Difference
a
(I-J)
Std. Error
Sig.
Lower Bound
Upper Bound
Male
Female
5950.051
4058.503
.143
-2016.612
13916.714
Female
Male
-5950.051
4058.503
.143
-13916.714
2016.612
Based on estimated marginal means
a. Adjustment for multiple comparisons: Least Significant Difference (equivalent to no adjustments).
dimension2
dimension1
dimension2
Univariate Tests
Dependent Variable: Salary
Contrast
Error
Sum of Squares
4.804E9
1.775E12
df
1
794
Mean Square
4.804E9
2.235E9
F
Sig.
2.149
.143
Partial Eta Squared
.003
The F tests the effect of Gender. This test is based on the linearly independent pairwise comparisons among the estimated
marginal means.
44
2. Rank
Estimates
Dependent Variable: Salary
Rank
95% Confidence Interval
Mean
Std. Error Lower Bound Upper Bound
Instructor
50666.743 3934.432
42943.625
58389.861
Assistant Professor 128477.133 3609.961 121390.938 135563.328
Associate Professor 122419.672 4040.858 114487.644 130351.700
Full Professor
162296.661 4587.556 153291.490 171301.833
Pairwise Comparisons
Dependent Variable: Salary
(I) Rank
(J) Rank
95% Confidence Interval for
Differencea
Mean Difference
a
(I-J)
Std. Error
Sig.
Lower Bound
Upper Bound
1
2
-77810.389*
5339.623
.000
-88291.835
-67328.944
*
3
-71752.929
5639.884
.000
-82823.774
-60682.083
4
-111629.918*
6043.627
.000
-123493.293
-99766.543
2
1
77810.389*
5339.623
.000
67328.944
88291.835
3
6057.461
5418.519
.264
-4578.856
16693.777
4
-33819.528*
5837.592
.000
-45278.467
-22360.590
3
1
71752.929*
5639.884
.000
60682.083
82823.774
2
-6057.461
5418.519
.264
-16693.777
4578.856
4
-39876.989*
6113.445
.000
-51877.414
-27876.565
4
1
111629.918*
6043.627
.000
99766.543
123493.293
2
33819.528*
5837.592
.000
22360.590
45278.467
3
39876.989*
6113.445
.000
27876.565
51877.414
Based on estimated marginal means; 1= instructor, 2= assistant professor, 3= associate professor, 4= full professor
*. The mean difference is significant at the .05 level.
a. Adjustment for multiple comparisons: Least Significant Difference (equivalent to no adjustments).
dimension2
dimension2
dimension1
dimension2
dimension2
Univariate Tests
Dependent Variable: Salary
Sum of Squares
8.723E11
1.775E12
Contrast
Error
df
3
794
Mean Square
2.908E11
2.235E9
F
130.087
Sig.
.000
Partial Eta
Squared
.330
The F tests the effect of Rank. This test is based on the linearly independent pairwise comparisons among the
estimated marginal means.
3. Gender * Rank
Dependent Variable: Salary
Gender
Rank
Male
dimension1
Female
1
2
3
4
1
2
3
4
Mean
51182.097
131202.881
124401.844
168973.489
50151.390
125751.385
120437.500
155619.833
Std. Error
4902.485
4211.846
3809.758
3110.654
6155.052
5864.096
7127.404
8631.715
95% Confidence Interval
Lower Bound
Upper Bound
41558.734
60805.460
122935.212
139470.550
116923.456
131880.232
162867.411
175079.567
38069.292
62233.488
114240.421
137262.348
106446.717
134428.283
138676.154
172563.513
45
Post Hoc Tests
Rank
Multiple Comparisons
Salary
Tukey HSD
(I) Rank
(J) Rank
95% Confidence Interval
Mean Difference
(I-J)
Std. Error
Sig.
Lower Bound
Upper Bound
1
2
-78565.64*
5138.854
.000
-91795.52
-65335.76
3
-72738.86*
5098.441
.000
-85864.69
-59613.03
4
-116656.57*
4823.816
.000
-129075.38
-104237.75
2
1
78565.64*
5138.854
.000
65335.76
91795.52
3
5826.78
4794.941
.617
-6517.70
18171.26
4
-38090.93*
4501.840
.000
-49680.82
-26501.03
3
1
72738.86*
5098.441
.000
59613.03
85864.69
2
-5826.78
4794.941
.617
-18171.26
6517.70
4
-43917.71*
4455.652
.000
-55388.69
-32446.72
4
1
116656.57*
4823.816
.000
104237.75
129075.38
2
38090.93*
4501.840
.000
26501.03
49680.82
3
43917.71*
4455.652
.000
32446.72
55388.69
Based on observed means. 1= instructor, 2= assistant professor, 3= associate professor, 4= full professor
The error term is Mean Square (Error) = 2235195289.532.
*. The mean difference is significant at the .05 level.
dimension3
dimension3
dimension2
dimension3
dimension3
Homogeneous Subsets
Salary
Tukey HSDa,b,c
Rank
N
Subset
2
1
3
1
152
3
198
123520.88
2
191
129347.66
4
261
Sig.
50782.02
167438.59
1.000
.620
1.000
Means for groups in homogeneous subsets are displayed.
Based on observed means. 1= instructor, 2= assistant professor, 3= associate professor, 4= full professor
The error term is Mean Square (Error) = 2235195289.532.
a. Uses Harmonic Mean Sample Size = 193.270.
b. The group sizes are unequal. The harmonic mean of the group sizes is used. Type I error levels are not guaranteed.
c. Alpha = .05.
46
A COMPREHENSIVE THEORETICAL FRAMEWORK
FOR UNDERSTANDING MORAL BEHAVIOR IN
ORGANIZATIONS
Timothy Ewest
Wartburg College
ABSTRACT
This paper explores the challenges and limitations of the predominate theory in
organizational ethics, normative ethical theory. The normative ethical theory is rooted in the
philosophical tradition of idealism and complemented by neoclassical economics’ rational
man and thus is largely committed to developing cognitive moral decision making. Yet, while
cognition is endemic, it is not seminal in regards to ethical motivation and therefore represents
only a truncated part of the ethical decision making process. Instead, this paper focuses on
endemic human dimensions, specifically human values, spiritual motivation of meaning making
and moral identity as they relate to agentic human endeavors. The paper suggests that all
human activity is motivated by endemic human values, a need for humans to make meaning of
their lives and arriving at those value(s) and personal meaning as ideal end state(s) are the
goals of human behavior (Schwartz, 1999; Haidt & Joseph, 2004; Emmonds, 2011). These
values are expressed through behaviors, which active agents who seek to demonstrate personal
interpersonal consistently, integrity. Specifically, the agentic endeavors result in selfregulated behaviors as a means to foster integrity as human agents within organizations seek
to live in congruency with those ends states and the goals which they represent, suggesting
support for moral leadership as a governing ethical criterion.
47
FISCAL DEFICIT, MONEY SUPPLY AND INFLATION
IN NEAPL
Nar Bahadur Bista
Global College of Management
Ph.D. Student at University of Warsaw
ABSTRACT
This paper is focused to examine the empirical relationship between fiscal deficit,
money supply, and inflation to test the hypothesis that domestic factors fiscal deficit and money
supply and external factor Indian inflation have positive effect on the inflation in Nepal. Nepal
has open border with India and India is the major international trade partner of Nepal.
Therefore, economy of Nepal can be influenced by the macroeconomic variables and policies
of India. The study has analyzed the time series data from 1990 to 2011. Econometric
techniques used in the study are unit root test, autoregressive distributed lag (ARDL) model
and Granger causality test. The empirical results show that there is positive effect of fiscal
deficit and narrow money supply on consumer price index of Nepal in short run and long run.
But, the relationship is weak and the effect is very small. While adding wholesale price index of
India as an explanatory variable along with fiscal deficit and narrow money supply, it shows
the significant short run and long run relationship among the variables. The positive and
significant effect of Indian wholesale price index is higher than the effect of fiscal deficit
whereas narrow money supply has not significant impact on consumer price index of Nepal.
Therefore, inflation in Nepal is affected by external factor rather than domestic factors.
Consequently, inflation controlling through monetary policy and fiscal policy are becoming
ineffective in Nepal. Thus, Nepal should diversify the over dependent trade with India and
explore the markets in other countries as well.
INTRODUCTION
The relationship between fiscal deficit, money supply, and inflation is a universal
phenomenon in theoretical and empirical grounds. From a theoretical perspective, both the
monetarist hypotheses, based originally on the quantitative theory of money, and the fiscal
theory of the price level, known as the quantitative theory of government financing of debt,
represent the two traditional approaches to understanding what links these macroeconomic
variables (Tiwari & Tiwari, 2011). There is a general concession among economists to support
monetarist view led by Milton Friedman, that inflation is strictly a monetary phenomenon
(Friedman, 1956). Growth rate of money supply exceeding the demand for cash balance
increases the demand for goods and it pushes up the price level (Ezeabasili et al., 2012). The
monetarists suggest for impendent monetary authority breaking the linkage between inflation
and budget deficit by refusing to monetize the fiscal deficit (Akcay et al., 1996; Chimodi &
Lgwe, 2010). Mortaza (2006) put forwards that in developing countries; inflation is not purely
a monetary phenomenon but is often linked with fiscal imbalances and deficiencies in sound
internal economic policies.
48
Inflation is a combined effect of monetary and fiscal imbalances. Monetary and fiscal
authorities are linked through money growth in the form of seigniorage, which provides
revenue to the fiscal authority (Ekanayake, 2012). The impact of monetary financing of a fiscal
deficit on the inflation rate was first formalized by Sargent and Wallace (1981). Since then,
attention has increasingly been given to the role of fiscal-factors in explaining inflation. In
developing countries, there is a need of budget deficit financing and revenue from seigniorage.
It causes increase in money supply and consequently the country faces inflation.
Nepal is among the poorest and least developed countries in the world. The
macroeconomic performance of Nepal is not satisfactory for more than two decades. Almost
one-quarter of its population lives below the poverty line and agriculture is the mainstay of the
economy, providing a livelihood for three-fourths of the population and accounting for about
one-third of GDP (NLSS, 2011). The economic growth rate remained 4.11 percent in an
average for this decade and per capita GDP growth rate is 1.99 percent (MoF, 2012). Fiscal
deficit and total public debt is 3.98 and 35.60 percent of nominal GDP respectively at the end
of fiscal year 2010/11. The annual growth rate of broad money supply (M2) is 12.30 percent
and narrow money supply (M1) is 5.17 percent in the same period. The inflation rate is 9.5
percent in the fiscal year 2010/11 and it has remained about double digit in past few years
(MoF, 2012).
India is a fast growing emerging economy and it has become the fourth largest economy
in terms of GDP (PPP) in the world (WB, 2012). The economic growth rate of India in fiscal
year 2010/11 was 8.39 percent and an average growth rate is about 8 percent in the recent
decade. The fiscal deficit in fiscal year 2010/11 was 5.20 percent of the GDP. Inflation in India
on the basis of consumer price index is 9.50 percent and 8.6 percent on the basis of whole sale
price index (PCI, 2012). The inflation remained near to double digit in past few years in India.
Therefore, it has been becoming the challenge for the economy in India.
Statement of the problem is whether the inflation of Nepal is caused by domestic factors:
fiscal deficit and money supply in Nepal. Nepal has faced the inflation even during the periods
of control over money supply and fiscal deficit. This situation may raise a question that
inflation in Nepal may be caused by external factors rather than monetary and fiscal
imbalances in Nepal. India is a major trading partner (two-third of total trade of Nepal is with
India) and it has open border of 1850 kilometers in three directions of Nepal. Therefore,
inflation in India may cause the inflation in Nepal. In order to answer these questions, the
objectives of this paper is investigate the relationship between fiscal deficit, money supply and
inflation in Nepal and to examine the casual relationship between consumer price index of
Nepal and whole sale price index of India.
LITERATURE REVIEW
The consensus on the relationship between fiscal deficit, money supply and inflation
differs among the economists. Persistent fiscal deficits, increasing money growth, and high
inflation are common in most developing countries. In order to analyse the relationship
between variables, many researchers have investigated time series as well as panel data. There
are huge differences in the monetary and fiscal policies consequences implemented by
different countries, and, sometimes, in the same country at different points in times (Edwards
& Tabellini, 1991 and Jha, 2001). The link between fiscal deficits and inflation is also less
obvious in countries that have institutional arrangements to curb fiscal dominance, wider
49
access to external financing, and a broader seigniorage tax base. When the differences in these
factors among countries are considerable, it is harder to uncover the relationship between fiscal
deficits and inflation from cross country panel studies (Catao & Terrones, 2005). Therefore, it
is important to analyse this issue within individual countries over time to build a sound
empirical basis to make country-specific policy recommendations (Ekanayake, 2012). In this
context, various empirical literatures have been reviewed in the following section.
NRB (2007) conducted an empirical analysis to identify the determinants of inflation in
Nepal. Empirical results in the study suggest that inflation in Nepal is mainly determined by
Indian inflation with narrow money only having an effect in the short run. The study has
considered the relationship among price indices, money supply, growth rate and inflation and it
has not included fiscal deficit as a determinant of inflation. Wolde-Rufal (2008) found in
Ethiopia that there was a long run cointegrating relationship among the series with a
unidirectional Granger causality running from money supply to inflation and from budget
deficits to inflation. In contrast, fiscal policy does not seem to have any impact on the growth
of money supply. Tiwari and Tiwari (2011) tried to establish the bi-directional casual
relationship among the variables. They analysed the time series data of India on fiscal deficit,
government expenditure, broad money supply and consumer price index. The results show
that the money supply has negative impact and government expenditure has positive and
significant impact on fiscal deficit. Another research in India was conducted by Tiwari et al.
(2012) to identify the casual relationship between fiscal deficit, government expenditure,
money supply, and inflation by employing Dolado and Lütkepohl (DL) and standard Grangercausality approach. Causality analysis based on DL approach suggests that both government
expenditure and money supply Granger-cause fiscal deficit while standard Granger-causality
test shows that only government expenditure Granger-cause fiscal deficit. Ekanayake (2012)
analysed the data of Sri Lanka to quantify the link between the fiscal deficit and inflation. The
estimated results in the research suggest that the ratio of fiscal deficit to narrow money supply
has the significant positive impact to increase inflation in Sri Lanka. Milo (2012) considered
the case study of three transition economies: Albania, Bulgaria and Romania. He found that
there is a positive relationship between monetary financing of government deficits and money
base growth in the case of Albania and Bulgaria, but it was not found strong relationship in
Romania. In his study, inflation is a cause of depreciation of exchange rate due to monetary
financing of budget deficits rather than direct impact of money supply and fiscal deficit. In
Tanzania, Ndanshau (2012) investigated the relationship among these three variables and result
shows that there is unidirectional causation of inflation on budget deficit and monetary base.
It can be concluded that there a link between fiscal deficit finance, money supply and
inflation in most of the economies. In most of the literatures, the domestic macroeconomic
variables like fiscal deficit and money supply are considered as the determinant of inflation and
rare of the studies have examined external causes of domestic inflation.
DATA AND METHODOLOGY
This study is based on secondary time series data from 1990 to 2011 from various
publications. The basic sources of the data are from Economic Surveys, National Planning
Commission and World Bank Database. Consumer price index (CPI) is taken as a measure of
inflation in case of Nepal and wholesale price index (WPI) of India is considered to measure
inflation in India in this study because the trade of Nepal occurs in WPI with India. The
50
absolute data are converted into natural logarithmic form for estimating the robust regression
results. The variables under the study are defined as natural logarithm of consumer price index
(LNCPI), natural logarithm of fiscal deficit (LNDEF), natural logarithm of narrow money
supply (LNM1), natural logarithm of broad money supply (LNM2) of Nepal and natural
logarithm of wholesale price index of India (ILNWPI).
The objective of the study is to establish the long run and short run relationship among
the variables. The econometric technique applied to analyze data is Autoregressive Distributed
Lag (ARDL) model for cointegration test. Though, the order of integration is not necessarily to
be same for the coitegartion in ARDL approach, but generally the data should be stationary
maximum of two time differences i.e. second difference (Pesaran et al., 2001). In order to test
the unit root, Augmented Dickey-Fuller (ADF) test has been employed which is most common
and widely used test in literatures.
The short-and long-run parameters with appropriate asymptotic inferences can be
obtained by applying OLS to ARDL with an appropriate lag length. The ARDL with Alkaike
Information Criterian (AIC) and Schwarz Bayesian Criterion (SBC) estimators have very
similar small-sample performances. ARDL-SBC has performed slightly better than ARDLAIC in the majority of the experiments (Pesaran & Shin, 1997). Therefore, in this study SBC is
used for lag selection while applying ARDL approach for small samples in this case.
Following Pesaran et al. (2001), an ARDL (p,q,r,…,m) representation can be written as:
p
q
i 1
j 0
r
m
p
l 0
i 1
 Yt   0    0 i Yt  i    1 j X 1t  j    2 k X 2 t  k  ...    nl X nt  l    0 i  Yt  i
q
   1 j X 1t  j 
j 0
k 0
r

k 0
m
2j
 X 2 t  k  ...    nl X nt  l  ... u t
... ... (1)
l 0
Where, Y is dependent variable, Xi are independent variables and i=1,2, …, n, Δ is the
first difference operator and ut is the usual white noise residuals. The coefficients (α0-αn)
represent the long-run relationship whereas the remaining expressions with summation sign
(β0-βn) represent the short-run dynamics of the model. The values (p,q,r,…,m) show the
number of lags of the corresponding variables. The F-statistics is used for testing the existence
of long run relationships. The ARDL level relationship is tested by Wald-test of coefficient
restrictions setting hypothesis as:
H 0 :  0   1   2  ...   n  0 , i.e. there is no level effect.
H 1 :  0   1   2  ...   n  0 , i.e. there is significant level effect.
The calculated F-statistic is compared with lower bound and upper bound critical
values to take the decision. If the calculated F-statistic lies between the bounds, the test is
inconclusive. If it is above the upper bound, the null hypothesis of no level effect is rejected. If
it is below the lower bound, the null hypothesis of no level effect can't be rejected. In this
study, the data are processed by using Microfit 5.0 software which has an in-build facility to
calculate the critical values on the basis of sample size (Pesaran & Pesaram, 2009).
After confirming the cointegration relationship among the variables, the estimated long
run model using the ARDL approach of above model (1) can be expressed as:
Yt   1   1 X 1t   2 X 2t  ...   n X nt  (ect ) t ...... (2)
The error correction representation based on the assumptions made by Pesaran et al.
(2001) of the ARDL model (1) can be expressed as:
51
 Yt   2 
m

l0
p

i 1
 0 i  Yt i 
 nl  X
nt  l
q

j0
  ect
t 1
 1 j  X 1t  j 
r

k 0
 2 jX
 t
2tk
 ... 
...... ( 3 )
The error correction term (ect)t is calculated from equation (2) and the coefficient of
(ect)t-1 i.e. λ indicates the long run dynamics. The coefficient λ also measures the speed of
adjustment towards equilibrium if disequilibrium exists in long run. The λ should possess
negative sign and it should be statistically significant to confirm the long run relationship
between the variables. The coefficients (β0- βn) in the model (3) show the short run impact of
corresponding independent variables on dependent variable (Narayan, 2004).
Finally, Granger Causality test is applied for the cointegrated variables to examine the
casual relationship between the variables (Granger, 1969). The model for two variables i.e.
with single independent variable case is expressed as:
n
n
Yt   0  1iYt i   2i X t i   1t
i 1
m
...... (4)
i 1
m
X t   0  1k X t k   2k Yt k   2t
k 1
...... (5)
k 1
Where, i and k indicate the number of lags used in the model. The Wald-test and Fstatistics for the coefficients restriction is performed setting hypothesis as following:
Null Hypotheses are:
X does not Granger-cause Y in first regression equation, and
Y does not Granger-cause X in second regression equation.
The coefficients restriction for Wald-test is:
1   2  ...   n  0
The regression estimations are tested for goodness of fit and overall significance by Rsquared/R-bar squared and F-test, statistical significance of the coefficients are tested by t-test.
Other residuals diagnostic tests are the Lagrange multiplier test of residual serial correlation,
the Ramsey's RESET test for functional form using the square of the fitted values, the
normality test based on a test of skewness and kurtosis of residuals and the heteroscedasticity
test based on the regression of squared residuals on squared fitted values. All the data are
processed in Mircofit 5.2 and Eviews-7 software. The paper has used APA (American
Psychological Association) sixth edition for citation and referencing.
EMPIRICAL RESULTS AND INTERPRETATION
Unit Root Test
In this study time series data from 1990 to 2011 of consumer price index, fiscal deficit,
narrow money supply and broad money supply of Nepal and wholesale price index of India are
analyzed. Augmented Dickey-Fuller (ADF) test is employed to test the unit root. The results of
ADF-test are presented in table 4.1 below:
52
Table 4.1
ADF-Test Results for Unit Root Test
Variables
Levels
t-Statistics
-1.109673
-0.446796
-1.346584
LNCPI
LNDEF
LNM1
LNM2
-0.438209
ILNWPI
-2.275734
ADF Test critical values
p-Value
0.6908
0.8834
0.5879
First Difference
t-Statistics
p-Value
-3.075897**
0.0460
-4.659427*
0.0016
-3.094952**
0.0401
0.8843
-2.498420
0.1306
0.1882
1% level
5% level
10% level
-3.550596**
0.0172
-3.808546
-3.020686
-2.650413
The symbols * and ** indicate data is stationary at 1 and 5 percent level of significant
respectively. In table 4.1, we can observe that all the variables have unit root at levels showing
that they are non-stationary but at first difference the variables are stationary except LNM2.
The data series of LNM2 is not significant even at 10 percent level of significance in first
difference. It is only stationary at second difference. In order to get reliable results time series
data should be stationary at the same order of integration to avoid the spurious regression
results (Gujarati, 2003, pp.792). Therefore, we have taken M1 as an indicator of money supply
and M2 has been dropped out in this study. After testing the unit root, we proceed to establish
the relationship among variables in the following section.
Consumer Price Index, Fiscal Deficit and Narrow Money Supply in Nepal
In order to establish the long run relationship among consumer price index, fiscal deficit
and money supply in Nepal, we apply ARDL approach to cointegration as discussed in the
methodology section. LNCPI is a dependent variable and LNDEF and LNM1 are explanatory
variables in this analysis. The ARDL (1,0,0) estimation and its coefficients bound testing Fstatistic and corresponding critical values at 95 and 90 percent confidence interval are
presented in table 4.2. The calculated value of F-statistic is 5.24 which is higher than 90
percent upper bound and lower than the 95 percent upper bound critical values. It means, there
is cointegration among the variables only at 10 percent level and the long run relationship is
not significant at 5 percent level. The long run coefficients of the ARDL estimation is also
presented in table 4.2. The coefficient of LNM1 is statistically significant at 1 percent level
whereas the coefficient of LNDEF is significant only at 10 percent level. Both coefficients are
positive showing that there is positive long run relationship with LNCPI. Also, the coefficient
of LNM1 shows that 1 percent increase in M1 causes 0.35 percent increase in CPI and the
coefficient of LNDEF shows that 1 percent increase in DEF causes 0.20 percent increase in
CPI and vice versa in long run. The impact of money supply is higher than the impact of fiscal
deficit on the consumer price index in the analysis.
53
F-statistic
Table 4.2
ARDL(1,0,0) Model: Dependent Variable is LNCPI
Bound Testing Result for Existence of Level Relationship
95% Lower Bound 95% Upper Bound 90% Lower Bound
5.2439
Independent Variable
LNDEF
LNM1
C
R-squared
F-statistic
Prob(F-statistic)
Test Statistics
Serial Correlation
Functional Form
Normality
Heteroscedasticity
90% Upper
Bound
4.7125
4.5695
5.8444
3.6546
Estimated Long Run Coefficients
Coefficient
Std. Error
t-Statistic
Prob.
0.20956
0.10845
1.9323
0.071
0.35094
0.07542
4.6529
0.000
-0.21789
0.25938
-0.8400
0.413
0.9956
Adjusted R-squared
0.9948
1218.8
DW-Statistic
1.3496
0.000
Diagnostic Tests
LM Version
F Version
CHSQ(1) = 1.1473 [0.284]
F(1,15) = 0 .912 [0.355]
CHSQ(1) = 5.1023 [0.024]
F(1,15) = 5.137 [0.039]
CHSQ(2) = 0.0190 [0.991]
………
CHSQ(1) = 0.1875 [0.665]
F(1,18) = 0.170 [0.685]
The coefficient of determination of the regression equation measured by R-Squared is
0.99. It means 99 percent of the variation due to explanatory variable can be explained by the
regression equation. The overall significance of the regression equation is also tested and it is
significant at 1 percent level shown by the F-statistic. The Lagrange Multiplier (LM) test of
serial correlation indicates the evidence of no serial correlation, the Chi-Squared value for
normality test shows that the residuals are normally distributed. Heteroscedasticity test and
corresponding Chi-squared value shows that the disturbance term in the model is
homoscedastic. These all are significant for desirable model specification except functional
form at 5 percent level.
After establishing the cointegration relationship among the variables, we can apply
error correction model (ECM) for short run relationship. The ECM results are reported in table
4.3. The coefficient of one period lag of error correction term i.e. ect(-1) is -0.40 which is
negative and significant at 5 percent level confirming once again the validity of long run
relationship between the variables. The speed of adjustment towards equilibrium is 40 percent
per annum in this model. The short run coefficients of LNDEF and LNM1 are 0.08 and 0.14
respectively. The first coefficient is statistically significant at 5 percent level but second is only
significant at 10 percent level. It means DEF has positive and significant but very small impact
on CPI where as M1 has higher positive coefficient but it is not significant at 5 percent level in
short run. The coefficient of determination of the regression equation measured by R-Squared
is 0.59 showing that the regression equation can explain about 59 percent variation in CPI due
to explanatory variables.
54
Table 4.3
ARDL(1,0,0) Model: Dependent Variable is ∆LNCPI
Error Correction Representation
Independent Variable
∆LNDEF
∆LNM1
ect(-1)
R-squared
F-statistic
Prob(F-statistic)
Coefficient
0.08496
0.14229
-0.40545
0.5925
7.7573
0.002
Std. Error
t-Statistic
0.032824
2.5885
0.068126
2.0886
0.12169
-3.3318
Adjusted R-squared
DW-Statistic
Prob.
0.020
0.053
0.004
0.5162
1.3496
Finally, the overall model is summarized as ARDL bound test and F-statistic is
significant only at 10 percent level. The long run coefficient of DEF and short run coefficient
of M1 are not significant at 5 percent level. These results show that there is very weak
relationship among the variables in Nepal.
Consumer Price Index, Fiscal Deficit, Narrow Money Supply and Indian Wholesale Price
Index
In the previous analysis, we have only considered the two major domestic factors
affecting to inflation in Nepal. But, the results show that the relationship is weak. Therefore, an
external factor of inflation in Nepal is wholesale price index of India as hypothesized in the
introduction part of the study. The ARDL technique has been again employed where LNCPI is
dependent variable and LNDEF, LNM1 and ILNWPI are independent variables. The results
are presented in table 4.4. The calculated F-statistic of the ARDL (1,0,0,0) model is 6.55 which
is higher than the 95 upper bound critical value showing that there is cointegration among the
variables at 5 percent level.
The long run coefficients of the model are presented in the same table 4.4. The
coefficients of LNDEF and ILNWPI are positive and statistically significant at 5 percent level.
The coefficient of LNDEF indicates that 1 percent increase in DEF causes 0.18 percent
increase in CPI and vice versa in long run. Similarly, the coefficient of ILNWPI shows that 1
percent increase in IWPI causes 0.95 percent increase in CPI and vice versa in long run. But,
the coefficient of LNM1 is negative and statistically not significant even at 10 percent level. It
shows there is no long run impact of M1 on CPI of Nepal.
55
Table 4.4
ARDL(1,0,0,0) Model: Dependent Variable is LNCPI
Bound Testing Result for Existence of Level Relationship
F-statistic
95% Lower Bound 95% Upper Bound
6.5500
4.1067
5.5713
90% Lower
Bound
3.2423
90% Upper
Bound
4.4751
Estimated Long Run Coefficients
Independent Variable
LNDEF
LNM1
ILNWPI
C
R-squared
F-statistic
Prob (F-statistic)
Coefficient
0.17596
-0.02847
0.95442
-0.88299
0.9967
1141.2
0.0000
Std. Error
t-Statistic
0.06796
2.5889
0.17060
-0.16688
0.36703
2.6004
0.31242
-2.8262
Adjusted R-squared
DW-Statistic
Prob.
0.021
0.870
0.020
0.013
0.9958
1.5931
Diagnostic Tests
Test Statistics
Serial Correlation
Functional Form
Normality
Heteroscedasticity
CHSQ(1)
CHSQ(1)
CHSQ(2)
CHSQ(1)
=
=
=
=
LM Version
0.4956 [0.481]
1.9630 [0.161]
1.4970 [0.473]
0.1222 [0.727]
F Version
F(1,14) = 0.35574 [0.560]
F(1,14)
= 1.5237 [0.237]
…..
F(1,18) = 0.11072 [0.743]
The regression equation has also passed through diagnostic tests. The regression
equation can explain 99 percent variation in dependent variable. The F-statistic shows the
overall significance of the regression equation. Other residual diagnostic tests at the bottom
rows of the table exhibit that there is no any specification and violation problems in the
regression equation.
Table 4.5
ARDL(1,0,0,0) Model: Dependent Variable is ∆LNCPI
Error Correction Representation
Independent Variable
∆LNDEF
∆LNM1
∆ILNWPI
ect(-1)
R-squared
F-statistic
Prob(F-statistic)
Coefficient
0.097131
-0.015716
0.52684
-0.55201
0.6937
8.4939
0.001
Std. Error
t-Statistic
0.029897
3.2489
0.093605
-0.16790
0.23672
2.2256
0.12732
-4.3355
Adjusted R-squared
DW-Statistic
Prob.
0.005
0.869
0.042
0.001
0.6120
1.5931
The error correction representation of above model is presented in table 4.5. The
coefficient of ect(-1) is negative and significant at 1 percent level. It shows that about 55
percent of the disturbance in the short run will be corrected each year. The short run
coefficients of LNDEF and ILNWPI are also significant at 1 percent level. There is positive
impact of DEF and 1 percent increase in DEF causes about 0.10 percent increase in CPI where
as 1 percent increase in IWPI causes about 0.53 percent increase in CPI in short run. The short
run coefficient of M1 is highly insignificant in the model. The coefficient of determination
indicated by R-bar squared is 0.61 showing the satisfactory explanatory power. The overall
regression equation is also significant at 1 percent level.
56
From this analysis, it is observed that the impact of DEF and IWPI are positive and
significant in short run and long run. The positive effect of IWPI is significantly higher than
the effect of DEF on CPI in Nepal. Thus, we can conclude that inflation in Nepal is highly
influenced by the Indian wholesale price index rather than the domestic macroeconomic
variables.
At last, one question may arise whether there is unidirectional causality or bidirectional
causality between CPI of Nepal and WPI of India. For this purpose, the Granger-causality test
for LNCPI and ILNWPI is carried out. The test results are presented in table 4.5. The Grangercausality test result rejects the null hypothesis that ILNWPI does not cause ILNCPI or it
accepts the alternative hypothesis that ILNWPI does Granger-cause LNCPI at 5 percent level
of significance. At the same time, the LNCPI does not Granger-cause ILNWPI null hypothesis
cannot be rejected rather it is accepted at 5 percent level of significance.
Table 4.5
Granger Causality Test for LNCPI and ILNWPI
Null Hypothesis:
ILNWPI does not Granger Cause LNCPI
Obs
20
LNCPI does not Granger Cause ILNWPI
F-Statistic
4.25812
Prob.
0.0343
1.13766
0.3467
This result shows that there is unidirectional causality between the variables from IWPI to CPI
of Nepal. It means wholesale price index (IWPI) of India affects the consumer price index
(NCPI) of Nepal but NCPI does not affect the IWPI which is the expected result.
CONCLUSIONS AND POLICY IMPLICATIONS
Deficit financing budget deficit from foreign loans or grants and revenue from
seigniorage expand money supply in an economy. Expansion in money supply higher than the
increase in economic activities causes inflation. From fiscal policy perspective, deficit
financing increases the government expenditure and it raises the aggregate demand. This
causes demand pull inflation. Therefore, fiscal deficit, money supply and inflation are
interrelated macroeconomic variables. In case of Nepal, inflation is about double digit in recent
years and fiscal and monetary remedial measures have been becoming ineffective to curb it.
India is a major trading partner and Nepal has open border with India. The inflation of India
may cause the inflation in Nepal. The study has focused to identify the domestic and external
factors to determine inflation in Nepal. The long run and short run relationship among the
variables fiscal deficit, money supply, consumer price index and Indian wholesale price index
are examined in this paper. The paper has used the secondary source of time series data from
1990 to 2011. The econometric instruments used in the study are unit root test, Autoregressive
Distributed Lag (ARDL) approach to cointegration and its error correction representation.
The empirical results while assessing the domestic data exhibit that the effect of fiscal
deficit and narrow money supply has positive short run and long run impact on inflation. But,
the relationship is very weak. While adding one more external factor i.e wholesale price index
of India along with domestic factors fiscal deficit and narrow money supply in the model, we
found very significant and positive impact on consumer price index of Nepal. Moreover, the
positive effect of Indian wholesale price index is significantly higher than the effect of fiscal
deficit in long run and short run. But, the effect of narrow money supply is highly insignificant
57
to cause the inflation in Nepal. Therefore, inflation in Nepal is highly affected by external
factor rather than domestic factors. Consequently, control of inflation through monetary policy
and fiscal policy is becoming challenging in Nepal. Thus, Nepal should diversify the over
dependent trade with India and explore the markets in other countries as well for the
implementation of independent monetary and fiscal policies.
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Areas, 42(1), 183-199.
59
THE FUTURE OF DE NOVO BANKS
James B. Bexley
Sam Houston State University
ABSTRACT
In today’s environment, it is very difficult to obtain a charter for a de novo (meaning a
new bank) bank. This study will examine the current environment for chartering de novo
banks, and examine the literature in the field of de novo banks. It will set out the critical
elements for obtaining a charter, such as examining market demographics, evaluate
competition, show need, the specific plan, professional involvement, and meeting with
regulators. Since the economic downturn in late 2008, very few charters have been
granted. In the years preceding the economic meltdown, there were hundreds issued over the
United States. Opportunities for future de novo charters will be discussed.
60
DOES HEDGING REDUCE RISK?
Garland Simmons
Stephen F. Austin State University
ABSTRACT
In this paper both theoretical and empirical methods are applied to understand the
hedging behavior of companies which compete in the American airline industry (2007-2012)
as they seek to cope with higher costs for jet fuel. In this context the question, “Does hedging
reduce risk?” is addressed. The empirical record demands an answer of no to this question,
even though in theory hedges could be constructed that would reduce risk.
In the first part of the paper the notion of risk is reduced to the problem of estimating a
first passage time given a random walk sequence of jet fuel prices so that the effect of reducing
the variability of jet fuel costs can be related to the probability that these fuel costs penetrate
some pre-specified upper boundaries can be studied. In the second part of this paper the
decision to hedge or not to hedge input costs is considered from the vantage point of game
theory. A Bayesian game in two future states, one where input costs increase and the other
where input costs do not is devised for two competing airlines in order to understand why
airlines may refuse to hedge away the possibility of future increases in input costs. The last
part of this paper is an empirical data analysis of differences in jet fuel costs, net of hedging
results, for the six largest American air carriers from 2007 through 2012. A parametric test,
the Randomized Block Analysis of Variance, and a non-parametric tool, the Friedman test, are
used to study differences in jet fuel prices that are explained by decisions on the part of
airlines to hedge or not to hedge jet fuel costs.
The purpose of a hedge is to reduce risk. A gold miner may agree to sell her some
portion of future production for a fixed price known today by way of a forward pricing
contract, thus shifting the risk that in the future gold prices might plunge to someone else. A
tractor manufacturer may transform its floating interest rate debt obligation into a fixed rate
commitment by entering into an interest rate swap agreement to make fixed interest rate
payments and accept floating rate payments. But what about an airline that hedges its jet fuel
costs by agreeing under contract to purchase jet fuel in the future at a fixed price? If in this
oligopoly competitors all hedge alike, then no airline will be at a disadvantage if in the future
jet fuel prices fall, even though all have locked in at an older, higher price. But what if some
airlines hedge and some do not? Hedging may have fixed the price of jet fuel for those who
61
chose to hedge, however: Can hedging still be said to reduce risk? That question motivates
this paper.
Since hedging is an investment problem, one might reasonably expect traditional
capital budgeting concepts to be applied to the question of whether or not a hedge investment
should create or destroy shareholder value. Irving Fisher (1930) invented the concept Net
Present Value (NPV), the quantity of shareholder wealth created by a management’s
investment decision. His concept is important, and remains even today a staple in universitylevel business curricula, because it links a company’s stock price that trades in capital markets
to the quality of that company’s strategic planning process. NPV is that analytical device that
attempts to link decisions made inside a business organization with their market values, as
determined in capital markets. Robert Heilbroner in his book, The Worldly Philosophers
(Heilbroner, 1986, pages 18-20) writes that economic problem of what to produce and how
much can be solved by one of three methods: tradition, command or free markets. NPV is that
concept which connects the investment decisions made within the context of the command
economy of the corporate pyramid with the free market economy of capital markets by
measuring the change in shareholder wealth that should result from the managerial investment
decisons. But in perfect markets where there is pure competition it may well be the case that
decisions to hedge or not are all zero NPV decisions; because, as Aretz and Bartram (2010)
note, shareholders themselves can choose to hedge or to not hedge risk without any assistance
from corporate management. To apply this reasoning to the case of the airline industry, if
Southwest Airlines should choose to stop hedging the risk that jet fuel prices might increase,
there remains nothing to stop shareholders and bondholders from choosing to hedge this risk as
individuals.
Some argue that corporate managers can generate positive NPV from hedging decisions
in the presence of capital market imperfections produced by tax law and bankruptcy costs, but
empirical evidence in this regard is slight. See Mackay and Moeller (2007) and Campello, Lin,
Ma, and Zou (2010) for more information about the connection of market imperfections and
the ability of corporate managers to create wealth by way of hedge decision making. Be that as
it may, Iin the context of oligopolistic market structures, I think that NPV should be informed
by random walk models and a game theory approach. What follows is a justification as to why
random walks and game theoretic models should be applied, and a section describing some
empirical realities concerning the hedging of jet fuel costs in the airline industry.
A RANDOM WALK
The purpose of hedging is to reduce risk. In this section the effect of hedging on risk
reduction is considered from the viewpoint of a random walk model which predicts first
passage times, the probability that a random variable following a random walk will penetrate
some pre-specified barrier over a longer period of time, say the next T years. I wish to study
the connection of reducing risk in the short run, measured below as the standard deviation σ,
62
which is determined by the volatility of rate of return on investment in the short run, to the
probability p of witnessing a loss of initial investment value greater than or equal to some
critical threshold amount at least once over the next T years. In this section it is demonstrated
that only if the standard deviation of possible short run rates of return can be reduced, will the
probability of witnessing a large loss of investment value be reduced. However, this result is
mitigated by the connection of the short term expected return µ to the probability of witnessing
such a loss. Larger expected returns are better than smaller expected returns, so if hedging
reduces expected return while at the same time reducing risk, the beneficial effect of hedging
could be eliminated altogether.
The first passage time model equation, notation, and parameter estimates follow: today
the value of the enterprise today is equal to S. The future value of this enterprise S(t) is a risky
value which is at present unknown. The problem here is to predict what this future value could
equal. In a random walk one estimates a drift parameter: assume that S earns a continuous
rate of return that is expected to equal to µ in each future time period. But this expected return
may or may not be realized for the continuous rate of return is a random variable, which in
every future time period is normally distributed with a standard deviation equal to σ. In every
future time period both the expected rate of return and the standard deviation around the
expected rate of return are assumed to be constant. The key measure one seeks is the
probability of a loss of some specified size on or before a certain period of time has elapsed.
To arrive at this answer, in a first passage time problem, one estimates the probability p that
this future value S(t) penetrates a threshold equal to C on or before future time period T is
reached.
Equation (1) below describes an answer to this question: the first passage time, or
hitting time, under a random walk. The probability p is the probability that the future value of
the enterprise shall have penetrated a future value equal to C on or before future time period T.

 C 

 C 
2
ln    T 

 ln S    T 
2
C 

    N   S 
p  N  




 S





T
T




(1)
where: C is the critical value that could be penetrated on or before time T by the future value
of the enterprise S(t), S is the present value of the enterprise today, μ is the expected
continuous rate of return, σ is the standard deviation of continuous returns, and T is the
number of years in horizon. If realized rates of return are normally distributed in cross-section
and investment values follow a random walk in time-series, the probability solution given in
this model above is exact.
Suppose we wish to never suffer a loss in value that is large enough to consume ten
percent or more of our original investment over the next T equal four years. Therefore, we
wish to know the probability p that such a loss would be realized at least once by the end of
63
four years. This type of problem is known as a first passage time problem in random walk
analysis. If we can know the parameters μ the expected continuous rate of return on
investment in the enterprise and σ is the standard deviation of continuous returns, then we can
solve for p, the probability that at least once in the next four years that the future value of the
enterprise will at any time be worth ninety percent of its initial value or less than that amount
over the next four years. Applying the first passage time model of equation one, if the future
value of the enterprise S(t) follows a random walk and given the following parameter
estimates: µ equals eight percent, σ equals twenty percent, T equals four years, S equals $100
and C equals $90, the probability p that the future value of the enterprise falls to $90 or less at
least once in the next four years approaches 100 percent.
What can be done to reduce this probability of witnessing a loss of ten percent or more
one or more times over the next four years? Hedging should work to reduce the standard
deviation σ of continuous returns so that this first passage time probability is reduced. So, in
this way hedging reduces risk. See Table 1 below to see the effect on the first passage time
probability that a reduction in standard deviation produces, assuming other variables held
constant.
Table 1
First Passage Time Probability Changes as Standard Deviation Changes
Expected
Continuous
Return on
Investment
Standard
Deviation Around
Expected
Continuous
Return on
Investment
Probability that a
Loss of 10 % or
More of the Initial
Investment Will Be
Witnessed at Least
Once Over
Investment
Horizon
10 %
8%
24 %
72 %
4 years
10 %
8%
20 %
65 %
4 years
10 %
8%
16 %
52 %
Investment
Horizon
Critical Loss
as a
Percentage of
Original
Investment
4 years
But the problem of hedging to reduce standard deviation is that hedging may also reduce
expected returns µ. However, this first passage time model allows the consideration of
changes in both of these variables. And even though hedging may reduce expected returns the
major point remains: hedging, if it is to work, must reduce the risk of witnessing a large loss
over an investment horizon by reducing the standard deviation around expected returns.
I think hedging can work to reduce risk in the case of business enterprises which
operate under pure competition. In the language of the first time passage model, σ can be
reduced by hedging. Certainly the wheat farmer can sell her crop at a certain price by way of a
producer’s hedge, thereby eliminating price risk associated with wheat. What about business
enterprises which compete in oligopolistic markets? The next section considers the question of
whether or not businesses competing in an oligopolistic market can reduce risk by way of
64
hedging. I think the next section shows that the answer to this question is no, unless all market
participants hedge alike.
HEDGING AS A GAME
In this section the problem airlines have of choosing whether or not to hedge jet fuel
prices is studied from a game-theoretic framework. The airline industry is studied because it is
an example of an oligopoly. As such it may be the case that your choice to hedge or not to
hedge jet fuel prices is not only connected to the future price of jet fuel but also connected to
your competitors’ hedging decisions. The combination of your hedging choice with that of
your competitors’ may have a bearing on which airlines survive apart from the future direction
of jet fuel prices.
To use game theory to think about hedging against the future possibility that future
input prices might increase, I begin with an assumed preference ordering over different future
states of the world. Certainly this preference ordering must reflect a desire for lower input
costs for each competitor. And in an oligopoly it must be true that one cares about their own
company’s cost structure but also care about the competitors’ cost structures too, so this idea
must also be reflected in a preference ordering.
What can each firm control in this game? Each can choose whether or not to hedge
against the possibility of higher input prices. What can firms not control? Two things:
whether or not their competitors hedge, and whether or not the prices for inputs rise. I hope
that game theory can help us predict under what conditions a firm should hedge.
In this section it is argued that in oligopolies, like the U.S. airline industry, that there
are profound problems associated with executing hedging strategies. To see this take the
problem of an airline that considers hedge possible increases in jet fuel prices. Perhaps all
airlines in this industry will choose to hedge. But if some airlines hedge while others do not,
then winners and losers are created based on the direction that jet fuel prices take and who
chooses to hedge. And if this is so, then the act of hedging when your competitor chooses not
to hedge, or vice versa, may not be risk reducing in the sense that buying insurance reduces
risk, but an act of placing a bet on the direction that jet fuel prices might take. So hedging
input prices reduces risk only when all participants in the industry hedge. Otherwise, winners
and losers are created by hedging: if you hedge and input prices go up, you win, but if you
hedge and input prices go down, you lose, and so forth.
Table 2 below describes preferences over possible future states of the world that will
permit us to keep score of who wins and who loses in a hedging game that will be illustrated in
a following table. Consider eight possible future states of the world. Each future state is
described in three dimensions: input prices, your decision to hedge input prices, and your
competitor’s decision to hedge input prices. To keep the model simple, it is assumed that one
can either hedge or not hedge, and input prices can only go up or down. A preference index
number of one indicates the worst possible future state and an index number of eight, the best
65
possible future state.
Table 2
Preference Over Possible Future States of The World
Where Rank 1 is Least Preferred
You
They
Input Price up
You Hedge
They Hedge
7
7
Input Price up
You Hedge
They Do Not Hedge
8
8
Input Price up
You Do Not Hedge
They Hedge
3
6
Input Price up
You Do Not Hedge
They Do Not Hedge
4
4
Input Price down
You Hedge
They Hedge
2
2
Input Price down
You Hedge
They Do Not Hedge
1
6
Input Price down
You Do Not Hedge
They Hedge
6
1
Input Price down
You Do Not Hedge
They Do Not Hedge
5
5
The way I have ordered these preference numbers, the worst thing that can happen to
“you” is that “you” hedges and “they” does not hedge when input prices fall: “they” can take
advantage of lower input costs, but “you” cannot do this because “you” has lost money
hedging. By contrast, the best thing that can happen to “you” is that input prices go up while
“you” has protected against that eventuality by hedging but at the same time “they” has no
such protection: “You” makes money from hedging that offsets higher input costs, but “they”
suffers from these higher costs. If both hedge, whether input prices rise or fall, neither gains
any advantage over the other. The same thing can be said if both do not hedge. My list of
preferences in Table 2 above are consistent with my hypothesis: in the context of oligopolies,
hedging does not reduce risk unless all participants hedge alike. Table 3 below shows a
reorganization of these same preferences such that each preference can be easily seen as
connected to the play of two players in a normal form (Bayesian) game. Reading from left to
right one sees pairs of preference index numbers. The first preference number of every pair is
the preference number for the row player, “you,” and the second preference number of every
pair is the preference number for the column player, “they.”
66
Table 3
Preferences In a Normal Form (Bayesian) Game With Two Players
INPUT PRICE UP
They Hedge
You Hedge
You Do Not Hedge
7
3
7
6
They Do Not Hedge
8
4
INPUT PRICE DOWN
They Hedge
You Hedge
You Do Not Hedge
2
6
2
1
8
4
They Do Not Hedge
1
5
6
5
Table 3 above reveals two sources of uncertainty in this hedging game. Both players
do not know whether or not input prices are going to move up or down, and neither player
knows if their competitor will choose to hedge or choose not to hedge input prices. In order to
simplify the analysis, I have assumed that players must choose either to hedge or to not hedge,
and that input prices can only move up or down. For the preference structure that I have
assumed, I can find no dominant (or dominated) strategy choice.
There is no dominant choice strategy choice consistent with the preference structure
that I have hypothesized. Such a finding is consistent with the notion that, in perfect markets,
corporate managers are not to be compelled to hedge price risk because shareholders
themselves can choose either bet or not bet against input price movements as they wish. This
freedom on the part of shareholders permits corporate managers to hedge or not hedge as they
like, but they cannot expect to create value for shareholders by their hedging decision. As a
matter of fact some airlines hedge and some do not. The effect that hedging or not hedging has
had on jet fuel prices for selected airlines is described in the next section.
EMPIRICAL
Data for this paper is made possible by the accounting professions’ desire to account
for derivative contracts at their market value so that investors and other interested parties could
more accurately gage the success or failure of publically held companies as they attempt to
deal with price volatility of foreign exchange and commodity markets. Originally
implemented in 2000, Statement of Financial Accounting Standards No. 133 defines cash flow
hedges and requires that the market value of those derivative contracts which are entered into
in order to make these hedges work be found on the balance sheet. And, for hedges that are
deemed under this standard to be effective at reducing risk, the changes in the market value of
derivative contracts employed to effect hedges are booked to other comprehensive income,
67
until the underlying exposure that is being hedged is either used or sold. When that is
accomplished, any gain or loss moves from other comprehensive income to the income
statement. In 2008 Statement of Financial Accounting Standards No. 161 amended FASB
Statement No. 133 to require that firms disclose how and why they hedge, and in what
accounts any gains or losses associated with hedging are located in the balance sheet, in other
comprehensive income, and in income statement accounts. Prior to the adoption of these
accounting standards it would have been difficult to gather data about the subject of the
empirical part of this paper, the jet fuel costs of large airlines after the results of hedging are
accounted for.
US Air being the exception, airlines wish to reduce the effect of a possible increase in
jet fuel prices, hedging jet fuel costs either by way of the swap market or by taking offsetting
positions in derivatives markets. However, these hedging efforts notwithstanding, the problem
of rising fuel costs persists. Hedging has not accomplished its purpose in the airline industry.
Hedges should have counteracted these rising jet fuel costs.
To see this failure, consider below the average per gallon fuel costs for six airlines in
the years 2007 through 2012, a period of rising jet fuel prices. This data below was found in
various 10-K reports. In each column a ticker symbol identifies each particular company.
Note in the table below that US AIR has the lowest jet fuel cost in three of the last four years.
Table 4
After Hedging Per Gallon Jet Fuel Costs After For Selected Airlines
UAL
AMR
DAL
LUV
USAIR
JBLUE
2012
$3.27
$3.20
$3.26
$3.30
$3.17
$3.21
2011
$3.06
$3.00
$3.05
$3.19
$3.11
$3.17
2010
$2.39
$3.20
$2.33
$2.51
$2.24
$2.29
2009
$1.80
$2.00
$2.15
$2.12
$1.74
$2.08
2008
$3.52
$3.03
$3.13
$2.44
$3.17
$3.08
2007
$2.18
$2.13
$2.24
$1.80
$2.20
$2.18
From left to right: United Airlines, American Airlines, Delta Air Lines, Southwest Airlines,
US Airlines, and JetBlue. Each number in the table above represents average jet fuel cost per
gallon, after the results of any hedging activity are accounted for. (Delta Air Lines, DAL,
since June of 2011 has declined to classify hedges as such in order to qualify accounting
treatment as hedges, but this has not distorted these comparisons above.)
The interesting point concerns US Air. Management of this airline decided in 2008 to
no longer hedge their jet fuel costs. By the third quarter of 2009 all of their hedging contracts
were gone. Since that time, even though jet fuel costs have continued to rise, their jet fuel
costs have been the lowest among the six airlines that I have studied. This makes me wonder:
how could it be that US Air has lowest jet fuel cost in a period of rising jet fuel prices when the
other five have hedged against these increases and they have not?
68
By contrast, Southwest Airlines, known for its past success in hedging rising jet fuel
costs, has not done as well as US AIR with regard to jet fuel costs. But hedging is not the
whole story for Southwest. Gwynne (2012) reports that Southwest, the largest domestic airline
which carried a record 104 million passengers last year, is the only domestic airline that has
avoided bankruptcy. The other major airlines: American, United, Delta, Northwest, and US
Airways have sought bankruptcy protection since September 11, 2011, or, like Continental,
have lost their separate existence. When the price of oil began to increase dramatically in 2000,
Southwest was protected in large degree by hedges, which saved the company four billion
American dollars from 2000-2011. But recently, as Carey and Nicas (2011) report, and as
Table 2 above shows, hedging has not benefited Southwest’s bottom line. Carey and Nicas
(2011) report that third quarter 2011 earnings deficit for Southwest Airlines were largely the
result of losses in its hedge portfolio. My sense is that when jet fuel prices dropped
dramatically after the recession of 2008, Southwest lost their cost advantage because their
hedges began to lose money, and in response, Southwest began a program of unwinding some
of their hedge positions while at the same time jet fuel prices started to climb.
Consider a ranking of airlines by their average jet fuel costs after the effects of hedging
are considered. Using the data set above Table 5 is created below. For each year, I assign rank
1 to the airline with the lowest cost and go up from there. In the year 2007 the average cost per
gallon of jet fuel for United and JetBlue were the same: third place and fourth place were tied.
Table 5
A Ranking of Selected Airlines By Their Per Gallon Jet Fuel Costs After
Hedging Effects
UAL
AMR
DAL
LUV
USAIR
JBLUE
2012
5
2
4
6
1
3
2011
3
1
2
6
4
5
2010
4
6
3
5
1
2
2009
2
3
6
5
1
4
2008
6
2
4
1
5
3
2007
3.5
2
6
1
5
3.5
Notice that the advantage that Southwest Airlines (LUV) had in lower jet fuel costs was gone
beginning in the year 2009, and that US Air, the airline that stopped hedging does well when
compared to the other airlines which have continued to hedge.
It may be that hedging is important in an economic sense, but that differences in
hedging practices from airline to airline are not statistically significant. Consider the null
hypothesis – Differences in hedging practices from one airline to another do not produce
different jet fuel costs. The alternative hypothesis is that differences in hedging practices do
produce different jet fuel costs. Take the data set contained in Table 4 which is the annual jet
fuel costs after hedging effects are accounted for, airline by airline for the years 2008 through
2012. Let the treatment variable be identified as the choice of airline, with six levels of that
69
treatment variable, one for each of the six airlines studied. And let the blocking variable be the
time periods in which annual per gallon jet fuel costs were measured, with six levels of that
blocking variable, one for each of the six years annual per gallon jet fuel costs were recorded.
Table 6 below is an ANOVA table that results:
Source
of
Variation
Airline
Year
Error
Total
Table 6
Analysis of Variance of Per Gallon Jet Fuel Cost After Hedging Effects
Degrees
Sum of
of
Mean
Squares
Freedom
Squares
0.15560
5
0.0311
8.761233
5
1.7522
1.41987
25
0.0568
10.3367
35
F Ratio
0.547939
30.84859
One cannot reject the null hypothesis that differences in hedging practices are uncorrelated
with jet fuel cost at any reasonable level of confidence. There is no evidence that differences
in hedging practices across the six airlines sampled over the years 2007-2012 produce different
annual jet fuel costs. As expected the inclusion of blocking variable – time period – was
highly effective in making the analysis of variance more powerful than it otherwise could be.
The blocking variable is statistically significant the 99 percent level of confidence. This test is
arguably powerful in a statistical sense and yet the null hypothesis cannot be rejected. This
leads me to believe that in fact airlines at least since the end of the 2008 recession do not see
that differences in their hedging practices lead to different results in regard to their jet fuel
costs. Although not shown above, a non-parametric approach, the Friedman test, produces
results identical to that of the analysis of variance.
But it may be the case that this will not be true in the future. Delta Air Lines (DAL)
has in 2012 purchased an oil refinery with the intention that this investment will alleviate a
shortage of jet fuel supply. Hargreaves (2012) reports that Delta purchased the shut-down
Phillips 66 Trainer Refinery for $150 million in 2012. It plans to invest another $100 million
to modify the refinery so that it can produce more jet fuel. From the Delta 2012 form 10-K I
find that in June of 2012 the Trainer refinery, located near Philadelphia, Pennsylvania, was
acquired in response to Delta’s inability to control jet fuel costs through hedging, in response
to higher refining margins for jet fuel, and declining supply of jet fuel in the North-Eastern
United States. The Trainer refinery has a capacity of 185,000 barrels per day. This refinery
restarted in September 2012 by Delta is buying its crude oil from BP under a three-year
agreement. Delta is selling non jet fuel products to Phillips 66 in exchange for more jet fuel.
Delta is also selling non jet fuel products to BP. Figure 1 below describes this transaction.
70
Figure 1
Delta consumes jet fuel
produced from its refinery
and produces other refined
products not consumed
BP purchases some refinery
production other than the jet fuel
from Delta’s refinery and sells
crude oil to the refinery
Delta exchanges some of
its refinery production
for more jet fuel with
Phillips
CONCLUSION
In the context of oligopolies hedging may be used by management to fix the price of
some input, but this decision cannot reduce risk unless all competitors hedge alike. If instead
some choose to hedge and others not, winners and losers will be created by the price
movement of the input being hedged. If input prices go down, those who hedge lose. If input
prices go up, those who hedge win. So, in the case of oligopolies, hedging does not reduce
risk.
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72
ASYNCHRONOUS ONLINE UNDERGRADUATE
BUSINESS DEGREE PROGRAMS IN TRADITIONAL
REGIONAL COLLEGES: COSTS AND BENEFITS
M. Keith Wright
University of Houston, Downtown
ABSTRACT
Because of popular beliefs about online education, many traditional business colleges
are now considering adding asynchronous online degree programs (AODPs) to their
classroom and/or hybrid programs. This paper reviews the important literature bearing on
that decision, and then examines it from the quality, economic, and ethical viewpoints. Our
review finds no evidence that such a strategy is, for traditional regional universities, likely to
create economic value equivalent to that of traditional classroom or hybrid strategies.
Furthermore, we find that online programs can damage the brand of traditional universities.
INTRODUCTION
Online learning is one form of distance learning. It involves the use of computer
networks and course management software to transmit educational materials among students,
teachers, administrators, and support staff.
Other forms of distance education include
interactive TV and teleconferencing. Online learning has become a global cultural
phenomenon. The use of internet tools such as search engines, social networks, YouTube,
Wikipedia, and course management systems, has truly revolutionized and popularized distance
education. For example Stanford University recently attracted more than 150,000 students to
a noncredit artificial intelligence MOOC (massively open online course) taught by a pair of
celebrity professors (Pappano, L, 2012; Rosenthal, 2013).
Because of popular beliefs about online courses, many traditional business colleges are
now considering offering entire degree programs online, in an apparent attempt to compete
head on with for-profit online schools such as The University of Phoenix, Devries University,
and many others. We call these programs AODPs - asynchronous online degree programs.
AODPs do not require students to perform learning and assessment activities at any exact time
or place, throughout the program. Thus, it is possible for such students to earn a college degree
without ever going to a physical classroom or testing center.
In today's service-oriented economy, most high paying jobs require a college degree.
Many traditional business college administrators view this new demand as an opportunity to
use AODPs as a low cost means to serve this new market segment. Many such administrators
initially saw this segment as consisting of self-motivated fulltime working adults without
access to a quality classroom education. We call this student "segment 2". Although many
colleges probably wanted to offer a quality AODP to segment 2, they instead had to settle for a
low quality program because of the unexpected high costs. These low quality programs have
in turn attracted a new segment of degree seeking students who find that these lower quality
AODPs require fewer study skills and less study time than do most classroom degrees (Beker,
73
et al, 2003). We call this student "segment 3". These students are attracted to asynchronous
online courses in part because of the associated un-proctored exams. This emergent "segment
3" culture is evidenced in this recently published quote from one of 250 Harvard students
recently accused of cheating on an un-proctored exam:
"He said that he also discussed test questions with other students, which he
acknowledged was prohibited, but he maintained that the practice was widespread and
accepted." (NY Times, 2012)
Due to the current popularity and convenience of online communication among younger
people, many traditional (segment 1) students with access to classrooms also prefer online
courses to classrooms.
Because of this burgeoning popularity of online courses, and increased demand for
college degrees, the incidence of online courses and has exploded. According to Columbia
University’s Community College Research Center, a third of all college students (more than
seven million) are now enrolled in online courses (Jaggars, S.J, 2009; NY Times, 2013).
There are now more than 90,000 college courses available online (AACSB, 2010). In addition,
89% of public, four-year colleges now offer at least one course online. More than 50% of
those colleges offer AODPs (asynchronous online degree programs) (Adams & Defleur, 2006).
As you may have guessed, many senior university administrators have been found
unfamiliar with much of the large body of empirical literature on asynchronous online learning
and its strategic implications for their institutions (Arbaugh et al., 2009; McCarthy & Samors,
2009; Kulchitsky, 2008).
One reason for this lack of awareness may be the obscure
distribution channels of this research (Redpath, 2012). Another reason is the frequency of
opinion articles that have appeared over the years in the Chronicle for Higher Education and
Biz Ed (Clift, 2009; del’Etraz, 2010; Bartlett & Smallwood, 2004b). The purpose of our paper
is to help fill this empirical knowledge gap.
Accordingly, we next review the most well respected empirical literature on online
teaching. Then we discuss its college-wide strategic implications and make recommendations
to administrators. We then conclude with suggestions for possible areas of valuable new
research.
LITERATURE REVIEW
Empirical studies comparing online to classroom learning typically use one or more of
the measures shown in table 1. Proponents of online courses cite primarily the 2009 metaanalysis published by the U.S. Department of Education. Table 2 shows some of the popular
conclusions drawn from that analysis. However, we now present a broader literature review,
which suggests that the US Department of education study does not sufficiently inform the
strategic decision to offer an AODP (asynchronous online degree program).
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Table 1: Empirical Research Categories
Measures
Methods
Article Samples
Sautter, 2007;
learning outcomes direct or indirect
Lim, et al, 2007.
Allen et al, 2002;
student satisfaction indirect
Lim, et al 2007
grades
direct
Lim, et al 2007
Kim, & Bonk, 2010;
faculty satisfaction indirect
Seaman, J.2009;
Tanner, et al. 2009
Table 2: Popular Conclusions: U.S. Department of Education Study
1) there no significant differences between online and classroom
learning outcomes and satisfaction, independent of subject matter
and student type;
2) blended or hybrid courses are better than purely classroom delivery.
3) online courses are less expensive and more scalable that classroom
courses.
Conditions for success in online learning
A substantial body of evidence has now been accumulated indicating that success in
any single online course is strongly dependent on many variables, including subject matter and
student type (Aragon et al, 2002; Jahng et al, 2007; Kick et. al. 2007; Shachar, 2008; Seaman,
2009; Sitzmann, et al., 2006; Zhao et al., 2005). Table 3 shows the variables believed to be
strongly interacting with the mode of course delivery (Peltier et al 2007).
Course Subject
There is much evidence to suggest that, under the right conditions, online courses in
applied qualitative courses such as management, marketing, and computer operations can be as
good as classroom courses. ( Friday, et all, 2006; Priluck, 2004; Sweeny, et al, 2001; TalentRunnels, et al, 2006; Ivancevich et al, 2009; Weber & Lennon, 2007). On the other hand,
there is much evidence to suggest that online courses do not compare favorably to classroom
courses in quantitative or theory-based subjects, such as economics, finance, and accounting
(Arbaugh & Rau, 2007; Arbaugh, J. B. 2000a; Arbaugh, et al, 2010; Gagne & Shepard, 2001);
Smith et al 2008; Vamosi et al, 2004). These subject matter effects are likely due to a higher
level of student teacher social interaction needed in the quantitative and theory-based subjects
(Joy & Garcia, 2000; Redpath, 2012).
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Table 3: Course Delivery Mode Interaction Effects
course subject
student perceptions of delivery mode
instructor perceptions of delivery mode
professor and student skills
faculty preferences
student learning styles
degree of possible social interaction
student and faculty preferences
student maturity
student learning styles
Social Interaction and Collaboration
Most studies of online learning indicate that the degree of effective social interaction,
especially between student and teacher, is one of the most important predictors of college
learning success (Brower, 2003; Liu et al.,2005; Garrison et al., 2000; Kim & Bonk, 2006,
2010; Ke, 2010; Nemanich et al.,2009; Peltier et al, 2003; Peltier et al., 2007; Shea et al.,
2010). Furthermore, there is literature indicating that successful undergraduate business
students require more teacher-student interaction than successful MBA students do. (Arbaugh,
J. B. 2010a). The research also shows that the teaching time and labor needed to facilitate
social interaction is much greater for online delivery than for the classroom (Alfred & Rovai,
2002).
The quality online teacher must take the time to provide explicit structure and rules for
social interaction; otherwise student participation will be lower than in the classroom (Sautter,
2007). Research also shows that for effective online collaboration, the instructor must create a
sense of “being there” through rapid response to individual student questions (Ke, 2010;
2010b).
Research shows clearly that merely opening a discussion board is not enough to ensure
effective collaboration (Redpath, 2012). The quality online instructor must also actively
facilitate the student-student interaction on discussion boards and group projects. This
includes identifying areas of agreement and disagreement, encouraging and reinforcing
contributions to learning, promoting exploration of ideas and productive dialogue, prompting
probing and prompting reflection (Ivancevich et al, 2009). This may require the instructor to
monitor several simultaneous discussions, provide timely feedback, and timely conclusions of
discussion threads. Such work requires a delicate sense of timing and balance among these
various instructional roles (Arbaugh, 2010b; Liu et al., 2005; Shea et al., 2010). Too much or
too little instructor involvement may have a negative effect on the quality and quantity of
student participation (Arbaugh, 2010b; Ke, 2010; Kellogg & Smith, 2009; Mazzolini &
Maddison, 2007).
Quality online teachers must provide clear instructions and monitoring of student time
constraints and dysfunctional group dynamics such as social loafing (Brower, 2003; Kellogg &
Smith, 2009). Such instructors must provide a strong rationale for online group work and a
76
good balance between that and individual assignments (Mullen & Tallent-Runnels, 2006). In
addition, research shows that if teachers do not grade group assignments in near real-time, low
student participation is likely (Brower, 2003). There is also evidence that low participation in
discussion boards is likely when students do not value their classmates' opinions (Redpath,
2012); and students have expressed dissatisfaction with superficial discussion board postings
that add no value (Ke, 2010).
Online instructors have reported feeling overwhelmed by the volume of discussion
board postings and the vigilance required to keep conversations on topic (Brower, 2003).
Teachers often respond to this pressure via coping behaviors such as superficial student
performance evaluation and avoidance of complex topics -- thus lowering course quality (Ke,
2010).
Economic Value of Online Programs
Many university administrators view online degrees a means to reduce costs, and to
gain economies of scale. However, as you might have surmised from the literature cited
above, the delivery time and labor involved in high quality online teaching significantly
exceeds that of an equivalent classroom. A study conducted by the Association of Public and
Land-Grant Universities found that 64% of faculty said it takes more effort to teach effectively
online as it does in the classroom (Seaman, 2009). In addition, there is research indicating that
the marginal cost of adding a student to a quality online course is greater than to an equivalent
classroom course (Noble, 1997). Finally, there is research indicating for online courses, there
is a negative relationship between class size and social interaction quality, and between class
size and student learning satisfaction (Hewitt& Brett, 2007).
In review, contrary to popular belief about high quality online courses, they are more
expensive per student than effective classroom courses. In turn, high quality AODPs are
significantly more expensive than equivalent classroom programs. Worsening the financial
picture for public colleges, there is some evidence that the extent of online course offerings can
reduce state appropriations (Jennings & Mixon, 2012). Furthermore, higher attrition rates and
faculty turnover may offset any revenue increases (Noble, 2007).
Attrition Rates and Ethical Issues in Online Programs
The attrition rates of MOOCs have been shown to be about 90% (Rosenthal, 2013).
However, MOOCs are non-credit, tuition-free programs. Unfortunately, the attrition rates for
online for-credit undergraduate courses are also significantly higher than those for classroom
programs. Columbia University’s Community College Research Center has done nine studies
covering thousands of programs in Washington and Virginia (Jaggars, S.J., 2006; Rosenthal,
2013). That research indicates that online community college students are significantly more
likely to fail or withdraw than classroom students. Another finding was that low-performing
students fall further behind in online courses than in classroom courses (Columbia, 2013;
Rosenthal, 2013). One of their studies, a five-year study issued in 2011, tracked 51,000
students enrolled in Washington State community and technical colleges. It found that those
who took higher proportions of online courses were less likely to earn degrees or transfer to
four-year colleges. The reasons cited were that students were attracted to online courses
77
because of their lack of English and time-management skills. A relevant quote from one of
these studies:
Lacking confidence as well as competence, these students need engagement with their
teachers to feel comfortable and to succeed. What they often get online is
estrangement from the instructor who rarely can get to know them directly. Colleges
need to improve online courses before they deploy them widely. Moreover, schools
with high numbers of students needing remedial education should consider requiring
at least some students to demonstrate success in traditional classes before allowing
them to take online courses…The online revolution offers intriguing opportunities for
broadening access to education. But, so far, the evidence shows that poorly designed
courses can seriously shortchange the most vulnerable student. (Jaggars, S.J., 2006).
In addition to the daunting challenges standing in the way of delivering a single high
quality online course, administrators should also consider the faculty perceptions AODPs.
This is one reason that many leading universities do not offer AODPs (Allen & Seaman,2009;
McCarthy & Samors, 2009).
For years, many leading academics have expressed direct and strong opposition to
purely online course delivery, viewing it as the harbinger of commoditization and
commercialization of higher education (Cox, 2005; Noble, 1997; Stahl, 2004). Some have
warned that that online learning may lead to a growing achievement gap between those who
can afford classroom courses and those who can not (Carr-Chellman, 2005). Then there are
the ethical issues associated with AODPs.
Public Perceptions of Online Programs
Impressions of AODPs have been negatively effected by recent media reports. There
have been many negative published accounts of cheating scandals, diploma mills, fake degrees
, and the aggressive advertising of for-profit online schools (Blumenstyk, 2005; Carnevale,
2002a; Perepres-Pena 2012; Wilner & Lee, 2002 ). It has been widely reported that some
online programs have faced legal accusations of false advertising (Bartlett & Smallwood,
2004a,b; Carnevale, 2002b; Koolan & Smith, 2003; Blumenstyk, 2005). Another example of
the bad press online degrees are now getting regularly is a recent NY Times editorial, which
asserts that courses delivered solely online:
"may be fine for highly skilled, highly motivated people, but they are inappropriate for
struggling students who make up a significant portion of college enrollment and who
need close contact with instructors to succeed" (Rosenthal, 2013)
Because of the 2008 downturn in the economy, business schools in general have come
under media attack from industry for not providing enough qualified graduates. Some leading
traditional business schools have defended themselves by criticizing online programs:
consider this quote from the dean of the Cambridge University business college (Barker,
2010):
78
"First and foremost, business education should be collaborative. Consider Oxford
University's MBA program, in which a class has about 240 students, each with about
six years of work experience, who represent nearly 50 countries and almost all sectors
of the economy. That amounts to some 1,500 years of experience. The pedagogical
opportunities in sharing it are obvious—and they require an environment in which
students actively work together and learn from one another….… in a collaborative
learning environment the people around you are more than just colleagues and friends;
they are an explicit and valuable part of your educational experience. It follows from
this that effective business education cannot be delivered exclusively online"(Barker,
2010)
Perhaps due in part to all the negative publicity online programs have recently gotten,
online degree programs face a difficult time getting accredited (AACSB International, 2007;
Redpath, 2012). Exacerbating the AODP image problem, the inconsistencies in US higher
education system have allowed many institutions to operate without accreditation, or with
accreditation by unrecognized agencies (Smallwood, 2004). Recent efforts to stop these nontraditional accreditation practices have led to tough state legislation ranging from mandating
additional accreditation requirements, to barring the use of unaccredited degrees on job
applications (Bartlett & Smallwood, 2004a).
Media rankings also contribute to the negative images of online programs. For
example, Financial Times Executive EMBA Rankings exclude executive MBA programs
(EMBA) that do not have 50% or more of their curriculum delivered in classrooms (Financial
Times, 2010). Instead, they relegate them to a separate list of unranked EMBAs that receive
far less attention (Financial Times, 2011).
The Market value of online Degrees
This negative impression of AODPs extends to employers as well: they have been
reluctant to hire graduates of purely online business programs (Carnevale, 2005, 2007). To
many employers, online degrees (and before that, correspondence degrees) are synonymous
with lower quality degrees. However, the brand recognition of the degree granting institution
mitigates the negative impression (Vault, Inc., 2001). Perhaps the best-respected study of these
effects was by Adams & Deflue in 2007. They addressed the question of whether a job
applicant with an online bachelor’s degree has the same chance of being hired as one who
completed their degree entirely in the classroom. Respondents were asked to choose one of a
pair of candidates based on the following three questions (See table 1.).
Table 4: Job Candidate Descriptions
Question 1: "Applicant A has the necessary degree. The degree was awarded by a college
or university where
100% of the applicant’s courses were completed via traditional classroom and lab
instruction."
Question 2: "Applicant B has the necessary degree. The degree was awarded by a ‘‘virtual
university.’’ This university does not have a campus, classrooms, labs or library, and
100% of the applicant’s courses were taken online".
Question 3: "Applicant C has the necessary degree. The degree was awarded by a college
79
or university, where 50%
of the applicant’s courses were taken online, and the other 50% were completed via
traditional classroom and lab instruction."
The first pairing, which had questions 1 and 2, showed that 96% (258 managers)
reported they would choose the classroom educated candidate over the online educated
candidate. The second pairing had questions 1 and 3 . Then 75% o f m a n a g e r s reported that
they would prefer the 100% classroom educated applicant to the 50% classroom educated
applicant.
These researchers also conducted a content analysis of the respondents' written
comments. Social interaction and classroom experiences surfaced as the theme of respondents'
most troubling perception of online coursework; but accreditation also surfaced as an important
hiring influence. Examples of such comments are shown in table 5. Another part of that
survey showed that many respondents commented that online courses from a known
‘‘traditional’’ college were "more acceptable" than those from an unknown. Furthermore,
about a third of respondents commented that an applicant with a mix of online and
classroom coursework was ‘‘more acceptable’’ than one with only online courses.
Respondents' comments also seemed to indicate that job experience was increasingly more
important than a degree, as a career progresses.
Table 5: Comments about hiring decisions
"The academic experience requires interaction between students, professors, and local
businesses. The internet, even when properly authenticated and accredited, creates a
‘‘sterile’’ learning environment. Opportunities to circumvent traditional learning methods
(interaction, role play, quizzing) create opportunities for less honest individuals to increase
their credentials."
"In my opinion a lot more than just the coursework is gained from classroom instruction;
feedback, interaction with others, participation, public speaking etc. It is my belief that this is
lost through on-line learning."
"Personal interaction between instructors and students presents a more real world
approach to learning. There are no jobs in this organization that are completed over the
Internet only."
"Students lose team experience and the ability to learn from each other. Part of learning is
interaction with peers and teachers. These skills are extremely useful in my work environment
and I would prefer candidates who have them."
Although we have seen no research that explains the processes at work when hiring
officials evaluate job applicant credentials, research implies that a significantly majority of
employers view AODPs with suspicion.
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In another of their national surveys, DeFleur and Adams (2004) found graduate
school admission administrators extremely reluctant to accept students with online bachelor
degrees: only 7% of administrators in the public institutions and 11% of private
institutions indicated that they would be admit such an applicant.
DISCUSSION
In review, we believe that the perspective gained from an analysis of the entire vast
body of empirical literature comparing online to classroom delivery reveals several things.
First and foremost is that online technology can add value to any college course. However
there are many situations where purely asynchronous online courses are inferior to classroom
courses. This is mostly likely to occur when faculty don’t have the extra time, assistance,
compensation, or training needed for quality online course delivery (Redpath, 2012). As a
result may faculty don't consider online activities appropriate for their discipline. For years,
many leading academics have expressed direct and strong opposition to purely online course
delivery, viewing it as the harbinger of commoditization and commercialization of higher
education (Cox, 2005; Noble, 1997; Stahl, 2004). Some have warned that that online learning
may lead to a growing achievement disparity between those who can afford to access
classroom courses and those who cannot (Carr-Chellman, 2005).
On the other hand, the
literature clearly shows there are conditions under which online courses can be as good as
classroom courses (Larson & Sung 2009). A proponent of online teaching recently
summarized these conditions nicely. Here is an excerpt from that article:
"The lack of face-to-face interaction [in online delivery] can be overcome by creating a
context where students can learn collectively and collaboratively. Communication
immediacy and richness, typically an advantage of classroom learning, can be overcome
by effective online instructional techniques and students’ ability to adapt to online
environments. The use of humor, personal anecdotes, and the shorthand and emoticons
that are part of the lexicon for online communication can counteract the absence of
body language in online environments. Instructors can create safe environments for
meaningful and honest communications by establishing a sense of trust and fairness,
disclosing more about themselves and their interests, and employing a variety of
pedagogical and social roles that facilitate online collaboration and learning. Particular
attention must be paid to minimizing instructor time devoted to technical and course
administration support …"
"Faculty often lack knowledge of the
pedagogy, instructional techniques, and
technical skills employed in online learning environments …."
"Faculty respondents rated their universities as “below average” in providing support
and extra compensation for online teaching. Training, alone, will not be sufficient to
support effective online teaching. Creation of an active online learning community
where faculty can share experiences on a continuous basis is more likely to sustain
faculty commitment and skills development …" (Redpath; 2012).
81
Because the empirical literature clearly enumerates the myriad of conditions that must
be in place to deliver a single high quality asynchronous online college course, it seems
entirely unlikely that an entire degree program offered asynchronously online will be as
effective as either a classroom or a hybrid program. Furthermore, contrary to the expressed
opinions of many business school administrators, the empirical literature clearly indicates that,
instead of decreasing the economic costs to schools with existing classroom facilities, a quality
AODP is as likely to add to total economic costs (Noble, 1997). These costs may be hidden in
the extra duties of dedicated faculty, or compensated for by the lower quality teaching of less
dedicated faculty. Other costs are computers, software, maintenance, underutilized physical
facilities, higher attrition rates, and damage to the institution's brand. Furthermore, these costs
may not be offset by sustainable increased revenue because of faculty turnover, and lower
sustainable enrollment (Noble, 1997).
CONCLUSIONS AND FUTURE RESEARCH
In conclusion, despite the popularity of some online courses, investments in high
quality AODPs are quite risky (See also Kulchitsky, 2008). To mitigate these risks, we feel
that such schools should take the following steps.
To avoid charges of false advertising, administrators should promote AODPs only to
self-motivated, older non-traditional, or advanced students. Weaker students just out of high
school or community college should be dissuaded from enrolling in AODPs, especially those at
less well-known regional schools. Such students are subject to the pain of discovering upon
graduation that their degrees are not nearly as acceptable to employers as classroom degrees.
Administrators of hybrid programs should not pressure students to take online classes by not
offering an equivalent choice of classroom classes. In the latter case, many students will take
on online class not because of preference, but because they do not want to delay graduation.
However, these same students may file formal complaints if they can not find a good job after
graduation. In addition, providing students with unforced choices between online and
classroom course offerings enables valuable metrics for ongoing continuous improvement
programs applicable to both delivery modes. Finally, to avoid damaging the brands of coexistent traditional programs, colleges offering asynchronous online degrees should label them
as such, to avoid their confusion with their classroom programs.
The evidence shows that, although online technology can add value to almost any
single college course, the business case for a high quality AODP is hard to make, especially for
regional state colleges facing large budget cutbacks. Taking a cue from large corporations,
where online training has been quite successful, business colleges should limit the amount of
asynchronous activities in their online courses. Synchronous activities such as conference
calls, teleconferences and webinars can greatly improve the quality of online courses.
Furthermore, inexpensive test-proctoring centers are readily available in most cities.
To mitigate further the risks of online college courses, administrators should not choose
course delivery mode without faculty input. Expert faculty members are more likely than
generalist administrators to apply online technology where it can be most educationally
effective. Delivery mode decisions should not be driven solely by administrators' hopes of
revenue increases.
Business school administrators can further mitigate the risk of AODPs by collaborating
with educational technology experts, and encouraging pedagogical research across disciplines.
82
Future strategic advantages for business colleges will likely accrue to those schools that
promote teaching innovation regardless of delivery mode: there are likely to be minimal gains
from additional studies to prove which mode of learning is better. The complex interaction
effects among instructional methods, learner characteristics, faculty characteristics,
technology costs, attrition rates, and other variables affecting learning quality raise the best
questions for further research (Arbaugh et al., 2009; Peltier et al., 2007). Course
management software will benefit greatly if researchers continue to develop and test emerging
design models: today's online course management systems are very incomplete in the areas of
security, vigilance, and learner-directed study (Machado & Tao, 2007). Course management
research should continue to explore the application of technologies including design science,
social networking, knowledge management, self directed learning, and mobile computing. (Li,
2007; McKerlich & Anderson, 2007; Twining, 2009). Regardless of the future of AODPs,
business colleges will continue to depend on research faculty to explore advances in hybrid
pedagogy.
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88
WHAT’S CONTINUOUS IMPROVEMENT?
STRATEGIES FOR DEVELOPING –
FIRST DO -THEN LEARN
Chynette Nealy
University of Houston Downtown
INTRODUCTION
In the varied topography of professional practice, there is a high, hard ground
practitioners can make effective use of research-based theory and techniques, and there is a
swampy lowland where situations are confusing “messes” incapable of technical solution. The
difficulty is that the problem of the high ground, however great their technical interest, are
often relatively unimportant to clients or to the larger society, while in the swamp are the
problems of greatest human concern (Schon, 1983, p. 42). This “reflective ideology” is used
with learners enrolled in my business communication classes to explain discrete points about
writing related to “continues improvement.” In brief, learners are told “practice isn't the
thing you do once you're good. It's the thing that makes you good (Gladwell, 2008, p. 42). This
paper examines previous research and proposes innovative strategies for closing the gap
between theory and practice that can help learners understand and be better equipped for
professional workplaces.
REVIEW OF LITERATURE
For summary purpose, a longitudinal study related to closing the gap between theory
and practice conducted by Du-Babcock (2006) found teaching business communication theory
and models without associated application materials is inadequate and will lead to learners not
being capable of applying communication skills in the future. The findings support Dewey’s
(1938/1997) theoretical approach that stated learning occurs when learners focus their
attention, energies, and abilities on solving real world problems and reflect on their
experiences. Despite this reliable academic evidences, gaps remain between transferable
workplace skills employers look for in college graduates. For example, employers and writing
coaches say business-school graduates tend to ramble, use pretentious vocabulary or pen toocasual emails (Middleton, 2011). In turn, business programs respond to such findings
recommending rethinking pedagogical approaches that develop skills rather than content
assessment (AACSB, 2003, 2007, 2011; Dias & Pare, 2000; Bell, 2009; Hoover, et al., 2010).
With this in mind, the author reviewed Bloom’s Taxonomy: knowledge,
comprehension, application, analysis, synthesis, and evaluation in terms of traditional
pedagogical grounded in - first learn, then do. The aim was to contribute to rethinking
traditional approaches by examining innovative strategies that suggests reflection as a practical
89
guide for developing skills – first do, then learn. Two approaches underpin this rethinking:
Problem-based learning (PBL) – action first learning by starting with a realistic problem and
taking action to solve the problem ( Smith, 2005; Pennell & Miles, 2009) and Shulman (2002)
table of learning: engagement and motivation, knowledge and understanding, performance and
action, reflection and critique, judgment and design and commitment and identity.
Both are rooted in action research, a disciplined process of inquiry conducted by and
for those taking action, thereby assisting
teachers-practitioners with improving and/or
rethinking actions (Sagor, 2000; Gordon, 2008; Lassonde & Israel, 2009). Critical reflection
on one's practice and understanding leads to higher-order thinking in the form of a capacity to
exercise judgment in the face of uncertainty and to create designs in the presence of constraints
and unpredictability (Shulman, 2002). It is important for business communication professor to
maintain currency in terms of disciplined based expertise and pedagogical skills and
knowledge. An example application using problem-based learning and Shulman’s table of
learning is provided. Additional examples with points to consider when applying these
strategies are available for exchange if this paper is accepted for presentation at the conference.
First Do –Then Learn
One of the key elements of Shulman’s model is it allows for learning to occur without
particular order. The implication of sequence and hierarchy within taxonomies obscures their
true value, because taxonomies are not and should not be treated as theories (Shulman, 2002).
It is plausible to suggest teachers-practitioners applying this premise when working with
learners prepare them to better understand what is expected in the workplace –best practices.
For example, learners enrolled in my business communication classes often view writing as an
“extreme challenge.” As such, it becomes crucial for the instructor to design applications
targeting Shulman’s last stage Commitment and Identity. This strategy improves learners’
insights about measurable outcomes related to - Engagement and Motivation. A common
assignment, free write, allows learners to experience an industry practice –performance
evaluation. The objective here is to explain to learners the relationship between thinking and
writing in term of continuous improvement with regard to writing challenges. The approach
encourages learners to work toward goals with bench indicators mapping continuous
improvement. To jumpstart the –do- we use a “Penny Journal” with a reflective question
designed to help each learner identify natural strengths and capabilities. We use the free writewrite for ten minutes-even if you draw a blank-write something, e.g. to do list, grocery list, or
muddiest point from last lecture. At the end of the ten minutes, learners reflect on their
comments and indentify the best comment/s. As the semester progresses, learners are able to
map continuous improvement of their writing skills within the context of course content and
professional development. Findings from this application show learners respond favorably in
terms of thinking about the application as an authentic work experience. So, learners are
engaged and motivated to understand why employers view writing as such a valuable
workplace skill.
90
REFERENCES
AACSB International – The Association to Advance Collegiate Schools of Business. (2003). Proposed eligibility
procedures and standards for business accreditation. Retrieved August 13, 2010, from
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procedures and accreditation standards for business. Tampa, FLA. AACSB International.
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AACSB International from the globalization of management education task force. 3, Tampa, FLA.
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Bell, M. (2009). Introduction: Changing the world through what and how we teach. Academy of Management
Learning & Education, 8, 574-575.
Dewey, J. (1938/1997). Experiences and education. Macmillan.
Dias, P. & Pare, A. (2000). Transitions: Writing in academic and workplace settings. Cresskill, NJ: Hampton
Press.
Du-Babcock, B. (2006). Teaching business communication: Past, present, and future. Journal of Business
Communication, 43, 253-264.
Gladwell, M. (2008). Outliers: The Story of Success. Little, Brown & Co., New York.
Gordon, S. (2008). Collaborative action research: Developing professional learning communities. New York:
Teachers College Press.
Hoover, J., Giambatista, R., Sorenson, R. & Bommer, W. (2010). Assessing the effectiveness of whole person
learning pedagogy in skill acquisition. Academy of Management Learning & Education, 9, 192-203.
Lassonde, C. & Israel, S. (2009). Teacher collaboration for professional learning: Facilitating study, research,
and inquiry communities. San Francisco, CA: Jossey-Bass.
Middleton, D. (2011). Students Struggle for Words. Wall Street Journal. Executive Education,
Pennell, M. & Miles, L. (2009). It actually made me think: Problem-based learning in the business communication
classroom. Business Communication Quarterly, 72, 377-394.
Sagor, R. (2000). Guiding school improvement with action research. Alexandria, VA: Association for Supervision
and curriculum development.
Shulman, L. (November/December 2002) . Making Differences: A Table of Learning. Change, 34, 6, 36-44.
Smith, G. (2005) Problem-Based Learning: Can It Improve Managerial Thinking? Journal of Management
Education, 29, 2, 357-378.
91
THE INTERNATIONAL SANCTIONS
PLACED ON IRAN
Daniel Rodriguez
Sam Houston State University
Charles Moore
Sam Houston State University
IRAN’S POLITICAL, RELIGIOUS, AND ECONOMIC HISTORY
Iran has a long history with the United States along with many of the countries that
neighbor the nation or have assisted the U.S. in trying to clean up the ongoing political turmoil
they face. Past encounters with Iran have resulted in barriers being imposed by the United
States in hope of gaining full co-operation to the guidelines the U.N. have set in place to
guarantee political rest moving forward. To understand this relationship we will look at Iran’s
political/religious background, economic resources, the road to international sanctions, and the
trade sanctions that have been imposed on Iran.
Beginning to understand the what, when, where, and why of Iran’s history requires a
brief overview of Iran’s religious/political background. Most countries have a reflection of
religious belief in their political structure however Iran has much more than many anticipate.
The original political structure of Iran was built on the Koran, which is the Islamic version of
the bible. “The Sharia comes from the Koran, the sacred book of Islam, which Muslims
consider the actual word of God” (Constitutional Rights Foundation). Sharia is the Islamic law
that was based on the teachings from the Koran and hadith. Hadith are the important tools from
the interpretation of the Koran by prophets, which were used to build the Islamic law that
governs their political system. The only law-based material in the Koran reflected through the
Sharia was law pertaining to family law, criminal law, and criminal procedure. An elected
leader known as the Wali Faqih, who essentially in Islamic belief reflects the will of God upon
their followers, is ruler of the legal system. The Sharia contains numerous regulations to both
public and private life that influence the way business interactions are performed. “Islamic law
prohibits usury, the collection and payment of interest, and prohibits trading in financial risk
(which is considered a form of gambling). Islamic law also prohibits investing in businesses
that are considered unlawful (businesses that sell alcohol or pork, or businesses that produce
media such as gossip columns or pornography, which are contrary to Islamic values)”
(WikiEducator). Several of these points go overlooked in business transactions around the
world particularly in the United States. Taking the responsibility of following these significant
details to pursue a business transaction within a country such as Iran is vital to the recognition
of the business deals.
92
The Koran has a major influence behind the political structure of Islamic law. For
example, as Hallaq (2009) suggests “Sharia (sic) does not distinguish between law and
morality…the absence of distinction becomes a clear and undoubtable liability…” (Hallaq
2009, 2). Iran’s political system still stands behind the Koran based ideology but appears to
have a more western influence. This western influence that many Muslims welcome with open
arms is one of the greatest reasons for their political tension. “Most Muslim legal scholars
today believe that the Sharia can be adapted to modern conditions without abandoning the
spirit of Islamic law or its religious foundations” (CRF). Presently not all Iran occupants
believe this to be the path of greater being. This has caused an ongoing crusade between the
two different ways of life. Even though the United States continues to have a westernized
influence on Iran, “The solutions of these problems cannot be left by default to the
fundamentalists in any society, but at the same time it is not productive to provoke the
fundamentalists to acts that can destroy a society” (Arnold), there is a happy medium between
guiding and forcing practices on a society.
Iran has countless economic contributors which come from being a country rich in
natural resources. The most notable of these resources is petroleum, which makes up over
eighty percent of their exports. “Iran is the second biggest importer of gasoline after the United
States, importing over 192,000 barrels daily in 2006, at a cost of $5 million dollars” (Middle
East Progress). As one of the chief exporters of petroleum Iran sells oil to many major
countries in exchange for products, consumable goods, and military equipment. There are
several other export items such as chemical/petrochemical products, nuts, fruit, and carpets.
These items don’t compare to the importance of petroleum production but offers a fair share of
economic income the country receives. Although rich in petroleum production the country
does not have the resources to meet the demands of its own country’s needs, consequently
causing them to actually import fuel from other surrounding countries.
Now with some minor knowledge on Iran’s political system along with economic
resources, we can look at how the relationship between the United States and Iran came to such
disagreement along with the development of numerous sanctions placed on Iran. “The United
States has long-standing concerns over Iran’s nuclear programs, sponsorship of terrorism, and
human rights record” (U.S. Department of State). The most significant reason the U.S., along
with many other countries, have placed sanctions on Iran is because of their nuclear
development and strategies to continue building upon that program. Any new development of
powerful weapons such as these, especially for a country who has an extended record of
violence towards other nations, must be watched and controlled to keep a major war from
developing. “Iran still has not recognized Israel’s right to exist and has hindered the Middle
East peace process by arming militants, including Hamas, Hizballah, and Palestinian Islamic
Jihad” (U.S. Department of State). Iran is a country filled with a great deal of terrorist groups
and citizens, which accept their beliefs over any other beliefs or ways of life.
The ongoing crusade between Israel and Iran has been going on for decades due to the
lack of appreciation of differences in culture, religion, and political parties. The United States
and Israel have a lengthy history as allies and aiding military power. This skirmish between
Iran and Israel involves a large number of the surrounding nations causing a massive problem,
93
which requires diplomatic presence to keep matters under control. “The United States broke
diplomatic relations with Iran in 1980 after the seizure of the U.S. Embassy and 52 Americans
by Iranian students” (U.S. Department of State). After the incident in the eighty’s the U.S.
broke all political ties with Iran and still today has no standing affiliation with Iran or any
country that does not follow sanctions imposed by the U.S and the U.N. Not only has the U.S
cut all political relations with Iran but also by presidential orders that there are to be no
financial assistance or investment performed towards Iran whatsoever.
The European Union’s relationship with Iran has not always been comparable to that of
the United States, but over time through aversion towards the development of their nuclear
program, ties to terrorist support, and the ongoing crusade against other nations; the E.U.
became inpatient with the lack of response to their requests and placed very similar sanctions
on Iran. A resolution was reached between the E.U. and Iran in 2003 but only lasted for about
three years after hiding evidence of nuclear progressions. “In early 2006, Iran was referred to
the U.N. Security council because of its failure to provide information on its past covert
nuclear program.The EU continued to take the lead in trying to convince Tehran to cooperate
with the international community” (Posch, 2010).
The UN followed suit of the United States by imposing strict sanctions on Iran dealing
with any type of trade or involvement. Any country doing business deals with Iran that
amounts over $20,000 U.S. dollars must first go through an authorization process by the
Department of Foreign Affairs and Trade before the deal can successfully be processed. Now
this instruction has no way of physically being disciplined if not followed, but the UN and EU
have major influence on countries to abide by international laws or instructions set in place to
ensure these types of programs are not nourished for growth.
THE SANCTIONS IMPOSED ON IRAN
The sanctions that have been drafted or imposed on Iran are of three categories those
established by the: United Nations Security Council; European Union (EU); and the U.S.,
respectfully. In order to understand Iran’s relations with the International community it is
integral to have cognizance of the sanctions that have been used in repugnance to its actions
worldwide. Despite, the factors relating to terrorism and lack of cooperation by Iran, the
sanctions that will be covered here are precise and delve much further into the underlying
issues that have caused International action.
UN Resolutions
The UN Security Council has proposed six (6) resolutions since 2006 to 2012; four of
which have become binding. Each of these resolutions will be considered separately in order to
exhibit the development and concern of the sanctions that have been proposed. The UN has
had ongoing difficulties with Iran and its officials since 2006; the first resolution stemmed
from,
“…the
IAEA
Director
General’s
report
of
27
February
2006
(GOV/2006/15)…which…lists a number of outstanding issues and concerns on Iran’s nuclear
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programme…” (UN Security Council (1) 2006, 1). As the UN Security Council asserts (2006),
the International Atomic Energy Agency, IAEA, is in part the initiator of all the UN
resolutions. Within resolution 1696 (2006) there are at least five (5) main points and concerns
in regard to Iran’s nuclear program. The first of which is related to the intent or use of Iran’s
nuclear technology program and coincides with the second regarding an overall lack of
knowledge on the part of the IAEA regarding the program. It should be noted Iran’s noncooperation initially in 2006 involving its nuclear program developed a sense of deception or
concealment on their part; and was being displayed to camouflage their true intent. Moreover,
among the listed concerns the UN Security Council (2006) stresses the concern that Iran,
“…could have a military nuclear dimension…the existing gaps in knowledge continue to be a
matter of concern, and that the IAEA is unable to make progress in its efforts…” (UN Security
Council (1) 2006, 1).
The UN Security Council (2006) further emphasizes in issue three (3) that upon
agreement that IAEA officials are able to provide a report, that such a report would be not only
a relief but a benefit to the International community in its attempts to verify that the nuclear
program is for strictly non-proliferative purposes. While the first three issues are based on the
subject of intent and the IAEA’s lack of knowledge about Iran’s nuclear program, the issues
that follow are directly related to nuclear enrichment and proliferation activities. Issue four (4),
“Demands...that Iran shall suspend all enrichment-related and reprocessing activities…” (UN
Security Council (1) 2006, 2). Shortly thereafter the UN Security Council (2006), issue five
(5), highlights that China, the U.S., the United Kingdom, France, Germany, and the Russian
Federation have a solution to the overall situation in order to reestablish relations and
cooperation among Iran. Although Resolution 1696 (2006) is rather short in context it is the
general framework for the development of the next resolutions that will be covered.
Resolution 1737 (2006), is unique in that it begins to offer some restrictions on items
such as arms and financial assets that could be allocated for use in Iran’s nuclear program. In
an international context this could prove to be a very impacting resolution proposed by the
UN’s Security Council. As with Resolution 1696 (2006), and all resolutions hereafter, the UN
Security Council (2006) asserts that Resolution 1737 (2006) was the result of the details, or
lack thereof, of the IAEA Director General’s reports. Issue one (1) was a reiteration of the
previous demand for Iran’s suspension in relation to its nuclear activities; the difference here is
the request to suspend, “…research and development…and…work on all heavy water-related
projects…” (UN Security Council (2) 2006, 1). Although this may seem to be a rather short
extension of the previous suspension, the issue at hand is to cease all nuclear activities;
whether for a non-proliferation purpose or not. The next issue of notable value relates to the
decision of the Security Council to extend suspension of nuclear related items that are either
being imported to or exported from Iran to other nations. This is perhaps the first of many such
requests of the International Community in regards to restrictive relations relating to trade with
Iran. Furthermore, “…all States shall also take the necessary measures to prevent the provision
to Iran of…financial assistance, investment, brokering or other services…related to the supply,
sale, transfer, manufacture or use of the prohibited items…” (UN Security Council (2) 2006,
3). These preventative measures were related to prohibited items that were itemized in the
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resolution. Another notable point to highlight is that Resolution 1737 (2006) has taken the
initiative necessary to advise States to, “…exercise vigilance regarding entry into or transit…of
individuals who are engaged in…or providing support for Iran’s proliferation sensitive nuclear
activities” (UN Security Council (2) 2006, 4).
The UN Security Council (2006) states that Resolution 1737 (2006), paragraph 17
directly relates to the training and education of Iranian nationals in the subjects that could
further develop Iran’s nuclear program; and depending on the interpretation of the sanction it
could go so far as to deny individuals access to higher education. The following is an excerpt
related to the restriction on education from paragraph 17 that, “Calls upon all States to exercise
vigilance and prevent specialized teaching or training of Iranian nationals, within their
territories or by their nationals… (UN Security Council (2) 2006, 6). The final highlight of
Resolution 1737 (2006) is the emergence of an Annex listing individuals and entities that are
either directly related to Iran’s program or have been in contact with it.
In relation to the preceding resolutions the suspension of two key resources, if only in a
restrictive sense, have been highlighted those being financial resources and the means of
International trade. The UN Security Council (2007) puts forth Resolution 1747 (2007) and
builds upon the restrictive items involved in International trade with Iran; the use of financial
assistance; and proposes an agreement set forth by the U.S., the United Kingdom, Russian
Federation, France, Germany, and China.
Resolution 1803 (2008) is mainly a reiteration of the previous resolutions with the
exception of a few distinct amendments. The UN Security Council (2007) in paragraph five (5)
builds upon the suspension of individuals who should be denied entrance into a country and
makes the sanction more specific by listing “…individuals designated in Annex II to this
resolution as well as additional persons designated by the Security Council or the
Committee…” (UN Security Council 2008, 3). The UN Security Council (2007) further
establishes in paragraph 10 there is evidence of a gradual suspension of financial resources on
a large scale by listing banks specifically such as “…Bank Melli and Bank Saderat and their
branches and subsidiaries abroad…” (UN Security Council 2008, 4). As with the suspension of
certain materials to or from Iran this suspension is regarding funds relating to nuclear
proliferative activities. The UN Security Council (2008) states further that the development
relating to International trading is set out in paragraph 11 advising States to inspect certain
vessels from Iran to dispel any suspicions that prohibited materials may be aboard.
Perhaps the most important sanction imposed by the UN Security Council (2010) in
Resolution 1929 (2010) is the suspension of uranium mining, as set in paragraph seven (7) and
further sanctions in relation to International trade with Iran. The decision to place further
suspensions on Iranian shipping vessels has been set out by in Resolution 1929 (2010) by
prohibiting aid and other services such, “…bunkering services, such as provision of fuel or
supplies, or other servicing of vessels…” (UN Security Council 2010, 6). Considering the
initial suspension on relations between Iran and States engaged in trade or commerce this one
in particular has a very distinct and effective potential regarding International law and
business. It could be gathered that this suspension would give the appropriate countries the
discretion to deny aid or service to any ship from Iran as long as, “…they have information that
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provides reasonable grounds to believe they are carrying items the supply, sale, transfer, or
export of which is prohibited…” (UN Security Council 2010, 6). The Security Council (2010)
also created a “…(“Panel of Experts”), under the direction of the committee…” (UN Security
Council 2010, 8). The UN Security Council (2010) asserts that the creation of this “Panel of
Experts” was specifically for the purpose of assisting the committee in carrying out certain
provisions of previous resolutions to the end that the sanctions imposed may be carried out
properly. The final characteristic that the UN Security Council (2010) has highlighted in this
resolution is listed in Annex I which specifically describes and identifies the geographic
location of entities directly or indirectly related to Iran’s nuclear activities. The first Annex set
out in Resolution 1747 (2007) has developed and expanded dramatically and Annex I of
Resolution 1929 (2010) is the result thus far. As in Annex II of Resolution 1747 (2007) the UN
Security Council (2010) provides Annex IV of Resolution 1929 (2010) that amends and
develops the resolution by providing the conditions of an agreement between Iran and the U.S.,
the United Kingdom, Russian Federation, France, Germany, and China. Furthermore, the UN
Security Council (2010) establishes that the agreement sets out terms of economic,
humanitarian, and resource related goals that could be gained from an agreement.
Resolutions 1984 (2011) and 2049 (2012) will not be covered in this analysis since they
only relate to the extension of the mandates requested from the “Panel of Experts” that were
created in Resolution 1929 (2010). From the six resolutions described here four are “…legally
binding, sanctions on Iran: Resolution 1737 (2006), Resolution 1747 (2007), Resolution 1803
(2008), and Resolution 1929 (2010)” (Bureau of Economic and Business Affairs, 2012). It may
be presumed that any law or sanction that is mandated must also have the necessary
enforceability as is required in satisfaction of the intended end of the law. Member States that
sign on to a resolution or convention are the only nations that are bound under International
law by that specific mandate; the problem here is that although Iran is a member of the UN
they did not accept or agree to these resolutions. A notable concern that the UN has regarding
Iran’s secrecy is the fact that Iran is a signatory to the Treaty on the Non-Proliferation of
Nuclear Weapons (NPT) as the Jewish Virtual Library (2012) suggests. Additionally, even
though Iran may not abide by the resolutions the member States that do follow them are in the
position to restrict relations and trade on Iran in more than one sense. This highlights the
potential effects of the four resolutions that are labeled as binding; the ultimate end of these
resolutions is to establish a peaceful non-proliferative nuclear program in Iran and restore
peaceful relations.
EU Regulations
In contrast to the UN resolutions the regulations that are passed within the EU are
applicable to EU member States as well as, “…binding on individuals and companies within
the EU” (Chisholm, Linderman, Shour 2011, 2). The formulation of the EU’s sanctions began
with the drafting of EU Regulation 423/2007 and Chisholm, Linderman, and Shour (2011)
suggest that it stemmed from UN Resolution 1737 (2006). In short there are two (2) restrictions
that EU Regulation 423/2007 sets out to prohibit; the first of which is detailed in Article two
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(2) and includes, “…to sell, supply, transfer or export, directly or indirectly…all goods and
technology contained in the Nuclear Suppliers Group and Missile Technology Control Regime
lists” (EU 2007, 2). The same was true of the first UN resolutions which began restricting trade
by the prohibition of certain nuclear related items.
The second restriction that has been applied by EU Regulation 423/2007 is listed in
Article five (5) and specifically prohibits, “…to provide, directly or indirectly, technical
assistance, or brokering services related to the goods and technology listed in Annex I…” (EU
2007, 3). Once again a trend has begun to emerge in the sanctions relating to a prohibition of
the outside financial resources that Iran is receiving. This regulation, as the UN Security
Council (2006) and EU (2007) may suggest, is intended to place such restrictive measures
upon Iran as to force their ready cooperation in the ultimate goal of establishing the existence
of a peaceful non-proliferative nuclear program.
The second of the three topics relating to EU regulations will cover the EU Council
Decision of July 26, 2010; which further amends and strengthens Regulation 423/2007 in a
more pressing manner. Chisholm, Linderman, and Shour (2011) assert that the nature of the
decision itself places restrictions on a few different areas affecting International business, three
of which will be covered here that are related to the Oil and Gas industry; transport; and
bunkering and supply. Those measures specifically intended to affect the Oil and Gas industry
prohibits, “…the sale, supply or transfer of key equipment and technology for the refining,
liquefied natural gas, exploration and production industries” (Chisholm, Linderman, Shour
2011, 2). Chisholm, Linderman, and Shour (2011) would further suggest that this decision has
to be accepted in the national legislation, the European Union, in order to become binding as is
the aforementioned Regulation 423/2007.
Chisholm, Linderman, and Shour (2011) further notes that the EU Council Decision
places an emphasis on inspecting Iranian vessels. In brief it states, “Member States will have to
inspect all cargo to and from Iran (seaports and airports) provided that they have information
that provides reasonable grounds to believe that the cargo being carried contains prohibited
items” (Chisholm, Linderman, Shour 2011, 2). If this decision were to become legally binding
in the EU, with respect to this measure, it would grant member States discretionary power to
inspect any and all vessels that are to and from Iran pending the specified requirements.
Under the authority of a legally binding decision the subject area of bunkering and
supply is further amended and modified from EU Regulation 423/2007 by stating, “…Member
States must not provide bunkering, supply or other servicing to Iranian owned or contracted
vessels…if they have information which provides reasonable grounds to believe that the
vessels carry prohibited items” (Chisholm, Linderman, Shour 2011, 2). This particular measure
could be compared to UN Resolution 1929 (2010); with the exception of having the potential
to become a more applicable and enforceable restriction.
EU Regulation 961/2010 is a modification of the EU Council Decision of July 26,
2010. It is unique in its entirety but most importantly in its restrictive measures in relation to
Member States. Furthermore, the jurisdiction of the regulation not only spans the geographical
boundaries of the EU but calls upon the use of nationality as a principle in Article 39 by
applying, “…to any person inside or outside the territory of the Union who is a national of a
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Member State…” (Deering, Hickey, Jones, Linderman, Macfarlane, Shepherd 2012, 1). The
use of nationality as a principle in this case is a very restrictive measure to say the least and
could prove to interrupt business relations between representatives of EU countries doing
business with Iranian nationals.
The regulation also makes further use of the restricting the funds of those individuals
that are listed in its annexes; a measure of this nature was also employed in the UN Resolutions
as well. The EU (2010) states that Article 26 to this regulation further sets out restrictive
measures on insurance to not only include companies that might be associated, or directly
involved, with proliferative nuclear activities but, “…Iran or its Government, and its public
bodies, corporations and agencies…an Iranian person, entity or body other than a natural
person…” (EU 2010, 13). Moreover, the EU (2010) further places restrictions on equipment
that is used in the Oil and Gas industry and further restricts entry into Iran of such materials.
The regulation itself is quite extensive in its purposes but when put into force this regulation,
as with the preceding regulations, should have the potential to make a convincing impact on
Iran.
U.S. Restrictions
The sanctions that have been imposed and modified by the United States followed the
1979 the capture of the U.S. embassy in Tehran. The Bureau of Economic and Business Affairs
of the United States (2012) states the most recent sanctions imposed on Iran are, “…the
Comprehensive Iran Sanctions, Accountability and Divestment Act (CISADA)…and…added
new measures and procedures to the 1996 Iran Sanctions Act (ISA)” (Bureau of Economic and
Business Affairs, 2012).
Although U.S. relations with Iran are very restricted, the CISADA, formerly the ISA of
1996, set out to further restrict individuals, and companies of U.S. origin and operating in the
U.S. in their trade with Iran. The Bureau of Public Affairs (2012) provided a summary of the
CISADA that was signed by President Obama on July 1, 2010; the act further restricted and
denied any trade or assistance related activities with Iran’s finance and energy sector. An
example of an act that would be sanctioned is “…making an investment that directly and
significantly contributes to the enhancement of Iran’s ability to develop its petroleum
resources…” (Bureau of Economic and Business Affairs of the U.S. Department of State (2),
2012). These and the others restrictions related to energy are sanctioned beyond a specific
amount in U.S. dollars. That is an entity would be violating these new sanctions if they were to
exceed the specified amount of assistance in each category. The Bureau of Economic and
Business Affairs (2012) states that the sanctions listed in the new CISADA pertaining to the
financial sector contain activities that must be reported to the Treasury Department and are
restricted as to financial investment or assistance to certain entities or individuals within Iran.
These sanctions are fairly similar to, and are based upon, those proposed by the UN resolutions
mentioned previously.
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CONCLUSION
In the contexts of International and business relations, all three categories of sanctions
when applied and enforced, have the potential to compel Iran into compliance with each
organization’s and nation’s pursuit to establishing the existence of a peaceful Iranian nuclear
program. Although the UN resolutions cover the intrinsic concerns of any and all countries that
wish to comply with them, they have laid the framework for the regulations established by the
EU as well as the most recent version of the United States’ CISADA.
Relationships between countries in the contexts of International and business relations
can be difficult when there is a conflict of differing cultures and a conflicting nature of
differing legal systems and business practices. In addition, Iran has been a sponsor of terrorist
activities and has been persistent in its non-cooperation in relation to its nuclear program’s
intent and composition. There is also the concern that has stemmed from Iran being a signatory
to the Treaty on the Non-Proliferation of Nuclear Weapons. Undoubtedly, the sanctions that
have thus been established by the respective organizations and countries will perhaps compel
Iran to aim their relations toward a sense of normalization; as set forth by the UN Resolution
1929 (2010). The end to which these sanctions were established will certainly be reached when
due to economic interests, at the least, Iran cooperates.
REFERENCES
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Bureau of Economic and Business Affairs of the U.S. Department of State. (2012) Iran Sanctions.
http://www.state.gov/e/eb/esc/iransanctions/index.htm
Bureau of Public Affairs of the U.S. Department of State (1). (2012). U.S. Relations with Iran.
http://www.state.gov/r/pa/ei/bgn/5314.htm
Bureau of Economic and Business Affairs of the U.S. Department of State (2). 2012. Fact Sheet: Comprehensive
Iran Sanctions, Accountability, and Divestment Act (CISADA).
http://www.state.gov/e/eb/esc/iransanctions/docs/160710.htm
Bureau of Near Eastern Affairs (2012). U.S. Relations With Iran http://www.state.gov/r/pa/ei/bgn/5314.htm
Chisholm, Alex. Linderman, Michelle. Shour, Reema. (2011). Trade Sanctions Against Iran An Overview at
http://incelaw.com/documents/pdf/strands/international-trade/trade-sanctions-against-iran-anoverview.pdf
Deering, Bob. Hickey, Denys. Jones, Daniel. Linderman, Michelle. Macfarlane, Rory. Shepherd, Nick. (2012).
Trade Sanctions Against Iran An Update- January 2011 at
http://incelaw.com/documents/pdf/strands/international-trade/int-sanctions-against-iran-an-updatejanuary-2012
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Encyclopedia of the Nations. Iran- Political Background http://www.nationsencyclopedia.com/World-Leaders2003/Iran-POLITICAL-BACKGROUND.html#b
European Union (EU). (2010). COUNCIL REGULATION (EU) No 961/2010of 25 October 2010on restrictive
measures against Iran and repealing Regulation (EC) No 423/2007. http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2010:281:0001:0077:EN:PDF
European Union (EU). (2007). COUNCIL REGULATION (EC) No 423/2007of 19 April 2007concerning
restrictive measures against Iran. http://trade.ec.europa.eu/doclib/docs/2010/august/tradoc_146397.pdf
Hallaq, Wael B. 2009. Sharia: Theory, Practice, Transformations. New York. Cambridge University Press.
Jewish Virtual Library. 2012. Signatories to the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) (As
of February 2012) at http://www.jewishvirtuallibrary.org/jsource/Threats_to_Israel/nptsigners.html
Middle East Progress. Iran’s Economy and Natural Resources. http://middleeastprogress.org/2007/11/iranseconomy-and-natural-resources/
Posch, Walter. (2010). Iran and the European Union at http://iranprimer.usip.org/resource/iran-and-europeanunion
UN Security Council (1). (2006). Resolution 1696 (2006). http://daccess-ddsny.un.org/doc/UNDOC/GEN/N06/450/22/PDF/N0645022.pdf?OpenElement
UN Security Council (2). (2006). Resolution 1737 (2006). http://daccess-ddsny.un.org/doc/UNDOC/GEN/N06/681/42/PDF/N0668142.pdf?OpenElement
UN Security Council. (2007). Resolution 1747 (2007). http://daccess-ddsny.un.org/doc/UNDOC/GEN/N07/281/40/PDF/N0728140.pdf?OpenElement
UN Security Council. (2008). Resolution 1803 (2008). http://daccess-ddsny.un.org/doc/UNDOC/GEN/N08/257/81/PDF/N0825781.pdf?OpenElement
UN Security Council. (2010). Resolution 1929 (2010). http://daccess-ddsny.un.org/doc/UNDOC/GEN/N10/396/79/PDF/N1039679.pdf?OpenElement
Wikieducator. Cultural Issues Affecting International Trade.
http://wikieducator.org/Cultural_Issues_Affecting_International_Trade/Culture_Applied
101
ILLICIT FUNDS FLOWS FROM DEVELOPING
COUNTRIES
Mark R. Leipnik
Sam Houston State University
James R. Ritter
Sam Houston State University
ABSTRACT
Illicit Funds Flows (IFF) from developing countries are critical problems for both the
developing countries (because of loss of essential capital and due to the promotion of local
corruption) and can be a major foreign relations problem for those countries receiving the
funds (due, in part, to the loss of reputation for probity, the potential to finance illegal
activities, as well as potential loss of tax revenues). IFF are generally disguised or kept secret
in order to avoid regulatory controls and, for some of the originators, imprisonment. IFF often
involve complex networks of off-shore banks and front companies shielded by bank and
corporate secrecy laws and rapid electronic transfer of funds. In order to understand the
magnitude of IFF, a non-governmental organization called Global Financial Integrity (GFI)
has been established and it publishes reports on IFF that have become a global standard
measure of IFF. Estimates of IFF are inherently imprecise with the potential to understate (or
occasionally overstate) the magnitude of the flows. Clearly, improved means for identifying
and estimating IFF are necessary. Addressing this necessity, GFI reports on IFF are
correlated by the authors with quantified and rank ordered national attributes (e.g., oil
exports, military budget) in the search for strong indicators of IFF. Spatial factors are
assessed with tools available in the ArcGIS software from esri are analyzed and mapped. The
study concludes with recommendations for further analysis and reporting.
GOAL OF THIS ANALYSIS
The goal of this analysis is to identify strong indicators of IFF based on easily
obtainable collections of multinational data available on the Worldwide Web (“web”). The
search for strong indicators will be based on spatial and rank investigations of correlations
between IFF and other national attributes (e.g., oil exports, military budget). Secondary goals
include evaluation of the utility of the tools (Excel, ArcGIS, Python, Visio, Word) used to
conduct the analysis with the aim of making that information available for investigators
making related studies. Another secondary goal is to note correlations among other national
attributes. The final goal, of course, is to identify and recommend areas for further analysis
and reporting.
102
DEFINITION OF ILLICIT FUNDS FLOWS
This analysis adopts the IFF definition of Kar and Freitas, GFI analysts:
Illicit Financial Flows: funds that are illegally earned, transferred, or utilized and cover
all unrecorded private financial outflows that drive the accumulation of foreign assets by
residents in contravention of applicable laws and regulatory frameworks (Kar & Freitas, 2011).
IFF includes two components:
(1) an estimate of money that exits developing countries via trade channels (called trade
mispricing), and
(2) an estimate of money that leaves developing countries through other, private capital flows.
IFF estimates are the remainder, “residual” or funds not accounted for ,” resulting from
subtracting legal flows from total flows among nations. This model captures some licit funds
as well: IFF = (Trade Mispricing) + (Illicit Private Capital Flows).
The definition above, however, is not the only one; researchers investigating IFF tend
to create definitions that best suit their research topic. Reed and Fontana state:
The literature on illicit financial flows is troubled by imprecision of key terms. Clarification of
terms is not a nicety to be respected merely for academic purpose. It is a necessary condition
for a proper discussion of policy options in fighting corruption by tackling illicit flows (Reed
& Fontanna, 2011).
BACKGROUND
History
Charles C. Mann, author of 1493, Uncovering the New World Columbus Created, has
written a memorable description of silver trade traversing Asian waters in the 1600s (Mann,
2012):
Much or most of the silver was illegal. Worried Mexican officials informed the
[Spanish] monarchy in 1602 that the galleons that year had exported almost four
hundred tons of silver – eight times the declared amount. Furious instructions from
Madrid changed nothing; smuggling was too lucrative. ‘The King of China could build
a palace with the silver bars which have been carried to his country … without their
having been registered,’ Admiral Banuelos y Carrillo complained thirty-six years later.
In 1654, the San Francisco Javier sank near Manila Bay. Its official manifest claimed
that it carried 418,323 pesos. Centuries later, divers found 1,180,865 aboard. Even if
one assumes, absurdly, that the divers found every last coin, the cargo was almost twothirds contraband.
The obviously Illicit Funds Flow described above was secret, hidden from at least some
authorities, and it was large. Today’s illicit funds flows, aided by computers and a robust
Internet, are even larger, though it might be difficult to believe, more difficult to detect, and
nearly secret. Some notion of the major sources of IFF can be gathered from Figure 1.
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Other illicit financial flows are more recent:
Last year, the People's Bank of China mistakenly released a report on its
website which was then quickly taken down.
The report said that between 16,000 and 18,000 government officials and employees of
state-owned enterprises had smuggled more than $120bn (£75bn) overseas between the mid1990s and 2008.
That works out to more than $6m per official. (Patience, 2012). The impact in China
and elsewhere is the same (OECD, 2012):
Corruption impedes economic growth, threatens the integrity of markets, undermines
fair competition, distorts resource allocation, destroys public trust and undermines the
rule of law.
The Tax Justice Network (TJN), founded in the UK in 2003, is dedicated to high-level
research, analysis, and advocacy in the field of tax and regulation; it publishes the Financial
Secrecy Index (FSI). TJN discusses IFF and concludes that the problem is a difficult one with
its difficulty compounded by the secrecy of financial flows to Organisation for Economic CoOperation and Development (OECD) nations, from developing countries:
These staggering [IFF] sums are encouraged and enabled by a common
element: secrecy. Secrecy jurisdictions . . . compete to attract illicit financial flows of
all kinds, with secrecy as one of the most important lures. A global industry has
developed where banks, law practices and accounting firms provide secretive offshore
structures to their tax dodging clients. Secrecy is a central feature of global financial
markets - but international financial institutions, economists and many others don’t
confront it seriously.
...
The . . . traditional stereotype of tax havens is misplaced. The FSI reveals
without doubt that the world’s most important providers of financial secrecy are not
small, palm-fringed islands as many suppose, but some of the world’s biggest and
wealthiest countries.
. . . financial flows that keep developing nations poor are predominantly enabled
by rich OECD member countries and their satellites, which are the main recipients of
these illicit flows. The trillion-dollar figure for annual illicit financial flows out of
developing countries . . . compares with little over US$100 billion in global foreign aid.
So for every dollar of aid provided by OECD countries to developing nations, ten
dollars or so flow back, under the table. The implications for global power politics are
clearly enormous.
The pattern that the FSI reveals also helps explain why widely heralded international
efforts to crack down on tax havens and financial secrecy have been so ineffective. It is OECD
countries, which receive these gigantic inflows, which set the rules of the game. It helps
explain why when the G20 declared in April 2009 that ‘the era of banking secrecy is over’, it
delivered very little indeed: not far off a whitewash.
It is business as usual in the secrecy jurisdictions, and global financial secrecy remains
entrenched (TJN, 2012).
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Corresponding to the TJN comments above, the OECD nations pictured in blue in
Figure 2 are the recipients of IFF totaling over ten times the foreign aid that they give the
developing nations shown in gold.
Global Financial Integrity Reports
This origin of this analysis can be traced to a report from Global Financial Integrity
(GFI): Illicit Financial Flows from Developing Countries: 2000-2009, Update with a Focus
on Asia, with authors Dev Kar and Karly Curcio, dated January 2011 (Kar & Curcio, 2011).
Investigation (Fagan, 2012) of that GFI report led to discovery of an update: Illicit Financial
Flows from Developing Countries Over the Decade Ending 2009, published by Global
Financial Integrity, with authors Dev Kar and Sarah Freitas, December 2011 (Kar & Freitas,
2011). Neither report mentions Spanish galleons nor the unfortunate Admiral Banuelos y
Carrillo. Neither report contains any meaningful maps.
Both reports (Kar & Freitas, 2011) make use of Principal Components Analysis, a
mathematical technique used “to reduce the amount of data in a set of variables while still
returning the same amount of information that was in the original set.” (Kar & Freitas, 2011)
Review of the process shows that it is strongly based on covariance estimates and is, in
essence, a data-smoothing algorithm that produces estimates of illicit flows based on
discrepancies in legal funds flows as reported by the World Bank (Kar & Freitas).
Given that some of the data used in the reports is in error and some might have been
knowingly incorrectly reported, perhaps concealing illicit flows, an approach based on
reducing error (residuals) via least-square smoothing is reasonable. Buttressing this
observation, are the facts that illicit flows are intended to be secret and the data for some of the
components is drawn from estimates of uncertain accuracy and freshness. Greg Gillette, a
graduate student at Roskilde University and a trustee at Global Brigades UK, casts the problem
as follows (Gillette, 2012):
First of all, getting figures is difficult. The IMF tracks trades in commodities
and hard goods, meaning international comparisons to find over-pricing are possible
with hard goods. This is not done in services however and determining “brand value”,
let alone brand value in a specific geographic location, is so subjective it seems almost
futile to enforce norms. What can be enforced however is reporting, such as “most
favoured country” statistics when a company trades one good in multiple places.
The Magnitude of the IFF Problem
The magnitude of IFF have been estimated at 2.5 to 5 percent of the global gross
domestic product, a huge amount, but some analysts argue that the range stated is conservative
and that the actual value could fall above this range. A substantial portion of IFF come from
developing countries and the flows out of these nations to developed nations are likely higher
than the 5% estimate just given (Kar & Freitas, 2011).
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The top ten exporters of illicit capital (China, Mexico, Russia, Saudi Arabia, Malaysia,
Kuwait, United Arab Emirates, Venezuela, Qatar, and Poland in declining order of magnitude),
account for an average of 70 percent of cumulative illicit outflows ($5,082.46 billion) from
developing countries over the period 2000-2009. Illicit flows from developing countries grew
by at least 10.2 percent annually over the decade ending 2009, with outflows from Africa (22.3
percent) growing faster than from the Middle East and North Africa (MENA) (19.6 percent),
developing Europe (17.4 percent). The total developing country outflow was estimated to be
$723.19 billion yearly, with 2007 and 2008 estimated at over $1 trillion dollars per year.
Illicit Funds Flows
A schematic of illicit funds flows is shown in Figure 3. The IFF might be of funds
from legal sources and, not surprisingly, some might be from corruption, human trafficking, or
drugs. Exfiltration of funds might comprise contraband on aircraft or, increasingly frequently,
Internet transfers, which come about from abusive transfers, tax evasion, or, possibly, bribery.
Although world leaders are searching for countermeasures to IFF, better tools are needed to
identify them. This report investigates such tools.
The inclusion of the lowest tier in the chart, countermeasures, is significant. Today,
countermeasures are based on “best estimates” by folks experienced with the IFF problem, not
certain knowledge that any countermeasure will be effective. The Tax Justice Network and
others have engaged analysts to study the flows so that countermeasures can be put into place,
as is shown by the efforts of the OECD, but effective countermeasures cannot be put into
practice until the flows are better understood. Once again, the creation of countermeasures
depends on better tools.
The Global Financial Integrity Approach
The material in this section closely follows: Illicit Financial Flows from Developing
Countries Over the Decade Ending 2009, published by Global Financial Integrity (GFI), with
authors Dev Kar and Sarah Freitas, December 2011 (Kar & Freitas, 2011).
GFI used a well-established economic model to estimate the illicit flows of funds, The
World Bank Residual Model. The model is intuitively appealing—legal sources of funds
exceeding recorded legal use of funds reflect unrecorded outflows, or illicit funds flows.
Source of Funds Exceeding Recorded Use Of Funds Reflect Unrecorded Outflows, or
[Illicit Funds Flows (IFF)] ≈ [Source of Funds] – [Use of Funds]
≈ → Approximately Equals
Source of funds includes increases in net external indebtedness of the public sector and the net
flow of foreign direct investment. Use of funds includes financing a current account deficit
and additions to reserves. GFI used the change in external debt (CED) rather than net debt
flows because of the wider availability of the series for most developing countries. Thus:
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[Source of Funds] – [Use of Funds] ≈ [CED + FDI (net)] – [CA Balance + ΔR] ≈ IFF
CA
→
Current Account (National)
CED →
Change in External Debt
FDI →
Foreign Direct Investment
IFF
→
Illicit Funds Flows
ΔR
→
Change in Current Account Reserves
While the definition is uncomplicated, the availability of the data necessary to compute
illicit flows is, in many cases, restricted, subject to substantial errors, or missing altogether. It
is not without controversy with respect to inflows versus outflows. The recent Euro zone crisis
has raised questions on how illicit flows are estimated using economic models, particularly
illicit inflows. Estimates of capital flight according to the World Bank Residual Model
adjusted for trade misinvoicing and netting out inflows from outflows indicate that Greece and
other “Club Med” countries have received huge illicit inflows running into billions of dollars.
Yet, the governments could not tap these so-called inflows to stave off the financial crises they
were facing. While there is nothing new about the flight of capital from countries that are
politically unstable, poorly governed or badly managed, the traditional method appears to be
questionable in treating illicit inflows as if they benefit the country. This analysis avoids the
controversy mentioned by using estimated outflows only.
The relationships described above are input to a normalization process that has the
effect of smoothing the data via a least-squares approach and reducing its dimensionality via
Principal Component Analysis. Whether the estimates are normalized or un-normalized, they
must be weighed against the fact that even the best models rely on official statistics which do
not capture illicit transfers of capital occurring through smuggling, same-invoice faking, and
hawala-style swap transactions.
A Word about Geography
To some, it might seem out of place for an analysis prepared for a geography course to
discuss Spanish galleons and illicit funds flows, but the content of this paper reflects the
breadth of human geography as it is defined and practiced today (Human Geography, 2012).
Human activities can be spatially assessed, measured, and correlated. These are exactly the
properties emphasized in the sections to follow.
TOOLS FOR THE ANALYSIS
Spatial Analysis
Spatial analysis, using the topological, geometric, or geographic properties of nations,
most often depicted in maps created to analyze specific phenomena, assists in determining
whether our hypotheses about IFF are valid, points the way to previously unseen correlations,
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and helps to strengthen the results overall. Our spatial analysis tools are those included in the
esri GIS (geographic information systems) mapping software as well as previous experience
based on the analysis of topological, geometric, and geographic properties.
Maps
Unless otherwise stated, maps used in this study are drawn in the Winkel Tripel
projection favored for general use by the National Geographic Society in an attempt to
minimize distortion of area and shape of the regions under study (Leipnik, 2012). The center
of the projection of the maps on IFF has been chosen to emphasize IFF flows; China and the
Russian Federation are nearly centered. Figure ??, which contains both a scale and a legend, is
centered on the Middle East. Scales, legends, and directional arrows have been included on
some maps but not on others so that the author could help others gather a notion of usefulness
of these items in spatial analyses. Maps of specific areas of the world generally have a scale
associated with them. With the exception of orthographic and stereo graphic maps, north is at
the top of all maps. A website showing the Winkel Tripel projection against another popular
compromise (i.e., minimizing distortion of area and shape) projection can be found through the
National Geographic website (NGS, 2012). Winkel Tripel projection of the whole earth results
in a non-rectangular figure that must be cropped and shaded for standard, rectangular,
presentation.
Selections of color and symbol size in the maps included in this analysis have been
made to emphasize the point(s) under discussion. For example, symbols on a map in this
analysis denoting the size of IFF per capita have been intentionally enlarged to show that some
small nations have very large IFF. With regard to color selection and symbol size, there are
those who would object that such selections are somehow “impure,” but the case in actual
practice, as experienced by the author, is that senior-level personnel will often ask that aspects
of an otherwise “pure” map be modified to emphasize points of importance to them (so that
they can present the same ideas themselves more convincingly or draw attention away from
items that they believe are less important or disadvantageous to them).
The continent of Antarctica has omitted from most maps and areas around the North Pole are
deemphasized by the projection and editing described.
Correlation of IFF with Other Variables
In practice, geographers and spatial analysts are faced with the need analyze such
variables and make recommendations in support of national or local governments or
international banking, for example. Complicating the analysts task is the fact that IFF can only
be estimated indirectly because the flows are almost always intended to be secret. Taking
these factors into account, they must find a way to make estimates of IFF from available data,
public data if possible.
When data is available by country in a category that might assist the analyst in
identifying and analyzing a particular aspect of IFF, the countries can be ranked by category
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values and used the ranking used as a part of the analysis. Just as rankings of football teams
provide an approximate measure of each team’s relative strength, ranking of countries by
national attributes can give an estimate of relative strength of the nation in the domain of that
national attribute. Knowledge of the highest sources of IFF might tell researchers where to
focus their investigations.
Rank correlation coefficients, frequently denoted “r,” provide a measure of the
similarity between two sets of rankings. They can be computed for continuous data (e.g.
temperature); they can also be computed for discrete data (something that can be counted). In
particular, rankings of national attributes in one category can be compared to rankings in a
second category (the defense expenditures and oil exports mentioned elsewhere) to determine
if there might be a close statistical relationship. Correlation coefficients must be used with
care, however, because:
Unfortunately, r is a rather poor statistic for deciding whether an observed
correlation is statistically significant, and/or whether one observed correlation is
significantly stronger than another (Press & al., 1992).
As de Smith, Goodchild, and Longley point out, “The theoretical foundations of
statistics rely on a set of assumptions and sampling procedures that are often more applicable
to experimental datasets than purely observational data. Very few problems addressed by
spatial analysis fall into the category of truly experimental research (deSmith, Goodchile, &
Longley, 2012).” It is for these reasons that we see the computation of correlation coefficients
as a methodological tool to be used to complement spatial analyses and rank orderings.
Rank Correlation Coefficients
One question that arises is how best to compare variables that might contain both
systematic and random errors and that vary over several orders of magnitude and possess
unknown underlying distributions. Too often, the geographer is left with the only option of
saying that the defense expenditures, for example, of country A are greater than those of
country B and are assuredly less than country C, thus constructing a ranking (in the case, C >
A > B). If we wanted to assess the strength of relationship between the defense expenditures
just mentioned and, say, oil exports, the ranking for oil exports would be constructed and (it
might be A > B > C). So far, we have two rankings, but no way to compare them. The
computation of rank correlation coefficients provides one means of comparison. Spatial
analysis provides a check on the use of the statistical tool. The detail of computing correlation
coefficients is available from the authors and we suggest that the interested reader review our
approach.
Correlation and Causation
Correlation does not imply causation; nor, for that matter, does spatial similarity. For
example, the correlation coefficient between the number of high school graduates each year
from Susquehanna Township High School near Harrisburg, Pennsylvania, and the number of
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basketballs sold in Harrisburg, Texas, a part of Houston, might be large (i.e., greater than 0.5),
but here is no obvious causal relationship despite the similarity of names.
DATABASES CREATED FOR THIS ANALYSIS
Pursuing our goal to identify strong indicators of IFF based on easily obtainable
collections of multinational data available on the Worldwide Web (“web”) and to being able to
verify them via spatial analysis and rank assessment, several web sources were used, the most
prominent of which are discussed here.
Off to a good start, the GFI reports are available on the web and their appendices are
contained in downloadable spreadsheets. Close behind, the Central Intelligence Agency (CIA)
makes substantial volumes of information ranking national attributes on the web. Similarly,
the World Bank puts data on the web related to their, principally finance-related, research
efforts. Transparency International, headquartered in Berlin, Germany, was the source of the
information used on perceived levels of public sector corruption in this report. Finally,
Freedom House, with national headquarters in Washington, DC, provided data on five
dimensions of freedom via the web.
Lest the reader think that the information available via the web is easy to use, the
author advises that there are substantial difficulties in collecting the data and preparing it for
use. Some is directly downloadable as spreadsheets (the GFI reports), but other data is buried
in web sites with no aim of spreadsheet compatibility (the perceived corruption data). Making
comparisons more difficult, the World Bank documents its research investigations in different
countries than those documented by the CIA. Each organization listed above seems to have its
own variant of country names (is Venezuela “Venezuela” or is it “Venezuela, Bolivarian
Republic of?”). There is an international standard for country names and abbreviations, but, in
the author’s view, it is not meticulously followed.
Because each information provider has its own research focus, different countries are
included on each list. For example, to ensure that Aruba could be included in this study, an
additional source had to be consulted to find that it is “mainly Catholic” on a web page
sponsored by Aruba. Even this, however, had to be revised to “Christian” for a section of our
database that turned out to be unused; much the same difficulties were true for defense
expenditures and perceived corruption for Aruba (which was estimated as average and used).
The 41 nations included in this analysis are shown in Figure 4 along with a locator map
showing those nations in red. A pie chart allows the reader to form a notion on the relative
sizes of national IFFs.
The sources of the data used in this report are shown in Figures 5 and 6.
An early version of the main database constructed for the analysis is depicted, in part,
in Figure 7. The reader should note that the database, constructed from multiple joins of
smaller single topic databases, continues past the right-hand margin. National attribute
rankings are shown in the columns with names ending in “_R”; these were the values used to
compute the correlation coefficients.
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Finally, it became clear early in the process of creating the databases that complete
descriptions for over two hundred sovereign entities would be extraordinarily difficult to
achieve. After several fruitless attempts to solve this problem, the problems of consistency and
completeness were growing rather than diminishing, the author finally settled for the subset of
the nations originating 95% of the estimated IFF, 41 in all. These have been the basis for this
study.
Separate, smaller, databases were created to address specific sets of attributes (e.g., OECD
membership). These were generally joined to the main database described above in support of
spatial analysis.
The databases themselves are available to the reader by request to the authors.
SPATIAL ANALYSIS RESULTS
Small Nations with Large IFF
Aruba, Malta, and Kuwait stand out in IFF calculated on a per capita basis as is shown
in Figure 8. It could be because these nations are acting as gateways from the developing
countries to OECD nations. Aruba may have high IFF because of spatial proximity to
Venezuela and Colombia. Malta might have high IFF because of spatial proximity to Libya.
Kuwait, beside its high-IFF Saudi Arabian neighbor, might facilitate the flow of IFF from the
Middle East to inviting investments in more heavily developed regions.
Converting total national IFF amounts to per capita figures shows that China, Mexico,
and the Russian Federation fall to relatively low values. Aruba, Malta, and Kuwait, shown as
large red dots on the accompanying map (Figure 8), take the lead with large IFF per capita.
The three nations named are not the only IFF gateway nations. Cyprus, another island nation
in the Mediterranean Sea, has been identified as a possible IFF gateway. A German newspaper
describes the Cyprus situation as follows:
Cyprus requested assistance from the EU and International Monetary Fund
(IMF) in June. Experts believe that Cyprus needs about 10 billion euros. Voicing major
concerns, Germany has raised the issue of international payment of billions in aid to the
financial partners of Cyprus. "We cannot secure the deposits of Russian money in
Cypriot banks with German taxpayer money", said the news magazine "Der Spiegel"
budget expert Carsten Schneider: "Before a loan is approved for Cyprus, there must be
a discussion of its financial controls." According to the magazine report, the BND
claims that Cyprus inadequately applies the agreed rules on combating money
laundering and that rich Russians are afforded generous opportunities for illicit
activities. (Berliner Morgenpost, 2012)
Although the information from the Germans might help in our search for tools to
identify IFF, we leave it to a follow-on report.
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China IFF Gateways?
There are two gateways, special administrative regions in China, Hong Kong and
Macau, which formerly were British and Portuguese territories. Neither of them is part of any
other administrative division. Each of them has a chief executive. Each territory has its Basic
Law, and in both bodies of law there is an article stating that the territory is a "local
administrative region of the People's Republic of China, which shall enjoy a high degree of
autonomy and come directly under the Central People's Government." (Special Administrative
Region, 2012) A Google map of these two regions is shown in Figure 9.
In addition, 15 free trade zones, 32 state-level economic and technological development
zones, and 53 new and high-tech industrial development zones have been established in large
and medium-sized cities. As these open areas adopt different preferential policies, they play the
dual roles of "windows" in developing the foreign-oriented economy, generating foreign
exchanges through exporting products and importing advanced technologies and of "radiators"
in accelerating inland economic development (Kar & Freitas, 2012).
Hong Kong and Macau were identified as IFF gateways in a report issued by GFI as
writing for this section was being completed (Kar & Freitas, October 2012). As it turns out,
Hong Kong, Macau, and the British Virgin Islands give Chinese interests a multipart gateway
to conceal funds. The 98 special zones described above might well be gateways for moving
illicit funds from China as well.
Regional Groupings: Ukraine and the Nations of the Caucasus
Georgia, Armenia, Azerbaijan, and Ukraine, strongly influenced by the Russian
behemoth to the north have common interests and common problems. They are shown in
Figure 10 from Google. Indeed, southern Russian Federation provinces border the Caucasus
themselves. Spatial analysis augmented by research on the web help lead to the results below
from the Central Asia-Caucasus Institute:
Until the Ukrainians become able to cope with their political and economic problems,
there will be a danger that the lack of Ukrainian competence may drive Ukraine back into the
Russian realm. The same dangers hold for the Caucasus. (CACI Anaylst, 2012)
This is notable because Ukraine has no land boundaries with Georgia (but a lengthy
boundary with the Russian Federation), Armenia, or Azerbaijan, and Azerbaijan comprises two
separate parts. Caucasus nations also include the southern tier of Russian Federation provinces
which, in all likelihood, will follow the Federation lead with respect to IFF. With regard to the
non-Federation, the Russians certainly are not helping this group of nations by holding them
hostage to energy supplies. The political and economic problems referenced portend larger
IFF flows if only because of the corrupt Russian Federation close by. Under Russian
influence, they are unlikely to lead the way towards greater financial integrity or transparency.
In this instance, both the ARCMap and Google presentations have been included to
facilitate spatial analysis. The ARCMap presentation is the product of complex and extensive
editing required to create and place the annotation and boundaries as shown in Figure 11.
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The Continent of Africa
Africa, a continent with over 60 political entities, has only four of the 41 nations
contributing to the top 95% of IFF and these comprise only a small part of the overall
continental land area. Africa Mineral Resource Specialists Inc., of Littleton Colorado,
summarized Africa’s potential:
Some of the largest, and richest, mineral deposits in the world have been found
in Africa. For much of the last half of the 20th century little mineral exploration and
development work was done in Africa, except for southern Africa, even though there is
significant potential for the discovery of new deposits. By the mid 1990's modern
exploration started to spread across much of Africa and many new deposits have been
discovered and developed and some of the old major deposits are being renovated.
The potential of Africa for the discovery and development of mineral resources
is immense. Mineral occurrences are present throughout the continent in all countries.
Most of these occurrences will never be anything but isolated areas that contain small
amounts of a mineral resource and will never be developed as a modern mine. The
reason for that is because most of these occurrences do not contain enough volume of
the mineral to make mining economic. However, the use of modern exploration
methods in the region where these occurrences are known could result in the discovery
of new, and previously unknown, deposits which could be of sufficient quantity and
quality to allow for economic mining.
In addition to the influence of the rocks that underlie a mineral deposit, the
ability to conduct mineral exploration operations and mining operations is affected by
the landscape and vegetative cover. Areas which are predominantly semi-arid and
savannah are easier to operate in when compared to the areas of desert and tropical
rainforest. (Africa Mineral Resource Specialists Inc , 2004)
As the resources of Africa are developed, there is almost certain to be increased IFF.
Given the “immense” potential, the IFF are likely to be large.
The Continent of South America
Spatial analysis suggests that we turn our attention to South America. Using logic
almost identical to that above, South America should be watched by IFF analysts. The fund
balances of Brazil, in particular, should be watched for signs of IFF. Our tools should be
adjusted, if necessary, to accommodate Brazilian funds transfers.
Regional Groupings: The Scandinavian Countries
The Scandinavian countries, Denmark, Norway, Sweden, Finland, and, sometimes
included, Iceland, have closely linked economies, but do not contribute noticeably to IFF, are
not G7 members, and do not participate in the OECD. Sweden, in particular, strengthened its
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banking system prior to the initiation of the GFI studies because it faced a financial crisis of its
own. Slate captures this turnaround in the author’s research on the web as follows:
Less than 20 years before the American crash, the Scandinavian country had
reformed a banking structure that was teetering on collapse after an overheated real
estate market—fueled by loose credit and financial deregulation—imploded. . . . Yet,
after the government’s bank takeover in 1992, not only did the economy swiftly
recover, but the country passed a series of structural reforms [providing greater
government control of banking practices and likely reducing IFF] that transformed the
nation into one of the most durable economies in Europe (Slate Group, 2012).
Religions Groupings
Finally, religions groupings, an area recommended for further study, allowed no
correlations with IFF because of the qualitative nature of the religion attribute (Christian,
Hindu, etc.). Such groupings might be handled statistically, but further work and insight is
needed.
RANKING AND CORRELATION RESULTS
Although it is possible to discuss the results of rank and correlation as distinct entities,
the interplay of these tools with spatial analysis is a necessary condition for their success.
The Search for Correlations with IFF
Figure 12 shows the four strongest correlations with IFF are: national exports, gross
domestic product, population, and oil exports. Correlations with other attributes are shown as
well.
The correlation with exports, 0.7720, is particularly strong, lending confirmation to the
notion that trade mispricing is a source of illicit gains by those controlling cross-border
exchanges. We suggest that at least the top four items confirm the GFI findings and provide a
basis for further investigations.
Correlations Between Other National Attributes
Correlation coefficients were computed among major attributes addressed in the study.
Figure 13 shows a subset of the correlations obtained between sets of national attribute
rankings that did not include IFF.
Of interest, we see that population and IFF per capita are strongly inversely related.
We suggest that this result is strongly influenced by China, which not only has the largest IFF
but also the largest national population; in this case, a large divisor (the number of people) of
the total IFF produces a per capita figure that is lower than many other nations.
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The other strong correlations, we believe, show the effects of large countries (e.g.,
China, India, and Indonesia) combined with large volumes of exports.
All of the correlations reported would be statistically significant if the underlying data
were, in fact, randomly selected. The data used in this study has been selected with an eye
toward finding strong correlations and, indeed, some were found. Nonetheless, it is difficult to
say that any of the correlation results in Figure 12 break new ground.
Corruption, Freedom, and IFF
As this study progressed, a question arose about the correlation of corruption with the
national attributes included in this study. A separate database was constructed and correlation
coefficients among corruption, freedom, and IFF across 121 countries were computed.
Transparency International makes its data available as well as a map, in Figure 14, that shows
relative corruption around the world titled the Corruption Perceptions Index 2011. From their
manner of map presentation, Transparency International appears to be well aware of the value
of algorithmically shaded maps lending themselves to spatial and statistical analysis.
(Transparency International, 2011)
A map showing the relative freedom of nations around the word is shown in Figure 15.
The green nations are relatively free while the red are less free. The data for the map
presentation has been drawn from the Freedom House 2011 Freedom Index; it has been drawn
in ArcGIS to repeat some of the formatting themes of the Transparency International map
above. Nations shown in gray could not be surveyed for the 2011 edition.
The data from Transparency International has been used to compute the correlation
coefficients with other national attributes below.
The strongest correlation is between corruption and freedom at a value of -0.5781,
which, given the large sample size, is strong. The fact that this correlation is negative indicates
that there is an inverse relationship between corruption and freedom across the nations
sampled. The scatterplot is shown in Figure 16 and the analysis worksheet is shown in Figure
17.
The weakest correlation, -0.0791, occurred between IFF and freedom. This suggests
that stronger correlations, and indications of more IFF, might be found among those nations
with more authoritarian regimes. Extending this thought a bit further, it might suggest that the
principals in authoritarian regimes are more likely to be corrupt (reinforcing the finding
above).
SUMMARY
Starting with the goal of identifying strong indicators of IFF based on easily obtainable
collections of multinational data available on the Worldwide Web (“web”), this report has
identified strong indicators of IFF using spatial analysis and ranking. The results and questions
raised on Chinese IFF are, the author believes, important. We believe that we have identified
sources of easily available data (e.g., the CIA, GFI); indeed, the volumes far exceed those
115
needed for this analysis. Correlation coefficients corroborated other results but did not
contribute new insights. The best results by far were drawn from the maps supporting spatial
analysis which pointed to Hong Kong and Macau as conduits for Chinese IFF. We have
described and evaluated the tools used in the production of this report and depicted them in
Figure 17; the esri software works extraordinarily smoothly with Office 2010 and GIMP, but it
has the drawback of a steep learning curve for those beginning to use it. Descriptions of the
unanswered questions arising from this analysis have been captured and included in
recommendations for further research.
RECOMMENDATIONS FOR FURTHER RESEARCH
The Organisation for Economic Co-Operation and Development has been investigating
the problem of IFF since 1996 (OECD, 2012). The organisation’s report, Automatic Exchange
of Information, What It Is, How It Works, Benefits, What Remains To Be Done, recommends
increased information collection and processing in support of identifying and reducing IFF.
The detailed recommendations almost certainly will not be adopted without modification and
some compromises will have to be made, but they do provide a sense of direction. Our next
steps, then, should be to analyze the OECD recommendations to estimate how appropriate our
tools (spatial analysis, rank ordering, and rank correlation) are to work with the newly
gathered data. Assuming that the tools are appropriate at some level of analysis of the data
gathered, proof-of-concept applications of the tools should be created, applied to the data
(possibly simulated prior to actual data collection) matched to the data, and reviewed for
success in finding IFF.
Africa will almost certainly show increased illicit funds flows in the future. The
improved tools called for above, in combination with the exploitation of Africa’s mineral and
ground cover assets will help to identify flows that are currently in existence as well as those
that emerge with the increasing wealth of African nations. Near-term specialized studies
targeting the continent might be undertaken, especially as refined toolsets become available, to
provide a baseline for future IFF flows and techniques.
Inviting further analysis, Figure 17 shows the distribution of religions around the world
centered on the cluster of Muslim nations in the Middle East. Religion was not addressed in
this report because the author knows of no accepted way to assign a numeric value to the
religions of the world that has any meaning in comparison with others. We suggest further
investigation into the possibilities of including qualitative values describing religion in the
geostatistical analysis. Further, we suggest that current methodologies for identifying IFF be
reviewed to determine how best to account for hawala, an underground banking system based
on trust whereby money can be made available internationally without actually moving it or
leaving a record of the transaction; terrorists make extensive use of hawala. (Dictionary.com,
2012)
As additional information becomes available about China’s finances, especially IFF, it
should be analyzed to determine how large the actual size of the flows and where they are
116
going. Unless there is a dramatic change in the Chinese government’s approach to making
such information available (as called for in the “Transparency” initiative above), this will
likely be a long-term effort. Nonetheless, even the Chinese would agree with Lao Tzu that:
The journey of a thousand miles begins with one step. (ThinkExist, 2012)
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FinancialIntegrity&EconomicDevelopment‐of‐the‐g20‐on‐illicit‐financial‐flows/.
OECD(OrganisationForEconomicCo‐OperationandDevelopment),GlobalForumonTransparencyand
ExchangeofInformationforTaxPurposes,retrieved18October2012,
http://www.oecd.org/tax/transparency/abouttheglobalforum.htm.
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4D0C5316659E35887A1924490C08B7ABF9725D1&first=1.
Reed,Q.&Fontana,A.(2011,January).Corruptionandillicitfinancialflows,Thelimitsandpossibilitiesof
currentapproaches,U4,theAnti‐CorruptionResourceCenter,p.6.
TheSlateGroup,HowSwedenSavedItself,17October2012,retrieved20October2012,Slate,
http://www.slate.com/articles/news_and_politics/the_pivot/2012/10/sweden_when_its_banks_fa
iled_the_scandinavian_country_made_a_miraculous.html.
Specialadministrativeregion,Wikipedia,retrieved23October2012,
http://en.wikipedia.org/wiki/Special_administrative_region.
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http://en.wikipedia.org/wiki/Special_Economic_Zones_of_the_People%27s_Republic_of_China.
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http://thinkexist.com/quotation/the_journey_of_a_thousand_miles_begins_with_one/214527.html
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2012,http://www.financialsecrecyindex.com/#significance.
FigureCaption
Figure1.Thenationssourcing95%oftheIFFoutflowsareshownincolor.Nationsingraytoneshavenot
beenincludedinthisIFFanalysis.
Figure2.AstereographiclookattheIFFsourcesinredandtheIFFdestinationsinblue.
Figure3.AschematicviewofIllicitFundsFlows.Notethattheflowsare“residuals,”sotheendpointsof
theflowscanonlybeinferred.
Figure4.The41nationsincludedinthisanalysis.
Figure5.Datasources.
118
Figure6.Datasourcescontinued.
Figure7.Maindatabase.
Figure8.ThetopthreepercapitaIFFnationsaresmall–twoareislandnations.
Figure9.Acriticalquestion:ChinawithHongKongandMacauinaninsetmap.
Figure10.Georgia,Armenia,Azerbaijan,andUkrainearestronglyinfluencedbytheRussianbehemothto
thenorth.
Figure11.TheARCMappresentationistheproductofcomplexandextensiveeditingtocreateandplace
theannotationandboundaries.
Figure12.ThefourstrongestcorrelationswithIFFare:nationalexports,grossdomesticproduct,
population,andoilexports.
Figure13.Otherstrong(non‐IFF)correlations.
Figure14.CorruptionPerceptionsIndex2011fromTransparencyInternational.
Figure15.RelativeFreedomEstimatesbasedontheFreedomHouse2011Index.
Figure16.ScatterplotofFreedombasedonFreedomHouse2011Index.
Figure17.Freedomanalysisworksheet.
Figure18.ReportProductionSchematic:TheTools
Figure19.Distributionofworldreligions.
119
120
121
122
123
124
Nations Online
Military Expenditures
Matt Rosenberg's Eight Regional Groupings of the World
Illicit Funds Flows
GDP Growth
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2034rank.html, Accessed and Verified 29 September 2012.
Countries and Regions of the World from A to Z, One World ‐ Nations Online, http://www.nationsonline.org/oneworld/countries_of_the_world.htm, accessed 29 September 2012.
G‐20 major economies, Wikipedia, http://en.wikipedia.org/wiki/G‐
20_major_economies, accessed 29 September 2012.
G7, Wikipedia, http://en.wikipedia.org/wiki/G7, accessed 29 September 2012.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2001rank.html, Accessed and Verified 29 September 2012.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2003rank.html, Accessed and Verified 29 September 2012.
Illicit Financial Flows from Developing Countries Over the Decade Ending 2009, Dev Kar and Sarah Freitas, December 2011, Global Financial Integrity, Appendix Table 9. Cumulative Normalized and Non‐Normalized Illicit Financial Flows by Country Illicit Financial Flows from Developing Countries Over the Decade Ending 2009, Dev Kar and Sarah Freitas, December 2011, Global Financial Integrity, Appendix Table 9. Cumulative Normalized and Non‐Normalized Illicit Financial Flows by Country G20 Members
G7 Members
GDP (Purchasing Power Parity)
List of freedom indices, Wikipedia, http://en.wikipedia.org/wiki/List_of_indices_of_freedom, accessed 29 September 2012.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2147rank.html, Accessed and Verified 29 September 2012.
ISO 3166‐1, Wikipedia, http://en.wikipedia.org/wiki/ISO_3166‐1, accessed and verified 29 September 2012.
Numerical Recipes in Fortran 77, The Art of Scientific Computing, Cambridge University Press / William H. Press et al., 2nd ed.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐factbook/rankorder/2078rank.html
Source
Freedom Indices
Exports
Covariance
Country Name
Area
National Attribute
Information Sources:
Nations Online
Military
MilBud
IFF
Flows
MR C&R
GDPGrow
G7
GDP
G20
Freedom
Exports
Country
Area
Database Name
GDP Growth
G7
GDP
G20
Freedom Indices
Exports
ISO 3166
Area
Tab Name
125
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2176rank.html, Accessed and Verified 29 September 2012.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2175rank.html, Accessed and Verified 29 September 2012.
Report downloaded from http://cpi.transparency.org/cpi2011/in_detail/ Accessed 14 October 2012.
Central Intelligence Agency World Factbook, https://www.cia.gov/library/publications/the‐world‐
factbook/rankorder/2119rank.html, Accessed and Verified 29 September 2012.
Official Listing of Countries by World Region, About.com, http://geography.about.com/od/lists/a/officiallist.htm, accessed 29 September 2012.
Religions by country, Wikipedia, http://en.wikipedia.org/wiki/Religions_by_country, accessed 29 September 2012.
Illicit Financial Flows from Developing Countries Over the Decade Ending 2009, Dev Kar and Sarah Freitas, December 2011, Global Financial Integrity
Military expenditure (% of GDP), The World Bank, http://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS, accessed 29 September 2012.
WB Military Expenditures
Study Inclusion
Religion
Region
Population
Per Corr
Oil Imports
Oil Exports
WBMilBud
Stdy_Incl
Religion
Geo_Region
Population
Pcorr
OilImp
OilExp
The database names are shown. For ranking information, the name shown is appended with '_R' for rankings and 'perP' for values computed per person.
The sources are inconsistent in their capitalization of article titles. The items above reflect the convention adopted by the referenced source.
Many of the references provided data which was incorporated into the database for this project. Where a reference was used to provide such data, the title of the column in the Summary tab is shown in the 'Database Name' column.
World Bank Military Expenditure Estimates
Study Inclusion
Religion
Region
Population
Perceived Corruption
Oil Imports
Oil Exports
IFF
Argentina
83042
Aruba
25111
Azerbaijan
32546
Bahrain
19984
Bulgaria
22261
Chile
83532
China
2467214
Colombia
17039
Costa Rica
47975
Croatia
43319
Cyprus
31380
Czech Republic
41042
Egypt
59938
Honduras
28386
India
104154
Indonesia
118961
Iran, Islamic Republic of
65640
Israel
54221
Kazakhstan
123057
Kuwait
268589
Latvia
24729
Libya
40786
Malaysia
337870
Malta
53407
Mexico
453027
Nigeria
158294
Oman
19231
Panama
43659
Philippines
121416
Poland
159552
Qatar
169788
Romania
40660
Russian Federation
427170
Saudi Arabia
365811
Slovenia
40268
South Africa
59409
Trinidad and Tobago
33635
Turkey
46502
Ukraine
91612
United Arab Emirates
262348
Venezuela, Bolivarian Republic of 171093
Country
18 Western Hemisphere
36 Western Hemisphere
33 Europe
39 MENA
38 Europe
17 Western Hemisphere
1 Asia
41 Western Hemisphere
24 Western Hemisphere
27 Europe
34 Europe
28 Europe
20 MENA
35 Western Hemisphere
15 Asia
14 Asia
19 MENA
22 MENA
12 Europe
6 MENA
37 Europe
29 MENA
5 Asia
23 Europe
2 Western Hemisphere
11 Africa
40 MENA
26 Western Hemisphere
13 Asia
10 Europe
9 MENA
30 Europe
3 Europe
4 MENA
31 Europe
21 Africa
32 Western Hemisphere
25 Europe
16 Europe
7 MENA
8 Western Hemisphere
IFF_R Geo_Region
42192494
107635
9493600
1248348
7037935
17067369
1343239923
45239079
4636348
4480043
1138071
10177300
83688164
8296693
1205073612
248645008
78868711
7590758
17522010
2646314
2191580
5613380
29179952
409836
114975406
170123740
3090150
3510045
103775002
38415284
1951591
21848504
142517670
26534504
1996617
48810427
1226383
79749461
44854065
5314317
28047938
14
41
23
37
26
21
1
12
29
30
39
22
8
24
2
3
10
25
20
33
34
27
16
40
6
4
32
31
7
15
36
19
5
18
35
11
38
9
13
28
17
0.00196817
0.233297719
0.003428204
0.016008357
0.003163002
0.004894252
0.001836763
0.000376643
0.010347584
0.009669327
0.027572972
0.0040327
0.000716206
0.003421363
8.64296E‐05
0.000478437
0.000832269
0.007143028
0.007022996
0.101495514
0.01128364
0.007265854
0.01157884
0.130313101
0.003940208
0.000930464
0.006223322
0.012438302
0.001169993
0.004153347
0.086999786
0.001860997
0.002997313
0.013786238
0.020168114
0.001217137
0.027426179
0.000583101
0.002042446
0.049366269
0.006100021
Population Pop_R IFFperP
30
1
25
9
27
21
32
40
14
15
6
23
37
26
41
39
36
17
18
3
13
16
12
2
24
35
19
11
34
22
4
31
28
10
8
33
7
38
29
5
20
7.256E+11
2258000000
94250000000
31500000000
1.023E+11
3.035E+11
1.144E+13
4.78E+11
55730000000
81360000000
24030000000
2.886E+11
5.256E+11
36150000000
4.515E+12
1.139E+12
1.003E+12
2.382E+11
2.196E+11
1.555E+11
35370000000
37970000000
4.53E+11
10890000000
1.683E+12
4.187E+11
82820000000
51260000000
3.954E+11
7.815E+11
1.843E+11
2.706E+11
2.414E+12
6.915E+11
58630000000
5.622E+11
26880000000
1.087E+12
3.337E+11
2.621E+11
3.789E+11
IFFperP_R GDP
9
41
28
37
27
19
1
13
32
30
39
20
12
35
2
5
7
23
24
26
36
34
14
40
4
15
29
33
16
8
25
21
3
10
31
11
38
6
18
22
17
17197.37165
20978.30631
9927.740794
25233.34839
14535.51361
17782.47133
8516.721253
10566.08602
12020.23662
18160.53998
21114.67562
28357.22638
6280.458011
4357.157725
3746.659088
4580.827941
12717.3373
31380.26532
12532.80874
58760.97848
16139.04124
6764.195547
15524.35727
26571.60425
14637.91309
2461.149749
26801.28796
14603.80138
3810.166152
20343.46538
94435.77061
12385.28734
16938.25053
26060.40799
29364.67034
11518.03077
21918.11204
13630.18617
7439.682446
49319.60212
13509.01446
GDP_R GDPperP
17
13
32
10
23
16
33
31
29
15
12
6
36
38
40
37
26
4
27
2
19
35
20
8
21
41
7
22
39
14
1
28
18
9
5
30
11
24
34
3
25
8.9
2.4
0.1
1.8
1.7
5.9
9.2
5.9
4.2
0
0.5
1.7
1.8
3.6
7.2
6.5
2
4.7
7.5
8.2
5.5
2.5
5.1
2.1
4
7.2
5.5
0
3.7
4.4
18.8
2.5
4.3
6.8
‐0.2
3.1
‐1.3
8.5
5.2
4.9
4.2
3
29
37
32.5
34.5
11.5
2
11.5
21.5
38.5
36
34.5
32.5
25
7.5
10
31
18
6
5
13.5
27.5
16
30
23
7.5
13.5
38.5
24
19
1
27.5
20
9
40
26
41
4
15
17
21.5
84270000000
1276000000
34490000000
19910000000
28120000000
81710000000
1.904E+12
56220000000
10380000000
12280000000
2165000000
1.385E+11
27910000000
7204000000
2.994E+11
2.015E+11
1.318E+11
62850000000
88890000000
1.043E+11
12030000000
16460000000
2.256E+11
5204000000
3.497E+11
1.039E+11
45930000000
16950000000
47230000000
1.939E+11
1.07E+11
62680000000
5.209E+11
3.599E+11
28770000000
1.045E+11
14630000000
1.435E+11
69420000000
2.526E+11
92610000000
GDPperP_R GDPGrow GDPGrow_R Exports
19
41
27
31
29
20
1
24
37
35
40
11
30
38
5
8
12
22
18
15
36
33
7
39
4
16
26
32
25
9
13
23
2
3
28
14
34
10
21
6
17
9.85428E‐07
1.96795E‐05
9.43636E‐07
1.00372E‐06
7.91643E‐07
1.0223E‐06
1.29581E‐06
3.03077E‐07
4.62187E‐06
3.52761E‐06
1.44942E‐05
2.96332E‐07
2.14755E‐06
3.94031E‐06
3.47876E‐07
5.90377E‐07
4.98027E‐07
8.62705E‐07
1.38437E‐06
2.57516E‐06
2.05561E‐06
2.47789E‐06
1.49765E‐06
1.02627E‐05
1.29547E‐06
1.52352E‐06
4.18702E‐07
2.57575E‐06
2.57074E‐06
8.22857E‐07
1.5868E‐06
6.48692E‐07
8.20061E‐07
1.01642E‐06
1.39965E‐06
5.68507E‐07
2.29904E‐06
3.24056E‐07
1.31968E‐06
1.03859E‐06
1.84746E‐06
27
1
28
26
32
24
21
40
4
6
2
41
12
5
38
34
36
29
19
8
13
10
17
3
22
16
37
7
9
30
15
33
31
25
18
35
11
39
20
23
14
2780400
180
86600
760
110879
756102
9596961
1138910
51100
56594
9251
78867
1001450
112090
3287263
1904569
1648195
20770
2724900
17818
64589
1759540
329847
316
1964375
923768
309500
75420
300000
312685
11586
238391
17098242
2149690
20273
1219090
5128
783562
603550
83600
912050
Exp_R IFFoverExp IFFoverExp_R Area
4
41
26
39
25
17
2
12
32
31
37
28
13
24
3
8
10
33
5
35
30
9
19
40
7
14
21
29
22
20
36
23
1
6
34
11
38
16
18
27
15
238100
206400
651700
239900
75840
52390
506500
400700
2087
36080
0
25480
163000
5114
825600
404100
2523000
86010
1390000
2127000
5160
1580000
644900
0
1511000
2102000
592300
0
60460
50400
1038000
74080
5010000
7635000
8958
54930
242600
68450
114000
2395000
1871000
21
22
13
20
26
31
16
18
38
33
40
34
23
37
12
17
3
25
10
5
36
8
14
40
9
6
15
40
29
32
11
27
2
1
35
30
19
28
24
4
7
0.8
0
2.6
4.5
2.6
2.7
4.3
3.4
0.6
2.39
3.8
1.15
3.4
0.6
2.5
3
2.5
7.3
1.1
5.3
1.1
3.9
2.03
0.7
0.5
1.5
11.4
1
0.9
1.9
10
1.9
3.9
10
1.7
1.7
0.3
5.3
1.4
3.1
1.2
Area_R OilExp OilExp_R MilBud
126
127
128
129
130
Figure 4 The strongest correlations with IFF are exports, GDP,
population, and Oil Exports.
131
132
133
134
135
136
137
138
AUDITING FOR USEFULNESS: A NEW CONCERN?
Carl Brewer
Sam Houston State University
Alice Ketchand
Sam Houston State University
Jan Taylor Morris
Sam Houston State University
ABSTRACT
This paper argues that recent changes in the U.S. Generally Accepted Accounting
Principles (GAAP) hierarchy logically lead to a new audit objective. The elevation of FASB
SFAC 1, The Objectives of Financial Reporting by Business Enterprises, into GAAP also
elevated the objective of providing information useful for making economic decisions into the
GAAP hierarchy. Since auditing standards require the auditor to indicate if the financial
statements are in conformity with GAAP and GAAP now contains the useful information
objective, it is a logical conclusion that the audit report must also indicate if the information in
the financial statements is useful for making economic decisions.
139
CPA EXAMINATION PERFORMANCE OF
CANDIDATES FROM COMMUNITY COLLEGE
ACCOUNTING PROGRAMS
Gordon Heslop
Texas A&M University-Commerce
Byungil Kim
Texas A&M University-Commerce
In the past, the traditional path for students wishing to take the Certified Public
Accountancy (CPA) examination was a four year undergraduate degree in accounting. In
recent years, most states have increased the credit hours required to take the examination from
120 up to 150 hours, thereby forcing students to gain extra credit beyond an undergraduate
degree. These extra 30 hours are gained in one of two ways. Many students continue on to
complete a master’s degree while others take extra courses to gain the 30 hours without
completing a second degree. In obtaining an undergraduate degree students can transfer a
substantial number of hours from a community college to a four year institution; normally up
to half the number required for the undergraduate degree. However, traditionally, the only
accounting courses offered by community colleges were the two principles of accounting
courses and these usually cannot be used to satisfy the accounting hours required to qualify to
take the CPA examination as the required accounting courses must be upper level courses.
Although a baccalaureate is required to take the CPA examination, it is now possible in
some states to complete the accounting course work required of all candidates, at a community
college. The most strictly controlled example of this is in Texas, where a community college
must be approved by the Texas State Board of Public Accountancy (TSBPA) before it can
offer accounting courses which candidates can use to meet the educational requirements to take
the CPA examination. These courses must be taken after gaining a baccalaureate degree. The
TSBPA invited interested community colleges to apply for approval to offer such courses.
Community colleges which meet the Board standards are awarded the designation – Qualifying
Educational Credit for the CPA Examination – by the Board. Three community colleges were
granted such permission effective 1/1/2004 and a fourth effective 1/1/2005 (TSBPA, 20042005). The four approved community colleges are Austin Community College, Houston
Community College, Lone Star College (formerly North Harris Montgomery Community
College) and Mountain View College.
After the CPA examination was computerized in April 2004, the TSBPA began to
display the pass rate statistics for Texas on its website. Statistics are made available for each
examination section and by the university/college attended by the candidates. These statistics
show that since April 2004, the four community colleges, although not a dominant force in
140
terms of the number of candidates they have taught, have produced a significant number of
candidates for the CPA examination. They produced 2.3% of the total number of candidates,
who took 2.2% (2,181) of the total sections attempted during the period up to the end of 2012.
These candidates accounted for a total of 1,002 sections passed – 2.1% of the total. Overall,
community college candidates achieved a pass rate of 45.9%, just 3.3% below the pass rate of
49.2% for all candidates. Austin Community College, which had the most sections attempted,
and passed, of the four had a pass rate percentage of 55.8%, which exceeded the state average
by 6.6%. The other three community colleges had a pass rate lower than the state average. The
results are shown in Table 1.
Table 1
Texas Community College CPA Examination Statistics
April 2004 to Dec. 2012
Institutions
1
2
3
4
Austin Community
College
Houston Community
College
Lone Star College
Mountain View
College
Total for Community
Colleges
Total for all 81
Schools in TX
Community College
% of Total
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
550
779
435
55.8
561
757
306
40.4
286
368
168
45.7
199
277
93
33.6
1596
2181
1002
45.9%
69615
99117
48764
49.2%
2.3%
2.2%
2.1%
93.4%
Compiled from Texas State Board of Public Accountancy (TSBPA), 2004-2012
A number of other states also allow students to gain their accounting course credits at
community colleges but do not require that each community college obtain the prior approval
of their accounting courses by the state board. The board approval of community college
courses is stated in one of two ways. A number of states specify in their rules that community
college accounting courses are acceptable if they are gained from a school which is accredited
by one of the regional accrediting bodies – for example by SACS. Washington, California,
Virginia and Maryland follow this procedure. A number of other states specifically state in
their educational requirement rules that courses from community colleges are accepted. These
states are Ohio, Delaware and Georgia. Georgia further stipulates that such community college
credit must be “transferred to a four-year accredited university or college as credit earned
towards a bachelor’s degree or higher, and appear on the official transcript from the four-year
accredited institution.” This is different from the Texas rule which requires that the accounting
courses must be taken after the student has completed a bachelor’s degree.
141
Most state boards do not publish the detailed CPA examination pass rate statistics.
However, this data is available from the National Association of State Boards of Accountancy
(NASBA). Every year since 1985 NASBA has published a detailed report on the performance
of candidates on the Uniform CPA Examination. The statistics presented in this paper, with the
exception of those from Texas, were compiled from the 2009-2012 NASBA reports. Of all the
states accepting community college accounting courses for the CPA educational requirement,
Washington has the most sections passed by community college trained students when
expressed as a percentage of all sections passed in that state. Candidates from a total of 14
community colleges in Washington have taken the CPA examination over the past four years.
Individually, the numbers are not large from any community college, with the largest having
40 candidates over the four year period, an average of 10 per year. However, in total, these
candidates account for 4.4% of all sections taken and 3.9% of all sections passed. The pass rate
of 51.9% is respectable although it is 6.8% below the state average of 58.7%. Amongst the
community colleges the pass rate varies widely, from a high of 90% down to 32.1%. However,
six of the community colleges have a higher pass rate than the state average. The results are
shown in Table 2.
Table 2
Washington Community College CPA Examination Statistics
2009-2012
1
2
3
4
5
6
7
8
9
10
11
Institutions
Candidates Total
Sections Total
Sections
Passed
Sections
Passed (%)
Bellevue Community
College
40
84
39
46.4%
5
10
9
90.0%
7
20
7
35.0%
36
81
26
32.1%
11
26
17
65.4%
13
27
9
33.3%
37
75
56
74.7%
5
9
5
55.6%
11
29
18
62.1%
10
21
10
47.6%
6
11
5
45.5%
Clark College
Columbia Basin
Community College
Edmonds Community
College
Green River
Community College
Highline Community
College
North Seattle
Community College
Pierce College
Seattle Central
Community College
Shoreline Community
College
7
19
13
68.4%
13
Skagit Valley College
Spokane Falls
Community College
Tacoma Community
College
11
18
7
38.9%
14
Wenatchee Valley
5
9
7
77.8%
12
142
College
Total for Community
Colleges
Total for all 29
Schools in WA
Community College
% of Total
204
439
228
51.9%
3871
9994
5865
58.7%
5.3%
4.4%
3.9%
88.5%
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
California, with 21, has the most community colleges offering accounting courses
which meet the CPA educational requirement. However, within California, this represents a
lower percentage than Washington of the total sections taken, at 1.4%, and the sections passed,
at 1.2%. The average pass rate in California for all schools is 45.7%, and 40.2% for the
community colleges. Eight of the 21 community colleges have a pass rate higher than the state
average. The statistics are shown in Table 3.
Table 3
California Community College CPA Examination Statistics
2009-2012
Institutions
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
31
65
39
60.0%
5
10
9
90.0%
20
53
22
41.5%
5
10
0
0.0%
91
239
111
46.5%
5
American River
College
Chabot College
City College of San
Francisco
Coastline Community
College
De Anza College
6
Diablo Valley College
15
25
13
52.0%
7
El Camino College
6
17
3
17.7%
8
Foothill College
61
174
82
47.2%
9
El Camino College
Glendale Community
College
Golden West College
10
27
14
51.8%
52
149
44
29.6%
5
11
7
63.6%
13
49
10
20.4%
8
18
5
27.8%
10
27
9
33.3%
8
24
3
12.5%
22
82
25
30.5%
1
2
3
4
10
11
12
13
14
15
16
Irvine Valley College
Los Angeles Pierce
College
Mission College
Mount San Antonio
College
Orange Coast College
143
17
Pasadena City College
5
10
4
40.0%
18
5
14
8
57.1%
5
10
1
10.0%
20
Saddle Back College
San Mateo County
Community College
Santa Ana College
11
24
14
58.3%
21
Santa Monica College
128
349
134
38.4%
516
1387
557
40.2%
40233
101800
46531
45.7%
1.3%
1.4%
1.2%
87.9%
19
Total for
Community Colleges
Total for all 90
Schools in CA
Community College
% of Total
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
The Virginia statistics are almost identical to those in California. Candidates from the
two Virginia community colleges taking the examination account for 1.3% of total sections
taken and 1.1% of sections passed. The pass rate of 45.8% is considerably below the average
pass rate in Virginia of 54.8% - a difference of 9%. The statistics are shown in Table 4.
Table 4
Virginia Community College CPA Examination Statistics
2009-2012
Institutions
1
2
Northern Virginia
Community College
Tidewater
Community College
Total for
Community Colleges
Total for all 35
Schools in VA
Community College
% of Total
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
89
213
97
45.5%
18
40
19
47.5%
107
253
116
45.8%
7321
19591
10743
54.8%
1.5%
1.3%
1.1%
83.6%
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
In Maryland, there is only one community college with candidates taking the CPA
exam and they represent only a tiny fraction of all candidates. They comprise 0.6% of total
sections taken and 0.4% of sections passed. The pass rate of 30.8% is 15.2% below the state
average. The statistics are shown in Table 5.
144
Table 5
Maryland Community College CPA Examination Statistics
2009-2012
1
Institutions
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
Montgomery College
16
39
12
30.8%
16
39
12
30.8%
2414
6042
2779
46.0%
0.7%
0.6%
0.4%
66.9%
Total for
Community Colleges
Total for all 17
Schools in MD
Community College
% of Total
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
In Ohio also, there is only one community college with candidates taking the
examination. These candidates make up 0.3% of both the total number of sections taken and
passed. However, the pass rate is 56.8%, which is 5.2% higher than the state average. The
statistics are shown in Table 6.
Table 6
Ohio Community College CPA Examination Statistics
2009-2012
1
Institutions
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
Columbus State
Community College
39
81
46
56.8%
39
81
46
56.8%
11245
30602
15791
51.6%
0.3%
0.3%
0.3%
110.1%
Total for
Community
Colleges
Total for all 47
Schools in OH
Community College
% of Total
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
In Georgia, the participation of community college students is even smaller, making up
only 0.1% of both the total sections taken and passed. As in the case of Ohio, the pass rate of
56.3% is higher than the state average of 50.0%. The statistics are shown in Table 7.
145
Table 7
Georgia Community College CPA Examination Statistics
2009-2012
1
Institutions
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
Georgia Perimeter
College
5
16
9
56.3%
5
16
9
56.3%
7124
18312
9158
50.0%
0.1%
0.1%
0.1%
112.6%
Total for
Community Colleges
Total for all 35
Schools in GA
Community College
% of Total
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
In Delaware there is also just one community college with candidates taking the
examination, although they make up a bigger percentage of all candidates with 1.6% of the
total sections taken and 1.4% of the sections passed. The pass rate is 44.6%, 5.9% below the
state average. The statistics are shown in Table 8.
Table 8
Delaware Community College CPA Examination Statistics
2009-2012
1
Institutions
Candidates Total
Sections Total
Sections Passed
Sections Passed
(%)
Delaware Tech & CC
Owens
22
56
25
44.6%
22
56
25
44.6%
1340
3455
1744
50.5%
1.6%
1.6%
1.4%
88.4%
Total for
Community
Colleges
Total for all 6
Schools in DE
Community College
% of Total
Compiled from NASBA Reports and Commentary on the 2009-2012 CPA Examinations
CONCLUSIONS
Candidate preparation for the CPA examination is still almost exclusively carried out at
four year institutions. Nationally, most states do not allow the required accounting courses to
be taken at community colleges. In those few states where it is allowed, it still represents the
preparation of only a very small fraction of all candidates. However, three states are beginning
to stand out. Texas and Washington have the highest percentage participation of community
146
college trained students. California, as the most populous state, has the most community
colleges offering these accounting courses, and has a sizeable number of total sections taken
(1,387) and passed (557). Many of the individual community colleges have candidates with
pass rates which exceed their overall state average, while many others, although lower, are still
close to the average and respectable. While unlikely to become a dominant provider of
accounting courses for CPA examination candidates, many community colleges have
demonstrated an ability to produce successful CPA examination candidates and future public
accountants.
REFERENCES
California Board of Accountancy (CBA). Uniform CPA Examination Handbook. Retrieved from
http://www.dca.ca.gov/cba/publications/exambook.pdf
Maryland Board of Public Accountancy. Retrieved from http://www.dllr.state.md.us/license/cpa/cpareq.shtml#cirr
NASBA Delaware. Retrieved from http://www.nasba.org/exams/cpaexam/delaware/
NASBA Georgia. Retrieved from http://www.nasba.org/exams/cpaexam/georgia/
NASBA Ohio. Retrieved from http://www.nasba.org/exams/cpaexam/ohio/
National Association of State Boards of Accountancy (2009-2012). Uniform CPA Examination: Candidate
Performance (2009-2011 Editions), Nashville, TN: NASBA.
Texas State Board of Public Accountancy (TSBPA) (2004-2005). Texas Community Colleges awarded the Board
designation - Qualifying Education Credit for CPA Examination. Retrieved March 10, 2013, from
http://www.tsbpa.state.tx.us/education/board-awarded-community-colleges.html
Texas State Board of Public Accountancy (TSBPA) (2004-2012). Candidate success rates –CBT-Uniform CPA
Examination university comparison. Retrieved March 10, 2013, from
http://www.tsbpa.state.tx.us/php/fpl/unvcompare.php
Virginia Board of Accountancy (VBA). Retrieved from
http://www.boa.virginia.gov/CPAExam/EducationRequirements.shtml
Washington State Board of Accountancy. Retrieved from
http://www.cpaboard.wa.gov/CertificateLicense/schools_accreditation.shtml
147
REVERSE CONVERTIBLES PRICES: EVIDENCE
FROM SECONDARY MARKET TRADING
Stephen J. Cotton
University of Houston - Clear Lake
Timothy B. Michael
University of Houston - Clear Lake
Ivelina Pavlova
University of Houston - Clear Lake
Jeffrey Whitworth
University of Houston - Clear Lake
ABSTRACT
We examine the secondary market price changes and their determinants for a large
sample of reverse convertible notes issued by the Royal Bank of Canada. Our dataset includes
1,112 reverse convertible notes issued by the Royal Bank of Canada (RBC) between January
2007 and October 2010. We find that the daily return of the reference stock is the most
important factor affecting secondary market prices of RC bonds. Further research including
liquidity proxies may improve the goodness of fit of our models.
INTRODUCTION
Reverse convertible (RC) bonds are unsecured short-term securities backed by an
issuing bank and tied to an underlying stock. At maturity, the owner receives full par value
plus a relatively large coupon payment, or if the value of the stock has fallen to a barrier price,
a predetermined number of shares of the stock. There are three possible outcomes of owning an
RC: (1) the underlying stock price stays flat, so the investor collects their principal and the
large coupon payment; (2) the underlying stock price increases, so the investor collects their
principal and large coupon payment but foregoes the gains from owning the stock directly, or
(3) the underlying stock price increases and the investor is paid in stock at a loss. Issued since
1998, the market for RCs has dramatically grown in recent years, exposing inexperienced
investors to what can appear on the surface to be highly-desirable fixed-income securities
despite having a risky option component.
148
Recent research has shown that RCs have been a windfall for issuing banks. Investors,
exposed to both the risk of changes in the underlying stock price and the credit risk of the
issuer, have been consistently overpaying (see Ruf, (2011); Szymanowska, et al, (2009);
Stoimenov and Wilkens, (2005)) . In 2010, for example, the S&P 500 Index returned 8 percent
and corporate bonds gained 11.1%, while RCs, a $6 billion market that year, lost 1% on
average. Banks, meanwhile, charged fees averaging 1.6% on three-month RCs (Faux, 2011).
FINRA has issued a formal warning to investors that RCs contain significantly greater risks
than standard bonds and that only the default and credit risk are covered by the credit rating –
not the risk of variations in the price of the underlying equity.
Reverse-convertibles, being of short maturity, are typically a buy-and-hold investment
although a secondary market for them does exist. This secondary market is thin, providing
limited liquidity, but is of academic interest because of what transactions may reveal about the
behavior of investors in the primary market. Given the large nominal returns of successful RC
investments, the speculative motive for selling an existing RC rather than holding it to maturity
is to get rid of it before the underlying stock hits the barrier price (with a buyer betting the
underlying will not hit) or if the issuing bank is expected to be unable to make the coupon
payment. Secondary market trades driven by credit risk more than stock price changes may
suggest that credit risk has surprised primary market investors. Likewise, trades driven more
by stock price changes may suggest that the option component has surprised primary market
investors.
Using secondary market data for RCs issued by the Royal Bank of Canada (RBC),
which allows us to factor out effects on RC prices of different issuers and focus on the effect of
the underlying stock prices and changes in RBC’s credit risk, we find that there is a strong
relationship between the return of the reference stock and daily price changes of the RC, while
term-structure variables and issuer credit risk do not appear to be significant determinants. This
suggests that investors may have focused too much on the fixed-income component of RCs and
have insufficiently accounted for the option component and are reacting accordingly in the
secondary market. We also find that RCs exhibit an inverted yield curve. Given that the
structure of these securities lends strongly to a normal yield curve, this may be further evidence
of the degree to which inexperienced investors are making poor decisions with respect to RCs.
The rest of the paper is organized as follows. Section II outlines a brief review of recent
studies on the pricing of reverse convertibles bonds. Section III describes the data sources and
in Section IV we discuss the models and empirical results. Our conclusions and suggested
extensions are presented in Section V.
LITERATURE REVIEW
Reverse convertible notes are just one type of structured product, albeit a relatively
popular type (Hens and Reiger (2009)). As noted by Ruf (2011), the early literature on
structured products focuses on valuation and finds significant overpricing of these products
compared with their constituent securities. Ruf points out, though, that more recently there has
149
been an emphasis on examining whether issuers use this market to prey on investors with
weaker financial backgrounds and/or biases regarding liquidity (page 1).
Stoimenov and Wilkens (2005) study the German market for equity-linked structured
products. These authors refer to reverse-convertibles of the type we study as knock-in
products, wherein the product pays as a bond if the underlying equity remains above a barrier
price. They examine both pricing in the primary market and the secondary market for 2,566
different issues, including 408 knock-in securities. For the overall sample, they find that
structured products are priced well above their theoretical values, and with knock-in options
have higher premiums than other types of securities. They find that the secondary market
premiums decline as maturity approaches.
Another early study by Benet, et al (2006) looks more closely at reverse-exchangeable
securities (RES), and in particular those issued by ABN-AMRO Bank between June 2001 and
July 2003. These authors use a portfolio approach to determine the theoretical value of each
RES at issue and determine that there seems to be a sizable bias in favor of the issuer overall.
They suggest that this is consistent with the growth in these markets, and that the different risk
characteristics of these products are beneficial to the hedging of the sponsor.
Hens and Reiger (2009) provide a comprehensive analysis of many different types of
structured products, and attempt to rationalize these products from the view of an investor
rather than the issuer. These authors examine the popularity of different products in different
markets as well, and discuss the optimal design of the various contracts. In addressing the
question of “why” investors pursue these securities, they suggest that perhaps systematic
misestimation of risk or unwarranted attention to small-probability outcomes leads to their
appeal. They divide structured products into categories based on the “degree of deviation from
rational preferences” that is needed to justify investor preferences (Hens and Reiger (2009), pg.
27).1
Ruf (2011) uses a very large collection of German over-the-counter warrant data to
draw conclusions about the structured products market overall. This author finds that retail
investors are more likely to use options that are either far out-of-the-money or far in-themoney, and suggests that far out-of-the-money warrants may be overpriced because there is no
alternative and because investors may have the hardest time pricing them without institutional
input. With respect to the secondary market, this author finds evidence that issuers can
anticipate upcoming demand and exploit that to increase their returns on sales of these types of
securities. Additionally, the author finds that premiums decline over the life of these products,
but that this is mainly due to the time to expiration and “moneyness” of the option, which
should be expected. The large drop in premiums found by prior work is explained here as
perhaps an artifact of the matching methodology used by those authors and the unavailability
of proper matching securities. Finally, this author looks at the credit risk component of the
premiums and finds a negative effect from credit risk after the bankruptcy of Lehman Brothers
in the U.S.
Szymanowska et al (2009) examine the pricing of reverse convertible bonds in the
Dutch market and provide a thorough discussion of the characteristics of these issues. They
1
Hens and Reiger (2011) refines some of the analysis of the original study.
150
analyze a sample of 108 issues from four different issuing banks (ABN AMRO, Fortis Bank,
ING Bank, and Rabo Securities) and end up with a subsample of 75 issues that had enough
ancillary data to be priced using their method, including 43 “knock-in” issues. They find
overpricing of approximately 6 percent for their entire sample, and document that some
premium remains over the entire period these securities are outstanding. They address this
premium and its persistence in several ways, concluding that only a small percentage of
overpricing differences can be explained without behavioral reasons such as financial
marketing, framing and representativeness bias. They document substantial differences
between issuers and between those securities with trending underlying equities.
DATA
Our initial dataset includes 2,195 reverse convertible notes issued by the Royal Bank of
Canada (RBC). The total principal of these notes is $1,410,064,000 and the period during
which the notes were issued spans from January 2007 till October of 2010. We collect data on
the note’s pricing date, issuance date, maturity date, coupon rate, strike price and barrier price
from the prospectus and the pricing supplement of each issue. Daily stock prices for the
reference stocks and for the reverse convertible notes are gathered from Thomson Datastream.
The maturity of the notes is two, three, six, nine or twelve months. The coupon is paid monthly
or quarterly. After merging the initial dataset with the stocks and notes data from Datastream
and deleting observations with missing data our sample consists of 1,112 notes.
Descriptive statistics on the data are reported in Table 1. The majority of the notes in
our sample have a three-month maturity, followed by six and twelve months. The coupon rates
in our sample range from 7 to 42.5 percent. The means for the three-, six- and twelve-month
maturity notes are 18.2, 14.1 and 11.9 percent, respectively. On average, the coupon rate
appears to go down the longer to maturity. The lowest principal amount in our sample is
$4,000 and the highest is $10,778,000. The ratio of the barrier price to the initial stock price of
the underlying is close to 72 percent, with the highest range from 30 to 90 percent in the threemonth maturity notes.
Appendix A includes the list of the reference stocks and the number of notes issued for
each reference stock. The largest number of notes was issued on Apple, followed by Wells
Fargo, GM, Freeport-McMoRan Copper & Gold, Inc. and JPMorgan Chase. The total number
of reference stocks included in our sample for which reverse convertibles notes were issued is
316.
EMPIRICAL ANALYSIS
The reverse convertibles bonds included in our sample are senior unsecured obligations
issued by RBC. They are a combination of a bond and a put option written by the buyer of the
reverse convertible bond. Therefore, the price of the reverse convertible should reflect the
value of a bond less the value of the short put:
Reverse convertible note price = Bond price – Put option price
(1)
151
Theoretically, the variables affecting the reverse convertible’s price should be the
inputs in the bond pricing and option pricing models. The bond price depends on the time to
maturity, the face value of the bond, the coupon payment amount and yield to maturity. The
option price is affected by the time to maturity, the risk-free interest rate, the volatility of the
underlying stock return, as well as the stock price and the strike price.
While few recent papers investigate the overpricing of reverse convertibles at time the
securities are issued (Szymanowska et al (2009); Stoimenov and Wilkens (2005) among
others), our focus is on secondary market price determination. In particular, we examine to
what extent the theoretical determinants of RC prices help explain the changes in daily
secondary market prices of these notes. We run time series regression for each reverse
convertible note and then average the coefficients. Our base regression model follows:
Pt i   i  1Tnotet   2 Slopet   3 VIX t 1   4 S & P500 ret t 1
  5 RBCSpread t   6 Stockret ti   ti
(2)
Where Pt is the change in price of note i from day t-1 to day t, ΔTnotet is the change
ij
in the one-year treasury rate,ΔSlopet is the change in the term structure slope measured as the
difference between 10- and one-year treasury rates in first difference; S & P500rett is the
contemporaneous return on the S&P 500 Index, and ΔVIXtis the change in the VIX,
RBCSpread t is the change in the yield spread of a bond of the issuer (RBC) over the
corresponding treasury (used as a proxy for credit risk of the issuer) and Stockret ti is the daily
equity return of the reference stock for each reverse convertible note.
The parameters estimates of our base model are reported in Table 2. We run the model
separately for each note and then average them by maturity. We only use the three-, six- and
twelve-month maturities since we have only three notes with two- and nine-month maturity,
respectively. The regression results reveal that the most important factor in secondary market
price changes of reverse convertible bonds appears to be the daily return on the reference stock
and the statistical significance of the stock return increases the longer to maturity of the
note.The level and slope of the yield curve do not appear to have an effect for any of the
maturity groups. More surprisingly, the credit risk of the issuer of the reverse convertible does
not play a role in secondary market pricing even though there is significant widening in RBC
bond yield spread during the period of our study. Equity market risk proxies such as the VIX
are not significant in the regression either. A possible explanation for the significance of the
daily return of the reference stock in explaining daily changes in prices of the reverse
convertible bonds in our sample could be that investors trade RC bonds in the secondary
market mostly out of fear that the stock price will reach the barrier price, whereas the initial
focus at the time of issuance is on the coupon payments of the notes and the view of RC bonds
as a high yield fixed income instrument. Furthermore, the R2s of the regression models range
from approximately 46 to 49 percent, which means that there may be another factor playing a
significant role which is not captured in our model. A possible candidate is the liquidity of the
securities which may be quite limited in the secondary market.
152
To examine whether the regression results differ by coupon rate of the notes, we split
the sample into four subsamples based the quartiles of the distribution of the coupon rate. We
expect that the lower the coupon payment, the lower the risk of the bond converting into shares
of stock at maturity and the higher the significance of the term structure variables. The results
reported in Panel A of Table 3 are similar to those in Table 2 and again confirm the
significance of the stock return. We also investigate the extreme tails of the distribution of the
coupon rates in Panel B of Table 2 and find that in the bottom 1 percent the change in the
Treasury note becomes marginally significant. The stock return of the underlying is still the
most important determinant.
CONCLUSION
We examine the secondary market price changes and their determinants for a large
sample of reverse convertible notes issued by the Royal Bank of Canada.We find that the daily
return of the reference stock is the most important factor affecting secondary market prices of
RC notes. Further research including liquidity proxies may improve the goodness of fit of our
models.
One useful avenue of further research would be to more directly explore the behavioral
factors underlying the mispricing of reverse convertibles. Our results suggest that the fixedincome component seems to carry more weight with investors than the risk of the option
component, but there are numerous confounding factors. Laboratory testing could show how
individuals treat these types of investments when compared against normal bonds, straight
equity, and other types of structured notes. There is also room to compare reverse convertibles
across issuers to better explore the impact of credit risk on investor decisions.
REFERENCES
Benet, Bruce A., Antoine Giannetti, and Seema Pissaris. (2006). Gains from structured product markets: The case
of reverse-exchangeable securities (RES), Journal of Banking & Finance 30, 111-132.
Faux, Zack (2011). Wall Street turns stock gains into investor losses with structured notes, Bloomberg.com, June
6, 2011.
Hens, Thorsten, and Marc Rieger. (2011) Why do investors buy structured products? Working paper, University
of Zurich.
Hens, Thorsten, and Marc Rieger. (2009) The dark side of the moon: structured products from the customer’s
perspective, EFA 2009.
Ruf, Thomas. (2011) The bank always wins: The dynamics of overpricing in structured products, 2011 MFA
Annual Meeting Paper.
Stoimenov, Pavel A., and SaschaWilkens. (2005) Are structured products fairly priced? An analysis of the
German market for equity-linked instruments, Journal of Banking & Finance 29, 2971-2993.
Szymanowska, Marta, Jenke Ter Horst and Chris Veld. (2009). Reverse convertible bonds analyzed, Journal of
Futures Markets 29, 895-919.
153
Table 1
Descriptive Statistics
Term
in
Frequency
months
STAT
Coupon
Rate
2
3 MIN
MAX
MEAN
STD
0.24
0.25
0.243
0.006
3
Initial
Stock
Price
Barrier Price
Principal Amount
Barrier
to
Initial
price
ratio
$22.11
$95.19
$48.24
$40.75
$16.58
$71.39
$35.72
$30.92
$1,000,000.00
$1,000,000.00
$1,000,000.00
$0.00
0.70
0.75
0.73
0.03
599 MIN
MAX
MEAN
STD
0.081
$2.19
0.425 $464.19
0.182 $45.71
0.062 $46.28
$0.60
$371.35
$32.34
$34.05
$5,000.00
$6,058,000.00
$588,726.96
$715,619.18
0.30
0.90
0.71
0.07
6
327 MIN
MAX
MEAN
STD
0.083
$4.86
0.28 $555.98
0.141 $52.13
0.037 $48.04
$0.50
$444.78
$36.78
$36.38
$4,000.00
$10,778,000.00
$593,218.35
$1,044,267.76
0.50
0.80
0.72
0.06
9
3 MIN
MAX
MEAN
STD
0.109 $25.23
0.168 $118.64
0.129 $73.30
0.034 $46.76
$18.92
$71.18
$50.31
$27.67
$1,000,000.00
$2,087,000.00
$1,362,333.33
$627,579.74
0.60
0.80
0.72
0.10
12
180 MIN
MAX
MEAN
STD
0.07
$3.74
0.229 $530.26
0.119 $50.32
0.03 $54.38
$0.65
$424.21
$33.40
$40.41
$21,000.00
$7,601,000.00
$795,746.99
$1,073,338.87
0.50
0.85
0.72
0.08
154
Table 2
Regression models by maturity
Variable
Intercept
ΔRBCspread
ΔSlope
S&P500ret
Stockret
ΔTnote
ΔVIX
R2
3 month
Estimate tValue
-0.00011
0.11
-0.00017 -0.33
0.00214
0.01
-0.00104 -0.21
0.32375
4.15
0.02237
0.39
-0.00024 -0.12
6 month
Estimate tValue
-0.00136 -0.16
-5.9E-06 -0.01
0.00636
0.30
-0.00223 -0.77
0.47403
7.68
0.02871
0.92
-0.00028 -0.08
46.26%
48.72%
Table 3 Regression models by coupon rate
Panel A. Quartiles of the coupon distribution
Coupon <10.75%
10.75<=Coupon <13.20
Variable
Estimate
tValue
Estimate
tValue
Intercept
-0.00051
0.03
-0.00043
-0.02
ΔRBCspread
-1.7E-05
0.00
-5.8E-05
-0.12
ΔSlope
0.00611
0.40
0.00919
0.20
S&P500ret
-0.00085 -0.66
-0.0016
-0.62
Stockret
0.42291
7.97
0.40761
6.83
ΔTnote
0.0283
1.10
0.02108
0.74
ΔVIX
0.000453
0.32
-0.00028
-0.16
R2
45.98%
47.24%
45.60%
13.20<=Coupon <16.8
Estimate tValue -0.00098 -0.17
-9.2E-05 -0.17
0.00844
0.13
-0.0025 -0.73
0.4295
6.60
0.02887
0.73
-0.0006 -0.20
48.48%
Panel B. Top and bottom 1 percent of the coupon distribution
Coupon <8 (1%)
Coupon >31.1 (99th%)
Variable
Estimate tValue
Estimate
tValue
ΔRBCspread
-0.00012 -0.17
-0.00075
-0.07
ΔSlope
0.000212
1.41
-0.00052
-0.77
S&P500ret
0.00824
0.76
-0.0451
-0.82
Stockret
-0.00136 -1.53
0.000631
0.05
ΔTnote
0.53975 17.52
0.23031
4.06
ΔVIX
0.01458
1.74
0.03113
0.36
ΔRBCspread
0.000619
1.18
0.000329
-0.01
R2
58.64%
52.60%
155
12 month
Estimate tValue
-0.0016 -0.53
-3.6E-05 -0.10
0.00773
0.42
-0.00204 -1.26
0.47976 11.32
0.02516
1.30
-4.1E-06
0.06
16.80<=Coupon
Estimate tValue
-0.00083 -0.09
-0.00019 -0.34
-0.00347
0.02
-0.00105 -0.30
0.35134
5.21
0.0205
0.45
-0.00013 -0.10
46.22%
Appendix A
Number
Ticker
of Notes
AA
14
AAP
1
AAPL
42
ABK
1
ABX
1
ACAS
2
ACH
2
ACI
12
ADM
5
AFL
9
AGU
1
AHM
2
AIG
11
AIR
1
AKAM
1
AKS
1
AL
1
ALU
1
AMD
6
AMGN
2
AMLN
2
AMR
4
AMZN
9
ANR
1
APOL
1
ARBA
1
ATI
6
ATPG
5
AUY
2
AVR
1
AXP
11
BA
1
BAC
17
BBD
1
BBT
1
BBY
1
BCSI
1
BDC
1
BEAV
3
156
GC
BHP
BIDU
BK
BKS
BLDP
BRCM
BSC
BSX
BTU
BUCY
BUD
C
CA
CAL
CALM
CAT
CBG
CBI
CCJ
CCRT
CELG
CFC
CHK
CHRW
CLR
CMI
CMP
CNH
CNO
CNQ
CNX
COF
COH
COP
COST
CPN
CREE
CSCO
CTV
CUTR
CVS
1
1
2
1
1
1
1
4
1
22
7
3
14
2
6
3
21
1
3
1
1
1
2
22
1
1
1
1
3
1
3
2
1
1
2
1
1
2
3
1
3
1
157
CVX
CX
CY
DE
DECK
DHI
DO
DOW
DRYS
DSX
DV
DVN
DYN
EAC
EBAY
ELN
EMC
ENER
ESV
EV
EWH
EWZ
EXM
F
FAST
FCEL
FCX
FITB
FLR
FMD
FNM
FRO
FRPT
FSLR
FSYS
FTO
FWLT
GDX
GE
GG
GGB
GLW
4
1
1
16
1
1
1
4
2
3
1
7
2
1
3
12
2
2
1
1
1
2
1
17
1
1
28
1
1
3
4
2
2
6
2
9
7
1
21
17
2
3
158
GM
GME
GMXR
GNW
GOOG
GRMN
GS
HAL
HD
HIG
HK
HLX
HMY
HOG
HOLX
HOT
HPQ
HUN
ICE
IGT
INTC
IR
ISRG
ITWO
JBLU
JCP
JEC
JOYG
JPM
JSDA
JWN
KBR
KEY
KO
KSS
KSU
KSWS
KWK
LDK
LEH
LEN
LM
40
1
2
2
7
3
6
5
12
1
1
1
2
1
1
1
6
2
4
1
8
1
2
1
1
3
1
6
25
1
2
4
2
1
2
1
1
1
2
4
1
3
159
LNN
LO
LOW
LTM
LUV
LVLT
LVS
MA
MAR
MBI
MCD
MCO
MDC
MDR
MEDX
MEE
MER
MGM
MI
MICC
MMR
MO
MON
MOS
MOT
MPEL
MRO
MSFT
MTW
MU
MWA
NCC
NDAQ
NE
NFLX
NG
NHWK
NILE
NMX
NOG
NOK
NOV
1
1
7
2
1
2
9
2
1
1
4
4
1
1
2
4
6
4
1
1
3
1
11
13
1
1
1
8
3
1
1
1
4
3
4
1
2
2
1
1
1
2
160
NRGN
NTAP
NTRI
NUE
NVDA
NWL
NYX
OFG
OI
ORCL
OSK
OSTK
OVTI
PALM
PBR
PCAR
PCLN
PCU
PEIX
PENN
PFE
PG
PGH
PHM
PLLL
POT
PTEN
PWR
QCOM
RAX
RDC
REXX
RF
RHT
RIG
RIMM
RIO
RTP
RVBD
RYAAY
S
SBUX
1
1
5
13
2
1
12
1
1
1
1
1
1
5
11
4
2
1
1
1
6
3
1
1
1
7
3
2
2
1
4
1
1
1
1
24
7
1
1
1
1
7
161
SF
SFD
SGR
SHLD
SID
SIRF
SIRI
SLB
SNDK
SNP
SOLF
SONO
SOV
SPG
SPWR
SPY
STI
STJ
STP
SU
SUN
SWC
SWN
SYMC
T
TASR
TCB
TEX
TGT
THC
TIE
TIF
TMA
TOL
TRA
TRN
TSL
TSN
TSO
TXN
UA
UNG
1
1
3
2
2
1
4
3
3
1
2
2
2
2
4
1
2
2
3
3
1
2
6
1
1
1
1
4
7
1
10
1
1
2
1
1
1
2
5
1
2
2
162
UNH
UNP
USB
USG
VALE
VCLK
VLO
VSE
WB
WDC
WFC
WFMI
WFT
WM
WMG
WMT
WU
WY
WYNN
X
XMSR
XOM
YHOO
YRCW
ZOLT
2
8
12
1
7
1
8
1
3
1
41
2
1
9
1
6
2
2
2
11
1
3
1
1
1
163
ONLINE BUSINESS STUDENTS: MULTIMEDIA
PRINCIPLES TO PROMOTE MEANINGFUL
E-LEARNING
Courtney Kernek
Texas A&M University-Commerce
Leslie Toombs
Texas A&M University-Commerce
Charlotte Larkin
Texas A&M University-Commerce
Abstract
The purpose of this study was to examine the learning effects of dual code and
interactivity, two multimedia principles intended to promote meaningful e-learning, in an
online learning environment within the discipline of business. Existing research has examined
the effects of multimedia instruction designed to engage learners, facilitate learning, and
reduce cognitive load. However, further research was needed to examine whether the
instructional design principles of multimedia learning also applied to various types of
multimedia lessons and more than one kind of learner in an online learning environment. Thus,
using a different discipline (i.e., business), causal model (i.e., business communication model),
learner sample (i.e., familiar), and environment (i.e., online instruction system) from that used
by Moreno and Valdez (2005), the present study replicated and extended this earlier study to
explore whether dual code and interactivity principles are related and have an effect on
learning and mental effort in a cognitive load condition. The participants consisted of
undergraduate business students. The study utilized a quantitative research design to examine
whether students construct better models of causal systems when: they are presented with two
representation modes rather than one, they are asked to organize the causal chain themselves,
they can control the amount of time deemed necessary for self-organization, and the feedback
designs encourage the intentional processing of information.
This study yielded a mix of significant and non-significant findings regarding the effects
of cognitive load and multimedia learning principles upon instructional efficiency and
meaningful learning. Most notably the results suggest that students learn best when the
instructional materials present them the opportunity to make rather than take meaning. This
finding is one of great importance because it purports that multimedia environments have the
potential of promoting meaningful e-learning by varying the degree of student interactivity
while considering specific characteristics of learners, such as level of expertise and learning
styles. However, future research is needed to investigate the aforementioned issues,
particularly the interactivity effect and level of knowledge.
164
Moreno, R., & Valdez, A. (2005). Cognitive load and learning effects of having students
organize pictures and words in multimedia environments: The role of student interactivity and
feedback. Educational Technology Research & Development, 53, 35-45.
165
IS THERE AN IDEAL GROUP SIZE?
PREPARING UNDERGRADUATES FOR SUCCESSFUL
ENTRY INTO THE ‘REAL WORLD’ OF BUSINESS
Carol Wright
Stephen F. Austin State University
C. Henry Dunn
Stephen F. Austin State University
ABSTRACT
Group work is a staple of college, but there are so many dynamics to consider. Using
both face-to-face and online courses at both lower-level and upper-level classes, this study will
illustrate students’ perceptions of group work and what they perceive as the ideal group size in
a college setting. Findings show that students prefer smaller groups, however this may not be
realistic in workplace settings.
INTRODUCTION
Whether it is called a group, team, task force, or committee, students must learn to
work together. Part of the learning experience in college is designed to help students make the
transition into a workforce that will require collaboration skills. Group work has been a
widely-used tactic for teaching concepts. According to Gottschall and Garcia-Bayonas,
“Group work is also considered by many instructors as a methodologically sound way of
utilizing class time and a robust technique for students to interact and learn from each other”
(p. 4). This is reinforced by the Association to Advance Collegiate Schools of Business
(AACSB), who encourages teamwork in its Standard 13 that states students should be involved
in the learning process through collaboration and cooperation. This can be assessed by
reviewing in-class group activities, both formal and informal (AACSB, 2012). This shows the
importance of students working in groups, and The National Survey of Student Engagement
(NSSE), reports that 49% of seniors in higher education work with other students during class
time and 61% of seniors work on projects with other students outside of class time (NSSE,
2012).
According to the AACSB, “Each student is a resource who brings unique experience
and knowledge to combined tasks. Students need to acknowledge their responsibilities to their
fellow students by actively participating in group learning experiences” (2012, p. 58).
Learning these skills is essential for the workforce, where collaborative skills are needed for
166
success. Companies use teamwork to meet goals, and textbook authors Gitman and McDaniel
(2002) state that “using a team-based structure can increase individual and group motivation
and performance” (p. 299).
With this focus on learning to work together, faculty members struggle finding the right
parameters to help students learn the valuable skills for their future careers. Group work is a
staple of college, but there are so many dynamics to consider. One aspect to consider is how
many students should be included in a team. Aggarwal and O’Brien (2008) contend that
reducing the size of the group will help with free-riding, and therefore improve the group
experience. In this case, reducing the number of members “will make it harder for social
loafers to hide behind the shield of anonymity provided by the larger group” (p. 262) and
making it easier to meet outside the classroom. Gentry (1980) used a simulation for his class
which found that larger groups caused more disagreement among members, but there did not
seem to be any difference in performance.
A quantitative study by Gottschall and Garcia-Bayonas (2012) found that students
majoring in Business Administration were more likely (54.5%) to have a negative attitude
toward group work than Education or Science majors. Respondents indicated that trying to
meet outside class time was the major obstacle in group work. Free-riding was more prevalent
in Education and Science majors.
Working in a business environment undoubtedly requires good team skills; however,
the above study shows that business students are unhappy with the process. If these negative
attitudes carry into the workforce, it can be detrimental for students. Working in groups can be
cumbersome for both instructors and students. Also, with the steady increase in enrollment in
institutions of higher education, but continued emphasis on budget cuts, many faculty members
are experiencing increased class sizes. These phenomena are expected to increase the
likelihood of more group projects in classrooms.
THE STUDY
In an unusual semester, Instructor A found that he had an unusually large class for his
upper-level business class. To balance the workload, he decided to increase his group sizes
upwards to eight students. He felt that the larger group sizes would help to divide the
workload into smaller units for the students and help with the grading process. In this
semester, he had two face-to-face classes and one fully-online course for a total enrollment of
221 students. The teams were randomly generated using the Groups tool with the learning
management system, Desire2Learn (D2L). These teams were then assigned a real-world
business case study in the textbook to analyze. The teams were structured to mimic real-world
self-managed work teams as closely as possible.
Self-managed work teams (SMWTs), also referred to as self-directed work teams, are
typically composed of 10-15 people given many of the responsibilities of their former
supervisors (Robbins, 1996). Similarly, Yeatts and Hyten (1998) state that SMWTs usually
consist of 5-15 people. Based on these sources, students can expect to work in larger groups
than they may have experienced in college. These SMWTs, which operate with a degree of
167
autonomy with minimal direction from their former supervisors, are responsible for their own
work scheduling, work approach methods, workload distribution, and performance monitoring
(Muthusamy, Wheeler & Simmons, 2005). This performance monitoring is reflected in the
peer reviews conducted by members of the team. The utilization of SMWTs by Fortune 1000
companies grew from 28% in 1987 to 72% by 1999 (Muthusamy, Wheeler & Simmons, 2005).
A significant amount of research surrounding the use and effectiveness of SMWTs has been
conducted over the years. Examination of recent research gives no indication of any
substantial change in the size, structure, autonomy, or use of SMWTs over the last 25 years.
Electronic communication tools, such as discussion boards, emails and chat rooms,
were created for each team within D2L. These tools were created to facilitate information
sharing outside the boundaries of face-to-face team meetings. While the project had specific
format guidelines regarding the finished product, latitude was given to the teams to formulate
their own project approach planning and workload distribution. At the conclusion of the
project each team member submitted peer evaluations of each of their team members,
evaluating those individuals’ performance and contributions throughout the project. These
evaluations were taken into consideration when assigning individual grades for the project.
Instructor A hypothesized that the larger group sizes of approximately eight students
would be better received by the students and yield a better product. The instructor did not
provide any type of team building lessons, but set the groups like a SMWT. Almost all of the
students were business majors, so it was assumed the students had a business communication
course that taught some aspects of teams.
Instructor B had normal-size classes in lower-level business communication classes that
had both business and non-business majors enrolled. She kept her group sizes at 3-4 students,
with most groups having four members. She felt that keeping the groups small would help the
students to coordinate their schedules and divide the work easier. In this semester, Instructor B
had three face-to-face classes with an enrollment of 94 students. Groups were assigned by a
mixed method: both self-selection and randomization. Students were allowed to pair up, then
pairs were “shuffled” to form a group of four. Upon group formation, each group was to
complete a written team agreement that specified how the work was to be divided and
established some group norms.
Communication tools were also created in D2L and discussed with classes, however it
was not required that students use the tools. In fact, few of the groups showed activity in these
tools. The group chose a research topic, completed individual research, wrote a summary
report, then presented their findings in an oral presentation. The project was broken into
smaller units with dedicated deadlines. This helped each group to divide the tasks, and
preliminary work was graded on an individual basis. At the end of the approximately four
week project, the groups submitted their findings in both written and oral forms as a team
grade. In addition, each group member evaluated other members for a small portion of the
individual’s grade.
Instructor B hypothesized that the smaller group sizes of four students would be better
received by students and avoid the problem of free-riders. Prior to beginning group activities,
the students learned background information about forming groups and group dynamics.
168
At the end of the semester, the students were given an eight question survey
administered through D2L. Students were asked about their general view of group work, how
large their group size was, what they thought the group sizes should be, and how they should
be evaluated. The survey ended with an open-ended question that allowed the students to
provide additional input if they chose. Students were given a small credit in their grades for
completing the survey. Overall, 79 students in Instructor A’s classes completed the survey for a
response rate of 35.7% and 78 students in Instructor B’s classes completed the survey for a
response rate of 83%.
THE RESULTS
Overall, both class groups had 58% of students indicate they had a generally positive
attitude toward group work. Only 22% stated having a negative attitude. Instructor A’s
classes, which are majority business students, had more indicate negative attitudes. These
results contradict the Gottschall and Garcia-Bayonas study previously cited which indicated
54.5% of business students having a negative attitude toward groups.
Only 44% of Instructor A’s classes indicated they thought their group was the right
size, whereas 73% of Instructor B’s classes said the same. Other responses indicated that
Instructor A’s classes were too large and that allowed for more free-riding (27%), created
difficulty dividing the work (15%), and caused problems with meeting outside class time
(13%). These results are show in Figure 1 below. In another question, 49% of these students
indicated that four members was the ideal group size.
Figure 1
Responses from All Classes to the Question:
Considering your group work for this class, what is your perception of the biggest issue related to the
number of people in your group?
Instructor A Instructor B All
Classes
My group size was just the right size.
35 44.3%
57 73.08% 58.60%
My group was too large and it was difficult to divide the work evenly.
12
15.19%
3
3.85%
9.55%
My group was too large and that caused more members to "free ride."
21
26.58%
5
6.41%
16.56%
My group was too large and that made it more difficult to reach
consensus.
10
12.66%
3
3.85%
8.28%
My group was too small which made all members work harder to
complete the work.
0
0%
4
5.13%
2.55%
My group was too small because it limited the amount of ideas and
talents brought to the project.
0
0%
5
6.41%
3.18%
My group was too small and that made it harder to divide the work
evenly.
1
1.27%
1
1.28%
1.27%
169
At first glance, it would appear that smaller group sizes are better for underclassmen.
However, a further analysis of the data shows that the class format may be a bigger indicator of
student satisfaction in group work. All classes that were surveyed, with the exception of one,
were traditional face-to-face courses. The two face-to-face classes indicated satisfaction with
their group size only 5% and 11% of the time. However, the one on-line course showed
different results: 28% of students felt the larger group size was just the right size. This detail
is shown in Figure 2 below.
Figure 2
Responses from Instructor A’s Classes to Question:
Considering your group work for this class, what is your perception of the biggest issue related to the
number of people in your group?
Face-to-Face
Face-to-Face
Online Class
Class 1
Class 2
My group size was just the right size.
4
5.06%
9
11.39%
22 27.85%
My group was too large and it was difficult to divide the
work evenly.
3
3.80%
5
6.33%
4
5.06%
My group was too large and that caused more members to
"free ride."
5
6.33%
7
8.86%
9
11.39%
My group was too large and that made it more difficult to
reach consensus.
1
1.26%
7
8.86%
2
2.53%
My group was too small which made all members work
harder to complete the work.
0
0%
0
0.00%
0
0.00%
My group was too small because it limited the amount of
ideas and talents brought to the project.
0
0%
0
0.00%
0
0.00%
My group was too small and that made it harder to divide
the work evenly.
1
1.26%
0
0.00%
0
0.00%
Because some students maintain a neutral or negative attitude toward group work, it is
important to understand some of the issues that cause problems. Overall, communication was
cited as the biggest obstacle to group work, with 42% of students reporting this problem. This
was followed by free-riding at 19%, procrastination at 17%, and dividing the task at 12%.
There was a larger disparity between classes. Instructor A’s class indicated that 61% of
students felt that communication was the biggest problem; a large majority. However,
Instructor B’s class only ranked it first 23% of the time, but this was balanced with other
factors almost equally problematic. This may be explained by the fact that more class time
was used to help students manage the project in smaller segments. These results can be seen in
Figure 3 below:
170
Figure 3
What do you see as the biggest obstacle in group work?
Instructor A Instructor B All Classes
Dividing the tasks.
1
1.27%
17 21.79% 11.46%
Communication among members.
48
60.76%
18
23.08%
42.04%
Too many trying to be the leader.
2
2.53%
6
7.69%
5.10%
Someone acting like a free rider.
17
21.52%
13
16.67%
19.11%
Personality conflicts.
2
2.53%
7
8.97%
5.73%
Procrastination.
9
11.39%
17
21.79%
16.56%
DISCUSSION
Survey responses seem to support the previous study by Gottschall and Garcia-Bayonas
(2008) that business students have a lower perception of group work. Also, the finding that
smaller group sizes are preferred reinforces Aggarwal and O’Brien (2008). However, smaller
group sizes may not be the norm for real-world business settings. If this is the case, groups in
college should increase group sizes to emulate this and expose students to the complexities of
working with more people.
One must further investigate to find what factors contribute to student success. In this
study, these dynamics differ for an online class. The face-to-face classes stated that 67% felt
their groups were too large for various reasons, compared to only 41% in the online class. The
class was somewhat split in that 44% of them said it was the right size.
The qualitative response to the last question on the survey may provide some insight.
Many student comments in the face-to-face class were about difficulty in scheduling out-ofclass meetings and the challenge of combining work (writing styles) from so many different
people. Comments from the online course also mentioned scheduling problems. Both classes
commented that “the way it was set up” made the larger groups work. These students may be
referring to the use of the online communication tools provided in D2L. The instructor
reinforced the idea that students should use this forum to communicate because it provided
documentation of activities for students and the instructor. The online students were probably
more likely to use this feature because the groups did not have the benefit of the face-to-face
class meetings. The increase of virtual team work in businesses reinforces the idea of
continuing to teach team skills in college. The online course resembles this trend of bringing
together workers who are geographically dispersed.
This study is limited in that it used student responses from only one semester.
Depending on specific student and course characteristics during that semester, the results may
171
not represent all cases of student group work. Further research that looks at more classes will
help with generalizability of results.
One student in the face to face class commented, “…any size group will work as long
as the members are willing to participate and work together.” One student in the online class
eloquently sums up the group experience, “Collaborating is an everyday setting now in the
corporate force work [sic]. As the economy is becoming more global, scholars such as
ourselves must learn to interact and constructively work together to combine our unique
personalities and backgrounds to create exemplary results. For two is better than one.”
REFERENCES
The Association to Advance Collegiate Schools of Business. (2012, January 31). Eligibility procedures and
accreditation
standards
for
business
accreditation.
Retrieved
from
http://www.aacsb.edu/accreditation/standards-busn-jan2012.pdf
Gentry, J. W. (1980). Group size and attitudes toward the simulation experience. Simulation Gaming, 11(4), 451460). doi: 10.1177/104687818001100405
Gitman, L. J., & McDaniel, C. (2002). The future of business [interactive edition]. Cincinnati, OH: SouthWestern College Publishing.
Gottschall, H., & Garcia-Bayonas, M. (2008). Student attitudes towards group work among undergraduates in
business administration, education and mathematics. Educational Research Quarterly, 32(1), 3-28).
Muthusamy, S. K., Wheeler, J. V., & Simmons, B. L. (2005). Self managing work teams: Enhancing
organizational innovativeness. Organization Development Journal, 23(3), 53-66.
National
Survey of Student Engagement.
http://nsse.iub.edu/html/annual_results.cfm
(2012).
Annual
results
2011.
Retrieved
from
Robbins, S. P. (1996). Organizational behavior: Concepts, controversies, applications. Englewood Cliffs, NJ:
Prentice-Hall.
Yeatts, D. E., & Hyten, C. (1998). High-performing self-managed work teams: A comparison of theory to
practice. Thousand Oaks, CA: Sage.
172
UNDERGRADUATE STUDENTS WRITING ABOUT
FINANCE: PREPARATION & ASSESSMENT
Timothy B. Michael
University of Houston-Clear Lake
Melissa A. Williams
University of Houston-Clear Lake
ABSTRACT
Over the past two years our department has developed writing assignments for the
undergraduate students in the “Contemporary Financial Institutions” course (an upperdivision major requirement). This was due to what we saw was the need to challenge their
writing and research abilities – we felt that some students were deficient in this area and
perhaps leaving our program without sufficient experience writing about our field.
Coincidentally, faculty felt that it would be a good idea to assess writing abilities within one of
our upper-level finance requirements rather than just through a common business core
curriculum. This paper discusses the basic need for writing, the challenges of preparing
students to write, the help they need during the process, and the evaluation of their processes
and products. In addition, we discuss the use of directed writing assignments for programlevel assessment.
Introduction
As with many things we do in our field, learning to write clearly and concisely about
finance requires practice, feedback and effort on the part of both the professor and the student.
Our students will be expected to communicate in an effective, written fashion once they are
done with school, and it is up to us to prepare them for writing technical documents involving
the concepts they will learn in our area. Many of our students come to us after one or two
years of mind-numbing objective exams and may even have trouble writing a 5-6 sentence
essay response on a quiz. Our earliest courses in the business curriculum must reawaken the
writing talents they had in high school and we must push them to write as often as we can to
keep their basic skills sharp and immediate.
Once they are comfortable with writing, they then must become comfortable writing
about business and finance, and this itself requires more practice and critical analysis from
everyone. Our students may not have the background or desire to write coherently about
business topics until their junior or senior years, but when they find that knowledge and
interest we must pounce on it and keep it flowing.
173
The payoff, both to the new graduate and us, can be tremendous. Students who can
learn to express themselves professionally will be better prepared to make the most of their
remaining curriculum, and will be more likely to score the jobs that they want to have. We
also argue that they may be more likely to continue into graduate school or scholarly pursuits
once they are confident about their writing.
This paper discusses my ongoing efforts to ask students to write in my undergraduate
banking course, FINC 4331. Not only did we give students a creative outlet and a great deal of
practice in writing, but we were able to use these assignments for writing assessment in our BS
Finance program.
Individual Writing Assignments
Starting in Spring 2009 we began requiring students in the Contemporary Financial
Institutions course to complete at least two individual writing assignments during the semester
over and above any group assignments. This course is an upper-division undergraduate course
that is required for all finance majors (or double majors). We also started asking most MBA
and MS Finance students in our Financial Policy course (Corporate Finance II) to write
individual assignments over and above their group project writing and presentation
responsibilities for the semester. Exams in each course have a significant (50% or more) shortanswer component, so writing in many of our finance courses is nothing new, but it's been a
few years since we required individual papers from most students.
For the graduate students, this started out of the concern that they weren't writing
enough as individuals during the class, especially our MS Finance students (or perhaps in their
program curriculum in general); for the undergraduates, we were worried about their ability to
structure arguments and find and record knowledge on their own. Both sets of assignments
have been successful, and the assignment from my banking course has subsequently been
integrated into our writing assessment for our BS Finance program.
Benefits
I have used group projects in my courses for many years, especially when working with
harder case studies or when asking for presentations of analyses from students. My MBA and
MS Finance students in Advanced Corporate Finance (FINC 5133) work in groups every
semester, analyzing and presenting directed and open-ended cases. However, I began to feel
that students, even my graduate students, weren't being asked to write enough in their own
voices. I found not only that some groups would have a free rider, occasionally, but that
groups would have their "writer" and their "presenter" and their "Excel person." Specialization
is expected, of course, and I've done it in collaborative work as well, but I felt that it was time
to push students into writing something that they could put their name on.
As much as anything, we wanted students to realize that writing was a big component
of "the real world," and it was important for their career prospects. We also wanted them to
have something they could show potential employers at the end of their studies - in the arts we
174
call that a 'portfolio.' That kind of thing has always been useful to job seekers, and we thought
that even our undergraduate students could benefit from that type of project.2
As mentioned above, we also wanted my students to find their own voices, and to
actually have a stake in writing about something, to take ownership of a topic or two in our
classes. In some cases that has ended up as opinions (backed by facts and sources), but in
many instances it has just been good reporting or a journey that they wanted to take in
researching a topic. We wanted to show them, and show ourselves and other faculty, that if
students found a topic that they actually cared about and understood they could write well and
easily. We wanted our undergraduate students to be able to count on their ability to write
about their field.
Thankfully, my students have been motivated, encouraging and highly successful in
these things.
Integrating Student Research
This is the type of assignment that we can use to encourage independent student
research and eventual collaboration. This is becoming more and more important at many
schools. In both our graduate and undergraduate finance courses we routinely emphasize the
importance and accessibility of 1) knowledge of current events from the business press, and 2)
the current state of academic research in financial economics. We consistently bring fresh
research results into the classroom so that students can see that research is important and
relevant. With the graduate courses, we also emphasize practical research results and
applications in an effort to frame the student’s understanding of business in a scientific context
– to avoid the “war stories” reputation that graduate business education has been trying to
outdistance over the past three generations. We have steadfastly refused to "just pass" students
through my courses without requiring them to understand some core concepts and the scientific
framework of modern business management. Having both sets of students write about finance
topics helps them see the benefit of a systematic approach to understanding the basic
phenomena of our field.
Finally, an unexpected benefit to adding these assignments is the "divisibility" that
these projects gives the grades for the semester; writing assignments mean that students have
the ability to demonstrate their knowledge away from a test, and this is very beneficial to those
who have extreme test anxiety or who don't do well on tests for whatever reason. It also means
that we risk having someone else write their paper for them, which is always a consideration.
Costs
Most of us can visualize the time commitment involved in giving and grading
individual writing assignments. To be effective, you must be ready to commit class time every
2
This is made more relevant in recent months because my 3-year-old daughter likes to bring things home to
show me what she did in preschool. There must be something innate about the phrase "look what I did!" in
human behavior.
175
week of the semester to at least mentioning (prodding about) different topics related to the
writing assignments: how to pick topics (even from a list), how to start writing (with an
outline), how to find sources, how to avoid plagiarism, proper formatting, etc. In our courses
we discuss some aspect of the writing of these assignments every week.
You must be willing to give students enough credit for their writing, compensating
them for their time in effect, and you must have enough slack in your course objectives for it.
We typically give students no more than 20 percent of their course credit from writing
assignments - in most semesters it has been only 15 percent total. Any less than that and they
might not take it seriously, and any more than that and they might be able to do well in the
class, grade-wise, without performing well on tests or other projects.
You must be willing to help them develop their outlines and topics, although not all
students will take advantage of that help. It is sometimes more, and sometimes fewer.
Addressing issues in class saves a lot of email and office face time later in the semester, so it
works well to make it a regular "housekeeping" item at the beginning of class to discuss
writing, every week. Usually we have provided a list of topics to choose from to the
undergraduates, and this seems to help a great deal.
“Scaffolding” is when we require preliminary pieces of the assignments to be turned in
at various points during the semester.3 This approach is probably the best way to both keep
students moving and prevent plagiarism, but it is also time intensive because each component
must be reviewed, commented upon and handed back. We haven’t implemented this approach
yet in all of our sections, but it seems to be the most needed in undergraduate classes, although
if you have graduate students who are unfamiliar with personal writing then it can help them a
great deal as well.
The time it takes to grade the assignments themselves, and perhaps to read drafts for
students who ask for it, can be extensive, but it is ultimately very satisfying. Students can
benefit a great deal from your detailed, written comments, and fewer and fewer faculty are
willing to give them feedback of this type. This type of assignment allows us to help students
learn something that we know they will value more and more as time goes on.
Plagiarism
Plagiarism is pervasive these days, and not just with undergraduate students either. For
the past several years one of the authors has volunteered to serve on our university’s Academic
Honesty Council, which is the body responsible for prosecuting plagiarism cases. In this time,
we have seen dozens of examples of academic dishonesty by students at all levels, and so we
were very sensitive to this issue when asking students to write more papers in class.
There are resources such as SafeAssign and TurnItIn that help faculty track sources in a
paper, but the best defense is a good offense here: show students that 1) penalties are swift and
extensive, and 2) plagiarism is unnecessary (because we expect them to be learning how to
3
For example, see “"Scaffolding the Writing Development of Undergraduate Literacy Education Students:
A Win-Win Solution" by Elizabeth Swaggerty (http://www.ecu.edu/cs-acad/writing/swaggerty2010.cfm) .
176
write, not to be perfect writers).4 In most cases that we have seen or adjudicated, a simple
Google search is enough to nail things down pretty well and find most cut-and-paste work.
Also, it may be a simple matter of explaining plagiarism to most students -- in the Information
Age, their understanding of "common knowledge" may be overdeveloped. For example,
faculty will have to point out that Wikipedia is not a source, ever, but only a starting point.
In the syllabus, as well as in a separate handout, faculty should point to the university's
formal plagiarism or academic honesty policy and the procedures that can be used to resolve
any trouble. Also, faculty should be sure to point out how they will resolve the issues if they
come up. Find out what your rights and responsibilities as a faculty member are - you may be
limited in how you can prosecute even an egregious plagiarist unless you configure your
syllabus correctly to start with. Documentation is the key to winning both grade appeals and
academic dishonesty cases.
For any suspected plagiarism or multiple submissions, document carefully what has
been turned in and when, trot out the language from your syllabus or catalog regarding
academic dishonesty and your penalties, and with these things prosecution is very
straightforward in most cases. It may help to find other faculty members who have been
through the process and talk it over with them for pointers, because each institution is,
unfortunately, different.
Supporting Documentation for Students
The authors have developed two handouts that we give students in our courses: one is a
general guide to writing and avoiding plagiarism and the other is a guide to help them choose
their individual topics for the semester. These are attached as Appendix II and Appendix III.
The "general" document (6 pages, Appendix II) has been through several revisions, but
it hasn't grown very much over the semesters. In that document we point out the meaning of
plagiarism, and give students some tips on how to write in an orderly fashion. We also provide
some general formatting and style ideas for those who may not have a lot of experience with
professional writing.
Most importantly, in the general document we provide students with a format for
documenting their sources that is independent of a formal style guide format (MLA, APA,
etc.). We have found over the years that students are often intimidated by the idea of using a
formal process, so we give them the reasoning behind documentation and ask them to make
sure that their technique, whatever they choose to use, follows the spirit of why we document
in the first place. We also stress that a great deal of documentation (in practice) is for their
future purposes as well as their readers'. By making the process simpler, and more universal,
and by having it make sense, students have been more likely to document correctly. Indeed,
4
Recent versions of the BlackBoard course management system incorporate SafeAssign into the options for
writing assignments and gives students the ability to submit drafts (and see how they're doing) and faculty the
ability to automate the process of checking for plagiarism. It is our understanding that TurnItIn provides a similar
service.
177
we have many students over-document their sources, but only a few so far have been in danger
of prosecution for plagiarism of official sources due to their writing assignments.5
The other document, also attached, is the "individual" component (2 pages). This
outlines some common pitfalls and gives a list of topics that students can choose from for their
assignments. We currently have two assignments per semester in the banking course. Unlike
the general document, this one gets revised quite a bit from one semester to the next.
Writing Assessment for BS Finance
For the undergraduate program, these writing assignments also allow us to measure the
writing skills of finance majors for program-level assessment. We have traditionally measured
writing abilities as part of our overall assessment program in the major, as shown in Table I.
However, because we had already implemented this writing project in FINC 4331, it allowed
us the opportunity to take an additional, major-specific measurement of the writing ability of
each of our finance majors or double majors.
Eventually, we hope to compare initial measurements from our earlier undergraduate
core writing course with our results measured closer to graduation.6 Having two measurements
will allow us to tweak the items that students might lose or forget over that time period.
Because of our assessment efforts, we were obligated to add (several years ago) a
statement to every syllabus in the School of Business informing students that they are being
measured. This statement is very simple, but it has the potential to generate a great deal of
discussion among students. Our school’s statement mirrors that of the university and the
university system, and it reads:
Statement on Assessment:
The School of Business may use assessment tools in this course and other courses
for curriculum evaluation. Educational Assessment is defined as the systematic collection,
interpretation, and use of information about student characteristics, educational
environments, learning outcomes and client satisfaction to improve program effectiveness,
student performance and professional success.
This assessment will be related to the learning objectives for each course and
individual student performance will be disaggregated relative to these objectives. This
disaggregated analysis will not impact student grades, but will provide faculty with
detailed information that will be used to improve courses, curriculum, and students’
performance.
BS Finance Learning Goals for Effective Written Communication Skills are listed in Appendix
I, along with the actual rubric (as originally developed for the entire degree and amended for
5
My most recent experience with an honor violation involved a student who cut-and-pasted the definition of the
Federal Reserve into an online exam. This was a graduate student taking the undergraduate course after being
approved for credit.
6
Because we have a large number of non-traditional students, there can be quite a delay between the semester
that they take their core writing class and their major courses.
178
BS Finance), results from several semesters, and our discussion of those results for reporting
purposes for a recent cycle.
The rubric shows the areas that we are assessing: Writing skills, including
organization, style/tone, and mechanics; Critical Thinking skills; and Research Literacy skills.
These translate into five items, each with five potential outcomes from 'inadequate' to
'excellent.' As evaluated in 2010-2011, and consistent with prior results, students tend to
struggle most with Research Skills and the actual Mechanics of writing. These results have
helped us decide what to emphasize when discussing this with students in class and in the
write-ups.
Writing Assessment for Online Courses
We have tried to keep these supporting material freestanding to avoid having to revise
them every semester. In addition, we have been able to use them effectively in the Web-only
course without modification. For the Web courses we have also recorded several podcasts
specifically discussing the handouts and writing assignments, and we can incorporate any
classroom discussions and questions about the writing assignments into the regular weekly
podcasts for the courses.
Table I
University of Houston-Clear Lake
Learning Outcomes and Assessment for BS Degrees
B.B.A and B.S. Degree Learning Outcomes
Courses Responsible
for Assessment
Our students will be effective written communicators.
WRIT 3132 (may look at
other courses to see
where this may be
assessed)
ISAM 3033 (may look at
other courses to see
where this may be
assessed)
MGMT 3031 (may look
at other courses to see
where this may be
assessed)
Our students will have technical competence
Our students will possess ethical awareness.
Our students will possess a common body of business knowledge.
Initially, we used an exam that we called the CBK (common body of knowledge)
exam which had 6 questions from each of the courses listed to the right. This exam
was given the first week of the strategic management class. The results from that
exam were poor. So we have decided to push the assessment of the common body of
business knowledge back to those 8 undergraduate core classes.
179
FINC 3331
ECON 3131
MKTG 3031
MGMT 4534
MGMT 3031
ACCT 3331
DSCI 3231
DSCI 3131
Conclusion
As academics, most of us can appreciate the value of being able to write clearly and
concisely, and we hope that we can remember what it was like to struggle with our writing, our
research, and the writing process. Writing requires a structured thought process, it requires
order, and knowledge. Our students can benefit a great deal from our help in this area, just as
we benefitted from our mentors and peers, and from practice. Once they become comfortable
with their own writing, and once they are convinced that their opinions can be structured,
valuable and supported by research, we can ask them more complicated questions and demand
a higher level of understanding and they will respond – we have seen it over the past few years.
Certainly, it is a time-consuming process for all, but worth it. We argue here that we can help
them improve their professional skills and thought processes and simultaneously use individual
writing assignments to assess their personal progress and growth in their programs of study.
180
APPENDIX I
B.S. in Finance Learning Goals
Effective Written Communication Skills
Objective:
Students will successfully complete a (technical) writing project in which they demonstrate
writing skills, interpretation of research and background data, critical thinking, and logical
argument.
Measures:
Students will be graded from a rubric (attached) in 5 specific areas:
 Organization
 Style/Tone
 Mechanics
 Critical Thinking Skills
 Research Literacy Skills
A committee of two or more full-time faculty members in finance will select the categories and
emphasis for this rubric, with input from the entire department over time.
Scoring:
Each area is evaluated between 1 and 5 points, where
1.
2.
3.
4.
5.
Inadequate
Adequate
Good
Very Good
Excellent.
Criteria for Evaluation:
Mastery
20-25 points (average > 4)
Competent
15-19 points (average > 3)
Deficient
Less than 15 points (average < 3)
Seventy percent of students are expected to score at the Mastery or Competent levels.
Schedule for Administration:
Two similar, graded writing assignments will be collected at least once per academic year in
Contemporary Financial Institutions (FINC 4331). The second assignment will be used to
complete the rubric for each student. As implemented in Spring 2010, this aspect of the class
involves 7 contact hours throughout the semester (approximately 30 minutes per class session
181
over 14 weeks). For the online component, the Writing Assignments are described via handout
and podcast.
Notes:
The original School of Business assessment at the core level (2007) used one additional
measure: Ability to Write with Visual Aids. This has been deleted as noted below.
Assessment Rubric for FINC 4331
[adapted from WRIT 3132 (School of Business) 2007 rubric]
All categories are rated using a scale of 1-5:
1 = inadequate
2 = adequate
3 = good
4 = very good
5 = excellent
Writing Skills:
Organization: Does the writer follow an organizational format (direct/indirect) appropriate
for the writer’s purpose and audience? Is the purpose clearly stated? Do paragraphs contain
topic sentences that clearly support the purpose? Are the paragraphs unified and cohesive?
Style/Tone: Is the paper free of redundancies, clichés, and trite business language? Does the
writer choose language that is appropriate for a business environment (free of non-specific
language, colloquialisms, non-standard English)? Is the tone respectful and supportive of the
writer’s purpose?
Mechanics: To what extent are grammar, spelling, and punctuation correct throughout the
paper?
Critical Thinking Skills:
How well do the student’s conclusions fit the data he or she presents?
recommendations consistent with the interpretations?
Are the
Research Literacy Skills:
How credible are the sources the student selected for the report? Did the student include a
variety of sources? Did the student correctly cite the sources?
[Note: The remaining original measure is not appropriate for this assignment, so it was not
measured in FINC 4331.]
182
Ability to Write with Visual Aids:
Did the student choose meaningful data that supports an important point in the paper? Did the
student choose a visual aid that fits the selected data set? Did the student clearly and correctly
present the data? Did the student interpret the data in the text?
FINC 4331: Assessment of Writing Assignment
Student: ___________________________
Major: _________________
Student Number: ____________________
A. Writing Skills: Organization
1.
inadequate
2.
adequate
3.
good
4.
very good
5.
excellent
B. Writing Skills: Style/Tone
1.
inadequate
2.
adequate
3.
good
4.
very good
5.
excellent
C. Writing Skills: Mechanics
1.
inadequate
2.
adequate
3.
good
4.
very good
5.
excellent
D. Critical Thinking Skills
1.
inadequate
2.
adequate
3.
good
4.
very good
5.
excellent
E. Research Literacy Skills
1.
inadequate
183
2.
3.
4.
5.
adequate
good
very good
excellent
F. Ability to Convey Business Information Through Visual Aids
1.
inadequate
2.
adequate
3.
good
4.
very good
5.
excellent
184
B.S. in Finance Assurance of Learning
2010-2011 School Year
Effective Written Communication Skills
(Administered in FINC 4331, both Face-to-Face and Web-Only)
Term
Mastery
Competent
Deficient
Spring 2010*
2/26
13/26
11/26
N = 26
(7.69%)
(50.0%)
(42.3%)
Fall 2010
10/32
19/32
3/32
N = 32
(31.3%)
(59.4%)
(9.4%)
Spring 2011
3/28
14/28
5/28
N = 28
(10.7%)
(71.4%)
(17.9%)
185
Analysis By Measure
Spring 2010*
Fall 2010
Spring 2011
Measure
Average
Average
Average
ORG
3.19
3.31
3.39
STYLE
3.27
3.41
3.39
MECH
2.92
3.66
3.18
CRIT
3.27
3.88
3.61
RES
2.77
3.72
3.64
[* For comparison purposes.]
Discussion of Assessment Results
2010-2011
As mentioned above, this assignment required approximately 7 contact hours over the semester
in the face-to-face class. Students were given extensive guidance in the writing process, on
avoiding plagiarism, documentation of source material, and other aspects of written
communication in a business environment.
The topic choices provided by the instructor made the assignment congruent with the course
material for the semester; otherwise, this assessment exercise would not be appropriate for the
FINC 4331 course.
In general, students seemed willing to put forth some effort for these assignments, and seemed
to be interested. A few complained that they weren’t required to write papers in many other
courses, and so this was burdensome for them. Giving students a range of topics to select from
was critical in getting their “buy-in” for this assignment.
We saw a slight increase in "Deficient" in the second semester, but overall students were
"Competent" or better. By measure, the scores seem to be improving, with dramatic
186
improvement in the "Research Literacy" area, consistent with the increased effort to help
students identify acceptable sources.
As was the case in 2009-2010, it is the administering faculty's opinion that there should be
more emphasis on what constitutes “acceptable” research source material (in the age of the
Internet), documentation of the ideas of others, organization/planning and some components of
style/tone (jargon, for instance). Students scored well on Critical Thinking and Style,
generally, and the areas of improvement are those for which the most questions were generated
during class discussion or via correspondence. This interpretation and course of action is
consistent with the numbers above.
Online Assessment:
The results of the assessments from the Web-Only sections of this course are integrated into
the numbers above. In general, the results of the Web-Only students were slightly lower than
the numbers from the face-to-face students -- this may be due to the amount of time spent
answering questions on these assignments in class versus in an online environment; during the
semester, there were very few discussion board posts or email questions from online students
regarding the two writing assignments for the semester.
Recommendation:
It is the lead instructor's recommendation that we continue to discuss this in class and give
students resources to help them become better writers. Although our results are encouraging,
the quality of the papers could certainly improve, especially in the area of "Mechanics." Given
the large of number of students in our sections who have English as a second language, it is
becoming more obvious that they need examples and encouragement over and above what
traditional students would need. In addition, the students in this class are being encouraged to
seek help from the instructor, individually, and at the UHCL Writing Center, and this will be a
bigger emphasis in the future.
187
APPENDIX II
GENERAL DIRECTIONS & COMMENTS FOR ALL WRITING ASSIGNMENTS
This document is considered to be part of the syllabus for any class I teach, therefore you
should read it very carefully before working on your writing assignments
I. CITATION PURPOSE AND FORMAT
The hardest part of any non-fiction writing is the documentation of sources, but without
sources you might as well be writing a blog. In some cases (especially in the working world,
and especially when you’re starting out) your audience won’t care what your opinion is, but
they will care where you got your information and they will want to be able to go back and
read what you read on the way to your conclusions (your source material).
WHAT IS PLAGIARISM?
From an academic standpoint, writing down what someone else said and passing it off as your
own is called “plagiarism.” That includes many things, but we’ll keep it simple here: if you
use more than four of the same words as a source author uses without quotation marks
and a page number reference, you’re stealing, and that's plagiarism. Also, if you use
someone else’s idea without a reference to who thought of it and which article it’s from,
it’s plagiarism.
You don’t need to steal ideas to effectively present, use and discuss them, so please don’t
lower yourself to that standard. Ignorance is no excuse – you are bound by the UHCL Student
Handbook to understand this stuff. Plus, you can always ask your professor to clarify things
for you.
NOTE: IF YOUR PAPER IS TURNED IN WITHOUT PROPER DOCUMENTATION IN
THE FORM OF QUOTATIONS AND CITATIONS YOU WILL BE CHARGED WITH
PLAGIARISM. You will not have an opportunity to take it back and "fix" it once you've
turned it in. Should you want to ask for clarification of what you "should do" about references,
you'll need to do that BEFORE you turn it in, and well before any deadline for the assignment.
On the date that it is due, anything you turn in will be considered to be the final assignment,
and any lack of documentation will be charged as plagiarism. Even your “rough draft” should
contain properly-documented references.
If you turn in someone else's work, I will contact you to start the hearing process. In addition,
you will receive a grade of “F” on any assignment that has plagiarism in it, including tests. I
also will assign a course grade of “F” if I catch you plagiarizing or cheating in my class,
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regardless of your other grades. You will have the opportunity to appeal my grade before the
Academic Honesty Council of the university.
If you’re not sure about plagiarism, you can always take advantage of UHCL’s Writing
Center. They can even answer questions online, and I think they’ll proofread papers for you
and help you fine-tune the writing process. There’s no excuse for turning in a plagiarized
document.
DIRECTIONS FOR CITING SOURCES
For purposes of effectiveness you can always use an established reference format: MLA,
APA, etc. You may have used these in other classes. At a minimum, however, you need to
make sure that your reference format includes the following (for your protection AND mine).
Step 1. Create a full list of everything you read in the preparation of your report or essay, put it
at the end of the paper, and title it "Bibliography" at the top of the page. This list should
include all papers, articles, books & interviews that you read for your paper, even those
that you didn’t directly quote or paraphrase in your writing. The format for this “bibliography”
needs to include sufficient information to allow your reader to go find the item you read, such
as names of all authors, full title of the work, date of publication, publisher (for books), volume
number, issue number, pages of the work, etc. Even if you only read something for
background, you should list it here so that your readers know where you’re coming from.
I realize that several citation formats don’t support this, asking only that you cite what you
quote or paraphrase. My method, however, works best in practice. It also makes it easier on
you if someone wants you to go back and do more work later on the same topic.
WHAT'S AN ACCEPTABLE SOURCE?
First, your source must be credible. For example, the fact that Lady Gaga has millions of
followers on Twitter is meaningless - it means she's qualified to comment on having millions
of followers on Twitter, and nothing else. You should start looking for sources with
recognized credible sources that fit the topic. For economy or business, it should be Financial
Times, The Economist, Wall Street Journal, and BusinessWeek. Forbes, Fortune, etc. also
count. For company information, start with the company itself via its 10-K filings online.
Wikipedia is NEVER a valid source, although it might point you in the right direction (via the
"References" part). Wikipedia can be edited by anyone, any time. Recognize that all sources
are biased - that's the point of writing, to inform someone or persuade them. Choosing how
and what and when to report is a function of one's biases. Blogs aren't valuable sources unless
the person writing it has some credibility in the field in question. The Internet has taught us
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that EVERYONE has an opinion, and unfortunately most of the opinions on the Internet are
worthless because the writer has neither knowledge nor a reputation that they've put at stake.
Step 2. Once you have your bibliography together, make sure you use either a numbered note
system for references (where you number each citation when it happens and then create a
separate reference list of “endnotes”) or you can cite in the document with some unique
reference marker such as (Michael, 2004a, page 23) at the end of the relevant sentence. Again,
if you use more than four of somebody else’s words, you have to cite at the end of that
sentence, with no exceptions. You can either use a note marker such as I’ve done here, or do
what I did inside parentheses.1 If you just choose to use a numbering system, then you'll need
to create a list of endnotes on a page at the end of your document that you can use to cite page
numbers in an appropriate way. With the bibliography already done in advance, the endnote
page is simple. You can always use footnotes if you'd like to.
Step 3. A recent copy of the APA or MLA style guides have examples of how to cite different
types of work (books, magazines, journals, Web sites, etc.) Remember, the most important
thing is traceability – can I find your source with the information you’ve given me in the
bibliography? Can I find your quote? If neither of these is true, even the “correct” format
doesn’t get the job done.
Step 4. Citation Summary and Checklist: At a minimum



when you start doing research for the assignment, make a list of all of your sources, get
their full information, and keep them ordered them by the last name of your first author
every time you use something from each of these, either
o put quotations and then cite the author, year, and page number at the end of the
sentence, or
o number the quote and put it in a list of endnotes.
o for paraphrased ideas or expositions, use a parenthetical or a note as soon as you
use someone else's idea.
put a bibliography section and a notes section at the end of your document. Make sure that
each contains enough information for a reader to be able to find the exact reference source
easily.7
II. THE WRITING PROCESS
I suggest that you start with a thesis or topic, make an outline that you think you'll use, and
then start finding and reading sources. As soon as you start reading, you're going to want to
revise your outline, but that's normal. Also, you're going to want to keep notes of 1) what
7
Use an established method if you want to, but make sure I can follow your path if I need to. That’s the most
important thing.
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sources you're using (even if you don't quote them or paraphrase them), and 2) what info and
ideas you found in each one.
Before you start researching: Think about using note cards or Excel to keep up with your
sources and the ideas that you take from each of them. Sometimes the old ways are still the
best ways. If you want to get high-tech, there are programs out there that will help you
organize your thought process. Believe it or not, 3x5 note cards are still useful for this
purpose. One reference, idea or fact per card.8
I've always found that writing each bibliographic source on its own notecard helps you to make
and use your reference list along the way.
You'll want to revise your outline, as I mentioned, as you write, but the outline will help you
make progress. Don't neglect it -- even if you're saying "I never needed that in high school"
you'll need it in your professional writing because projects are just too big for off-the-cuff
exposition. Practice using an outline and it will pay off later.
Another thing: write to your audience. An exception can be made if you want to make sure
that anyone can pick up your piece and read it, but usually the more carefully you target
something the better. Plus, if you keep all your sources handy you can go back and reframe
your work easily for others' to read. Thinking about something from the audience's perspective
should help you develop your thesis and outline.
Have an introduction, body and conclusion, and plan for documentation (and worksheets if
appropriate) in a table or appendix format at the end of the paper. Make sure you actually
write to fit the assignment, and if it isn't clear what the professor (or your boss) wants, go and
ask. And ask again. And keep asking until it's clear. Take notes while you’re asking. Same
with documentation of sources: if you're unsure, ask the professor about formatting, etc. Or
just note something just in case.
Believe me, it’s much better to ask enough to get the assignment clarified than to do weeks or
months of work only to find out that it’s opposite of what they wanted. That gives “live and
learn” a new meaning.
III. PRESENTATION FORMAT AND DISTRIBUTION
Finally, in professional writing, most readers will prefer that you turn in a one-sided, doublespaced document (with page numbers) that is stapled in the top left corner. Leaving out page
8
I still think note cards are better than a PC, because you don’t need battery power. If you figure out a better,
more portable, less error-prone method, please share it with me in an email sometime. Scrivener (software for
Mac & Windows) comes very close I think - it's a computerized corkboard for "notecards." EndNote and Zotero
(both platforms) can do the same thing for references.
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numbers is a big no-no. Also, those slide-on plastic binders that people use just get in the way.
A single staple allows for easy page-turning, and one-sided, double-spaced allows for the easy
writing of comments. If your document has a lot of sections or different arguments within it,
make sure you have a table of contents (this doesn’t apply to anything less than about 5-6
pages, unless you just want to). If you have a good number of attachments, you might want to
have a list of those at the beginning of your document.
Remember, if a professor gives you a “recommended” number of pages, it usually doesn’t
include the cover or any table of contents, or reference pages. Those are extra.
Edit your document carefully for white space. This is a big problem with some student writers.
Actually print it out and look at it before turning it in (even via email).
Use full justification if you can, because it is less distracting to your reader.9
Other big problems are typos and spelling errors. You should assume that your audience is
actually going to read your work, and you should read it first. Proofreading EVERYTHING
YOU DO, as a habit, is a great way to get your work noticed by your bosses and professors. It
will set you apart from many of your peers (or competitors).
Finally, if you want to make things more durable (for discussion or distribution to those outside
your unit)10 you can use a plastic comb binder (so the document will open and lie flat on the
desk) with Mylar or cardstock covers. For really big docs people use 3-ring-binders
effectively, and cardstock numbered tabs make a good way to separate sections and/or
appendices or add-ons. It also makes it easier to add or update attachments if it is a "working
document." This binder approach is overkill for anything less than about 30 pages total.
In summary







double-spaced if comments or notes are expected from your reader (they usually are)
absolutely must have page numbers on every page but the cover & table of contents
absolutely must have all titles, names and a date on the cover
one-inch margins, 12-point font11; use Times Roman or something similar
full justification unless told not to
single-sided paper
stapled in top left corner
9
Especially if that reader is me.
Or to show to your parents so they’ll think you’re actually learning something in school. This works, trust me.
11
Unless it's a bunch of poetry; if it’s poetry you can do whatever you want to. Of course, your reader may not
LIKE poetry, so this is risky. For business reports, don’t get happy with font and margin sizes, and don’t use lots
of different fonts in a document. That’s called the "ransom note" effect.
10
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o unless it's for wide distribution or needs to be durable; in that case use Mylar or
cardstock covers and a comb or 3-ring binder, with cardstock tabs to index or
separate sections
RESOURCES
The UHCL Writing Center has a lot of resources online.
Neumann Library has some as well. The can be found here
http://libguides.uhcl.edu/FINC or http://libguides.uhcl.edu/MGMT
Plagiarism is discussed on the library’s “Citing & Writing Help” tab at that link.
I have found online a working paper by Matthew O. Jackson entitled “Notes on Presenting a
Paper” (http://www.stanford.edu/~jacksonm/present.pdf) that will help you understand
citations in context.
I will also recommend a writing handbook such as “The Longman Handbook for Writers and
Readers” by Anson and Schwegler, Longman Publishing. (ISBN-10 0-205-74195-9, print
version). http://www.coursesmart.com/9780205794331/part01
The APA, Chicago or MLA style guides also contain a lot of good examples if you’re
struggling with citations. You can find more info about this at the Neumann Library site.
Also, you might be able to find an older edition of the APA or other guide at a used bookstore
for cheap.
"Writing a journal article summary" at www.donnavandergrift.com/WritingSummary.htm .
(3 pages)
"How to Read a Scientific Research Paper -- A four-step guide" located at
http://www.hampshire.edu/~apmNS/design/RESOURCES/HOW_READ.html , including the
"Teacher's Guide…" by Ann McNeal. (6 pages total)
"Summarizing a Scholarly Journal Article." online at www.ufv.ca/writing_centre (3 pages)
"Critiquing a journal article" (which is a related subject) can also be found there
"Writing a journal article review" found at https://academicskills.anu.edu.au (2 pages)
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APPENDIX III
FINC 4331, Contemporary Financial Institutions: Individual Writing Assignments (2
pages)
BEFORE YOU DO ANYTHING ELSE ON THESE ASSIGNMENTS please read and
make sure you understand the document entitled "General Directions & Comments for all
Writing Assignments" which is on BlackBoard under “Writing Assignments.” That document
contains instructions and guidelines that you need to follow for completing these assignments.
Because of its remarkable and invaluable content, that document is incorporated herein by
reference as an important part of the assignment and part of the syllabus, too. In particular,
you must read and understand its comments on plagiarism as well as the plagiarism language
in the current UHCL Student Handbook and the official catalog.
Writing Assignment #1
Please write 8-10 pages (double-spaced) on one of the topics listed below. Please use at least
10 "real" sources for your paper (newspaper or magazine articles, including those duplicated
online, count -- reporter blogs do not count; Wikipedia doesn't count - ever - it's a starting
place only) and be sure to document them properly. Opinion pieces are OK as references if the
writers are actual experts, not just some blogger-type pundit.
You must also turn in a printed copy of these assignments at the beginning of class on the
date they are due. If you come to class late that day, or if you fail to turn it in at the beginning
of class, the paper will be considered “late” and may be subject to a late penalty of up to one
letter grade.
You should send a copy in *.doc or *.docx format to the instructor’s email address before
the due date in the Course Schedule. I will add the emailed copy to my electronic database of
student papers in SafeAssign, and I will use SafeAssign to screen for plagiarism. I will not
grade your paper unless I have an electronic version, and you will receive a zero for your grade
in that case.
Working Together
You can work with other folks on this project, but you must all have different topics (both
times) and you must turn in only your own work. I will treat any common writing on any of
these assignments as plagiarism, and I will prosecute everybody involved. Anything more
than four words is "common writing" unless you have a documented source (which has to be
cited anyway), and if your paper consists of only a bunch of quotes strung together, you'll get a
low grade. You must do and turn in only your own work on every assignment in this class.
PLEASE NOTE: Any questions about plagiarism should be addressed to me BEFORE you
turn in the assignment. "I was planning to ask you about that" will not be an acceptable
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excuse, and I will prosecute what I think is plagiarism. If you make a “mistake” and turn in a
“rough draft” without references, I will STILL prosecute you for plagiarism. Even rough
drafts have to have references, and when they don’t it’s a violation.
Acceptable Topics

economic and political causes of the 2008 financial collapse

economic effects of proposed government solutions for "underwater" mortgages

predatory lending practices by mortgage banks and their economic effects

predatory lending practices by "subprime" consumer lenders and their economic effects

the growth & history of the subprime consumer lending industry (payday loans, title
loans, etc.)

provisions of the Dodd/Frank Act and its expected consequences for the banking
industry

solutions for the Freddie/Fannie problem going forward

the Community Reinvestment Act and its relationship to subprime mortgage lending*

impact of the subprime mortgage lending crisis on consumer finance*

the impact of the subprime lending crisis on consumer mortgage availability*

proposed government changes to regulations on management compensation at financial
institutions and their expected effects

the recent history of bonus compensation in the financial services industry (on "Wall
Street"), before and after the crisis

the effect of Sarbanes-Oxley on the banking and/or financial services industries

the importance of fair value accounting and its role in bank reforms
NOTE: You must choose from this list for your writing assignment topic. You cannot make up
your own topic. If you do not use a topic from this list for your writing assignment, you will
receive a grade of zero on your writing assignment, with no exceptions.
Also, for some topics your references may include Kindleberger & Aliber book (5th edition or
later). Chapters 8-11 (5th) are especially useful in understanding the current crisis with some
historical perspective. Other chapters may be useful -- you should see what you can find in
there. Chapter 9 (5th) is about fraud following a financial bubble, so it should be fun to read.
Writing Assignment #2
For Writing Assignment #2, I will expect you to choose a different and unrelated topic from
the list given above and follow the directions for Writing Assignment #1.
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Grading
Your grade will be determined by how well you cover the topic, but I will also take off points
for grammar problems and awkward construction. Be sure to have someone proofread your
paper several times before you turn it in. You should also pay attention to five separate aspects
of the paper that I will grade and assess

Writing Skills: Organization: Did you use an outline? Does the paper flow logically
from one idea to another?

Writing Skills: Style/Tone: Is it written in a formal fashion? Does it use jargon and/or
first-person pronouns? Does it read like someone’s blog?

Writing Skills: Mechanics: Are the sentences complete? Are there lots of
proofreading errors?

Critical Thinking Skills: Do you understand the key aspects of the topic? Did you take
time to find out different opinions/facts regarding the topic?

Research Literacy Skills: Do you use enough sources, relevant sources, different
sources (instead of just a few)? Do you use sources that are questionable or off-topic?
All of these aspects were emphasized in your Business Communications course, so you should
be somewhat familiar with what they mean.
I will not grade papers on formatting, specifically, but they should meet the following
minimums:

one-inch margins all around

12-point font

title page with your title, name, course and date

page numbers

list of references in a proper reference format, and

other things mentioned in the "GENERAL DIRECTIONS…" document online.
I will grade your paper and give it back with some comments that explain why you lost points.
My comments may be specific or general in nature, but I am always willing to discuss grading
once you've gotten your paper back and reviewed my comments thoroughly.
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NEW METHODS TO TEACH INFORMATION
SYSTEM DEVELOPMENT
Vance Etnyre
University of Houston – Clear Lake
ABSTRACT
Case studies have been used for decades in the teaching of information system
development. Since information system development is almost always a team effort, teamwork
strategies and team processes have been used in conjunction with information system
development cases to make learning information system development a realistic and efficient
endeavor. Etnyre [2011] described the use of multi-semester cases to extend the amount of
time available for programming and testing in a complex development situation.
The platform used to develop the project has an enormous effect on the level and
quality of learning that goes on. When a specific environment is used with established rules
and standards, students learn to follow the rules and standards in their efforts to develop a
system. Although following rules and standards is a positive thing, it is possible to do far
better in a systems development course. Developing the best set of rules and standards forces
the developer to examine possible alternatives, screen out those which would prove infeasible
or impractical and apply a decision-making strategy to determine the best set of alternatives.
Devising and applying the processes used to determine the best set of rules and standards
teaches students far more than they could learn by simply following an existing set.
One difficulty in forcing students to develop the rules and standards they will use is the
time it takes to do the job well is significant compared to the duration of a semester. If you add
the time required to complete the investigation and system analysis phases to the time it takes
to create rules and standards for developing the system, you have a substantial amount of time
relative to the duration of a semester. Doing these tasks sequentially would leave a small
amount of time remaining in the semester for detailed design, programming, testing and
implementation of the developed system. One useful approach requires each student to
simultaneously serve on an application development team and standards development group.
This approach can be used to reduce overall development time and still allow students to
benefit from the useful process of determining the best set of rules and standards for a
particular development project.
A process which has used this approach for several semesters at University of Houston
– Clear Lake will be discussed and demonstrated in this paper.
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AN ANALYSIS OF BUSINESS CHARACTERISTICS
THROUGH GEOCACHING
Kevin Thomas Groth
Wartburg College
ABSTRACT
Geocaching is a free outdoor treasure hunting game where participants search for
concealed containers called geocaches by using a Smartphone or GPS. Various concepts of
geocaching are then explained to develop a better understanding of the activity. This paper
answers the question of whether positive and negative aspects of ethics, problem solving, and
teambuilding can be shown through geocaching and applied to business. Aspects discussed in
ethics include analyzing how the Geocachers’ Creed is similar to a establishing a code of
ethics in a business and the many different ways in which the Geocachers’ Creed can be
applied to business. Aspects discussed in problem solving include various effective methods of
solving a problem in business and how these effective methods can be used in geocaching.
Ineffective problem solving skills are also mentioned and ways in which these skills can be
avoided are also discussed. Aspects discussed in teambuilding include various ways in which
to develop a more effective and efficient team in business and how it can be applied to
geocaching. An analysis of negative teambuilding skills is also presented. From the evidence it
can be concluded that geocaching can effectively strengthen ethics, teambuilding, and problem
solving. Geocaching should be implemented in businesses because it strengthens ethics,
problem solving, and teambuilding and also can potentially strengthen many other business
related characteristics.
INTRODUCTION
What activity encompasses the entire world and can entertain for a lifetime? There
aren’t many activities that fit this description. However, geocaching fits this description very
well. Many people have never heard of geocaching. Geocaching is a free worldwide treasure
hunting game where participants go outside and try to find hidden containers called geocaches
by using a Smartphone or GPS. They can then share their experiences on geocaching.com
(“Geocaching,” 2012). “Currently, there are over 5 million geocachers worldwide and there are
1,934,791 active geocaches, located in more than 150 countries including Vatican City!”
(“Geocaching,” 2012 and “Hide and Seek a Cache,” 2012). The number of active geocaches
continues to grow as people place more and more geocaches. The locations of geocaches range
from Antarctica to the International Space Station (“Hide & Seek a Cache,” 2012). If one
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started geocaching when they were 25, lived to be 100, and found one geocache a day, it would
take them over 5,300 years to find all of them. Geocaching is an activity that can be enjoyed by
all, helps to promote the outdoors, and also helps to promote physical activity.
In addition, geocaching can potentially offer those in a business setting opportunities to
develop and strengthen certain characteristics and apply those characteristics to business. There
are many characteristics that geocaching can possibly develop and strengthen. Some of these
characteristics include problem solving, teambuilding, goal setting, strategic planning, ethics,
leadership, camaraderie, observational acuity, and communication. What positive and negative
aspects of ethics, problem solving, and teambuilding can be shown through geocaching and
applied to business? This paper will address this question by providing evidence as to how
geocaching can affect the way in which each of these three characteristics can be applied to
business through an analysis of the positives and negatives of each characteristic. The scope of
this paper will be limited to these three characteristics since they relate the most similarities
between business and geocaching.
Since there is minimal scholarly evidence about geocaching, the majority of the
evidence will reveal how these three characteristics relate to business processes. This evidence
will then be connected with geocaching in order to determine if these three characteristics have
been effectively strengthened and developed through geocaching. The basics of geocaching
and the purpose of geocaching will first be discussed to develop an understanding of
geocaching. Then positive and negative aspects of ethics, problem solving, and teambuilding
through geocaching will be analyzed. A determination will be made as to whether each of the
three characteristics can be strengthened and developed through geocaching and effectively
applied to business.
The best way to understand geocaching is to physically participate in the activity, but since this
is not possible, a brief explanation of how to participate will suffice.
BACKGROUND OF GEOCACHING
The first step while participating in geocaching is to visit the geocaching.com website.
One can easily search for geocaches by entering the appropriate address or zip code and mile
radius. A listing of geocaches within the specified mile radius of the address or zip code will
appear (“Hide & Seek a Cache,” 2012). Users should simply click on the geocache they want
to find and record the coordinates provided. There are hints provided in case the geocache
cannot be found (“Search for Geocaches,” 2012).
The next step is to obtain a GPS or Smartphone and enter the coordinates in for the
cache. One should then travel to the geocache, park in a safe area, and begin searching. It may
seem like it would be too simple to find a geocache but GPS’ and Smartphone’s aren’t always
accurate and geocaches vary greatly in size. Geocaches range in size from micro caches, which
are less than one inch in diameter (about the same size as a dime but thicker), to regular size
caches, which are ammo boxes (“Geocache Details,” 2012). Geocaches can be placed
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anywhere. However, if they are placed on private property the owner must approve of the
placement. Searches may take several minutes or several hours depending on the size of the
geocache and its location.
In addition, there are over a dozen different types of geocaches. Some of the more
common types include traditional, multicache, event caches, wherigo caches, virtual caches,
and mystery caches (“Geocache Types,” 2012). Traditional geocaches only require the
geocacher to search for the geocache at the posted coordinates. Multicaches involve the
geocacher going to multiple waypoints, or locations, that lead them to the cache. For event
caches, geocachers are given the coordinates to a certain place, such as a park, where
geocachers get the opportunity to socialize with other geocachers (Daggett, 2006). Wherigo
caches require the geocacher to participate in a quest to find the final coordinates of where the
geocache is located by following the instructions contained in a cartridge which can be found
online. (“Geocache Types,” 2012). Virtual caches don’t lead geocachers to a geocache, but
instead to a point of interest, such as a historic site or beautiful view. For these types of
geocaches, geocachers are usually required to answer a question or take a picture of where they
were to prove they were there (Daggett, 2006). Mystery caches are geocaches that usually
require the geocacher to solve a puzzle before they receive the final coordinates of the
geocache location. These puzzles can range from solving mathematical formulas to doing
research on historical events. Once the puzzle has been solved the final coordinates of the
cache will be revealed.
Geocachers must also be on the lookout for muggles, which are nongeocachers,
because if a muggle spots a geocacher finding a cache, then they may wonder what it is and
there may be a risk that the geocache may be stolen by the muggle. This is where stealth may
be required to find a geocache. (“Glossary of Terms,” 2012). Once the geocache is found
geocachers are allowed to take one item from the geocache and sign the logbook. Every
geocache contains at least a logbook. The rest of the items that may be in the geocache are a
mystery. Items that could be in a geocache range from pennies to foreign currency, decks of
cards to books, and sports paraphernalia to squirt guns. The possibilities of what could end up
in geocache are endless.
Once a geocacher takes an item and signs the logbook they must put an item in place of
the one they took that is of equal or greater value. Geocachers can put anything in a geocache,
but putting in food and other substances that could be harmful to the environment or other
geocachers are not allowed. Geocachers must also replace the geocache to the closest
representation of where they found it so other geocachers can enjoy finding the geocache as
well. Once the hunt is complete geocachers can log their find on geocaching.com stating when
they found the geocache and any additional comments that they would like to add (“Learn
How to Log Your Find,” 2012).
Now that a basic understanding of geocaching has been acquired the positive and
negative aspects of ethics, problem solving, and teambuilding can be analyzed to determine
whether any of these three characteristics can be strengthened and developed through
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geocaching and applied to business. Ethics will be the first characteristic to be analyzed since
developing sound ethical practices are crucial to the growth and success of a business.
ETHICS
Following sound ethical practices while geocaching can be achieved through adhering
to Geocachers’ Creed in order for geocaching to remain safe, legal, and sustainable. This will
be explained in depth in the following paragraphs. Sound ethical practices that can be used in
geocaching will be weighed against unsound ethical practices to determine whether sound
ethical practices can be strengthened and developed through geocaching.
Sound ethical practices can be accomplished in business by establishing an ethics
policy, involving employees and community stakeholders in the development of the ethics
policy, and communicating and linking ethical standards to a business strategy (Thompson,
Thach, and Morelli, 2010). However, the scope of this paper will only focus on establishing an
ethics policy in an organization Establishing an ethics policy can be accomplished in
geocaching through following the Geocachers’ Creed. The Geocachers’ Creed contains a list of
seven elements. These seven elements include “not endangering myself or others, observing all
laws and rules of the area, respecting property rights, and seeking permission where
appropriate, avoid causing disruptions of public alarm, minimizing the impact on the
environment, and being considerate of others, and protecting the integrity of the game pieces”
(“Geocachers’ Creed, 2005, para. 1). These seven elements will be explained to determine
whether geocaching can strengthen sound ethical practices in business. A comparison of sound
and unsound ethical practices is not necessary since all of the unsound ethical practices in
geocaching are the exact opposite of the sound ethical practices.
Following sound ethical practices in element one (not endangering oneself or others)
would be including any dangers that may be present in the description of the geocache online
when attempting to find the geocache, placing geocaches in safe areas, and only placing safe
items in the geocache (“Geocachers’ Creed”, 2005). If these policies are not followed this may
lead to geocachers becoming injured while searching for the geocache. Reasons for this may
include hidden dangers that weren’t described online, searching for geocaches in dangerous
areas, such as near a busy highway or near train tracks, or due to harmful items placed in the
geocache, such as toxic chemicals or sharp objects. Geocachers should also not take
unnecessary risks when attempting to find a geocache, such as climbing a tall tree without the
proper equipment or supervision. This should also be included in a description of the geocache
online, or the person who placed the geocache may become liable for injuries caused to those
attempting to find the geocache. However, taking a reasonable risk while geocaching is
sometimes necessary in order to obtain items worth some sort of value.
Not endangering oneself or others can be applied to business by managing risks within
a business. CEO’s, managers, and employees within a business should be able to identify risks
that are worth pursuing and those that are not. Risks that are worth pursuing include areas
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where the business has a competitive advantage. These risks should be utilized. Areas that are
not worth pursuing include areas where the business does not have a competitive advantage.
Risks in this area should be reduced (McShane, Nair, & Rustambekov, 2011). Risk
management can be beneficial because research has revealed that it can reduce expected costs
in certain areas, such as tax payments, financial distress and many other business related items
(McShane, Nair, & Rustambekov, 2011).
In order to follow ethical guidelines in element two (observing all laws and rules of the
area) geocachers should not place illegal items in a geocache and not place a geocache in an
area where geocaching is banned, such as national parks or certain historical sites
(“Geocaching: Giving Naturalists Headaches,” 2006). This can be accomplished in business by
implementing an ethics officer in the organization who ensures that the companies code of
ethics is followed (Pendse, 2012). This is similar to observing all laws and rules of the area
while geocaching and also relates to making sure that the Geocachers’ Creed is followed.
Another effective way that this can be accomplished in business is by implementing an ethical
hazards officer. Their role is to identify and predict possible ethical issues that could take place
within the business, and notify the board of directors of these issues (Pendse, 2012).
Following ethical guidelines in element three (respecting property rights and seeking
permission where appropriate) can be accomplished by checking to see if permission from the
landowner has been granted before placing a geocache. This can also be accomplished by not
damaging buildings while placing a geocache (“Geocachers’ Creed,” 2005). If geocachers
don’t follow these policies then the geocachers may be charged with trespassing when placing
or searching for a geocache on private property where the owner has not granted permission
for the placement of the geocache. The geocachers may also be charged with vandalism if they
damage the building or property where the geocache is being placed.
Respecting property rights and seeking permission in business can be accomplished
through not taking credit for others work, and seeking authorization from upper management
when appropriate. An example of not taking credit for others work in business would be
enforcing anti-plagiarism policies in business classes to prepare students not to plagiarize in
the business world. If someone takes the ideas of others in business, and uses them as their
own, the perpetrator may face costly litigation and damage to their reputation. An example of
authorization in the workplace would be not accessing an unauthorized computer and only
having access to a computer that does not exceed an employee’s authorized access (Lavin and
DiMichele, 2012). Employees using unauthorized computers may be fired from their job.
Avoiding causing disruptions of public alarm (element four) can be accomplished by
placing geocaches in areas that are not near schools or government buildings, using caution
when searching for geocaches in areas where children are playing, and not placing geocaches
by critical infrastructure (“Geocachers’ Creed,” 2005). If these policies are not enforced then
people may call the police if geocachers are searching for geocaches around schools or
government buildings. Also, parents may become concerned if strangers are acting suspicious
around their children, and some people may mistake the geocache container for a bomb if it is
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placed around critical infrastructure, such as a school or important government building
(“Geocachers’ Creed,” 2005).
Following ethical guidelines in element four can be applied to business mainly during
the audit of a business. If fraud is discovered during the audit it should only be reported to an
appropriate level of management, and if it is material it should be reported directly to the board
of directors. This helps to avoid causing disruptions of public alarm. If the fraud is disclosed to
unauthorized parties then the auditor could face litigation due to the ethical and legal
obligations of confidentiality (Messier, Glover, & Prawitt, 2012). The auditor may also
disclose the information in an improper manner, which may cause unnecessary alarm for
public investors in the business.
Minimizing the impact on the environment (element five) can be accomplished by
leaving better than it was found and cleaning up litter in the area. If there is a significant
amount of litter in an area then geocachers will not want to visit the geocache. Also, if a
geocacher stops maintaining a geocache they should remove the container from its location so
it doesn’t harm the environment, and so other geocachers don’t attempt to find it
(“Geocachers’ Creed,” 2005). Geocachers should also not place food in the geocache so
animals won’t be attracted to the geocache, and possibly become injured due to tampering with
the geocache or eating something harmful from the geocache. One way all of this can be
accomplished in business is by adopting a local compliance strategy for becoming more
environmentally friendly. This could include recycling, energy conservation, maintaining
equipment for maximum efficiency, and rewarding employees for practicing conservation.
Furthermore, this may also involve purchasing more up to date technologies, changing
products, and changing current business processes (Wijen and van Tulder, 2011).
Following ethical guidelines in element six (being considerate of others) can be
achieved by treating other geocachers with dignity and respect (“Geocachers’ Creed,” 2005).
Geocaching can be a very competitive activity and this may tempt geocachers to sabotage the
plans of other geocachers so they won’t be as successful at finding the geocaches. Another way
of being considerate includes refraining from spoiling the hunt for others. Geocachers should
avoid leaving easily seen tracks to the geocache or marking the spot where the geocache is
located. In addition, after geocachers have found the cache they should not include spoilers in
their logs online so others can enjoy the hunt as well (“Geocachers’ Creed,” 2005).
Being considerate of others relates well to business because one should be considerate
of others while at the workplace, be considerate toward their competitors in the business world,
and most importantly, in this global economy, .learn cross cultural communication and
etiquette if the business is international. Learning proper business etiquette skills is crucial for
business success in a competitive global environment (Bovee and Thill, 2010).
In many instances when business objectives have not been achieved, this can be mainly
attributed to the lack of cross-cultural etiquette (Okoro, 2012). This is a very important
consideration for international businesses that have locations in many countries around the
world. In fact, the failure of international business ventures and objectives has been attributed
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to three significant factors. These factors include lack of proper cultural skills, lack of effective
communication skills among different cultures, and failing to practice business etiquette. In
order to solve these problems international businesses need to understand the significance of
different cultures and their values, in addition to developing strong communication and respect
among those cultures (Washington, Okoro, and Thomas, 2012).
Protecting the integrity of the game pieces can be accomplished by making sure that the
geocache is not damaged when it is found and that it is left in the same spot so the next
geocacher can find it. Making sure the geocache is properly closed is also crucial so the items
contained in the geocache don’t get stolen or damaged. Being inconspicuous when retrieving
the geocache is also very important so muggles (nongeocachers) don’t become alerted to where
the geocache is hidden and then either steal or vandalize the geocache. Another important
aspect is not asking someone else for the solution for a geocache that involves solving a puzzle
to get the correct coordinates. This can relate to business through the auditing of financial
statements. Corporations rely on auditor’s to carefully prepare an auditor’s report, which is
meant to ensure that the corporation’s financial statements are not materially misstated so
investors can rely on the integrity of the financial statements when making investment
decisions (Messier, Glover, and Prawitt, 2012).
As evidenced above an ethics policy in business can be strengthened through
geocaching by not endangering others, observing all laws and rules of the area, respecting
property rights, seeking permission where appropriate, avoid causing disruptions of public
alarm, minimizing the impact on the environment, being considerate of others, and protecting
the integrity of the game pieces.
PROBLEM SOLVING
Following ethical practices in business is important, but developing problem solving
skills are crucial for success in business as well. Problem solving relates very well to
geocaching because geocachers must use their ingenuity and creativity to find geocaches. The
larger geocaches are usually very easy to find, but the smaller ones require much more work.
Geocaches that have a high difficulty rating or are placed in areas where there are significant
amounts of people are difficult to find as well. Positive problem solving skills that can be used
in geocaching will be weighed against negative problem solving skills to determine whether
problem solving can be developed and strengthened through geocaching.
An analysis of positive problem solving skills, which can be applied to business, will be
briefly mentioned and then will be applied to geocaching. “In business, there are 8 effective
ways for a manager to solve a problem. These include collecting facts about the problem,
defining the problem and the desirable solution, finding out how people feel about it,
identifying the objectives, generating possible solutions, reviewing the solutions and selecting
the most promising solution, putting the solution into action, and evaluating the outcome”
(Khan, Hafeez, & Saeed, 2012, p. 317).
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Collecting facts about geocaching can be accomplished in several ways. This can be
accomplished by going on geocaching.com and finding relevant information about how to find
the geocache. This includes information such as the coordinates, a detailed map of where the
geocache is located, the difficulty and terrain of the geocache, the size of the geocache, hints
about where to find the geocache, and a description of the geocache (“Geocache Details,”
2012).
Defining problems can reduce costs and strengthen processes in businesses. (Spradlin,
2012). In the same way, defining the problem and solution saves time and energy costs by first
determining where the geocache is located and then planning when to search for the geocache
due to other people being present. If the geocache is located in an area where there are
significant amounts of people then the geocache should be searched for at a more cost effective
time of day when there aren’t as many people present. Also, by viewing the description of the
geocache online one can determine if tools or special clothing are needed beforehand in order
to retrieve the geocache and replace it. During this stage geocachers should only spend time on
figuring out the causes of the problem, and not spending time yet on the solutions (Liang and
Zhang, 2010).
Finding out how people feel about the solution can be accomplished through
geocaching l if one is geocaching with a group, which is a more fun and effective way to
geocache. The solution should be discussed among those in the group. If one is geocaching
alone then this cannot be accomplished. In business, communication plays a critical role while
solving problems (Liang and Zhang, 2010). Discussing solutions to a problem can only be
accomplished with effective communication. Otherwise the solutions will be implemented
improperly.
In the same way as a successful business, identifying the objective of what one hopes to
achieve in geocaching is critical. One of the primary objectives should be to find the geocache
with as little disruption as possible. This is important because several communities have
banned geocaching. For example, a wilderness area in Oregon has banned geocaching and a
bill in South Carolina proposed a $100 fine for anyone caught placing geocaches in cemeteries
or historic sites without proper approval (“Geocaching: Giving Naturalists Headaches”, 2006).
If disruptions are not kept to a minimum geocaching may be banned in more areas making it
less accessible to geocachers.
Generating solutions is a constant requirement of business managers. Geocachers must
also generate possible solutions to the problem by determining how they are going to get to the
geocache, and once in the area, how they are going to reach it. They can review these solutions
by talking amongst the group about how they are going to achieve these solutions and decide
which solution is most promising to the particular situation. Putting the solution into action can
be accomplished by carrying out the solutions planned for and discussed among the group.
And finally, evaluating the solution can be accomplished by considering how long it took to
find the geocache by using the solution that was implemented. If a considerable amount of time
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was used to find the geocache, or if the geocache was not found, then the solution to finding
the geocache should be revised.
The negative aspects of the problem solving process involved in geocaching should
also be considered. One of these negative aspects is giving less experienced team members the
responsibility to come up with solutions to the problem (Jameson, 2009). When this occurs
during geocaching some possible solutions may be overlooked, and while searching for a
particular geocache, it may not be found because those solutions were overlooked. For
example, a geocache that has the appearance of a rock may not be found if inexperienced
geocachers have never found a rock type geocache. However, this problem can be overcome
for less experienced geocachers by doing some simple research on the geocaching website to
determine that there are geocaches that are shaped as rocks as well as many other naturally
appearing items such as pinecones. (“Cache Containers,” 2012).
Another negative consequence of problem solving occurs when team members with
convincing personalities focus on only one solution due to their preconceived notions about the
problem and its solutions when there is more than one possible solution (Jameson, 2009). This
can occur while geocaching when a convincing leader rules out possibilities of where the
geocache could be because they think it won’t be there. For example, while searching for a
geocache around a tree, the leader may rule out the possibility that the geocache is in the tree
when it really is in the tree. This may cause other members in the group not to look up in the
tree which will lead to failure in finding the geocache.
Others ways in which problem solving is not strengthened during geocaching include
“several problems that can detrimentally affect the recognition of a problem, which include
ignoring or omitting relevant information, identifying wrong causes or problems from the
information, skipping over the recognition stage altogether, and trying to solve problems
before they are clearly defined” (Charles, 1976, p. 91).
The omission of relevant information and incorrectly recording coordinates can be a
common among impulsive geocachers who are eager to get outside and search for geocaches
so in the process they may also try to solve problems before they are clearly defined. It is very
likely that this hurried and careless approach will lead to failure in finding the geocache and
result in disappointment and frustration. Relevant observations and recordings that should not
be omitted or overlooked include recording the correct coordinates, noticing that the geocache
hasn’t been found for a long period of time, as evidenced by the online logs, recognizing that
the geocache is disabled, and noting the size, difficulty and terrain of the geocache.
Identifying wrong causes of problems passed on to future geocachers can occur when
there is a misinterpretation of the size of the geocache and an underestimation of the difficulty
and terrain of the geocache. Since these factors are subjective, wrong assumptions are made,
resulting in ineffective planning and preparation on those attempting to find the geocache
because they don’t take into account these considerations. Using this ambiguous information it
is easy to attribute the problem to a missing or misplaced geocache. At that point the search is
ended, when in reality the geocache could have been if they had made an effective plan.
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After analyzing the positive and negative aspects of problem solving it can be inferred
that geocaching can help strengthen positive problem solving skills required for success in the
business world. In organizations it is critical for management to be able to find problems to
resolve, to grasp opportunities, and to take actions against challenges (Nickerson, Yen, &
Mahoney, 2012). This can be accomplished by having experienced geocachers solve problems,
record the correct information, and plan for all possible outcomes. Geocachers should avoid
having less experienced geocachers solve problems, focusing on only one solution, incorrectly
recording information, and assuming the difficulty, terrain, and size of the cache is always
accurate.
TEAMBUILDING
Problem solving is an important aspect of business, but there is also a need for
teambuilding so new knowledge and skills can be used effectively and efficiently (Teire,
1982). Teambuilding will be analyzed to determine whether it can be strengthened while
geocaching because teambuilding is critically important to the success and growth of a
business. Teambuilding can be applied to business by “getting the right people on the team and
the wrong ones off, making sure the top team does only the work it can do, and addressing
team dynamics and processes” (Kruyt, Malan, & Tuffiled, 2011). An analysis of the positives
and negatives of teambuilding will be discussed in each instance.
Getting the right people on the team and making sure the top team does only the work it
can do involves delegating specific authorities to those on the geocaching team. For example,
those technologically savvy should operate the GPS, those who pay close attention to detail
should be the primary searchers for the geocaches, and those who are stealthy should search for
geocaches when there are people around. This relates well to the skill differentiation team
taxonomy used to evaluate teams in business. Skill differentiation means the amount of special
knowledge members have on a particular process and how difficult it would be to substitute the
person if they were absent (Hollenbeck, Beersma, & Schouten, 2012). For instance, if the
person who normally operates the GPS cannot participate in the geocaching excursion then
others who may not be as effective at operating the GPS may not be able to efficiently find
geocaches because they didn’t learn how to effectively use the GPS. It may be difficult to
substitute someone else for this person’s position if everyone lacks the proper training in how
to use the GPS besides the person who is absent.
It may be better to focus on having all members of the geocaching team learn how to
effectively operate all aspects involved in geocaching instead of strictly focusing their attention
on one area of expertise. This helps to create a well rounded geocaching team and prevents the
problem of solely relying on one person for a particular operation of the geocaching process
(operation of GPS, searching for geocaches, etc.).
Another method of getting the right people on the team would involve including more
geocachers on the team that have worked together in the past. This relates to the temporal
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stability taxonomy. This taxonomy means that team members work more effectively with those
they have a history of working with in the past and an expectation of working with them in the
future (Hollenbeck et al., 2012). Geocachers who have worked with each other in the past will
be more efficient in their teamwork because they know from past experience how the other
team members think and solve problems. However, a negative outcome of this would be the
creation of team members, who have not worked well with each other in the past, working
together again. There will most likely be dissent between the members and they will not work
together as well due to disagreements or differences in style they may have.
An effective way to help address team dynamics and processes is to create a
geocaching team that is diverse in their ways of thinking. This can point out differences that
may invoke team members to brainstorm novel ideas. (Perry-Smith & Shalley, 2003) It may
also encourage them to think differently by viewing something in a different way (Jehn,
Northcraft, & Neale, 1999). By having a diverse geocaching team there will always be more
than one way to find the geocache (solve the problem), which will lead to greater success in
finding the geocache. Having more than one method of finding the geocache will provide a
backup plan if the initial method fails. A negative aspect related to creating a diverse
geocaching team may relate to differences between team members that are not tolerable. This
may result in the team members treating each other harshly, and it may be difficult for them to
accept one another’s strengths (Shin, Kim, Lee, & Bian, 2012).
Addressing team dynamics and processes can also be achieved by including different
types of problem solvers on the geocaching team, similar to what was described earlier. This
adds diversity to the team, which creates innovative ideas due to the team members being
exposed to a wider variety of information and viewpoints (Shin, et al., 2012). According to Xu
and Tuttle there are two types of problem solvers; adaptors and innovators. Adaptors like
working with existing techniques and frameworks for solving problems while innovators enjoy
seeking novel solutions and therefore may ignore existing frameworks (2012). On the
geocaching team, the adaptors would draw upon existing methods and experience, while the
innovators would think out of the box when the tried and true methods prove to be ineffective.
On the negative side this may also lead to arguments between the two types of problem
solvers due to emotional and relational conflict (Jehn et al., 1999; Mannix &Neale, 2005). This
will weaken the teambuilding experience and possibly lead to developing ineffective solutions
for finding the geocaches. Team members are less likely to consider creative methods, such as
testing, constructing, and elaborating on thoughts with one another when these conflicts are
present (Shin, et al., 2012).
CONCLUSION
In conclusion, after analyzing the application of ethics, problem solving, and
teambuilding to geocaching and business, several determinations were made. Sound ethical
practices can be strengthened through geocaching and applied to business primarily by
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following the seven elements in the Geocachers’ Creed which are akin to establishing an ethics
policy for business. Sound ethical practices in business that can be strengthened through
geocaching include managing risks within an organization, implementing an ethics officer,
ensuring there is proper authorization, ensuring fraud is reported appropriately, following
regulations to become more environmentally friendly, practicing business etiquette, and being
audited to provide reliable information to investors and the public interest. In addition to ethics,
problem solving can be strengthened through geocaching and applied to business by having
experienced geocachers (employees) solve the major problems, recording the correct
information, and planning for all possible outcomes. Defining problems can be cost effective
for organizations and can also help improve organizational performance. Furthermore,
teambuilding that is strengthened through geocaching and applied to business includes getting
the right people on the team, ensuring that the top team does only the work it can do, and
addressing team dynamics and processes by including those in a team that have worked
together in the past. In addition, it is critical to create a diverse team, and include different
types of problem solvers on the team, such as adaptors and innovators. The free worldwide
treasure hunting game of geocaching has multiple benefits. Anyone can participate, it promotes
the outdoors and physical activity, and it strengthens the ethical, problem solving, and
teambuilding aspects of a business. It is recommended that geocaching be implemented during
business lunch hours or breaks to maintain those characteristics that keep businesses
successful.
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PERSONALITY AND PERCEPTIONS OF EFFECTIVE
LEADERSHIP – DIFFERENCES BETWEEN
MEN AND WOMEN
Ben Cavazos
Our Lady of the Lake University
James E. Eastham
Our Lady of the Lake University
Mark T. Green
Our Lady of the Lake University
Rocio Harrelson
Our Lady of the Lake University
ABSTRACT
The meta-analytic literature indicates that the personality of a leader is related to
perceptions of how that leader leads. In 2004, Bono (Bono, Joyce and Judge, Timothy)
published a meta-analysis studying 384 correlations from 26 different studies looking for links
between personality and leadership behavior. The Big 5 Model of Personality was used to
measure personality and the Full Range of Leadership, indicating transformational,
transactional and passive avoidant dimensions of leadership, was used to measure leadership
behavior. The study found that Extraversion (r = .24) was positively linked and Neuroticism (r
= -.17) was negatively linked to transformational leadership. The study further reported that
Charisma is the leadership trait most commonly linked to personality, while management by
exception was linked least frequently with personality.
The meta-analytic literature also indicates that women and men are typically rated
differently on leadership. In a study conducted in 2003, (Eagley, Johannesen-Schmidt and
Engen) determined that female leaders were more transformation than men. The study
identified significant differences in the areas of transformational, transactional and laissezfaire leadership styles. Women scored higher in the transformational subscales of idealized
influence, intellectual stimulation and individual consideration. In addition, women scored
higher in the transactional subscale of contingent reward, while men scored higher in the
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transactional subscales associated with management by exception (passive), management by
exception (active) and the laissez faire scale.
What is less clear is how gender moderates the relationships among personality and
followers’ perceptions of leadership.
In this study 115 female and 76 male leaders were each rated by three followers and
two colleagues on the Multifactor Leadership Questionnaire. Each leader also completed the
NEO-PI personality assessment. A 5 by 9 correlation matrix for leadership ratings and leader
personality found very limited relationship between personality and leadership.
Ree, Carretta and Earles (1999) have pointed out that sometimes when analyzed
independently relationships can be found for males or females and a third variable that is not
apparent when the sexes are combined.
In this study, when relationships between personality and leadership were analyzed for
male leaders and again for female leaders, strikingly different patterns emerged.
Generally, extraversion and conscientiousness were positively related to ratings of
transformation/effective leadership for male leaders, but were unrelated for female leaders.
Conversely, a lack of openness and lack of emotional stability were related to ratings of female
leaders as passive/ineffective leaders.
Additional research of possible reasons for these distinctions is needed.
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ASSESSING STUDENT CRITICAL THINKING SKILLS
FOR ONLINE QUANTITATIVE COURSES
Annette Hebble
Trident University International
Mina Richards
Trident University International
ABSTRACT
Using rubrics is an accelerating trend in education, especially in the online
environment. Rubrics are tools for assessing learning outcomes and evaluating critical
thinking skills are currently of interest given a changed emphasis in education. How well do
rubrics capture student improvement of critical thinking skills over time? Can the ability to
perform quantitative analysis also be captured under the category of critical thinking skills? Is
quantitative analysis a distinct skill that needs to be captured by a separate measurement such
as a rubric for numeracy or quantitative literacy?
INTRODUCTION
Over the last two decades, it has become apparent that the acquisition of knowledge is
no longer a sufficient goal in higher education. The world of business is changing so rapidly
leading to changes in instruction to nurture cognitive abilities for problem solving. The
increase in the diversity among students has also brought the emphasis on critical thinking to
help individuals be successful in today’s business environment. New instructional methods in
higher education has devised ways to standardize learning by establishing institutional,
program, and course learning outcomes levels to measure student learning.
Frequently, academia is posed with the question of how one knows that students are
acquiring critical thinking skills when doing coursework. The motivation of this study is to
attempt to measure student critical thinking and analytical skills as students make progress in
their coursework. Rubrics have facilitated the way to measure institutional outcomes. In
particular, the Association of American Colleges and Universities (AAC&U) has published a
collection of VALUE rubrics developed by a diverse team of university professors and
administrators. The Critical Thinking and Quantitative Literacy VALUE rubrics will be used
for this study.
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LEARNING OUTCOMES, ASSESSMENTS, AND RUBRICS
Learning Outcomes
Learning outcomes (LOs) are defined as statements that describe significant and
essential learning that learners have achieved, and that can reliably be demonstrated at the end
of a course or program (Program Assessment Guide, 2012). A learning outcome must be clear,
specific, learner-oriented, task-focused, and measurable (Fulcher, 2010). Learning outcomes
are assessed to provide evidence of knowledge, skills, and values learned and what remains to
be learned. This outcome-based approach is essentially a “learner centered” approach in which
outcomes determine the teaching and learning activities.
Assessments
Baroudi (2007) and Johnson and Jenkins (2013) likewise define two types of
assessments: formative and summative. The professor uses formative assessments to determine
a student’s level of knowledge and understanding. The results are used to provide the student
with developmental feedback and to improve future instruction. In contrast, summative
assessments are those to evaluate and grade student learning at a point in time.
Assessments are further classified into direct and indirect measures. Direct measures
are based on a sample of actual student work, including reports, exams, demonstrations,
performances and completed works. The strength of direct measurement is that faculty
members are capturing a sample of what students can do, which can be very strong evidence of
student learning. This type of assessment is also used to perform gap analysis for continuous
classroom improvements (Shepard, 2000, p.7). Indirect measures are based upon a report of
perceived student learning. The reports can come from many perspectives including students,
faculty, and employers. Indirect measures are not as strong as direct measures because one
needs to make assumptions about what exactly the self-report means to faculty and students.
Setting learning outcomes encourage and measure student achievement. Learning outcomes
state the goal and rubrics assist in measuring the attainment of such goals.
Rubrics
Rubrics are multi-purpose tools. Rubrics are used to measure institutional, program,
and course outcomes as well as to determine the grades on individual assignments. Rubrics are
not only popular with instructors and administrators but are also encouraged and supported by
accrediting organizations. Consequently, the design and use of rubrics in education has a wide
adoption. The information gleamed from rubrics’ ratings can also be used to improve the
educational experience for students.
The term rubric was often associated with instructional rubrics in the past. They were
used to guide students and assist instructors to evaluate student work in a consistent manner. It
can be an efficient manner of grading that can easily be explained to students (Andrade 2002).
Another crucial aspect of a rubric is that the performance assessed should be observable and
215
measurable (Wolf & Stevens 2007). The latter is true whether a rubric is used for institutional
assessment or individual grading. There is much to learn about using rubrics for evaluating
LOs, so the emphasis will be on institutional assessment for purposes of this study.
VALUE Rubrics
Among the many developers of rubrics, the Association of American Colleges and
Universities (ACC&U) has served as the leader. The association designed various types of
VALUE rubrics with the intent to measure learning outcomes in 15 intellectual and practical
kill areas of study (ACC&U, 2013). The association consists of a diverse advisory board,
leadership and partner campuses representing development teams. VALUE rubrics are
designed to accommodate different campuses, disciplines, and courses aiming at measuring
learning outcomes. Depending on the assignment, these rubrics can be used as analytical tools
to grade students’ work. According to ACC&U (2013), several initiatives are ongoing to
establish the reliability of VALUE rubrics and to ensure that all users have the same
understanding of rubrics’ criteria, levels, and descriptors. VALUE rubrics are examples of
summative assessments with direct measure properties, and these are designed to accommodate
different type of campuses, disciplines, and courses. VALUE rubrics include progressively
more sophisticated criteria for meeting learning outcomes.
Critical Thinking VALUE Rubrics Defined
According to Striven and Paul (1987), “critical thinking is the intellectually disciplined
process of actively and skillfully conceptualizing, applying, analyzing, synthesizing, and/or
evaluating information gathered from, or generated by, observation, experience, reflection,
reasoning, or communication, as a guide to belief and action. In its exemplary form, it is based
on universal intellectual values that transcend subject matter divisions: clarity, accuracy,
precision, consistency, relevance, sound evidence, good reasons, depth, breadth, and fairness.”
This study adapted the Critical Thinking Rubric developed by American Association of
Colleges and Universities for their Valid Assessment of Learning in Undergraduate Education
(VALUE) project, using the following domains of critical thinking:

Explanation of issues

Evidence

Influence of context and assumptions

Student position (perspective)

Conclusions and related outcomes (implications and consequences)
A sample of this rubric can be found in the AAC&U website, which site address is listed in the
reference page.
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Quantitative Literacy VALUE Rubrics Defined
According to the Mathematical Association of America (2013), “colleges and
Universities should accept responsibility for overseeing their quantitative literacy programs
through regular assessments. A quantitative literacy program should be managed watchfully.
At appropriate times and in appropriate ways, the results should be evaluated so as to obtain
enlightened, realistic guidance for improvement. Evaluation methods should reflect course
goals and teaching methods used, and besides pointing to possible improvements in the
program can themselves be educationally beneficial. In particular, the evaluation methods
should involve clearly applications-oriented tasks.”
Due to the nature of the material covered in accounting a second VALUE rubric was
applied for these two courses. The Quantitative Literacy VALUE rubric was selected for the
second evaluation for comparison purposes. It is possible that a different type of categorization
is needed to capture quantitative analytical skills. The following domains were scored.

Interpretation

Representation

Calculation

Application/analysis

Assumptions

Communication
The Quantitative Literacy Rubrics can be also found in the AAC&U website. See reference
page for site address.
PURPOSE OF STUDY
A persistent lack of evidence remains as to whether students improve their critical
thinking skills in quantitative courses. In fact, it is unclear if faculty can apply the same criteria
to assess gains in higher level thinking skills for courses involving numeracy skills. It is
common knowledge that many students struggle with this type of course materials, so it is an
issue of interest. Since the authors already have some experience with the VALUE rubrics
from working on an institutional assessment committee and regional accreditation activities,
the use of VALUE rubrics was chosen for this exploratory study. The authors are both
interested in the successful implementation of rubrics for quantitative courses. The goal of
conducting assessments at the university where the author teach is to support a learner-centered
environment and apply effective techniques to conduct and measure learning. The primary
function is to benchmark improvements of student learning and to enhance academic
programs. Assessments play a significant role for the university mission, and instructional
outcomes and rubrics are tools to improve the learning culture and instructional practices
(WASC, 2013). Another issue of interest is to assess the information learned from using
alternative VALUE rubrics.
The authors used the AAC&U’s VALUE rubrics because these instruments have been
thoroughly tested and offer strong validity and reliability. The rubrics are also available for use
217
by any institution. Critical thinking skills are paramount in today’s education and are an
important skill to take away from any course. Although quantitative courses have
computational and written components, the use of VALUE could inherit challenges not
otherwise observed with faculty-driven rubrics.
The major concern voiced about assignment evaluations is if a teaching institution
should use rubrics to assess student improvements in a quantitative course. Similarly, faculty is
faced with the question if a thinking skills rubric is applicable or whether a quantitative literacy
rubric should a better measure of analytical skills. Accrediting institutions endorse numeracy
as a separate category; however, measuring literacy skills in quantitative courses is important
just as it is in any other course. Can the same critical thinking skills rubric be successfully
applied to a course that has a significant quantitative component? Is quantitative reasoning or
numeracy distinct from critical thinking skills? Can one apply the same rubric to both types of
courses to measure performance? Given the rapidly growing use of rubrics, these questions are
worthy of attention.
Because student evaluations are pervasive in use, it is essential to apply rubrics to gain
an understanding of the advantages and disadvantages and how to best use them to assess the
meeting of outcomes. While it is a compelling idea to use the same generic rubric to assess an
important skill for all courses, the practicality remains an issue until proven otherwise.
Sample Selection
The authors used signature assignments to rate six undergraduate and two graduate
classes taught during a recent session at Trident University International (TUI). The accounting
courses do not include signature assignments. Instead, two equivalent types of assignments
were evaluated. Signature assignments all have elements of theory application, computations,
analysis, synthesis, and conclusions. The selection encompassed both critical thinking skills
and performance of financial analysis for the accounting courses since these courses lacked a
signature assignment.
A signature assignment is an assignment or milestone that is used to measure
competency or progress in achieving an institutional or program learning outcome. As a
guideline, it is generally recommended that signature assignments occur in the first course and
after students have had the opportunity to develop and refine the skills related to the outcome.
For this reason, the first course and last course were chosen for the Information Technology
Management (ITM) graduate program. For accounting, a required MBA core course and an
accounting elective covering similar type of material were chosen. The two accounting courses
are sequential as opposed to the other courses evaluated.
For the undergraduate computer science and BS ITM programs, a total of 28 student
submissions were selected and another 30 submissions for the MSITM program. Fifteen
student submissions were randomly selected for the MBA accounting graduate courses. The
number of student submissions evaluated for different courses varied based on the availability
of assignments to evaluate. All identifying criteria of the authors were removed before
downloading and saving the documents. Each assignment was read twice and carefully
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analyzed before applying the rubric by evaluators familiar with the assignments. In all, 88
assignments were evaluated; and 30 of those assignments were evaluated on two dimensions.
Selected assignments were scored using modified levels for Critical Thinking VALUE
Rubric on a scale of 1 – 4. The representing levels were 1 = weak, 2 = marginal, 3 = adequate,
and 4 = strong. The rubric was administered in the form of a summative assessment and used
to evaluate the learners’ critical thinking abilities.
Assignments were scored using a holistic approach for all criteria and levels. To
process the scores, the means were calculated for each category and thereafter compared
between the first and last course of the ITM program for mean changes. Percentages were also
calculated by level within each criterion to determine what level had the highest and lowest
ranking in the rubrics. Accounting courses also noted a minimal variation in mean changes
between the core and elective course.
RESULTS AND CONCLUSION
Results of the Study
All courses in the ITM program evaluated with the Critical Thinking VALUE rubrics
showed gains in mean for all criteria except for “position” in the Computer Science Program.
Since computer courses are technical and programming oriented, there is little room to
“synthesize” principles across courses. Therefore, a low level of fluctuation was noticed.
Significant gains were observed in “evidence and conclusions” in the CSC program,
demonstrating knowledge increase between the first and last course. The “analysis” criterion
also showed a substantial increase, proving that students’ analytical skills improved over time.
The BSITM program did not vary dramatically in gains, but “position” or synthesis showed a
noteworthy increase above other criteria. See details in Table 1.
The MSITM program enjoyed the best gains across criteria. The ITM courses indicate a
gain in critical thinking skills as evidenced by the data in Table 1. It is also interesting that the
score increased for all the categories assessed. Additional details for the undergraduate courses
are displayed in the last two tables, 7 and 8.
Table 2 indicates that the results are less consistent for the accounting courses than ITM
courses. The difference may be explained by the courses analyzed. The ITM courses were the
first and last in a sequence, implying that there were several courses between the two. The
highest increase was on “position,” demonstrating strong arguments to defend points of view.
The lowest gain was on “analysis,” which could be justified by the pressure of the learning task
(Kottasz, 2005).
The accounting courses yielded only modest gains in “interpretation, analysis, and
position.” There was no intervening accounting course between the two courses evaluated in
this study. Additionally, the assignment evaluated for the core accounting course were placed
in the middle of the course while the assignment evaluated for the accounting elective was in
the beginning of the course. The study reveals that those two courses do not have prerequisites
and are close together in the program and could be taken in any order. The analysis of the
219
accounting courses shows a different pattern. Table 3 indicates some gain in “interpretation,
knowledge, comprehension” and analysis, but a loss for the “conclusion, evaluation” category.
The negative gain in “conclusions” may indicate that students did not tie the application of
knowledge and analysis together to provide a statement on how they supported the thesis. The
findings remain consistent with the lack of bringing closure on essay writing (Norton & Pitt,
2011) and engaging students in difficult courses through online schools.
Table 4 below shows the results from the emphasis of numeracy or quantitative
reasoning and analysis. Comparing this table to Table 3, it demonstrates a gain on all
dimensions of quantitative literacy for the accounting courses. The gain for analysis is lower
than a similar dimension using the critical skills rubric.
Table 5 provides a summary of the gain in means for the graduate courses of the two
disciplines evaluated in this study using the critical thinking skills VALUE rubric. Table 6
provides a concise summary comparing the two VALUE rubrics for accounting.
CT Criterion
Interpretation
Evidence
Analysis
Position
Conclusions
Table 1
DISCIPLINES
Summary of Gain in Means
CSC
BSITM
0.50
0.40
1.00
0.40
0.75
0.40
0.00
0.80
1.00
0.40
Average
0.65
MSITM
0.53
0.73
0.40
1.07
0.66
ACC
0.27
-0.06
0.20
0.06
-0.20
0.68
0.05
0.48
Table 2
ITM COURSES – CRITICAL THINKING VALUE RUBRIC
Average Ratings
CT Criterion
ITM524
ITM590
Interpretation/Knowledge/
Comprehension
2.80
3.33
Evidence/Application
2.47
3.20
Analysis
2.73
3.13
Position/Synthesis
2.20
3.27
Conclusions/Evaluation
2.47
3.13
Average
Gain in Mean
0.53
0.73
0.40
0.53
0.53
0.54
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Table 3
ACC COURSES – CRITICAL THINKING VALUE RUBRIC
Average Ratings
CT Criterion
ACC501
ACC504
Interpretation/Knowledge/
Comprehension
2.80
3.07
Gain in Mean
0.27
Evidence/Application
2.93
2.87
-0.06
Analysis
Position/Synthesis
Conclusions/Evaluation
2.87
2.87
2.93
3.07
2.93
2.73
0.20
0.06
-0.20
Average
0.05
Table 4
ACC COURSES – QUANTATIVE LITERACY VALUE RUBRIC
Average Ratings
CT Criterion
ACC501
ACC504
Gain in Mean
Interpretation
2.47
2.80
0.33
Representation
2.47
3.13
0.66
Calculation
2.47
2.93
0.46
Application/Analysis
2.73
2.87
0.14
Assumptions
2.67
2.73
0.06
Communication
2.79
2.87
0.08
Average
0.29
Table 5
COMPARISON OF ITM AND ACC - – CRITICAL THINKING VALUE RUBRIC
Gain For the Next Course
Gain in ITM
Gain in ACC
Mean
Mean
Interpretation/Knowledge/
Comprehension
0.53
0.27
Evidence/Application
0.73
-0.06
Analysis
0.40
0.20
Position/Synthesis
0.53
0.06
Conclusions/Evaluation
0.53
-0.20
Average
0.54
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0.05
Table 6
ACC Courses
Comparison of Two VALUE Rubrics
ACC501
Overall Mean for Critical Thinking Rubric
Overall Mean for Quantitative Literacy
CT Criterion
Interpretation/Knowledge/
Comprehension
Evidence/Application
Analysis
Position/Synthesis
Conclusions/Evaluation
ACC504
2.88
2.60
2.934
2.89
Table 7
BS COURSES - COMPUTER SCIENCE
Average Ratings
CSC111
CSC111
2.25
2.25
2.25
2.75
2.00
Average
2.75
3.25
3.00
2.75
3.00
Gain in
Mean
0.05
0.29
Gain in Mean
0.50
1.00
0.75
0.00
1.00
0.65
Table 8
BS COURSES - INFORMATION TECHNOLOGY MANAGEMENT
Average Ratings
CT Criterion
ITM206
ITM491
Gain in Mean
Interpretation/Knowledge/
Comprehension
2.20
2.60
0.40
Evidence/Application
2.20
2.60
0.40
Analysis
2.00
2.40
0.40
Position/Synthesis
1.80
2.60
0.80
Conclusions/Evaluation
2.40
2.80
0.40
Average
0.48
CONCLUSION
The results of the study indicate that the application of the Critical Thinking Skills
VALUE Rubric to the first and last course in a given program yields the best results as
demonstrated by the evaluation on the quantitative non-accounting course assignments. This
kind of rubric can provide valuable insights into student achievement even in some quantitative
courses.
The application of two separate VALUE rubrics does not appear to yield meaningful
222
differentiation even though the quantitative rubric shows some improvement from one course
to the other. The study also observed that using both rubrics at the same time might
contaminate the scoring by trying to fit the understanding of the analysis into more than one
rubric. Also, timing could attribute the lack of significant improvement from the first required
course to the second elective accounting course. The assignment evaluated for the first
accounting course was due mid-session while the assignment for the second accounting course
was due early in the semester. Yet another possibility is that the assignment are not comparable
meaning that the assignment chosen in the first case may have been at a higher difficult level
than the one chosen for the next course.
Regardless of the issues discussed above, this exploratory study provides some initial
observations into the use of VALUE rubrics for assessing student progress on thinking and
analytical dimensions for quantitative online courses. The initial observations and information
gleamed warrant further investigation, and it should be tested with larger course samples and
course variety.
REFERENCES
Andrade, H.G. (2000). Using Rubrics to Promote Thinking and Learning. Educational Leadership, vol. 57, no.5.
Retrieved from http://www.ascd.org/publications/educational-leadership/feb00/vol57/num05/UsingRubrics-to-Promote-Thinking-and-Learning.aspx
Association of American Colleges and Universities. (2013.). Critical Thinking VALUE Rubric. Retrieved from
http://www.aacu.org/value/rubrics/pdf/CriticalThinking.pdf
Association of American Colleges and Universities. (2013.) Quantitative Literacy VALUE Rubric. Retrieved
from http://www.aacu.org/value/rubrics/pdf/QuantitativeLiteracy.pdf
Baroudi, Z. (2007). Formative assessment: Definition, elements, and role in instructional practice. Post Script:
Post Graduate Journal of Education Research, 8(1) pp. 37-48.
Formative versus Summative Assessments. (2012). Why’s and how’s of assessments. Carnegie Mellon
University. Retrieved from: http://www.cmu.edu/teaching/assessment/howto/basics/formativesummative.html
Fulcher, K. (2010). Student-centered learning Objectives. In the “Complete How-to Guide.” The Center for
Assessment & Research Studies. James Madison University.
Norton, L., & Pitt, E. (2011). Writing essays at university: A guide for students by students. Write Now Centre for
Excellence in teaching and learning. Retrieved from
http://www.writenow.ac.uk/assessmentplus/documents/WritingEssaysAtUni-11.pdf
Kottazs, R. (2005). Reasons for student non-attendance at lectures and tutorials: An analysis. Investigations in
University Teaching and Learning, 2(2), 53-59.
Johnson, E., & Jenkins, J. (2013). Formative and summative assessments. Retrieved from
http://www.education.com/reference/article/formative-and-summative-assessment/
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Mathematical Association of American. (2013). Quantitative reasoning for college graduates: A complement to
the standards. Retrieved from http://www.maa.org/past/ql/ql_toc.html
Program Assessment Guide. (2012). Program learning outcomes manual. Center of Assessment. Trident
University International.
Shepard, L. A. (2000). The role of assessment in a learning culture. Educational Researcher 29(7), 4-14.
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Striven, M., & Paul, R. (1987). Critical thinking as defined by the National Council for Excellence, 1987.
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WASC Program Learning Outcomes. (2013). Rubric for assessing the quality of academic program learning
outcomes. Retrieved from
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WASC on Critical Thinking and Quantitative Reasoning. Measuring thinking worldwide. Retrieved from
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Wolf. K. & Stevens, E. (2007). The Role of rubrics in advancing and assessing student learning. The Journal of
Effective Teaching, 17(13-14). Retrieved from http://uncw.edu/cte/et/articles/vol7_1/Wolf.pdf
224
EMOTIONAL INTELLIGENCE DRIVEN
QUALITATIVE MARKET RESEARCH
Manish Sharma
Delhi Technological University
Pritam.B.Sharma
Delhi Technological University
Shikha N. Khera
Delhi Technological University
ABSTRACT
This paper seeks to investigate the role of emotional intelligence in doing qualitative
market research. This research is done with the aim of enriching commonly used qualitative
research methodologies for doing market research with emotional intelligence. A one week
course on emotional intelligence was attended by 48 qualitative researchers while working in
different market research companies in India. After three months of this course, authors
moderated 8 focus groups (in a group of 6) among these researchers and conducted in-depth
interviews of 44 out of these 48 researchers. It is found that qualitative researchers, who
attended one week course on emotional intelligence, found it easier to sail through minds of
consumer while conducting market research. These qualitative researchers reported that
emotional intelligence helped them to get better insights and in understanding consumer
behavior in a better manner. Companies are turning every stone to understand their existing
and prospective customers; and are getting this done with help of market research companies
in addition to their own researchers. Not just the needs of customers but they are trying to
know everything about the customers and are using qualitative research methods like
Ethnographies, Focus groups, In-Depth Interviews. Using emotional intelligence can enrich
these methods and can increase the output of qualitative market research projects.
225
ANALYZING SUPERVISORY COMMUNICATION
COMPETENCY: AN APPLICATION OF
MESSAGE DESIGN LOGICS THEORY
Kathryn S. O’Neill
Sam Houston State University
Geraldine E. Hynes
Sam Houston State University
Heather Wilson
Sam Houston State University
Organizations in the U.S. invested $133.4 billion in 2011 to train supervisors to work
effectively with their direct reports (ASTD, 2011). Because so much of management consists
of talk, most of this training centers on improving communication. Often, organizations
promote those who are best at their work into positions of overseeing the work of others,
expecting that they will be able to transfer their knowledge and skill to their direct reports. To
accomplish this transfer, however, requires skill and ability in delivering feedback, both
reinforcing and corrective. Most of us understand how to deliver a reinforcing statement that
compliments performance, but performance and effectiveness vary widely when it comes to
corrective feedback designed to achieve a change in someone else’s behavior. If organizations
have a way to determine at a pre-supervisory stage who of their candidates is already skilled as
a communicator of corrective feedback, likelihood increases of improved performance and
productivity.
Feedback of performance results is a critical phenomenon in all work settings because
it affects the course and success of organizations. Scholars have noted its effectiveness in
producing improvements in a number of organizational areas, including tardiness and
absenteeism, customer service, safety (Balcazar, Hopkins & Suarez, 1986), productivity
increases (Wilk & Redmond, 1990), and job performance in general (DeGregorio & Fisher,
1988; Davenport, 1985).
No organization can survive and prosper with below par job
performance, and feedback is essential to maintaining satisfactory performance (Barry &
Watson, 1996).
In general, the position of the supervisor as a primary and important source of feedback
is well established by research (Vecchio & Sussman, 1991; Becker & Klimoski, 2989).
Sullivan (1988) asserted that language and speech acts are the heart of motivating employees,
and previous research substantiates that good communication is essential to managing people
well (Penley, Alexander, Jernigan & Henwood, 1991; Luthans and Larson, 1986).
Communication scholars define corrective feedback as a “regulative message,” delivered with
the object of changing behavior versus changing attitudes, opinions, or beliefs (O’Keefe &
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McCornack, 1987; Seibold, Cantrill & Meyers, 1985). Feedback given by a supervisor to a
subordinate is, thus, goal-oriented communication.
Both communication (O’Keefe & McCornack, 1987) and management and
organizational behavior scholars (Dugan, 1989; Podsakoff & Farh, 1989; Liden, Ferris &
Dienesch, 1988) note that giving corrective feedback poses more problems to the supervisor
than reinforcing feedback. In so critical an area of supervisory competence, then, having an
explanation and a methodology to assess the abilities of the communication could improve
outcomes for job incumbents, their direct reports, and the organization.
O’Keefe and McCornack’s (1987) theories of Message Design Logic and Message
Goal Structure seek to answer the question of why some situations, such as regulative
messages, elicit enormous variant in messages. O’Keefe and Delia (1988) agree with other
scholars that successful communicators form message using skills associated with the task at
hand. They further state that, as communicators become more sophisticated about the ways in
which they communicate, they begin to appreciate that they may call upon characteristics of
the audience to accomplish their purposes. In a corrective feedback situation, the desire to
improve performance would motivate the supervisor to compose and deliver a message, but
this goal does not automatically specify the form of the message. The supervisor would make
choices about message formation dictated by his/her communication skill level. This skill
level is, in turn, bound up with individual concepts of how communication processes operate,
including specific problems posed by specific targets.
O’Keefe (1988) proposed that messages arise from three fundamental premises in
reasoning about communication and called them Message Design Logics. Communicators use
these premises to reason from goals to message, that is, to consider what they wish their
communication to accomplish and to form a suitable message. She theorized three levels of
premises, Expressive, Conventional and Rhetorical, and asserted that they formed a
developmental progression with each level a prerequisite to the next.
O’Keefe (1988) tested Message Design Logics and related theory regarding multifunctional goals with students by posing a situation in which the respondents produced a
message to change the behavior of an under-performing group member in a class project.
Most recently, researchers in the healthcare field have used the theory to explore message
formation and effectiveness (Caughlin, Brashers, Ramey, Kosenko, Donovan-Kicken & Bute,
2008; Peters, 2005), but no research has tested the theory with supervisors in the workplace.
This gap is a significant omission, considering the potential advantage to improving selection
and training.
This presentation reports on a pilot study of Message Design Logics in a group of
working supervisors.
The study collected messages in response to a typical corrective
feedback situation centered on tardiness to work. The design of the study followed O’Keefe’s
and McCornack’s (1987) design, and the analysis classified messages collected for level of
premises and goal structure with a view towards expanding the study to include additional
supervisors from multiple industry settings, and adding in a procedure for assessing perceived
effectiveness of the messages.
The presenters, who are co-investigators, will present and explain Message Design
Logics and report on the progress and findings of the study to date.
227
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Becker, T. & Klimoski, R. (1989). A field study of the relationship between the organizational
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communication performance feedback information? Academy of Management Journal,
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reactions and behavior. Group & Organizational Studies, 13(3). 348-373.
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communication. Communication Monographs, 55 (March). 80-103.
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development of audience-centered message production. In B. A. Rafoth and D. A.
Rubin (Eds.), The social construction of written communication (pp. 70-95). Norwood,
NJ: Ablex Publishing Corp.
O’Keefe, B. & McCornack, S. (1987). Message design logic and message goal structure:
Effects on perceptions of message quality in regulative communication situations,.
Human Communication Research, 14(1). 68-92.
Penley, L., Alexander, E., Jernigan, I. & Henwood, C. (1991). Communication abilities of
managers: The relationship to performance. Journal of Management, 17. 57-76.
Peters, M. (2005, November). Message design logic and comforting communication in a
chronic illness context: Introducing a message elicitation task and adapted coding
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scheme. Paper presented at the annual convention of the National Communication
Association, Boston, MA.
Podsakoff, P. & Farh, J. (1989). Effects of feedback sign and credibility on goal setting and
task performance. Organizational Behavior and Human Decision Processes, 44. 4567.
Seibold, D., Carntrill, J. & Meyers, R. (1985). Communication and interpersonal influence.
In M. L. Knapp and G. R. Miller (Eds.) Handbook of interpersonal communication (pp.
551-611). Beverly Hills, CA: Sage Publications.
Sullivan, J. (1988). Three roles of language in motivation theory. Academy of Management
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Organizational Behavior Management, 11(1). 55-75.
229
THE RELATIONSHIP BETWEEN ADOLESCENT
PERSONALITY AND LEADERSHIP
Lucinda Parmer
University of Houston-Downtown
ABSTRACT
Personality and leadership in adolescents is a complex research area. There is an
abundance amount of research in adults in the area of personality and leadership; however in
adolescents there is a need for further development and analysis. This paper examines
personality and leadership in adolescents utilizing the Mini-International Personality Item
Pool (McCrae & Costa, 1987) and the Roet’s Rating Scale for Leadership (Roets, 1997)
instruments to conduct a multiple regression research analysis. It was found that extraversion,
gender (female), and the number of clubs and organizations the participant belonged to were
significant factors in self-ratings of leadership.
INTRODUCTION
Leadership is a business discipline regarding several related disciplines (e.g.
management, organizational behavior), as well as, facets which involve different theories
starting with the Great Man Theory (Carlysle, 1850) to GLOBE (House et al, 1994).
Arguments have been made regarding whether leaders are born or made. If leaders are born,
does it begin at birth? If leaders are made, does it begin at birth through the experiences the
person goes through in life? This debate will surely go on for many years to come. This study
examines the relationship between adolescent personality and leadership.
When it comes to examining leadership in adolescents, the first notion is to review
scholastic grades, or the talents of the individual, such as, whether the person is a star athlete,
or student council president, for example. Often times, within these scenarios, it is perceived
that the adolescent has leadership abilities, and rightfully so, because it does take leadership
qualities to be a leader on a sports team or within a club or organization. It takes determination
to win the game, self-confidence to play and participate, and sociability skills to effectively
function within a group or team. When it comes to examining personality traits in adolescents,
the most known traits are whether an adolescent is outgoing or quiet, mean or nice, or whether
the adolescent makes outstanding versus mediocre grades in school. These are some of the
more observable characteristics. However, adolescents are encompassed with many emotionaltype personality traits, for example, are the adolescents happy or funny, or pushy and calm?
These are just a few of the varying different degrees of behaviors that can surface within an
adolescent at such an unpredictable time in his/her life.
REVIEW OF THE LITERATURE
The literature shows through various studies found through teacher evaluations that the
more open to new experiences, conscientious, extraverted, and agreeable the students were the
230
more likely the students could adjust well to school (Graziano & Ward, 1992). Additional
studies found that the more peers had expectations; the more likely their goals would be
realized (Filisetti, Looney, & Wentzel, 2007). Another study found that the more anti-social
the adolescent was, the less likely he/she would adhere to group interactions (Bates, et al.,
2003). Various studies found that males had more anxiety, and had more negative attitudes
than females (Kenny, 2009; Costanzo et al., 2009; and Reynolds, Riccio, & Sullivan, 2008).
Alternate studies showed that boys and girls with career goals had higher self-esteem levels
(Chiu, 1990). One study found that the age of the older sibling was related to projected goal
outcomes (Hildy Ross et al., 2006). Another study found that the older the participant, the
more prone to emotional problems he/she had (Sellers et al., 2006).
Numerous studies found that older children were more apt to instigate conflict over
their younger siblings Older siblings were also more likely to blame their younger siblings for
wrongdoings (Hildy Ross et al., 2006). Another study found that the specific birth order of the
sibling contributed significantly to the level of sociability skills the participant portrayed
(Daniels, 1986). Several studies found within the African-American culture, the more
aggressive the participant; the more the participant pressured his/her peers (Costanzo et al.,
2009). An additional study found the higher socio-economic status of the participant, the
harder it was for the participant to stay focused. Additionally, the study found that the higher
the socio-economic status of the individual, the happier the individual was (Masten, 1986).
Family income was found to be a significant factor on getting along with others (Powell &
Steelman, 1985). Lastly, it was found that the higher the socio-economic status of the
participant, the less self-esteem he/she had (Huebner & Mancini, 2004).
An additional analysis indicated that group members had significantly higher scores on
sociability, and positive socio-metric nominations than did nonmembers (Chang et al., 2003).
An additional study found that the more transformational of a leader the participant was, the
more he/she rated having effective peer relationships, and more satisfaction with his/her peer
relationships (Barling et al., 2000). Another study found females scored higher over males on
perceived competence (Filisetti, Looney, & Wentzel, 2007). Another study found that boys had
lower scores on leadership than did girls (Chang et al., 2003). One study found that older
siblings’ age was related to the strategies used by older and younger siblings. Younger siblings
were less likely to suggest plans, and more likely to request assent to plans, and to agree to
plans (Hildy Ross et al., 2006). Another study found significant differences between the age of
the participants, empathic skills, and social confidence (Oberklaid et al., 2001). An additional
study found that biracial black/white adolescents showed more self-deprecation, and feelings
of alienation, over the mono-racial counterparts (Cheng & Lively, 2009).
Another study showed that Hispanic students out-performed White students during the
twelfth-grade (Battle & Pastrana Jr., 2007). Another study found that Black/White adolescents
are significantly more likely to feel alienated in school than are mono-racial White adolescents
(Cheng & Lively, 2009). Another study (Bohnert, et al, 2008) found, in regards to, AfricanAmerican adolescents; the more motivated, and engaged the participant was, the more
confident the person felt, and the more motivated, and engaged the participant was, the less
alienated the person felt. Lastly, one study found the higher the socio-economic status, the
higher the White students out-performed the Hispanic students for eight-grade status (Battle &
Pastrana Jr., 2007).
231
METHODOLOGY
Overview
The current research examined the relationship between adolescent personality, and
leadership. The personality assessment instrument ratings will measure the Big Five (McCrae
& Costa, 1987) personality traits within the sample including, conscientiousness,
agreeableness, neuroticism, openness to new experiences, and extraversion. The Roets Rating
Scale for Leadership (Roets, 1997) was used to measure how the student self-rates on differing
leadership scales. A multiple regression analyzed the results of the relationship between the
personality and leadership in adolescents.
Participants
The sample for this research consisted of a total of five groups in public and private
sectors in the greater Gulf Coast area. The groups included Galena Park High (Galena Park,
Texas); St. Pius X High School (Houston, Texas); Girl Scouts Troops (Houston, Texas);
Houston Mayor’s Youth Council, and friends in family (Alabama/Florida). The total sample
consisted of 264 adolescents. Sample subjects were 43% male and 57% female, with 72%
Hispanic, 17% Caucasian, and 11% were classified as Other. The mean age was 15.5 years.
Instruments
The research survey was given in two forms, administered in person with paper
surveys, and administered online at www.surveymonkey.com. The survey was constructed of
three sections, the demographic section, Mini-International Personality Item Pool Assessment
(Mini-IPIP), based on McCrae and Costa (1997) rating of personality and the Roets Rating
Scale for Leadership (RRSL), from Roets, 1997. The RRSL is a self-rating scale for students
ages 8-18 years old. It is a measurement for students to rate themselves. It measures leadership
(already active, or in the daydream stage), ambition, and desires.
Research Design
This study was a multiple regression analysis. Research area one addressed the
relationship between the participant’s personality, as defined by the Big Five Factor Model
(McCrae & Costa, 1987) of personality, and the participants’ self-rating of leadership, based on
the Roet’s Rating Scale for Leadership (Roets, 1997). Research area two examined adolescent
leadership and predictors of personality.
NULL HYPOTHESIS
H1:
Ho2:
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and overall leadership.
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and critical thinking leadership.
232
Ho3:
Ho4:
Ho5:
Ho6:
Ho7:
Ho8:
Ho9:
Ho10:
Ho11:
Ho12:
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and guidance leadership.
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and courage leadership.
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and charismatic leadership.
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and tolerant leadership.
There is no relationship between adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and willpower leadership.
There is no relationship between adolescents’ leadership, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and conscientiousness.
There is no relationship between adolescents’ leadership, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and agreeableness.
There is no relationship between adolescents’ leadership, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and neuroticism.
There is no relationship between adolescents’ leadership, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and openness to new experiences.
There is no relationship between adolescents’ leadership, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, extraversion.
EXPLORATORY FACTOR ANALYSIS
An exploratory factor analysis was conducted using a Principal Components Method
for the Roet’s Rating Scale for Leadership (Roets, 1987). Six components were found with
an Eigenvalue greater than .5 or less than -.45. The first component, which measured critical
thinking leadership, had an Eigenvalue of 3.09 which explained 11.88% of the variance.
Using a Varimax rotation, five questions loaded on this component with an Eigenvalue vector
score greater than .45 or less than -.45. The second component, which measured guidance
leadership had an Eigenvalue of 2.34 and explained 9% of the variance. Using a Varimax
rotation, three questions loaded on this component with an Eigenvalue vector score greater
than .45 or less than -.45. The third component, which measured courage leadership had an
Eigenvalue of 2.32 and explained 9% of the variance. Using a Varimax rotation, four
questions loaded on this component with an Eigenvalue vector score greater than .45 or less
than -.45. The fourth component, which measured charismatic leadership had an Eigenvalue
of 2.21 and explained 8% of the variance. Using a Varimax rotation, four questions loaded on
this component with an Eigenvalue vector score greater than .45 or less than -.45. The fifth
component, which measured tolerant leadership had an Eigenvalue of 1.93 and explained 7%
of the variance. Using a Varimax rotation, five questions loaded on this component with an
Eigenvalue vector score greater than .45 or less than -.45. Table 1 shows the rotated
component matrix of the six components of leadership including critical thinking leadership,
233
guidance leadership, courage leadership, charismatic leadership, tolerant leadership, and
willpower leadership. Table 1 shows the rotated component matrix of the exploratory factor
analysis.
Table 1
ROTATED COMPONENT MATRIX
L23
L21
L3
L24
L22
L20
Thinking
.713
.584
.496
.493
.478
.468
Guidance
.076
.230
-.021
.153
.130
.296
Courage
.179
.006
.124
.365
.180
.044
Charismatic
.120
.157
-.016
.265
.222
.299
Tolerant
.119
.061
.493
.018
.250
.145
Willpower
-.021
.069
.226
-.335
.084
.320
L10
L9
L8
.193
.304
.051
.788
.782
.515
.088
.050
.347
.111
.024
.118
.065
.047
.450
.123
.122
.010
L13
L1
L11
L4
.281
.022
.352
.004
.181
-.012
.107
.071
.677
.585
.535
.526
.030
.037
.055
.389
-.041
.216
.112
-.119
-.069
.204
.248
-.128
L5
L19
L15
L6
.168
.356
.408
-.140
.048
-.056
.265
.144
.283
-.053
.115
.064
.628
.599
.470
.469
.096
.221
-.096
.014
.079
-.051
.132
.551
L17
L16
L12
.148
.419
.063
.069
.040
.370
.020
.006
.405
.004
.333
.159
.719
.502
.454
.078
.037
.138
L7
L2
.284
.046
.177
-.036
.045
.424
-.043
.170
.055
.185
.680
.476
L26
L18
L14
L25
.356
.235
.400
.008
.175
.214
.306
.402
.182
.102
.342
.066
.053
.431
.340
.331
.167
.113
.032
.425
.200
.182
.086
-.110
234
FINDINGS
Ho1:
There is no relationship between the adolescents’ personality, age, gender, ethnicity, number of
clubs and organizations, number of older siblings, number of younger siblings, and the number
of computers at home, and overall leadership.
In order to test null hypothesis 1, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and overall leadership. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
personality dimensions of conscientiousness, agreeableness, neuroticism, openness to new
experiences, and extraversion. The stepwise method was used for both blocks.
Number of clubs and organizations explained 12% of the variance in leadership scores
2
(R = .12, β = .27, rp = .27, p = .00). The partial correlation of .27 indicated that the higher the
number of clubs and organizations the adolescent belonged to, the higher the adolescent rated
him/herself as a leader. The number of younger siblings explained an additional 3% of the
variance in leadership scores (ΔR2 = .03, β = -.20, rp = -.21, p = .00). The partial correlation of
-.21 indicated that the higher the number of younger siblings the adolescent had, the lower the
adolescent rated him/herself as a leader. Gender explained an additional 3% of the variance in
leadership scores (ΔR2 = .03, β = .18, rp = .19, p = .00). The results of a t-test, t(264) = -3.371,
p = .00, found that girls (M2 = 52.04) rated themselves higher on leadership than boys
(M1 = 46.57). Age explained an additional 1% of the variance in leadership scores (ΔR2 = .01,
β = .14, rp = .14, p = .05). The beta weight of .14 indicated that the older the adolescent was,
the higher the adolescent rated him/herself as a leader. Extraversion explained an additional
2% of the variance in leadership scores (ΔR2 = .02, β = .13, = .15, p = .02). The partial
correlation of .15 indicated that the higher the adolescent scored in extraversion, the higher the
adolescent rated him/herself as a leader.
Ho2:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, the number of computers
at home, and critical thinking leadership.
In order to test null hypothesis 2, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, the number of computers
at home, and critical thinking leadership. Two blocks of data were used in the regression.
Block 1 contained age, gender, ethnicity, number of number of clubs and organizations,
number of older siblings, number of younger siblings, and the number of computers at home.
Block 2 contained the personality dimensions of conscientiousness, agreeableness,
neuroticism, openness to new experiences, and extraversion. The stepwise method was used in
both blocks.
Number of clubs and organizations explained 11% of the variance in critical thinking
leadership scores (R2 = .11, β = .29, rp = .31, p = .00). The partial correlation of .31 indicated
that the higher number of clubs and organizations the adolescent belonged to, the higher the
adolescent rated him/herself as a critical thinking leader. Gender explained an additional 6% of
the variance in critical thinking leadership (ΔR2 = .06, β = .27, rp = .29, p = .00).The results of a
t-test, t(264) = -4.812, p = .00, found that girls (M2 = 13.47) rated themselves higher on critical
thinking leadership than boys (M1 = 11.21). The number of younger siblings explained an
235
additional 3% of the variance in critical thinking leadership scores (ΔR2 = .03, β = -.17, rp = .19, p = .00). The partial correlation of -.19 indicated that the higher the number of younger
siblings the adolescent had, the lower the adolescent rated him/herself as a critical thinking
leader.
Ho3:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, the number of computers
at home, and guidance leadership.
In order to test null hypothesis 3, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, the number of computers
at home, and guidance leadership. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
personality dimensions of conscientiousness, agreeableness, neuroticism, openness to new
experiences, and extraversion. The stepwise method was used in both blocks.
Number of clubs and organizations explained 7% of the variance in guidance leadership
scores (R2 = .07, β = .26, rp = .26, p = .00). The partial correlation of .26 indicated that the
higher the number of clubs and organizations the adolescent belonged to, the higher the
adolescent rated him/herself as a guidance leader. Extraversion explained an additional 2% of
the variance in guidance leadership (ΔR2 = .02, β = .13, rp = .13, p = .04). The partial
correlation of .13 indicated that the higher the adolescent scored on extraversion, the higher the
adolescent rated him/herself as a guidance leader.
Ho4:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and courage leadership.
In order to test null hypothesis 4, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and courage leadership. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
personality dimensions of conscientiousness, agreeableness, neuroticism, openness to new
experiences, and extraversion. The stepwise method was used on both blocks.
Number of younger siblings explained 2% of the variance in courage leadership scores
(R2 = .02, β = -.15, rp = -.15, p = .02). The partial correlation of -.15 indicated that the higher
number of younger siblings the adolescent had, the lower the adolescent rated him/herself as a
courage leader. Extraversion explained an additional 2% of the variance in courage leadership
scores (ΔR2 = .02, β = .15, rp = .15, p = .00). The partial correlation of .15 indicated that the
higher the adolescent scored on extraversion, the higher the adolescent rated him/herself as a
courage leader.
Ho5:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and charismatic leadership.
In order to test null hypothesis 5, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, and number of computers
at home. Two blocks of data were used in the regression. Block 1 contained age, gender,
ethnicity, number of clubs and organizations, number of older siblings, number of younger
236
siblings, and number of computers at home. Block 2 contained the personality dimensions of
conscientiousness, agreeableness, neuroticism, openness to new experiences, and extraversion.
The stepwise method was used in both blocks.
The number of clubs and organizations explained 8% of the variance in charismatic
leadership scores (R2 = .08, β = .19, rp = .19, p = .00). The partial correlation of .19 indicated
that the higher the number of clubs and organizations the adolescent belonged to, the higher the
adolescent rated him/herself as a charismatic leader. Gender explained an additional 2% of the
variance in charismatic leadership scores (ΔR2 = .02, β = .15, rp = .16, p = .02). The results of a
t-test, t(264) = -2.61, p = .01, found that girls (M2 = 8.23) rated themselves higher on
charismatic leadership than boys (M1 = 7.40). The number of younger siblings explained an
additional 2% of the variance in charismatic leadership scores (ΔR2 = .02, β = -.14, rp = -.15,
p = .04). The partial correlation of -.15 indicated that the higher number of younger siblings the
adolescent had, the lower the adolescent rated him/herself as an charismatic leader. Age
explained an additional 2% of the variance in charismatic leadership scores (ΔR2 = .02, β = .15,
rp = .15, p = .03). The beta weight of .15 indicated that the older the adolescent was, the higher
the adolescent rated him/herself as a charismatic leader. Extraversion explained an additional
2% of the variance in charismatic leadership scores (ΔR2 = .02, β = .15, rp = .16, p = .01). The
partial correlation of .16 indicated that the higher the adolescent scored in extraversion, the
higher the adolescent rated him/herself as a charismatic leader. Openness to new experiences
explained an additional 2% of the variance in charismatic leadership scores (ΔR2 = .02, β = .13,
rp = .14,
p = .03). The partial correlation of .14 indicated that the higher the adolescent scored in
openness to new experiences, the higher the adolescent rated him/herself as a charismatic
leader.
Ho6:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and tolerant leadership.
In order to test null hypothesis 6, a multiple regression was conducted to predict the
relationship between the adolescents’ personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and tolerant leadership. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
personality dimensions of conscientiousness, agreeableness, neuroticism, openness to new
experiences, and extraversion. The stepwise method was used in both blocks.
The number of clubs and organizations explained 9% of the variance in tolerant
leadership scores (R2 = .09, β = .23, rp = .22, p = .00). The partial correlation of .23 indicated
that the higher the number of clubs and organizations the adolescent belonged to, the higher the
adolescent rated him/herself as a tolerant leader. Gender explained an additional 2% of the
variance in tolerant leadership scores (ΔR2 = .02, β = .16, rp = .17, p = .02). The results of a ttest, t(264) = -2.86, p = .01, found that girls (M2 = 9.27) rated themselves higher on tolerant
leadership than boys (M1 = 8.09). The number of younger siblings explained 2% of the
variance in tolerant leadership scores (ΔR2 = .02, β = -.13, rp = -.13, p = .03). The partial
correlation of -.13 indicated that the higher the number of younger siblings the adolescent had,
the lower the adolescent rated him/herself as a tolerant leader. The number of computers at
home explained an additional 2% of the variance in tolerant leadership scores (ΔR2 = .02, β =
.13, rp = .13, p = .04). The partial correlation of .13 indicated that the higher the number of
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computers the adolescent had at home, the higher the adolescent rated him/herself as a tolerant
leader.
Ho7:
There is no relationship between personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and willpower leadership.
In order to test null hypothesis 7, a multiple regression was conducted to predict the
relationship between the adolescent’s personality, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and willpower leadership. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
personality dimensions of conscientiousness, agreeableness, neuroticism, openness to new
experiences, and extraversion. The stepwise method was used for both blocks.
The number of clubs and organizations explained 5% of the variance in willpower
leadership scores (R2 = .05, β = .20, rp = .20, p = .00). The partial correlation of .20 indicated
that the higher the number of clubs and organizations the adolescent belonged to, the higher the
adolescent rated him/herself as a willpower leader. The number of younger siblings explained
an additional 2% of the variance in willpower leadership scores (ΔR2 = .02, β = -.14, rp = -.15,
p = .02). The partial correlation of -.15 indicated that the higher number of younger siblings the
adolescent had, the lower the adolescent rated him/herself as a willpower leader. Openness to
new experiences explained an additional 2% of the variance in willpower leadership scores
(ΔR2 = .02, β = .12, rp = .13, p = .04). The partial correlation of .13 indicated that the higher the
adolescent scored in openness to new experiences, the higher the adolescent rated him/herself
as a willpower leader.
Ho8:
There is no relationship between leadership, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and conscientiousness.
In order to test null hypothesis 8, a multiple regression was conducted to predict the
relationship between leadership, age, gender, ethnicity, number of clubs and organizations,
number of older siblings, number of younger siblings, number of computers at home, and
conscientiousness. Two blocks of data were used in the regression. Block 1 contained age,
gender, ethnicity, number of clubs and organizations, number of older siblings, number of
younger siblings, and number of computers at home. Block 2 contained the leadership
subscales of critical thinking leadership, guidance leadership, courage leadership, charismatic
leadership, tolerant leadership, and willpower leadership.
Age explained 8% of the variance in conscientiousness scores (R2 = .08, β = .11, rp =
.11, p = .02). The beta weight of .11 indicated that the older the adolescent was, the higher the
adolescent scored in conscientiousness. Charismatic leadership explained an additional 2% of
the variance in conscientiousness scores (R2 = .02, β = .15, rp = .15, p = .02). The partial
correlation of .15 indicated that the higher the adolescent scored in charismatic leadership, the
higher the adolescent scored in conscientiousness.
Ho9:
There is no relationship between leadership, gender, age, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and agreeableness.
In order to test null hypothesis 9, a multiple regression was conducted to predict the
relationship between leadership, age, gender, ethnicity, number of clubs and organizations,
number of older siblings, number of younger siblings, number of computers at home, and
agreeableness. Two blocks of data were used in the regression. Block 1 contained age, gender,
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ethnicity, number of clubs and organizations, number of older siblings, number of younger
siblings, and number of computers at home. Block 2 contained the leadership subscales of
critical thinking leadership, guidance leadership, courage leadership, charismatic leadership,
tolerant leadership, and willpower leadership.
The number of clubs and organizations explained 5% of the variance in agreeableness
scores (R2 = .05, β = .17, rp = .17, p = .00). The partial correlation of .17 indicated that the
higher number of clubs and organizations the adolescent belonged to, the higher the adolescent
scored in agreeableness. Charismatic leadership explained an additional 2% of the variance in
agreeableness scores (R2 = .02, β = .15, rp = .15, p = .02). The partial correlation of .15
indicated that the higher the adolescent scored in charismatic leadership, the higher the
adolescent scored in agreeableness.
Ho10:
There is no relationship between leadership, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and neuroticism.
In order to test null hypothesis 10, a multiple regression was conducted to predict the
relationship between leadership, age, gender, ethnicity, number of clubs and organizations,
number of older siblings, number of younger siblings, number of computers at home, and
neuroticism. Two blocks of data were used in the regression. Block 1 contained age, gender,
ethnicity, number of clubs and organizations, number of older siblings, number of younger
siblings, and number of computers at home. Block 2 contained the leadership subscales of
critical thinking leadership, guidance leadership, courage leadership, charismatic leadership,
tolerant leadership, and willpower leadership. The stepwise method was used in both blocks.
Gender explained 7% of the variance in neuroticism scores (R2 = .07, β = .15, rp = .19, p =
.00). The results of a t-test,
t(264) = -2.212, p = .01, found that girls (M2 = 11.60) rated themselves higher on neuroticism
than boys (M1 = 10.92).
Ho11:
There is no relationship between leadership, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and openness to new experiences.
In order to test null hypothesis eleven, a multiple regression was conducted to predict the
relationship between leadership, age, gender, ethnicity, number of clubs and organizations,
number of older siblings, number of younger siblings, number of computers at home, and
openness to new experiences. Two blocks of data were used in the regression. Block 1
contained age, gender, ethnicity, number of clubs and organizations, number of older siblings,
number of younger siblings, and number of computers at home. Block 2 contained the
leadership subscales of critical thinking leadership, guidance leadership, courage leadership,
charismatic leadership, tolerant leadership, and willpower leadership. The stepwise method
was used for both blocks.
Ethnicity explained 2% of the variance in the openness to new experiences scores
(R2 = .07, β = -.11, rp = -.11, p = .03). A comparison of means indicated that “other” ethnicity
(M = 15.08) scored higher on openness to new experiences over the Hispanic ethnic group
(M = 14.13). Charismatic leadership explained an additional 2% of the variance in openness to
new experiences scores (ΔR2 = .02, β = .15, rp = .14, p = .02). The partial correlation of .14
indicated that the higher the adolescent rated him/herself on charismatic leadership, the higher
the adolescent scored in openness to new experiences.
Ho12:
There is no relationship between leadership, age, gender, ethnicity, number of clubs and
organizations, number of older siblings, number of younger siblings, number of computers at
home, and extraversion.
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In order to test null hypothesis twelve, a multiple regression was conducted to predict the
relationship between leadership, age, gender, ethnicity, number of clubs and organizations,
number of older siblings, number of younger siblings, number of computers at home, and
extraversion. Two blocks of data were used in the regression. Block 1 contained age, gender,
ethnicity, number of clubs and organizations, number of older siblings, number of younger
siblings, and number of computers at home. Block 2 contained the leadership subscales of
critical thinking leadership, guidance leadership, courage leadership, charismatic leadership,
tolerant leadership, and willpower leadership. The stepwise method was used in both blocks.
Courage leadership explained 2% of the variance in extraversion. (R2 = .02, β = .30, rp = .15,
p = .02). The partial correlation of .15 indicated that the higher the adolescent rated him/herself
in courage leadership, the higher the adolescent scored in extraversion.
DISCUSSION OF FINDINGS
A person’s personality disposition is a complex element involving several factors of
conscientiousness, agreeableness, neuroticism, openness to new experiences, and extraversion,
among new and developing factors. Do personality factors, as well as, the demographic
characteristics of an individual predict leadership behaviors? Within research area one, this
study examined the relationship between adolescent personality and predictors of leadership
and found that ethnicity, the number of older siblings a person has, nor does the personality
dimensions of conscientiousness, agreeableness, and neuroticism predict leadership behaviors
in adolescents. However age, gender, number of clubs and organizations (group affiliation),
number of younger siblings, number of computers at home (SES indicator), openness to new
experiences, and extraversion did predict leadership behaviors in adolescent leaders. The
strongest predictors of leadership were the number of clubs and organizations the adolescent
belonged to, gender (Female), and extraversion. The number of younger siblings the adolescent
had was also a strong predictor with an inverse relationship. The higher the number of younger
siblings the adolescent had, the lower the adolescent rated him/herself as a leader.
Females rated themselves higher as leaders than boys. An ANOVA post hoc analysis
indicated that girls rated themselves higher as leaders on 11 of the 26 items. The higher the
number of clubs and organizations the participant belonged to, the higher the participant rated
him/herself in overall leadership, critical thinking leadership, guidance leadership, charismatic
leadership, tolerant leadership, and willpower leadership. The higher the participant scored in
extraversion, the higher the participant rated him/herself in overall leadership, guidance
leadership, courage leadership, and charismatic leadership. An ANOVA post hoc analysis
showed that the St. Piux X High School group (Student Council and Honors Students) scored
higher on overall leadership, openness to new experiences, conscientiousness, extraversion,
and agreeableness.
In regards to research area two, the relationship between adolescent leadership and
predictors of personality; age, gender (Female), number of clubs and organizations, charismatic
leadership, and courage leadership were the strongest predictors of personality. The older the
participant was, the higher the participant scored in conscientiousness. The higher the
participant rated him/herself on charismatic leadership, the higher the participant scored on
conscientiousness, agreeableness, and openness to new experiences. The higher the number of
clubs and organizations the adolescent belonged to, the higher the adolescent scored on
agreeableness. Females scored higher on neuroticism. The “Other” race scored higher on
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openness to new experiences over the Hispanic race; and the higher the participant scored on
courage leadership, the higher he/she scored on extraversion.
SUMMARY OF FINDINGS
In regards to research area one, the higher the number of clubs and organizations that
the adolescent belonged to strongly predicted leadership behaviors, as well as extraversion, and
gender (Female). The higher the number of younger siblings showed an inverse relation to
predicting leadership. In regards to research area two, charismatic leadership predicted the
personality dimensions of conscientiousness, agreeableness, and openness to new experiences.
LIMITATIONS OF FINDINGS
The limitations of this study included that the sample did a self-rating as a leader; the
sample base was a convenience sample which required parental consent; and the sample was
almost entirely Hispanic.
RECOMMENDATIONS FOR FUTURE RESEARCH
The recommendations for future research are to focus on other ethnicities, repeat the
study with different leadership instruments, and repeat the study with different age groups, for
example 11 – 14 year olds.
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HOW DO PERCEIVED USEFULNESS OF
E-TEXTBOOK-AND-HOMEWORK SYSTEMS
CORRELATE WITH STUDENTS’ PERSONALITY
TRAITS OF INTROVERSION AND THINKING?
Joseph S. Mollick
Texas A&M University - Corpus Christi
Robert Cutshall
Texas A&M University - Corpus Christi
ABSTRACT
Using the theoretical literature on personality and temperament, technology
acceptance model and task technology fit model, we theoretically build and empirically test a
research model to explore how perceived usefulness of e-textbook and homework systems for
business statistics courses correlate with the strength of students’ personality traits of
introversion and thinking.
INTRODUCTION
Many publishers are offering electronic textbooks and homework systems or e-learning
systems targeting learners and educators in general, especially in the higher education industry.
These e-learning systems can be viewed and analyzed as special types of information systems
that directly relate to learners, educators, authors and publishers. The writers of this article are
interested to understand how two dimensions of psychological preferences or traits-introversion and thinking-- relate to how students perceive the usefulness of an Internet-based,
electronic textbook and homework system used in a business statistics course at a business
school in the USA. The personality traits of introversion and thinking are common across
many Jungian personality assessment tools including the popular Myers-Briggs Type Indicator.
The Myers-Briggs Type Indicator (MBTI) assessment is a psychometric questionnaire
designed to measure psychological preferences in how people perceive the world and make
decisions (Myers and Myers, 1995).
LITERATURE REVIEW
There is an extensive body of literature in psychology about psychological types,
temperaments, and dimensions of personality (Hogan, Johnson and Briggs, 1997). The
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personality trait called introversion-extraversion is also studied in sociology, personnel studies
and organizational behavior, and other behavioral sciences. Thinking is a function of the
human mind that has been the subject of study not only in typology and cognitive psychology
but also in philosophy in general and epistemology, computer science, neurology, and
virtually in all the branches of knowledge to the extent that learning involves thinking and
sense making. Perceived usefulness of a computer-based tool or a system has been a major
subject of study in the discipline of information systems which deals with creating value or
benefits for users of computer-based tools and information systems. Customers' perception of
usefulness or utility of a product or cost benefit analysis of a choice are subjects studied in
disciplines such as economics and marketing as well. In the literature review, we limit
ourselves to the most relevant sources related to the one dependent variable in sub-section 2.1
followed by discussions on two independent variables in sub-section 2.2.
The Dependent Variable: Perceived Usefulness of Aplia System
An extensive body of research literature in the field of information systems shows that
perceived usefulness of any technology, tool, procedure or system is a reliable predictor of
intention to use and actual usage of a system by its intended users (Davis, 1989). Similar
research is also available in fields such as diffusion of innovation, evolutionary biology,
anthropology, and educational technology. Throughout history, usefulness has driven adoption,
acceptance and usage of any tool, technology, procedure or system by humans and other living
things in their struggle for survival. The usefulness of a teaching tool used for teaching a
business statistics course need to be evaluated by tool developers, teachers, students,
employers and other stakeholders of professional business schools, among others. Student
centered teaching demands that students’ perspectives on tools, methods and procedures used
in teaching any course be given an appropriate consideration in adopting, modifying or
discontinuing the use of any tool or procedure. If students perceive a teaching tool as useful,
they can motivate themselves to use that tool because of its fit with their learning style and its
effectiveness in helping them achieve their learning goals. It is of great practical value to assess
the perceived usefulness of a new teaching tool, especially when it has been experimentally
used by some professors who teach difficult and unpopular courses like a required
undergraduate course in business statistics.
|Items Used to measure perceived usefulness (Y)
PU1| Aplia was effective for your learning style.
PU2| I was better able to learn the material using Aplia.
The dependent variable Y for this research is labeled perceived usefulness of an etextbook and homework system for students. The system is called Aplia. Using the items listed
above, the perceived usefulness of Aplia was rated by students on a scale ranging from 1 to 5,
with 1 being the least useful and 5 being the most useful. Knowing how useful students
perceive the Aplia system to be is important for teachers, Aplia tool developers, institutions of
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education that have adopted or are planning to adopt Aplia, students and others. In addition to
having electronic textbooks, Aplia has a learning tool which enables students to try a problem
and then receive a complete explanation of the problem once it has been submitted for grading.
The explanations allow the student to follow a step by step process to get the right answer. It is
a system of trying and learning from mistakes. The Aplia system takes place in an online web
browser environment, which many current university students are familiar with.
The Independent Variables: Personality Factors
Western conceptualizations of individual differences in personality can be traced back
at least 2000 years to the ancient typologies of Hippocrates and Galen (McAdams, 1997; p.7).
However, personality psychology became an identifiable discipline in the social sciences in the
1930s (McAdams, 1997; p.4). Personality studies focus on how people are different from one
another as well as how they are alike. Three distinguishing features of personality psychology
are the emphases on (1) the whole person, (2) motivation and dynamics, and (3) individual
differences (McAdams, 1997; p.4). Personality tests have been used and continue to be used
widely in management such as for screening applicants unfit for military service (Woodworth,
1919) or for advising and guiding students as they make choices regarding specific academic
majors, jobs and professions. Among the hundreds of variables, traits, factors or dimensions of
personality that have been identified by psychologists, we have limited ourselves to studying
the effects of two important traits or dimensions of personality: introversion and thinking.
These are the independent variables used in this study to predict and explain the dependent
variable—perceived usefulness of an e-textbook and homework system.
Introversion (X1)
Myers-Briggs literature uses the terms extraversion and introversion as Jung first used
them. Extraversion means "outward-turning" and introversion means "inward-turning" (Zeisset,
2006). Introversion, introduced by Jung (1921), has been identified as an extremely important
concept in trait psychology or temperament studies. In Jung’s typology, introverts oriented
toward internal, subjective experience, focusing on their own thoughts, feelings, and
perceptions. As a result, they tend to be introspective, ruminative, and self-preoccupied, and
appear aloof, quiet, unsociable, and reserved to others. An introversion-extraversion factor can
be identified in virtually every widely used multidimensional personality inventory (Watson
and Clark, 1997; P. 767). Eysenck and Eysenck (1975) describes an extravert as: “The typical
extravert is sociable, likes parties, has many friends, needs to have people to talk to, and does
not like reading or studying by himself.” (p. 5). An introverted person is directed internally and
usually solves problems on his or her own. An introversive person who thinks within himself
or herself rather than speaking every thought will likely approach problem solving this same
way—alone, within one’s own personal space of ideas. Introverted personalities need their
concentration, quiet, and their own space at times, especially when problem solving.
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While extraversion is associated with being directed outward toward people and objects,
introversion is associated with being directed inward toward concepts and ideas. Some
contrasting characteristics (Tieger and Tieger, 1999) between extraverts and introverts include
the following:
1. Extraverts are oriented toward action, while introverts are thought oriented.
2. Extraverts seek and value breadth of knowledge and influence, while introverts seek
and value depth of knowledge and influence.
3. Extraverts often prefer more frequent interaction, while introverts prefer more
substantial interaction.
4. Extraverts recharge and get their energy from spending time with people, while
introverts recharge and get their energy from spending time alone.
Introversion is a personality type or trait that is very misunderstood. Because of the
personality aspects and the comparison to what an American is expected to be, many
introverted personality types feel guilty about what they are. Instead of seeing themselves as
just reserved, introverts may see themselves as worthless or abnormal. Even with this
misunderstanding, Henjum (1982) discusses how introverts many times are among the most
successful people and can attain great things, especially with education. The ability to
concentrate and the lack of need for constant social stimulation allows introverts to ponder
many problems that the world needs solved (Henjum, 1982).
The results of a study by Ebeling-Witte, Frank, and Lester (2007) showed that shy
people prefer an online setting for conversing. The trait of shyness is a classic trait of an
introverted personality. This type of shy person also spent more time on and thought about the
Internet more than one normally should, by psychological measures. This shows a tendency for
introverted personality types toward a preference for computer aided situations such as online
networking and conversing. The preference for a computer aided environment is consistent
with the traits of a shy, introverted personality (Ebeling-Witte, Frank, & Lester, 2007).
Thinking (X2)
The second independent variable in our study,X2, is the thinking personality trait. One
of C.G. Jung's four functions through which a person deals with the world inside and around is
thinking; the other three being sensing, intuiting and feeling. Jung's concept about the thinking
function involves evaluating information, experiences and ideas rationally, logically. Since
thinking involves decision making or judging, rather than simple intake of information, Jung
called the thinking function rational.
The type indicator, based on Jung's concepts of types and functions of personality, that
Katherine Briggs and her daughter Isabel Briggs Myers developed, has four scales or
dimensions of personality: extroversion-introversion, sensing-intuiting, thinking-feeling and
judging-perceiving. According to the Myers-Briggs type indicator (MBTI), the four functions
have opposite forces such as thinking and feeling tend to be opposite ends of the same scale or
dimension of personality. Researchers have found that roughly two-thirds of men are thinkers,
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while about two-thirds of women are feelers, depending on whether thinking or feeling is the
superior or dominant function of one's personality.
A study by Furnham, Moutafi, and Paltiel (2005) showed that “individuals high on g ,
general intelligence, tend to logically analyze information in terms of the strict principles of
cause and effect instead of identifying the emotional value that is attached to objects or events”
(p. 9). This means that thinking based people tend to have higher intelligence levels because of
their way of evaluating problems and solving them. Taking the logical approach enables the
thinking based personality type to achieve greater success in solving problems.
Those who prefer thinking have the tendency to decide things from a more detached
standpoint, evaluating the decision by conditions that seem reasonable, logical, causal and
consistent with rules, goals and objectives. Those who prefer feeling tend to make decisions
by empathizing with the situation, looking at it 'from the inside' and weighing the situation to
achieve, on balance, the greatest harmony, consensus and fit, considering the emotional needs
of the people involved. Thinkers usually have trouble interacting with inconsistent and illogical
people, and tend to give very direct feedback to others without considering much how a
person's feelings may be affected. They are concerned with the truth and view it as more
important than being tactful, sweet or nice but dishonest. Thinking trait may be associated with
economists' and psychologists' conceptualization of logic and rationality (Kahneman, Amos
Tversky, 2000) in personal judgment and decision making, such as utility maximizing or
optimizing decisions and multi-criteria decision making.
Items used to measure the second independent variable X2 attempt to assess how
thinking based, logical, and rational a student’s personality is. Seven items, each on a scale
ranging from 1 to 5, have been used in this study, to measure the strength of the thinking trait
of each student. The Likert-scale based response score values from the seven items were
summed for each student to derive the thinking personality trait score for each student. A
summed response score of 7 means that the respondent is less of a thinking-based personality
type; while a response of 35 means the respondent is more of a thinking-based personality
type. Any score between seven and thirty five is an indicator of the importance, dominance or
strength of the thinking trait in one's decision making and cognitive functions. The thinking
based personality type relates to how a person evaluates information and uses a technical,
systematic approach to solving a problem. It measures the extent to which the use of logic in
problem solving is important to a person. In contrast, a feeling dominated personality type
would examine problems more along emotions than logic. Thinking based types try to use an
objective approach to a problem rather than letting his or her emotions get involved in the
process.
The Research Model and Hypotheses
We theorize that personality traits such as introversion and thinking can predict and
explain how students perceive the usefulness of e-learning systems such as Aplia. Because
Aplia has features, tools, and capabilities that cannot be customized to the personality of each
person or each personality type, Aplia may be perceived more useful to some and not so useful
247
to other personality types. The research hypotheses about the relationships between X1 and Y
(Ha1) and X2 and Y (Ha2) are summarized in Figure 1. Theoretical arguments to support
hypotheses Ha1 and Ha2 are presented in subsections 2.3.1 and 2.3.2, respectively.
Figure 1: The Research Model
X1= Introversion
Ha1:
+
X2= Thinking
Ha2:
Y= Perceived
Usefulness of etextbook and homework
systems for a business
statistics course
Ha1: Relationship between Introversion and Perceived Usefulness
A study by David Unfred discussed that Transforming and Performing learning
orientation types, which thrive on self motivation and self directness, had greater achievement
than other learning types with the electronic textbook (Unfred, 2002, p.102). Based on this
source, it can be argued that the more introversive a person is the more he or she will find the
Aplia electronic textbook and homework system useful. The more introverted a person is, the
more useful he or she will find the system because the system allows one to be self-direct and
self-motivated with regard to study and practice at one’s own pace as opposed to being with
human tutors. Introverted people are directed inward, less social, and less outgoing than an
extroverted personality type. They also tend to be self directed and would likely favor self
directed online homework rather than an in-class discussion. For this reason, more introverted
personality types will find the Aplia system to be more useful because they have the ability to
direct and control their learning of the material.
Henjum (1982) found that an introvert’s “ability to ‘stick to the task’ accounts for a
great deal of this success” (p. 41). I believe this statement supports the hypothesis that
introverted personalities will find Aplia useful because of their concentration level and ability
to stay focused on the Aplia system. The fact that introverts do not need constant interaction
and social stimulation enables them to sit and focus on the Aplia system and learn the material.
Aplia encourages self motivated and self timed work and these qualities are fitting with the
temperament of an introverted personality. With the Aplia system being so fitted to the
introverted personality, more introverted types will likely find the system more useful in their
learning efforts.
248
The results of the Ebeling-Witte, Frank, and Lester (2007) study that shy people prefer
the online environment can be used to support the hypothesis of a positive relationship between
introversion and perceived usefulness of Aplia. If an introverted student is physically online
and thinking out the Internet more than others, he or she will find the Aplia system useful
because it is an environment he or she is comfortable with. Likewise, if the student is already
on the Internet visiting social networking sites and checking email, they also have the ability to
do their homework on the Aplia system while doing these other things. This ability to multitask
and be in a comfortable environment should increase a student’s perceived usefulness of the
environment because they see it as convenient (Ebeling-Witte, Frank, & Lester, 2007) and,
using the language of task-technology fit model, good fit with their personality, the learning
task at hand and the e-learning technology. Task-technology fit (TTF) theory holds that IT is
more likely to have a positive impact on individual performance and be used if the capabilities
of the IT match the tasks that the user must perform (Goodhue and Thompson, 1995).
On the basis of the arguments presented above, it can be hypothesized that
Ha1: Relationship between Introversion and Perceived Usefulness of e-learning systems is
positive.
Ha2: Relationship between Thinking Personality Trait and Perceived Usefulness
Three arguments are presented here to support a hypothesized negative relationship
between a thinking personality trait of students and students’ perceived usefulness of etextbook-and-homework systems or e-learning systems like Aplia.
Argument 1. Higher intelligence associated with a thinking personality trait could be
the first reason for the existence of a negative relationship between thinking personality trait
and perceived usefulness of an e-textbook and homework system. Furnham, Moutafi, and
Paltiel (2005) found that a thinking based personality is positively associated with higher
intelligence. It can be argued that because of higher intelligence, the more thinking driven a
person is the more open and active that person will be in processes involving thinking,
studying and learning which require use of intelligence. The Aplia e-textbook-and-homework
system provides only limited opportunities for reading or thinking because the –e-textbook can
only be used on an Internet-enabled computer. The homework problems are structured, with
multiple choice answers, and the explanations are readily available after an answer is submitted
by a student. If the explanations were not so readily available, a student would have to think
long and hard to find out what went wrong during the first attempt and then attempt to discover
the right answer and embark upon a voyage of discovery. This voyage of discovery through
arguing with classmates in groups and questioning professors might not be quick and easy, but
it would stimulate the brain and provide food for a thinking, active brain, resulting in true
training of the brain to seek and discover. The result would be not just learning but metalearning-- learning how to learn. A higher intelligence level can be associated with an
increased desire to learn and therefore a desire to achieve more in classes. The desire to
achieve more would be consistent with putting more effort in to learning the material. Because
of the limitations inherent in Aplia, it will not work as an effective and useful aid for learners
249
with stronger thinking personality traits to achieve the combined higher goal of learning and
meta-learning.
Argument 2. Not getting adequate chance to think because the explanations are readily
available. Thinkers need opportunities to think through problems and argue about problems in
substantial terms. Thinkers find Aplia less useful because they may find arguing with
classmates or professors to be more useful for learning statistics in a non-structured, open
environment where arguments and interactions can be customized to a person’s specific
questions and concerns. The problems and explanations provided by Aplia are not customized
to an individual’s personality traits, learning styles and specific concerns—they are standard
explanations—the same for every student.
Those who like the convenience of having to think less and embrace fast and ready
explanations will find Aplia more useful. On the other hand, those who naturally like to think
through problems, may find Aplia less useful. Its structured and readily available explanations
make e-learning systems like Aplia a fast-food type learning environment that do not give
thinking students enough food for thought.
Argument 3. Students’ need for control of their learning environment is another reason
why a thinking personality trait may be negatively associated with perceived usefulness of etexbook and homework systems. A recent study suggested that a student’s academic
achievement can be predicted by how in control they feel they are of the outcome (Adeyinka
Tella, Adedeji Tella, & Lawrence O Adika, 2008). The feeling of being in control of the
situation is a way of thinking. If a student believes their achievement is based on their actions
and thoughts, this would be a sign of a thinking based person. Because the study showed that a
person’s perception of their level of control is positively related to their level of achievement, it
can be argued that the Y variable and the X2 variable will show a negative relationship. The
more thinking driven a student’s personality is, the less effective and useful the student will
find the Aplia system to be because they have a feeling of less control in their methods of study
within the structured and controlled environment set up by the Aplia e-textbook and homework
system. The Aplia system is more guided, focused, and result oriented than a classroom
discussion would be. I believe a thinking based student will find a guided step-by-step process
driven learning system less useful than a free flowing question-answer and discussion situation
that the student can control by asking questions that are in the student’s thinking mind. The
student can only look at the standard explanation that the Aplia system provides for a question.
A student cannot ask Aplia a question that is on his or her mind because Aplia will not answer
his or her specific question in the context of a specific problem—peers in a class or a professor
will do that. As such, group work and free discussions and arguments with peers and
professors might be more useful for students with higher need for control of the learning
environment.
In light of the arguments presented above, it can be hypothesized that
Ha2: Thinking personality trait and perceived usefulness of e-learning systems are related
negatively.
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DESIGN AND METHODOLOGY
Items used to measure introversion and thinking personality traits, borrowed from
(Myers and Myers, 1995), are in Figure 2. The X1 variable measures how introverted a student
is on a scale ranging from 7 to 35. These scores were derived by adding the scores of each
student on the seven items used to measure the degree of introversion of that student. Likewise,
the X2 variable measures the thinking trait or how thinking driven a student’s personality is on
a scale ranging from 7 to 35. In this paper, each of the two traits has been measured and treated
as a continuous variable on the interval scale just as the dependent variable has been treated as
a continuous, quantitative variable on the interval scale. As such, scatter diagrams, correlation
coefficients and regression analysis have been chosen as appropriate procedures for analyzing
the data and testing the statistical significance of the hypotheses. Students were given extra
credit points for participating in the study by anonymously filling up a survey questionnaire at
the end of the semester in which they used Aplia for a business statistics course.
Figure 2: Instrument used to measure Introversion and Thinking personality traits
Rate how well each of the sentences below apply to you.
1 = not at all 2 = only a little 3 = somewhat 4 = strongly 5 = very strongly
Statement
Type
circle one number
T I prefer to be logical about things.
1 2 3 4 5
I I am hard to get to know.
1 2 3 4 5
T I consider myself objective.
1 2 3 4 5
I I am a rather deep person.
1 2 3 4 5
T I often base my decisions on principles.
1 2 3 4 5
I I like reflecting on life.
1 2 3 4 5
T Sometimes one needs to be firm with others.
1 2 3 4 5
I I like having just a few close relationships.
1 2 3 4 5
T I like to figure out why things happen.
1 2 3 4 5
I Being with people drains me.
1 2 3 4 5
T Justice is more important than mercy.
1 2 3 4 5
I I like being by myself.
1 2 3 4 5
T I believe people don't use their brains enough.
1 2 3 4 5
I I prefer to deal with ideas and feelings.
1 2 3 4 5
RESULTS OF DATA ANALYSIS
The first scatter diagram exhibited in Figure 3 shows a positive linear relationship
between the variables X1 and Y. This scatter diagram shows that the level of introversion of a
person’s personality and the perceived usefulness of the Aplia system are positively related.
This shows that the higher level of introversion a person has, the more useful he or she will
perceive the Aplia system to be. The second diagram shown in Figure 4 exhibits a weak
251
negative linear relationship between the variable of X2 and Y. This means that there is a
moderate negative relationship between one’s level of thinking based personality and the
perceived usefulness of the Aplia system. The first scatter diagram fairly strongly supports
hypothesis Ha1 ,while the second scatter diagram weakly supports hypothesis Ha2.
Figure 3
Perceived Usefulness of Aplia
Relationship between Introversion (X1) and Perceived
Usefulness of Aplia (Y)
6
5
4
3
2
1
0
0
5
10
15
20
25
30
35
Level of Introversion
Figure 4
Perceived Usefulness of Aplia
Relationship between Thinking Based Personality (X2) and
Perceived Usefulness of APlia (Y)
6
5
4
3
2
1
0
0
5
10
15
20
25
30
35
40
Level of Thinking Based Personality
The mean, median, and standard deviation of each of the variables X1, X2, and Y are
exhibited in Figure 5. The average level of introversion of the subjects that were sampled was
22.18 on a scale ranging from 7 to 35. The median value of introversion was 22. The average
252
level of thinking based personality trait score in the sample was 26.92 on a scale ranging from
7 to 35. The median value of the thinking based personality trait score was 27. The average
perceived usefulness of Aplia system for all 89 students was 3.05 on a scale ranging from 1 to
5. The median, middle value, of perceived usefulness was 3. The standard deviation of the
introversion data was 3.84. The standard deviation of the thinking based personality was 3.45.
The standard deviation of the usefulness of Aplia data was 1.03. The standard deviation values
show the variability of each of the variables in the sample data.
Figure 5: Descriptive Statistics of the Variables under study
X1=Introvert X2=Thinking
Scale: 7 to 35 Scale: 7 to 35 Y=Usefulness
Descriptive Statistics
Mean
22.1798
26.9213 Scale: 1 to 5
Median
22.0000
27.0000
3.0000
Standard Deviation
3.8363
3.4484
1.0254
The correlation matrix shown in Figure 6 below shows the correlation coefficients of
the three variables of the research project. The .3082 value of rX1Y shows a moderate positive
relationship between the variables introversion and perceived usefulness. This moderately
supports Ha1. The value of -.0680 of rX2Y shows a weak negative relationship between the
thinking based personality and perceived usefulness of Aplia. This weakly supports research
hypothesis Ha2. The value of .2605 for rX1X2 shows a weak positive relationship between the
variables of X1 and X2, which are introversion and thinking based personality, the independent
variable in this study. There is some linear association as exhibited by statistic that rX1X2=
.2605, but this does not pose the problem of multicollinearity to the research because it remains
well under the threshold of .70. If the rX1X2 value were above .70, the two independent
variables would be related in a way that could pose multicollinearity problems for the research
outcomes of multiple regression. So, the finding that correlation coefficient rX1X2<.70 supports
the appropriateness of multiple regression as the method of data analysis.
Figure 6: Correlation Matrix and Tests of Hypotheses
Correlation Matrix with 1-tailed P-values
n=89
X1=Introvert
X2=Thinking
Y=Usefulness
X1=Introvert X2=Thinking Y=Usefulness
1
0.2605
1
0.3082
-0.0680
1
Figure 7 shows the regression output for this research project. The estimated regression
equation is y-hat= 2.2509 + .0935X1 - .0473X2. The estimated parameters are as follows: B0=
2.2509, B1= .0935, and B2= -.0473. F-test for the multiple regression model and t-test for each
of the beta coefficients B1 and B2 are performed based on the values of the F-statistic and two
t-statistic values in Figure 7.
253
For the F test the null hypothesis is Ho: B1=B2=0 and the alternate hypothesis is Ha:
One or more of the parameters is not equal to zero. The F test statistic is the MSR value of
5.4852 divided by the MSE value of .9483. The F test statistic is therefore 5.7844 and the p
value is 0.0044. This p value permits the rejection of H0 because the p value is less than the
alpha value of .05 for the 95% confidence level. Since the null hypothesis is rejected, we
accept the alternate hypothesis that one or more of the parameters is not equal to zero. This
means that there is a significant relationship between the dependent variable and one or more
of the independent variables.
Figure 7: Multiple Regression Output and Tests of Hypotheses
Regression Statistics
Multiple R
0.3443
R Square,R2
2
Adjusted R
Standard Error
Observations
0.1186
0.0981
0.9738 Estimated model
89 Y-hat= 2.2509+0.0935*X1 - 0.0473*X2
ANOVA
df
Regression
Residual
Total
2
86
88
SS
10.9705
81.5520
92.5225
Standard
Coefficients
Error
Intercept
2.2509
0.9109
I=X1
0.0935
0.0280
T=X2
-0.0473
0.0312
*** Ha1 is supported with at least 99% confidence.
* Ha2 is supported with at least 90% confidence.
MS
F
5.485
0.948
t Stat
2.471
3.334
-1.517
5.784
Significance F
0.004395968
1-tailed
P-value
0.00772 Hypotheses
0.00063 Ha1: supported***
0.06651 Ha2: supported *
Since the overall significance, the F test, exhibited a significant relationship we use the
T test to explore which of the independent variables are related to the dependent variable. The
hypotheses for the T test for B1 are H0: B1≤0 and Ha: B1>0. The t test statistic is 3.3344 and the
one-tailed p value is 0.0006. Since this p-value is less than the alpha of .01, H0 is rejected with
at least 99% confidence. This shows that the variable introversion, X1, is statistically
significantly related to the dependent variable Y, perceived usefulness of Aplia.
The hypotheses for the T test for B2 are H0: B2≥0 and Ha: B2<0. The t test statistic is 1.5167 and the one-tailed p value is 0.0665. This p value is greater than the alpha of .05 but les
than .10. So H0 is rejected with 90% confidence. This shows that there is a statistically
significant negative relationship between the variable X2 and the dependent variable Y. We
can be at least 90% confident that there is a negative relationship between the thinking
personality trait and perceived usefulness of Aplia.
The R2 value is 0.1186 or 11.86%. The meaning of this value is the goodness of fit of
the estimated regression model that was created. The value means that 11.86% of the total
254
variability in the perceived usefulness of the Aplia system can be explained by the regression
model. This means that the model with b1 and b2 is not a great fit because 88.14% of the
variability of the y variable remains unexplained by the created model.
DISCUSSION AND CONCLUSION
While both hypotheses have been supported by the sample data, the explanatory power
or goodness of fit of the multiple regression model, indicated by the R-square value, is low.
This could be explained by the argument that perceived usefulness of an electronic textbook
and homework system like Aplia depend on many other variables not included in our multiple
regression model which had only two independent variables.
The R2 could possibly be improved by the addition of more variables to the estimated
regression model. Other dimensions of personality type could be added to the model to
improve the fit of the estimated model. An X3 variable such as whether a sampled person is a
Type B personality or not. Using this theory of type A or Type B personality could help
explain some more of the variability in how sampled people perceive the Aplia system as
useful or not. Other dimensions of personality could also be explored and examined to see
whether they show a significant relationship to the Y variable of the perceived usefulness of
the Aplia system.
The results of sampling may not be accurate because of the stigma in society that was
discussed by Henjum (1982). For example, a sampled person, even in an anonymous survey,
may not want to admit to themselves that they prefer to be by themselves and have less
interaction with people. Other dimensions of personality type or factors related to learning
styles that could affect the perceived usefulness of Aplia could be explored to see if they show
a significant relationship to the dependent variable.
Other variables not associated with personality type could also be added to the model to
try to increase the R2 value. Variables from the literature on technology acceptance model and
task technology fit model could also be used to explain perceived usefulness of a computerbased system like Aplia. Other variables such as grade point average, years in the university,
and preference for web based or in person classes, computer experience, computer selfefficacy, computer anxiety, Internet anxiety, and math anxiety could also help explain and
predict why a person would find the Aplia system to be more or less useful.
REFERENCES
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to the development and use of the Myers Briggs type indicator) p.131. Consulting Psychologists Press;
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Daniel Kahneman, Amos Tversky (2000). Choice, Values, Frames. The Cambridge University Press. ISBN 0521-62172-0.
Davis, F. D. (1989), "Perceived usefulness, perceived ease of use, and user acceptance of information
technology", MIS Quarterly 13(3): 319–340
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Davis, F. D.; Bagozzi, R. P.; Warshaw, P. R. (1989), "User acceptance of computer technology: A comparison of
two theoretical models", Management Science 35: 982–1003
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256
JOB STRESS AND JOB PERFORMANCE AMONG
EMPLOYEES IN PRIVATE BANKING SECTOR IN
ISTANBUL: EXAMINING THE MODERATING ROLE
OF EMOTIONAL INTELLIGENCE
Uğur Yozgat
Marmara University
Elif Bilginoğlu
Marmara University
Orkun Demirbağ
Marmara University
R. Hande Serim Bahadınlı
Marmara University
ABSTRACT
This study was conducted among 476 private banking sector employees to examine the
relationship between job stress and job performance considering emotional intelligence as a
moderating variable. It was also intended to be a replication of a previous study on job stress
and job performance which was conducted in the Taiwanese Finance industry. The result
pattern across both samples was similar. While a negative relationship was found between job
stress and job performance, it was reported that emotional intelligence had a positive impact
on job performance and moderated this relationship.
INTRODUCTION
Job stress is one of the common problems that employees confront with increasing
frequency. Recently job stress is becoming an epidemic in the work environment. Therefore a
large number of researches have focused on job stress and its effects on the various aspects of
the organizational output. Due to the fact that job stress has become a common negative
outcome of today’s dynamic work life, growing number of people complain about stress as a
result of work overload, job insecurity and increasing pace of life. Researches support the idea
that the higher the imbalance between demands and the individual’s abilities, the higher job
stress experienced will be (Jamal, 2005).
257
Job performance, which can be affected by job stress as well as other numerous factors,
can be viewed as an activity in which an individual is able to accomplish successfully the task
assigned to him or her, subject to the normal constraints of the reasonable utilization of
available resources (Jamal, 1984). In order to be competitive in a rapidly changing economic
and work environment, increasing the job performance of the employees and consequently the
performance of the companies has become more crucial. Therefore it is necessary for the
companies to analyze the issues such as stress that are related with job performance.
Nowadays the financial sector, defined as the set of institutions, instruments, and the
regulatory framework that permit transactions to be made by incurring and settling debts; that
is, by extending credit by OECD, is facing new challenges and threats because of the global
financial crisis and this makes the competitiveness quite problematic. Most of the companies in
this sector are going through a difficult period and that’s why they are expecting a very high
performance from their employees. In order to clarify the theoretical issues related to stress and
performance relationship, this study aims to search the effect of stress on performance among
the private banking sector employees.
Additionally the moderating role of the emotional intelligence, based on the fact that
the ability to manage one’s own emotions plays an extremely important role in appraisal and
coping with work related stress and reducing stress helps them to facilitate their performance,
was examined.
LITERATURE REVIEW AND HYPOTHESES
Job Performance
Performance is “evaluatable behaviors (Viswesvaran, 2001, 113). It is something that
people do and is reflected in the actions that people take. Further, it includes only those actions
or behaviors relevant to the organization’s goals (Campbell, 1990, 704). Murphy and Kroker
(1988) define that performance as a function of the individual’s performances on the specific
tasks that comprise standard job descriptions, and declare that it is also affected by variables
such as maintaining good interpersonal relations, absenteeism, and withdrawal behaviors,
substance abuse and other behaviors that increase hazards at the workplace (Murphy, 1989).
According to Motowidlo (2003), job performance is the total expected value to the
organization of the discrete behavioral episodes that an individual carries out over a standard
period of time. Job performance is directly related to the level of energy and the specific form
of action characterizing a worker's behavior. To the extent that motivation raises a worker's
energy and shapes appropriate behavioral patterns, it plays a key role in determining overall
job performance. Thus, job performance can properly be said to represent an operational
measure of worker motivation (Mitchell, Ortiz& Mitchell, 1987).
258
Job Stress
Stress is a feeling that's created when we react to particular events. It's the body's way
of rising to a challenge and preparing to meet a tough situation with focus, strength, stamina,
and heightened alertness (D’arcy, 2007). Job stress can be defined as an individual’s reactions
to characteristics of the work environment that seem emotionally and physically threatening
(Jamal, 2005). Job stress is very much an individual reaction, and differs from general stress as
it is also organization, and job–related (Chen & Silverthorne, 2008). Based on these definitions
job stress can produce adverse consequences for both the individual and the company since it
has the effect of lowering motivation levels and performance, and increases turnover intentions
(Montgomery, Blodgett & Barnes, 1996).
Because stress is a contributing factor to organizational inefficiency we would like to
propose the following hypothesis:
H1
Job stress is negatively associated with job performance.
Emotional Intelligence (EI)
Thorndike (1920, 228) was one of the first to identify the aspect of EI he called “social
intelligence”. He declares that social intelligence refers to “the ability to understand and
manage men and women, boys and girls—to act wisely in human relations”. Mayer and
Salovey view emotional intelligence (EI) as ability, that is, a set of skills for processing
emotion-relevant information. This model is the only one for which an objective, ability
measure has been developed (Mayer, Salovey, & Caruso, 2004; Mayer, Salovey, Caruso, &
Sitarenios, 2003). Carmeli (2003) emphasized that employees with a high level of intelligence
can manage their emotions in terms of retaining a positive mental state which can lead to
improved job performance. Based on these we researches would like to propose the following
hypothesis:
H2
There is a positive relationship between emotional intelligence and job performance.
Mayer, Roberts and Barsade (2008) claim that EI involves the ability to carry out
accurate reasoning about emotions and the ability to use emotions and emotional knowledge to
enhance thought. Based on the fact that the ability to manage one’s own emotions plays an
extremely important role in appraisal and coping with work related stress and reducing stress
helps them to facilitate their performance, we researches would like to propose the following
hypothesis:
H3
Emotional intelligence moderates the relationship between job stress and job performance.
259
RESEARCH METHOD
The research of Wu “Job Stress and Job Performance among Employees in The
Taiwanese Finance Sector: The Role of Emotional Intelligence” (2011) is used in this study
with the researcher’s permission. Just like his study we used the same model and hypothesizes
intended to find out the relationship between job stress and job performance and the
moderating role of emotional intelligence on this relationship. Different from the original study
we have chosen a private banking sector in Istanbul for conducting our study. Employees in the
private banking sector have tasks with deadlines and high stress owing to time pressure.
Sampling Design
More than 140.000 employees were working in 12 Turkish and 16 foreign capital
invested private banks in Turkey (Türkiye Bankalar Birliği, 2012). Different branches of the
private banking sector in Istanbul where circa 40 % of them were employed were chosen for
conducting this study. Considering the number of employees in each branch of our study’s
scope, we have made quoted convenient sampling and distributed 300 questionnaires to
Turkish and 400 to foreign capital invested banks’ branches. Total 700 questionnaires were
distributed to several branches and 498 (83 %) were returned. After deleting the semi-filled
ones 476 (79.3 %) questionnaires were analyzed using SPSS statistical program.
The sample consists of 274 female (57,6 %) and 202 male (42,4 %) employees with a
mean age of 32.88 (Standard Deviation: 5.69) and with an average tenure of 7.02 years
(Standard Deviation: 4.94) in the current position or sector. The sample included both
managers and non-managers.
Measures
A multi-item questionnaire used by Wu in his research “Job Stress and Job Performance
among Employees in The Taiwanese Finance Sector: The Role of Emotional Intelligence”
(2011) is used with the researcher’s permission.
Job Stress
Job Stress is measured using the questionnaire developed by Parker and DeCotiis
(1983). Participants are asked to rate each of the 13 items using a 5-point Likert scale so that
they can select a numerical score ranging from 1 to 5 for each statement to indicate the degree
of agreement or otherwise, where 1, 2, 3, 4, and 5 denote “Strongly Disagree”, “Disagree”,
“Neither Agree nor Disagree (Neutral)”, “Agree”, and “Strongly Agree”, respectively.
260
Emotional Intelligence
Emotional Intelligence is measured by the widely used The Self-Report Emotional
Intelligence Test (SREIT) developed by Schutte et al. (1998) Participants are asked to rate each
of the 33 items using a 5-point Likert scale (1=strongly disagree, 5= strongly agree) Although
the original scale of Schutte has one factor, in different studies three and sometimes four
aspects of the scale were explored (Schutte et al. 2009) like emotion perception, utilizing
emotions, managing self- relevant emotions and managing others’ emotions. In this study
original one factor model is used.
Job Performance
Job performance is measured by the scale developed by Dubinsky and Mattson (1979),
and was modified by Singh, Verbeke and Rhoads (1996). Participants were asked to rate each
of the 6 items using a 5-point Likert scale (1=poor performance, 5= excellent performance).
Control Variable
Job tenure which is measured by the number of years an employee has worked for
his/her company, is controlled due to its positive effects on job performance in many studies.
The findings of our study have also shown that job tenure may impact job performance. Just
like the study of Wu, we have explained this for the positive impact of job tenure within an
organization on job performance, because employees learn and enhance their skills as they gain
experience.
Findings
As can be seen from the Cronbach Alpha values reported in Table.1, variables of our
study are found to be reliable.
Bivariate correlations between the variables involved in this research are reported in
Table.1, job stress has a significant negative correlation with job performance (r = -0.212,
p
< 0.001), while the EI has a significant positive correlation (r = 0.465, p < 0.001).
Table 1
Means, Standard Deviations, Alpha Coefficients, and Correlations Among Study
Variables
Variables
Job Performance
Job Stress
Emotional Intelligence
*
M
3.97
2.75
3.87
SD
.66
.96
.49
1
(.90)
-.212***
.465***
2
3
(.92)
-.115*
(.92)
Note: Values on the diagonal represent alpha coefficients.
p <0.05, ** p <0.01, *** p <0.001 (two-tailed tests); N=476.
261
In order to test the first two hypothesizes the hierarchical regression analysis is
conducted. The control variable job tenure was added in Model 1. As shown in Table.2 two
variables regressed job performance linearly. Job stress has low, negative significant effect on
job performance and EI has moderate positive effect supporting the Hypothesis 1 and 2.
The interaction term was created by multiplying the two main effects and added in
Model 2 to test the moderating effect (Hypothesis 3) (Aiken and West, 1991). The results of
Model 2 show a significant change in R-squared (ΔR = 0.010, ΔF = 5.42, p < 0.05). The
moderating effect of emotional intelligence on the relationship between job stress and job
performance (β=0.532, p<0.05) is significant but standardized beta value is lower compared to
the study of Wu.
Table 2
Hierarchical Regression Results
Variables
Job Performance
Model 1
β
Model 2
Β
152***
0.150***
-0.180***
0.439***
-0.796**
0.222*
0.265
0.265***
0.635*
0.272
0.007*
Control variable
Job tenure
Main effect variables
Job stress (JS)
Emotional Intelligence (EI)
Interaction variables
JS*EI
R2
ΔR2
Notes: *p<0.05, ** p <0.01, *** p <0.001
Figure 1
Moderating Effect of Emotional Intelligence on Job Stress - Job Performance Relation
4.4
Job Performance
4.2
4
3.8
3.6
3.4
3.2
low
Job med
Stress
highEI
high
P
262
high
low
lowEI
The moderating effect of emotional intelligence on the relationship between job stress
and job performance is depicted in Figure.1. As can be seen from the figure low stressed
employees has higher job performance levels compared to high job stressed employees
whether they have high or low EI (latter having higher performance values). However
employees with high EI shows higher performance levels in high job stressed conditions.
CONCLUSION
Various behavioral outcomes have been linked to high or persistent stress, including
lower job performance, poor decision making, and increased workplace accidents and
aggressive behavior (McShane & Steen, 2009, 91). Although some researchers have indicated
that the relationship between stress and performance is either a positive (e.g. LePine et al.,
2005) or an inverted-U shape, most have found a negative stress-performance relationship
(e.g., Van Dyne et al., 2002; Siu, 2003; Gilboa et al, 2008; Jamal, 2011; Jehangir et al., 2011;
Wu, 2011; Yozgat et al., 2012). Suprisingly, some studies (e.g. Baddeley, 1972; Cohen, 1980)
suggest that a moderate amount of stress is optimal for job performance because, at such
levels, the individual is not only activated but also able to direct his or her energies toward
better job performance. There are also studies which have found no relation between job stress
and job performance. (e.g., Chen et al., 2006)
The results of this study support our hypotheses that job stress has significant impact on
job performance and it is moderated through EI. These findings are consistent with Wu
(2011)’s original and our in the public sector conducted initial study’s (Yozgat, Yurtkoru,
Bilginoğlu, 2012) arguments.
As a result of the global financial crisis in the world where the countries are about to go
bankrupt, it’s not only the profit making organizations, but also the countries that compete with
each other. Job stress is a major problem both for the employees and for the organizations. In
order to increase organizational efficiency and organizational effectiveness in the
organizations, it is suggested to help the employees to cope with their stress which is an
uncomfortable and undesirable to the individual. To make a budget plan for the coaching and
training of the employees on stress management can be regarded as a necessary action to help
them reduce the stressors without delay or help them be successful in coping with them so that
they can reach their full potentials.
Considering the positive impact of job tenure on job performance it is suggested that
the organizations should not make policies on early retirement of the old employees, but
support them to work for longer. In evaluation of the employees senior ones should have an
advantage to the junior ones regarding their higher job performance or the organizations can
create important incentives on job tenure in order to increase their intent to remain in the
organization.
263
LIMITATION AND FUTURE RESEARCH
This study was limited and only focused on the role of the job stress among employees
of the private banking sector in Istanbul. Further research is suggested to collect data over a
wider range of the employees of the private banking sector overall in Turkey or other areas of
private finance sector such as investment, leasing, factoring etc.
Another limitation is that all data were obtained from sources using self-reports.
Nevertheless, in future research, supervisory and peer ratings should be used as well as selfreports, so that this potential issue is overcome.
Because the EI is discussed to be just another aspect of personality, it is suggested that
future research be directed at the proposed linkage between personal characteristics and the job
stress and job performance relationship.
A further research can also be conducted on the effect of organizational support, which
is found to be effective on job performance in many researches.
ACKNOWLEDGEMENT
This work was supported by BAPKO - Marmara University (SOS-D-100413-0141).
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APPENDIX - Questionnaire
Job Stress
 Working here makes it hard to spend enough time my family.
 I spend so much time at work; I can’t see the forest for the trees.
 Working here leaves little time for other activities.
 I frequently get the feeling I am married to the company.
 I have too much work and too little time to do it in.
 I sometimes dread the telephone ringing at home because the call might be job-related (d).
 I feel like I never have a day off (d).
 Too many people at my level in the company get burned out by job demands.
 I have felt fidgety or nervous as a result of my job.
 My job gets me more than it should.
 There are lots of times when my job drives me right up the wall.
 Sometimes when I think about my job I get a tight feeling in my chest.
 I feel guilty when I take time off from job.
Emotional Intelligence
 I know when to speak about my personal problems to others.(d.)
 When I am faced with obstacles, I remember times I faced similar obstacles and overcame them.
 I expect that I will do well on must things I try.
 Other people find it easy to confide in me.
 I find it hard to understand the non-verbal messages of other people. (r)
 Some of the major events of my life have led me to re-evaluate what is important and not important.
 When my mood changes, I see new possibilities.
 Emotions are one of the things that make my life worth living.
 I am aware of my emotions as I experience them.
 I expect good thing to happen.
 I like to share my emotions with others.
 When I experience a positive emotion, I know how to make it last.
 I arrange events others enjoy.
 I seek out activities that make me happy.
 I am aware of non-verbal messages I send to others.
 I present myself in a way that makes a good impression on others.
 When I am in a positive mood, solving problems is easy for me.
 By looking at their facial expressions, I recognize the emotions people are experiencing.
 I know why my emotions change.
 When I am in a positive mood, I am able to come up with new ideas.
 I have control over my emotions.(d)
 I easily recognize my emotions as I experience them.
 I motivate myself by imaging a good outcome to tasks I take on.
 I compliment others when they have done something well.
 I am aware of non-verbal messages other people send.
 When another person tells me about an importance event in his or her life, I almost feel as though I have experienced this event myself.
 When I feel a change in emotions, I tend to come up with new ideas.(d)
 When I am faced with a challenge, I give up because I believe I will fail. (r,d)
 I know what other people are feeling just by looking at them.
 I help other people feel better when they are down.
 I use good moods to help myself keep trying in the faceoff obstacles.
 I can tell how people are feeling by listening to the tone of their voice.
 It is difficult for me to understand why people feel the way they do. (r)
Job Performance
 How would you rate yourself in terms of the quantity of work (e.g., sales) you achieve?
 How do you rate yourself in terms of your ability to reach your goals?
 How do you rate yourself in terms of your performance potential among coworkers in your company?
 How do you rate yourself in terms of quality of your performance in regard to customer relations?
 How do you rate yourself in terms of quality of your performance in regard to management of time, planning ability, and management
of expenses?
 How do you rate yourself in terms of quality of your performance in regard to knowledge of your products, company, competitors'
products, and customer needs?
(r): Reverse
(d): Deleted due to the low factor loading
267
CORPUS CHRISTI ESTATE PLANNING COUNCIL
FACES CHALLENGES
Eugene Bland
Texas A&M University – Corpus Christi
Karen A. Loveland
Texas A&M University – Corpus Christi
CASE DESCRIPTION
This case can be used to illustrate a variety of concepts in marketing including
strategic market planning for non-profit organizations, event planning & promotion strategies,
marketing of educational services, and the challenges associated with small
businesses/organizations. This case is appropriate for a variety of courses and teaching
strategies. The case contains enough information to permit students to perform a situation
analysis (with or without external research required), identify and prioritize issues/problems,
evaluate alternative courses of actions (including “do nothing), and recommend one or more
strategies making it appropriate for upper-level (3 or 4) case-based courses in marketing
strategy, promotional strategy or services marketing. Formal case analysis would require
three to ten hours of preparation by students depending on the requirements of the
class/instructor. Alternatively, this case could be employed in lower-level marketing classes by
asking students to respond to several discussion questions. Depending on the topics and
complexity of the questions, this type of usage would require from one to three hours of
preparation time by students and one to two class periods for in-class discussion.
CASE SYNOPSIS
The Corpus Christi Estate Planning Council (CCEPC) is a non-profit organization
dedicated to improving the practice of estate planning in South Texas. Recognized by the IRS
as a 501(c)(3) organization, the primary mission of the CCEPC is to provide continuing
education opportunities to members and non-members. The CCEPC recently recovered from a
significant decline in membership numbers but is still concerned that membership dues are not
covering the membership meeting costs and operating costs for the organization. As the
organization prepares for FY 2013, the board is considering raising dues (again) to increase
membership revenue or allowing proceeds from the annual educational seminar to subsidize
membership dues. In either case, the annual seminar is suffering from a significant decline in
268
attendance and the board needs to consider options for reversing this trend and perhaps even
returning attendance levels to the highs enjoyed during the 1990s.
INTRODUCTION
The Corpus Christi Estate Planning Council (CCEPC) is a non-profit organization
dedicated to improving the practice of estate planning in South Texas. Recognized by the IRS
as a 501(c)(3) organization, the primary mission of the CCEPC is to provide continuing
education opportunities to members and non-members.
Many professionals involved in estate planning require continuing education to
maintain state licensure. For example, license renewal for Certified Public Accountants
(CPAs) in Texas requires a minimum of 200 hours of continuing education during the most
recent three year period with a minimum of 20 hours per year (from an accredited provider).
The CCEPC provides two primary opportunities for members and non-members to earn
continuing education credit: membership meetings (members only) and an annual seminar
(members and non-members). Both opportunities qualify for continuing education credit for a
variety of professions including CPAs, attorneys, insurance professionals, certified financial
planners and bank trust officers.
BACKGROUND
The CCEPC is governed by a nine-member Board of Directors (hereinafter referred to
as “the board”) elected by the membership to serve a nine-year term. The board consists of
two attorneys, two bank trust officers, two CPAs, two insurance professionals, and the past
president. The newest member of the board represents the same group as the past president to
ensure consistent representation of the primary membership groups.
For the first four years of service, board members are classified as “directors”. In the
fifth year, they begin progressing through the following executive positions: Treasurer,
Secretary, Vice President and President until they conclude their term by serving as past
president (and advisor to the current president). The Board meets on the Thursday following
each monthly meeting and once a month in the summer to prepare for the following year.
The CCEPC has nine membership meetings per year (adjourning for the summer).
Each membership meeting includes dinner and a guest speaker. Each member of the board is
responsible for arranging the guest speaker for one meeting. Members who attend the meeting
are eligible for one hour of continuing education credit.
The first meeting of each fiscal year (July 1 to June 30) is held in September. At this
meeting, the organization provides each member with two coupons for drinks at the bar.
Members pay for their own drinks at subsequent meetings. Direct membership meeting
expenses include room fees and meals. In addition, the guest speaker’s actual travel costs (if
applicable) and an honorarium of $250 (though in recent years, many speakers have declined
269
the honorarium and instead considered their service as a charitable contribution to the
CCEPC).
The secretarial service sends a notice to the members about two weeks prior to each
meeting and then sends a reminder the following week. Members that want to attend the
meeting are asked to confirm their attendance to provide a count for the caterer. Members that
confirm attendance but do not attend are charged a no-show fee of $15 to cover the cost of the
meal. Members that do not confirm attendance, but come to the meeting are charged a late fee
of $5. Otherwise, the cost of the meeting is included in membership dues.
Annual operating expenses for the CCEPC consist of:
 Clerical Support – a secretarial service that handles membership support, promotion
and communication activities, and basic record keeping. In FY 2010-11, the CCEPC
switched from using a commercial secretarial service to an independent contractor.
 Continuing Education (CE) Accreditation – expenses associated with maintaining
accredited status for CE. An increasing number of licensure boards have reporting and
fee requirements to maintain the accredited CE status of CCEPC educational programs.
 Tax Return – expenses associated with filing federal taxes and maintaining 501(c)(3)
status.
 Gifts – Speakers at the membership meetings receive an appreciation gift, usually a
coffee table book. In addition, the organization provides funds for recognizing the
contribution of past presidents of the organization.
 PO Box Rental
 Check Printing
 Postage
For many years, membership in the CCEPC remained fairly constant at about 90 members.
Membership dues were structured to cover the costs of membership meetings, board meetings,
and annual operating expenses. A variety of factors caused membership to decline during the
first part of the last decade (between 2000 and 2005). During the decline, the Board held
annual membership dues constant at $95 to avoid further loss of membership. Following
strategic improvements in membership communication and a variety of efforts to encourage
word-of-mouth promotion by existing members, membership stabilized and eventually grew to
its pre-2000 levels by 2006.
With the strengthened membership retention, the board was comfortable raising
membership dues to $100 in 2007 and then to $125 in 2008 to cover increased meeting and
operating expenses. Membership dues were increased again in 2010 to $135. The increases do
not appear to be having a negative impact on membership as the organization grew to 105
members in 2012.
As the first Board meeting of fiscal year 2012-13 approaches, some members and advisors
have expressed concerns that, even with the recent increases in membership numbers and
annual dues, membership receipts are still not meeting the objective of covering all meeting
and operating expenses. One option the board will consider is increasing membership dues to
270
$150, but some members are concerned that another increase might reverse the recent growth
trend in membership numbers. Other members favor a strategy of subsidizing membership
receipts with revenue from the annual seminar, but opponents suggest that such a strategy is
riskier and requires significantly more cost and effort. Recent declines in attendance at the
annual seminar and the fact that the annual seminar is the last event of the year, occurring after
all the costs for membership meetings are incurred, increase the riskiness of relying on the
annual seminar to cover membership meeting and operating expenses. In addition, profits
from the annual seminar have historically been used to award scholarships to local
college/university students and increasing the costs covered by seminar receipts may reduce
future contributions.
CCEPC ANNUAL SEMINAR
The CCEPC Annual Estate Planning Seminar (hereinafter referred to as the “annual
seminar”) is the second primary source of funds for the organization. The annual seminar is
held in May on the campus of Texas A&M University – Corpus Christi (TAMUCC). Seminar
participants are eligible for eight hours of continuing education credit. In addition to this
primary benefit, the annual seminar also offers social and networking benefits to participants
that some members of the board believe are even more valuable than the continuing education
benefit.
The primary source of revenue for the annual seminar is the seminar registration fee.
Between 1989 and 2001 (when attendance began a downward trend), the average number of
paid registrations per year was 118 with a high of 152 in 1993 and a low of 86 in 2001. Table 1
displays the number of paid registrations and selected participant information for the 2002
through 2012 annual seminars.
Following flat registration numbers for 2002 and 2003, the board identified poor
communication as an issue and implemented various strategies to improve communication
with potential participants including expanding mailing lists and sending promotional materials
farther in advance of the seminar date. Paid registrations increased to 100+ in 2004 and
remained there until 2007 when they again fell to less than 90. The downward trend has
continued since that time with the 2012 numbers falling below 80 for the first time in the 39year history of the seminar.
Some members of the board assume that the decline in registration is a function of the
proliferation of continuing education providers, especially online providers, and increasing
opportunities for CE credit through other professional organizations. One board member
noted that, “…the glory days of the early 1990s appear to be gone”. Increases in competition
may present significant challenges for the organization going forward. Other environmental
variables such as changes in state licensing regulations and requirements, economic forces, and
others may also affect the revenue and/or costs of the organization in general and the annual
seminar in particular.
271
The annual seminar generates a small but increasing amount of sponsorship revenue for
the CCEPC. The College of Business and the Office of Institutional Advance at TAMUCC are
the named co-sponsors of the annual seminar. The College of Business provides resources for
seminar development and support for student guests. The Office of Institutional Advancement
also provides resources including a $500 cash donation to cover selected seminar expenses. In
addition, a local bank donates the cost of the luncheon (up to $1,700) and receives recognition
on the back cover of the seminar book. Starting in 2011, another bank agreed to donate the
cost of the continental breakfast ($750) and is acknowledged with tent cards on the breakfast
tables and on the inside back cover of the seminar book.
In recent years, the seminar coordinator (a finance professor at TAMUCC) has
encouraged the CCEPC to sponsor an increasing number of “student guests” at the annual
seminar. Student guests are asked to pay a nominal fee ($30) to cover meal expenses with the
remaining costs of attendance absorbed by the CCEPC. Some members believe that the board
should look for opportunities to expand the student guest program without incurring additional
costs.
The president of the board is responsible for choosing the speaker(s) for the annual
seminar. The speaker(s) provides a packet of materials that the CCEPC compiles into a
“seminar book” that participants can take away from the event. Some participants (and nonparticipants) have expressed an interest in purchasing additional copies of the seminar book for
recent seminars but the CCEPC has not yet established policies to administer the practice.
Seminar participants are given the opportunity to evaluate the annual seminar. The
evaluation instrument asks respondents to rate the following factors on a scale of poor (1) to
excellent (4): speaker(s) content, speaker presentation, usefulness of the information, quality
of the facilities, value for the money, and overall quality of the seminar. Average ratings for
the 2008 through 2012 seminars appear in Table 2.
The seminar evaluation instrument also includes the following question: “What day of
the week is best for continuing education seminars?” Between 2008 and 2010, 46% of the
evaluators that expressed a preference indicated that Friday was a better day than the historical
Monday date for the annual seminar (see Table 3). The board responded by moving the
seminar to Friday in 2011 and 2012.
Informal comments by seminar participants suggest that some of the participants that
travel from more distant locations may favor the CCEPC annual seminar because it allows
them to take advantage of the tourist and recreational opportunities offered by the Corpus
Christi location. At least one advisor has suggested that the CCEPC might be able to increase
attendance (or at least reverse recent declines) by selectively targeting more “out of area”
prospects and positioning the annual seminar as an opportunity to earn continuing education
credit and enjoy a “weekend break”.
Expenses associated with the seminar speaker can vary widely. Speaker honorariums
for the last five years have varied by as much as $5,000 with speaker expenses (automobile or
airline travel & meals) ranging from a low of less than $400 to a high of nearly $2,500. In
272
addition, the costs of reproducing the seminar book depend on the amount of materials
provided by each speaker. Total costs for producing the seminar book ranged from as little as
$458 to over $2,200 in the last five years.
Because of the co-sponsor relationship with the university (TAMUCC), most of the
activities associated with promoting and delivering the annual seminar are performed by
university personnel for a much lower cost than the CCEPC would incur if it relied on external
providers or contractors. Table 3 lists the Annual Seminar expenses for resources/services
provided by TAMUCC for 2008 through 2012.
The “pre-mailer” and “slick brochure” are the primary promotional materials for the
annual seminar. The pre-mailer is a 5”x8” card mailed to prospective participants about two
months before the seminar announcing the date and speaker. Exhibit 1 is a sample of the premailer for the 2012 annual seminar.
About three weeks after the pre-mailer is sent (in early April), a slick brochure with
more information is sent to the same prospects. The slick brochure is printed on glossy paper,
folded and sealed with mailing information and a brief “teaser” on the outside (see Exhibit 2
for a sample from the 2012 seminar). The inside contains the seminar agenda, registration
information and a detachable registration form (see Exhibit 3 for a sample for the 2012
seminar).
Both promotional fliers are designed and printed at the university and then sent to the
CCEPC clerical support staff for distribution. The CCEPC maintains several mailing lists of
prospects, but has not yet considered consolidating the lists and renting additional prospect lists
to increase the reach of promotional efforts.
In October 2011, the CCEPC created a Facebook page and began posting
announcements for membership meetings and the annual seminar. As of the end of FY 2012,
the CCEPC Facebook page had garnered just 13 “likes” (and was not structured to allow
people to join the group) prompting one advisor to suggest that they are not taking full
advantage of the promotion, communication, and relationship-building opportunities offered
by Facebook (and other social and networking media sites such as Twitter and LinkedIn). The
CCEPC does not have a web site and does not currently accept online registrations for the
annual seminar. Some board members have expressed concerns that the costs of developing an
online registration option outweigh the benefits while other have noted that the ease and
convenience of online registration may increase the number of registrations by more than
enough to cover any costs incurred.
The CCEPC does not currently have a formal process for soliciting additional sponsors
for the annual seminar. Recent economic conditions prompted the bank that sponsors the
annual seminar luncheon to limit its contribution to $1,700. While that level of support has
come within $100 of the actual cost of the lunch in recent years, some members have
expressed concern that any increase in the cost of catering might force the CCEPC to either
reduce the quality of the meal provided or seek additional sponsorship funds.
273
Future sponsorship contributions from TAMUCC may also be influenced by economic
conditions. While the university was able to continue (and even increase) its contribution for
the 2011 and 2012 seminars, there is concern on both sides that the trend toward higher
education budget cuts in Texas may affect the ability of the university to maintain its current
level of sponsorship.
Several companies have offered to sponsor selected costs of the seminar (e.g., the
seminar book, snacks provided during breaks) in recent years. All have requested that their
products be advertised to seminar participants, but most members of the board believe that
allowing advertising in seminar materials for products that may compete with the products and
services offered by CCEPC members is “…a bad idea”. However, a few members and
advisors believe that it may be possible to attract new sponsors for the event that sell noncompeting products and services (e.g., travel & tourism organizations, publishers, business
supplies & services providers, etc…).
The seminar registration fee remained stable at $150 from 1997 until 2004. The fee
increased to $160 in 2004 and to $180 in 2010. In 2011, The Board experimented with a twotier pricing strategy that increased the base fee to $185 while offering a $25 discount to
CCEPC members. The two-tiered strategy yielded a small increase in registrations by existing
members, but decreased registrations by non-members to the lowest level ever recorded.
The board has have expressed concern about breaking through ‘psychological prices
levels.’ For instance, $199 would be more palatable than $200. However, the board is
reluctant to raise the seminar registration fee again so soon after the last increase, especially in
the face of declining registration numbers.
Most of the annual seminar expenses are incurred in the final two weeks before the
seminar.
The seminar book is printed at the university the week before the seminar and
delivered to the University Center the Friday before the meeting. Catering is confirmed seven
(7) days before the meeting. While the University Center is booked a year in advance, because
the seminar qualifies as a university-sponsored event, the CCEPC does not pay a deposit or
incur the normal cancelation fees for reservations. The speaker’s hotel room is booked through
the university to take advantage of state rates, but the reservation is not billed until the speaker
checks into the room. The university also provides a welcome message and directions to the
event (and event parking) on university marques for a nominal fee. Miscellaneous expenses
including name tags and phone and other support by graduate students are also incurred during
the week of the seminar.
If the annual seminar were to be cancelled, the expenses that were already incurred
would have to be reimbursed to the university and would expenses associated with services
already rendered by the secretarial service. For example, if the speaker cancelled before the
catering was confirmed or the books printed, those expenses would not be incurred, nor would
the rental of the ball room. Likewise, the speaker’s fee, hotel and travel expenses would not be
due. The worst case scenario would be if a problem on campus that occurred the day of the
event. If the university suffered a power or water outage or if an early hurricane threatened the
274
area the day of the event, the seminar would likely have to be cancelled and the registration
fees returned, but the expenses paid. Such events are not probable but do increase the risk of
any strategy that involves subsidizing monthly meeting costs or membership dues with the
annual seminar.
Table 5 summarizes the total receipts and disbursement for the CCEPC for the most
recent five years. It also shows the year-end balance for the organization’s checking and
investment (CD) accounts.
As the board prepares for the first director’s meeting of the 2012-13 fiscal year, they
face a number of challenges revealed by ongoing analysis of the information presented above.
If the board wishes to cover membership meeting costs and operating expenses with
membership dues, then it must consider increasing membership dues. Alternatively, if the
board wishes to subsidize membership dues (possibly to the point of reducing dues in the
future), then it must identify strategies to increase receipts and/or decrease the costs of the
annual seminar. As evidenced by some of the information presented above (e.g., changing the
day of the seminar, creating a Facebook page), the board has demonstrated its openness to new
marketing strategies for the annual seminar as long as those strategies don’t compromise the
mission or reputation of the organization.
TABLE 1
ANNUAL SEMINAR PARTICIPANTS
2002 2003 2004 2005 2006
91
87
116
104
105
Paid Registrations
Career Field
2007
89
2008
92
2009
91
2010
84
2011
91
2012
77
22
31
17
11
10
91
23
39
15
6
4
87
32
42
26
10
5
115
27
46
14
7
10
104
31
47
12
6
9
105
28
34
13
5
7
87
31
33
15
5
8
92
26
29
12
5
10
82
27
34
12
10
3
86
35
32
15
5
4
91
18
32
11
14
2
77
83
79
93
88
81
74
76
69
69
70
60
1
1
9
4
11
9
11
11
13
9
9
5
4
11
8
9
2
3
5
1
2
2
2
3
0
2
1
1
0
0
0
1
1
5
0
91
0
87
2
115
2
104
3
105
1
87
2
92
6
91
1
84
9
91
5
77
Member
Non-member
Total
50
41
91
50
37
87
63
52
115
72
32
104
61
44
105
54
33
87
49
43
92
54
34
88
47
35
82
49
42
91
53
24
77
Attorney
CPA
Trust Officer
CLU/Insurance
Other
Total
Geographic Location
1
Corpus Christi, TX
2
Victoria, TX
3
San Antonio, TX
4
Brownsville-Harligen, TX
Other
Total
Membership Status
1
Includes the communities of Portland, Robstown, Beeville, Alice, Port Aransas, Aransas Pass, Rockport, Refugio, Bayside, Freer & Kingsville
Includes the communities of Port Lavaca, Goliad, and Palacios
3
Includes the communities of Pleasanton & Karnes City
2
4
Includes the community of Rio Grande City
Includes participants from as far away as Houston, Austin, and Henderson.
5
275
TABLE 2
ANNUAL SEMINAR EVALUATIONS
2008
2009
2010
Speaker Content
n/a
n/a
Speaker Presentation
n/a
Overall Rating
Usefulness of Information
1
2011
2012
3.38
3.54
3.46
n/a
3.23
3.67
3.54
3.04
3.55
3.38
3.65
3.44
3.04
3.3
3.32
3.59
3.23
Facilities
3.65
3.74
3.5
3.55
3.77
Good Value
3.35
3.68
3.5
3.67
3.66
2
1
Speaker Content & Speaker Presentation numbers are the average of three speakers. Individual
ratings ranged from 3.04 to 3.74 for content and from 2.75 to 3.81 for presentation.
2
Speaker Content & Speaker Presentation numbers are the average of five speakers. Individual
ratings ranged from 3.11 to 3.77 for content and from 3.11 to 3.83 for presentation.
TABLE 3
BEST DAY FOR CE SEMINARS
2008 2009 2010 2011 2012
Monday
13
11
21
27
12
Tuesday
5
5
5
5
2
Wednesday
3
2
4
3
3
Thursday
10
8
9
11
6
Friday
32
29
22
13
30
TABLE 4
ANNUAL SEMINAR EXPENSES (TAMUCC)
2008
2009
2010
2011
2012
Pre-mailers
$48.62
$37.88
$63.17
$62.27
$81.83
Slick Brochures
220.22
270.63
355.59
$313.21
$303.00
Seminar books
2,208.15
458.48
910.60
$1,095.35
$740.78
Catering (breakfast, lunch & breaks)
2,510.75
2,783.35
2,668.35
$1,748.53
$2,587.65
University Center
636.37
664.56
667.70
$604.65
$784.50
Speaker's Hotel Room
185.30
97.75
196.20
$189.66
$0.00
University Marques
75.00
75.00
75.00
$75.00
$0.00
Pin Name Tags
20.98
37.18
0.00
$16.89
$15.12
Phone and Graduate Student Support
100.00
135.00
50.00
$200.00
$250.00
$6,005.39
$4,559.83
$4,986.61
$4,305.56
$4,762.88
TOTAL
276
TABLE 5
CCEPC RECEIPTS & DISBURSMENTS
FYE 6/30/08
FYE 6/30/09
FYE 6/30/10
FYE 6/30/11
FYE 6/30/12
$10,760.00
$11,835.00
$12,515.00
$12,690.00
$13,350.00
$35.00
$315.00
$285.00
$200.00
$75.00
$16,415.00
$16,045.00
$15,205.00
$16,790.00
$13,900.00
$1,254.00
$2,163.50
$3,017.70
$4,900.00
$5,000.00
$30.00
$210.00
$115.00
$270.00
$360.00
Receipts
Membership Dues
Late Registration/No-show Fees
Seminar Registration Fees
Seminar Sponsorships
Seminar Guest Fees
Other Receipts
1
TOTAL RECEIPTS
$0.00
$448.29
$597.79
$2,500.00
$0.00
$28,494.00
$31,016.79
$31,735.49
$37,350.00
$32,685.00
$1,268.14
Disbursements
Board Meeting Expenses
$824.83
$1,280.52
$1,286.54
$1,052.14
Membership Meeting Expenses
$7,831.37
$8,464.56
$9,921.88
$8,728.40
$7,772.18
Meeting Speaker's Expenses
$1,167.81
$1,112.36
$1,100.39
$1,244.50
$1,501.01
$9,824.01
$10,857.44
$12,308.81
$11,025.04
$10,541.33
$2,467.07
$2,859.56
$2,510.56
$1,444.49
$2,796.57
$347.50
$499.50
$1,344.00
$1,540.50
$987.00
$0.00
$0.00
$775.00
$810.00
$0.00
$211.00
$38.00
$42.00
$40.00
$52.00
SUBTOTAL MEMBERSHIP MEETING COSTS
Clerical Support
CE Accreditation
Tax Return
PO Box Rental
Check Printing Charge
Postage
Gifts
SUBTOTAL OPERATING COSTS
Annual Seminar Speaker's Expenses
$78.95
$63.96
$0.00
$0.00
$0.00
$0.00
$680.00
$350.44
$585.00
$458.23
$75.00
$254.28
$433.25
$400.00
$270.63
$3,179.52
$4,395.30
$5,455.25
$4,819.99
$4,564.43
$2,227.85
$157.06
$365.39
$1,382.44
$379.01
$3,000.00
$5,000.00
$3,500.00
$4,000.00
$0.00
Annual Seminar Expense
$6,005.39
$4,559.83
$4,986.61
$4,305.56
$4,762.88
Seminar Coordinator Stipend
$1,500.00
$1,500.00
$1,500.00
$1,500.00
$1,600.00
$0.00
$185.00
$160.00
$160.00
$350.00
$10,662.45
$11,610.22
$11,529.05
$10,344.57
$8,940.73
Annual Seminar Speaker's Honorariums
2
Seminar Refunds
SUBTOTAL ANNUAL SEMINAR COSTS
Scholarships
3
TOTAL DISBURSEMENTS
NET RECEIPTS
$10,000.00
$5,000.00
$6,000.00
$1,500.00
$6,000.00
$33,665.98
$31,862.96
$35,293.11
$27,689.60
$30,046.49
($846.17) ($3,557.62) $9,660.40
$2,638.51
($5,171.98)
Additional Information
Actual Checking Account Balance
CD Balance
$12,250.32
$17,948.05
$9,904.15
$18,497.37
$5,161.73
$18,869.17
$14,572.13
$16,454.08
$17,210.64
$16,454.08
1
Following the significant shortfall of funds in FY 2010, the board cashed in a CD for $2,500 to cover scheduled disbursements at the beginning of
FY 2011.
2
The 2012 annual speaker requested that the honorarium be used to fund an additional scholarships ($1,000) to TAMUCC.
The CCEPC traditionally awards $5,000 in scholarships each year. An adminstrative oversight caused the FY 2006-07 scholarship funds not to be
distributed to TAMUCC until after the award deadline and the funds were not distributed to students in Fall 2007. When the CCEPC requested a
five-year summary of recipients in early FY 2011, the error was discovered and the CCEPC decided to apply the balance of the funds held by the
university to the Fall 2011 scholarships instead of making the scheduled contribution in May. The CCEPC added an extra $1,500 in scholarship
funds for FY 2011
3
277
EXHIBIT 1
2012 ANNUAL SEMINAR PRE-MAILER1
THE CORPUS CHRISTI ESTATE PLANNING COUNCIL’S
39th Annual Estate Planning Seminar
Co-sponsored by the College of Business, Texas A&M University-Corpus Christi & the
Division of Institutional Advancement, Texas A&M University-Corpus Christi
FRIDAY, MAY 18, 2012 From 8am to 5pm
University Center, Texas A&M University-Corpus Christi
Reserve this date on your calendars now!
A detailed brochure and registration form will be mailed 4-5 weeks prior to the seminar.
Presented by the Prestigious Law firm of
Meadows, Collier, Reed, Cousins,
Crouch & Ungerman, L.L.P.
Topics include: Using Family Limited Partnerships; IRS and Tax Update; Estate Planning with
Life Insurance and Annuities; and much more!
Approval is being requested for continuing education hours for member professions
For more information: (361) 825-2829, eugene.bland@tamucc.edu,
Don’t miss this year’s presentation…Great Speakers & Invaluable Materials!!
1
Speakers’ names and contact information for CCEPC hidden to protect privacy
278
EXHIBIT 2
2012 ANNUAL SEMINAR SLICK BROCHURE -- OUTSIDE1
1
Speakers’ names and contact information for CCEPC hidden to protect privacy
279
EXHIBIT 3
2012 ANNUAL SEMINAR SLICK BROCHURE -- INSIDE1
1
Speakers’ names and contact information for CCEPC hidden to protect privacy
280