African Journal of Business Management - 28 January 2013 Issue by Academic Journals

African Journal of

Business Management Volume 7 Number 4 28 January, 2013 ISSN 1993-8233

ABOUT AJBM The African Journal of Business Management (AJBM) is published weekly (one volume per year) by Academic Journals. African Journal of Business Management (AJBM) is an open access journal that publishes research analysis and inquiry into issues of importance to the business community. Articles in AJBM examine emerging trends and concerns in the areas of general management, business law, public responsibility and ethics, marketing theory and applications, business finance and investment, general business research, business and economics education, production/operations management, organizational behaviour and theory, strategic management policy, social issues and public policy, management organization, statistics and econometrics, personnel and industrial relations, technology and innovation, case studies, and management information systems. The goal of AJBM is to broaden the knowledge of business professionals and academicians by promoting free access and providing valuable insight to business-related information, research and ideas. AJBM is a weekly publication and all articles are peer-reviewed.

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Editors Prof. Wilfred Isioma Ukpere Department of Industrial Psychology and People Management, Faculty of Management, University of Johannesburg, South Africa. Prof. Gazi Mahabubul Alam Department of Educational Management, Planning and Policy, Faculty of Education Building, University of Malaya, 50603 Kuala Lumpur, Malaysia. Dr. Olawale Olufunso Fatoki University of Fort Hare Department of Business Management, University of Fort Hare, x1314, Alice, 5700, Eastern Cape, South Africa. Dr. Amran Awang Faculty of Business Management, 02600 Arau, Perlis, Malaysia Dr. Giurca Vasilescu Laura University of Craiova, Romania 13, A.I. Cuza, 200585, Craiova, Dolj, Romania. Prof. Himanshu Tandon VIT Business School, VIT University, Vellore 632014 (India) Dr. Ilse Botha University of Johannesburg APK Campus PO Box 524 Aucklandpark 2006 South Africa. Dr. Howard Qi Michigan Technological University 1400 Townsend Dr., Houghton, MI 49931, U.S.A. Dr. Aktham AlMaghaireh United Arab Emirates University Department of Economics & Finance United Arab Emirates. Dr. Haretsebe Manwa University of Botswana Faculty of Business University of Botswana P.O. Box UB 70478 Gaborone Botswana.

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Dr. Hela Miniaoui University of Wollongong in Dubai, Knowledge Village, Block 15 PoBox 20183,Dubai UAE Dr. Suhanya Aravamudhan 6965 Cumberland Gap Pkwy, Harrogate, TN USA

Dr. Guowei Hua NO. 3 Shangyuancun, Haidian District, Beijing 100044, School of Economics and Management, Beijing Jiaotong University, China.

Dr. Hooman Attar Amirkabir University of Technology Iran Prof. Luis Antonio Fonseca Mendes University of Beira Interior – Business and Economics Department Estrada do Sineiro – Polo IV – 6200-209 Covilhã Portugal

Dr. Mehdi Toloo No. 136, Forsate Shirazi st., Islamic Azad University, Central Tehran Branch, Tehran, P. O. Box 13185.768. Iran. Dr. Surendar Singh Department of Management Studies, Invertis University Invertis village, Bareilly - Lucknow Highway, N.H.-24, Bareilly (U.P.) 243 123 India.

Dr. Wu, Hung-Yi Department of Business Administration Graduate Institute of Business Administration National Chiayi University No.580, Xinmin Rd., Chiayi City 60054, Taiwan (R.O.C.)

Dr. Nebojsa Pavlovic High school “Djura Jaksic” Trska bb, 34210 Raca, Serbia.

Dr. Shu-Fang Luo No.28, Da-Ye S. Road, Lin-Hai Industrial Park, Hsiao-Kang, 812, Kaohsiung City Taiwan

Dr. Colin J. Butler University of Greenwich Business School, University of Greenwich, Greenwich, SE10 9LS, London, UK.

Dr. Ahmad.M.A.Ahmad Zamil King Saud University, P.O.Box 28095 , Riyadh 11437 Kingdom of Saudi Arabia Dr. Paloma Bernal Turnes Universidad Rey Juan Carlos Dpto. Economía de la Empresa Pº de los Artilleros s/n Edif. Departamental, Desp. 2101 28032 Madrid, España

Prof. Dev Tewari School of Economics and Finance Westville Campus University of Kwa-Zulu Natal (UKZN) Durban, 4001 South Africa. Dr. Olof Wahlberg Mid Sweden University, 851 70 Sundsvall Sweden

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African Journal of Business Management Table of Contents:

Volume 7

Number 4

28 January, 2013

ARTICLES Review Attitudes of people with disabilities towards teleworking as an employment opportunity: It’s modelling in terms of the Turkish case H. Filiz Alkan Meshur and Çiğdem Çiftci Ulusoy Consideration about global finance crisis and solution offers Ece Demiray Erol

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Research Articles Organizational image as a crucial factor in the organizational efficiency of education faculties of state universities: A sample of Education Faculty of Pamukkale University in Turkey Ali Rıza Erdem Accounting information systems in the fast food industry: A valuable tool for small business survival Thembelihle Allah, Puleng August, Siphamandla Bhaza, Tinashe Chigovanyika, Unathi Dyan, Tinashe Muteweye, Mandisi Ngcoza, Neliswa Tshiwula, Vuyiseka Qambela, Yanga Vooi and Juan-Pierré Bruwer

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Credit risk management of commercial banks in Iran; Using logistic model Hamid Sepehrdoust and Adel Berjisian

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Accounting information systems: An intelligent agents approach Marcelo Seido Nagano and Marcelo Botelho da Costa Moraes

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Internal Control and Accounting Policies and Procedures Practices: An Institutional Perspective Muhammad H. Al-Hazmi

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Review

Attitudes of people with disabilities towards teleworking as an employment opportunity: It’s modelling in terms of the Turkish case H. Filiz ALKAN MEŞHUR* and Çiğdem ÇİFTÇİ ULUSOY Department of City and Regional Planning, Faculty of Architecture, Selcuk University, 42031, Campus/Konya, Turkey. Accepted 6 February, 2012

The rapid advancement of information and communications technologies (ICTs) has opened up many opportunities for people with disabilities. Telework is an activity to use ICTs to free staff from traditional office locations and enable them to work elsewhere. This includes working from home and telecentres or other locations. Also, teleworking offers significant benefits to people with disabilities. This new way of working allows to access information and services from any location and reduces or eliminates time spent on commuting. In this sense, telework can be seen as an important opportunity for persons with disabilities particularly those with limited mobility, and of course, this opportunity may be critical in many aspects. This paper examines the effects of individual and household related characteristics on disabled persons’ attitudes towards teleworking. The sample comprised 155 disabled employees from Ankara, Turkey. The results suggest that individual and household related characteristics influence the attitudes of disabled employees towards teleworking. Additionally, if organizations used teleworking as a flexible work option, the employment opportunities and the quality of life of disabled people would increase into working life. In this context, the purpose of this paper is to propose a conceptual model that would increase the employment opportunities of disabled employees. Key words: Disabled people, disability, employment, telework, information and communication technologies (ICTs). INTRODUCTION The development of new information and communication technologies has brought new possibilities for teleworking. Telework allows employees to work from alternative places such as homes, telecenters, hotels and airports, or even during travel journeys. Employees are able to interact with colleagues and customers using non face-to-face contact (e.g. using web-conferencing, audioconferencing, instant messaging, emails etc) that may

*Corresponding author. E-mail: hfilizalkan@yahoo.com. Tel: + 90 332 223 22 04. Fax: +90 332 241 72 59.

result in less business and commuting travel. In addition, work can be accomplished before or after regular office hours, for example, during evenings or weekends (Mirti, 1998; Lim et al., 2003). There are many terms used in definitions of telework, such as telecommuting, flexi- places, and electronic cottages (Baloh and Trkman, 2003). They are becoming an increasingly common alternative and flexible work arrangement, which involves working remotely from an employer for a large proportion of employees‟ time (Teo and Lim, 1998). According to Mokhtarian et al. (2004) telework is an umbrella term for the use of “information and communications technology to perform work „at a

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distance‟,” and thus includes salaried, contractual, and self-employed workers, as well as after-hours work activity by commuters (Moos et al., 2006). Additionally, in most transport-related studies, the term „telecommuting‟ is often considered as an alternative mode of transportation (Mokhtarian and Salomon, 1997; Salomon, 1998). In other words, telework can be seen as the use of new technologies in order to work from a location other than the regular work place (Mokhtarian et al., 2004). In this paper, teleworking is defined as a work arrangement where employees can make use of telecommunications technology to work at home during regular working hours for one or more days a week. Such arrangements can remove the geographical and organizational boundaries of the traditional, centralized workplace (Olszewski and Lam, 1993). Most studies distinguish between various forms of telework, of which working at home with ICTs is one form. Indeed for some researchers, especially European researchers, telework also includes work done in satellite offices or business centres away from the central employer organization, or even mobile work, that is, workers who are more often in a client's office than in their own. Some consider marketing and sales employyees who are always on the road part of the phenomenon of telework (Tremblay et al., 2006). From this general point of view, four types of telework could be distinguished; home based telework; satellite offices where all employees telework for one employer; neighbourhood telework centres, which are occupied by employees from more than one organization; and mobile teleworkers (Kurland and Bailey, 1999). The potential benefits of telework have been discussed by many studies. These benefits could increase the effectiveness of organizations in a variety of ways (Shin et al., 1997). Teleworking has various benefits for individuals and society; however, there are also negative aspects and costs associated with teleworking. The greatest obstacles to teleworking are the organizational, operational and attitudinal barriers against it. Organizations and employers have concerns about worry those employees who are not monitored during working. Data security is a major concern for organizations and employers when using distributed networks or when transmitted over unsecured telecommunications lines is also another issue for organizations and employers (Stanek, 1993). “If designed, implemented and managed effectively, teleworking programs can be successful and can reap numerous benefits. There are, however, individual and organizational challenges that should be considered. Analyzing these benefits, challenges, and their implications for each company can help provide a well-rounded assessment of predicted invention success” (Madsen, 2003). The potential benefits and costs of teleworking for organizations and individuals can be seen in Tables 1 and 2.

TELEWORK AS AN ACCOMMODATION EMPLOYEES WITH DISABILITIES

FOR

Millions of people worldwide are disabled. More than 50 million disabled people live nowadays in the European Union; it is 15% of all residents (Bileviciene and Bileviciene, 2010). In addition, more than 54 million U.S. residents or about 19% of the U.S. population have some sort of disability; the U.S. Census Bureau reported in Reuters (2008). “Disabled persons as other members of society have demand to be engaged in significant work, useful for society and for them. Problem of employment for disabled persons partly is connected with permanent improvements and technical achievements in labour market. Now European Union is implementing strategy for creation more flexibility in labour market, to modernize organisation of work and working intercourse, both, such factors as the safety and social protection of employees, balance between work and life, lifelong learning, cannot be forgotten” (Bileviciene and Bileviciene, 2010). Information and communication technologies (ICTs) could offer wide opportunities for employees with disabilities and others to participate in global activities as equals. Disabled people also could benefit from opportunities provided by current technological developments in all of the same fields as able-bodied. This is one of the major requirements of being a social and contemporary state. These new technologies could be used by all social groups alike and offer disabled people better quality of life (Neumann and Uhlenkueken, 2001), thereby reducing exclusion from this information society. Such opportunities enable disabled people to live a selfdetermined life and take part in social and economic affairs (Pieper and Hermsdorf, 1997). Accessing information requires effective communication in order to reach people and services in social life. This communication covers a broad spectrum, from daily conservations to computer-use; it is very important in terms of participation in social life and is one of the most basic human rights. Work provides not only a means to earn a living, but is also a way to participate in society, achieve goals and find personal fulfilment; people with disabilities should have equal opportunities to achieve all of these things, but greater policy and practical efforts are required to help them in this respect. Teleworking is an emerging opportunity in the labour market, which can dramatically expand employment possibilities for people with disabilities. Additionally, teleworking will be of major importance for sustainable and profitable job placement in an increasingly flexible labour market. People with disabilities could be considered as candidates for telework, because remote working can remove barriers related to health conditions, safety, fatigue, stress and the need for personal assistance at the worksite (TWIN, 1994). Telework with particular factors increase and support the

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Table 1. The costs and benefits of telework for organizations.

S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Benefits for organizations Adherence to government regulations Improved employee recruitment Improved employee retention Improved productivity Improved quality Improved satisfaction Increased morale Increased organizational commitment Opportunities for better service Promoted diversity Reduced absenteeism Reduced expenses Reduced office space requirements

18 19 20 21 22 23 24 25

Costs for organizations Alignment with organization goals and mission Attitudes of in-office employees Career promotions Clear common aims and procedures Communication concerns Compensation and benefit packages Consistent policies and contracts Coordinating work Corporate buy-in Creating synergy Disruptions in work teams Employee accountability Initial financial investment Management control and trust Management and staff training Measuring productivity Organizational culture Redesign of processes Reduced informal mentoring Reduced networking Security issues Technical support Thorough organizational and individual assessment Union concerns Unrealistic expectations

Source: Madsen, 2003; Kurland and Bailey, 1999; Shin et al., 1997.

opportunity of disabled personsâ&#x20AC;&#x; employment. Additionally, opportunity of telework is expanding rate of potential and available work (Bileviciene and Bileviciene, 2010). Telework, which permits home-based work through the use of information and communication technologies (ICTs), alleviates many of return-to-work barriers for individuals with disabilities, including job demands, mobility limitations, transportation needs and fatigue imposed by medical complications (Bricout, 2004). Telework can enable disabled persons to be more productive in their home environment than elsewhere; potential difficulties of transport to work are eliminated, and work and communication can take place while using oneâ&#x20AC;&#x;s own workplace, adaptations or tools (Zwinkels, 2003). Many people with disabilities have the desire and capabilities to work from their homes. These individuals, many with good job skills and a strong work ethic, constitute a hidden labour pool (West and Anderson, 2005). Telework offers the possibility of an accessible,

barrier-free workplace, flexible scheduling and the elimination of discrimination. Many organizations have discovered the benefits of allowing employees to work at home through teleworking (EEOC, 2003). The use of teleworking benefits disabled persons in several ways: 1. Teleworking could eliminate geographical barriers, benefiting both disabled and non-disabled people. 2. The integration of ICTs and teleworking may help to dispel negative attitudes and lead employers to view disabled persons much more equally. 3. The use of teleworking increases job satisfaction and motivation among both able-bodied and disabled people. 4. People with disabilities face many physical obstacles during their commute to work and within the workplace; teleworking therefore provides increased physical comfort to disabled workers. 5. Due to reduced travel to work, teleworking will also lead to a reduction in workplace stresses for disabled people (Oâ&#x20AC;&#x;Neill et al., 1998).

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Table 2. The costs and benefits of telework for employee.

S/N 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19

Benefits for individuals Avoidance of office politics Better work/family balance Can work with disabilities/health problems Child care issues less stressful Flexibility to relocate Improved morale Improved productivity Improved quality of life and work life Increased autonomy Increased family and leisure time Increased job satisfaction Increased technical skills Less distractions Less spillover Lower stress level More community ties More flexibility Reduced commute time Saves money on gas and parking

Costs for individuals Accessibility to others Career development and promotions Development of interpersonal skills Handling expenses Interruptions from home Intrinsic motivation Isolation and social satisfaction Lack of management or improper management Reduced informal communication Reduced informal mentoring Reduced informal training and development Reduced social networking Remaining "visible" Self effacament Shared work space in office Tendency to work more hours Unrealistic expectations Work space in remote locations Work/personal time blurred

Source: Madsen (2003), Kurland and Bailey (1999) and Shin et al. (1997).

Two types of people in the disability population who will be affected by telework are: 1. Disabled people who are unemployed. 2. Those who become disabled in the future, as people live and work longer. According to Zwinkels (2003), one can argue that teleworking is not a suitable solution to integrate disabled people, because they will be socially isolated in this way. However, it has to be preferred instead of an alternative with no paid job at all. Besides, disabled people can determine their own workplace and save energy from travelling. It also gives them the flexibility to choose to work at home or not, an option that will especially suit people with an unstable health condition. A study by Virginia Commonwealth University and MITE (2001) reported that 90% of disabled teleworkers did not feel socially isolated during teleworking. These people achieved a balance between their work and family life (Anderson, 2003). â&#x20AC;&#x153;In its 1999 Enforcement Guidance on Reasonable Accommodation and Undue Hardship under the Americans with Disabilities Act (revised 10/17/02), the US Equal Employment Opportunity Commission said that â&#x20AC;&#x153;allowing an individual with a disability to work at home may be a form of reasonable accommodation. The Americans with Disabilities Act (ADA) requires employers with 15 or more employees to provide reasonable

accommodation for qualified applicants and employees with disabilities. The ADA does not require an employer to offer a telework program to all employees. However, if an employer does offer telework, it must allow employees with disabilities an equal opportunity to participate in such a program. In addition, the ADA's reasonable accommodation obligation, which includes modifying workplace policies, might require an employer to waive certain eligibility requirements or otherwise modify its telework program for someone with a disability who needs to work at home. For example, an employer may generally require that employees work at least one year before they are eligible to participate in a telework program. If a new employee needs to work at home because of a disability, and the job can be performed at home, then an employer may have to waive its one-year rule for this individualâ&#x20AC;? (www.eeoc.gov/facts/telework). The flexibility in work environment allows people with disabilities to minimize disruptions caused by the needs for attendant care and medical care, the lack of specialized transportation. Additionally, employees can work at the times of the day in which they are most productive. This is especially important for those employees who require rest breaks throughout the day due to their medical condition. By working at home, they may work according to their own schedule. Also, Bradford and Hesse (1995) found that the participants in their study experienced more control over

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their lives, leading to greater productivity, better health, and increased morale (Xu et al., 2006). “Telework is not a panacea for the problems of unemployment and underemployment of persons with disabilities, or even for the two populations of interest. Telecommuting may be an attractive work option for many people, including those with disabilities, but this option must be balanced against each individual‟s employment goals and interests, life situation, and work personality” (West and Anderson, 2005). Therefore, new information and communication technologies are creating opportunities for employees with disabilities to effectively span geographical boundaries. Changes in ICTs have the potential to ease integration of people with disabilities into the labour market and society. These same technical developments, by opening labour markets to global competition, might also endanger integration and lead to a new division of society (Bruyère and Ruiz-Quintanilla, 2000). Briefly, for persons with a disability, telework options could provide excellent opportunities to find employment and also to remain employed, because of enhanced personal control (Hesse, 1995). By eliminating daily commutes and reducing fatigue issues, teleworking also helps individuals to maintain their productivity (Anderson et al., 2001). Telework can be demanding and requires that people with disabilities have an appropriate and accessible workplace at home, which may sometimes include a customized workstation and assistance in getting the equipment and materials needed to perform their work (Xu et al., 2006). THE EMPLOYMENT OF DISABLED PEOPLE IN TURKEY In order to facilitate the integration of disabled people into urban and social life, their specific needs must be taken into account within urban and regional planning frameworks. In this context, it is necessary to provide, firstly, opportunities for education and then participation in working life. The planning of urban spaces to meet the requirements of disabled people is obligatory in contemporary society; however, disabled people still face some important constraints in urban spaces, which make their participation in both education and working life difficult. From this point view, it is necessary to improve present employment policies that deal with the needs of disabled people. Telework could offer flexible work opportunities for disabled people. In this context, this study aims to examine attitudes among disabled people in Turkey towards teleworking as an alternative form of work. Indicators of disability employment in Turkey The United Nations estimates that approximately 10% of

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the global population may be considered disabled. Also, in Turkey, according to research conducted by the TUIK, Turkey Disability Survey (2002) shows that people with disabilities proportion in the overall population is 12.29%. The proportion of orthopedically, seeing, hearing, speaking and mentally disabled people is 2.58% (approximately 1.8 million people) and the proportion of people having chronic illnesses is 9.70% (approximately 6.6 million people) as well. When the proportion of these disabilities is examined by age groups, it is observed that proportion of disabled people increase in older ages. This is especially observed in people having chronic illnesses. While the proportion of orthopedically, seeing, hearing, speaking and mentally disabled people is 1.54% in 0 to 9 age group, this proportion is 2.60% for people having chronic illnesses in 0 to 9 age group. While the proportion of orthopedically, seeing, hearing, speaking and mentally disabled people is doubled in 50 to 59 age group, the proportion of people having chronic illnesses is doubled in 20 to 29 age group, approximately (TUIK, 2002; Fırat, 2010) (Table 3). In orthopedically, seeing, hearing, speaking and mentally disabled population, while the work force participation rate is 21.71%, population rate not in labour force is 78.29%. On the other hand, in people having chronic illnesses, the labour force participation rate is 22.87%; population rate not in labour force is 77.13%. In other words, one of every five disabled persons participate labour force. While it is seen an important difference in labour force participation rate for orthopedically, seeing, hearing, speaking and mentally disabled people with 25.61% in urban and 17.76% in rural, it is not observed an important difference between urban (23,08%) and rural (22,48%) for people having chronic illnesses. Labour force participation rate by gender shows an important difference for disabled people. While labour force participation rate for orthopedically, seeing, hearing, speaking, mentally disabled people is 32.22% for males and 6.71% for females, this rate is 46.58% for males and 7.21% for females in people having chronic illnesses. The differences among sexes are more in people having chronic illnesses. Labour force participation rate for males and females in people having chronic illnesses is higher than that of orthopedically, seeing, hearing, speaking and mentally disabled people (TUIK, 2002; Fırat, 2010). This is an indication of the fact that disabled people are not involved in production and are entirely dependent upon other people. The only way to enable the disabled persons and their families to participate in production and to increase their independence and quality of life is to solve their employment problems. This is a multidimensional problem for which the government must take a large degree of responsibility. The state is responsible for creating employment areas to meet the needs of all its

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Table 3. The proportion of disability in Turkey.

Age group Total 0-9 10-19 20-29 30-39 40-49 50-59 60-69 70+ Unknown

People with disabilities population (%) Total Male Female 12.29 11.10 13.45 4.15 4.69 3.56 4.63 4.98 4.28 7.30 7.59 7.04 11.44 10.43 12.42 18.07 15.15 21.08 27.67 22.56 32.67 36.96 31.60 42.02 43.99 39.77 47.77 11.68 6.30 14.17

Orthopedically, seeing, hearing, speaking and mentally disabled population (%) Total Male Female 2.58 3.05 2.12 1.54 1.70 1.37 1.96 2.26 1.65 2.50 3.34 1.74 2.56 3.18 1.95 2.65 3.29 1.99 3.23 3.73 2.74 5.14 5.65 4.65 7.89 8.45 7.38 0.34 0.53 0.25

Population having chronic illnesses (%) Total Male Female 9.70 8.50 11.33 2.60 2.98 2.20 2.67 2.72 2.63 4.80 4.24 5.30 8.89 7.26 10.46 15.43 11.86 19.09 24.44 18.83 29.94 31.82 25.95 37.37 36.10 31.32 40.39 11.33 5.77 14.09

Source: TUIK (2002).

Table 4. The proportion of labour force participation and orthopedically, seeing, hearing, speaking and mentally disabled people.

Turkey Urban Rural Male Female

Labour force participation (%) 21.71 25.61 17.76 32.22 6.71

Unemployment (%) Non-labour force (%) 15.46 78.29 17.43 74.39 12.58 82.24 14.57 67.78 21.54 93.29

Source: TUIK (2002).

Table 5. The proportion of labour force participation and people having chronic illnesses.

Turkey Urban Rural Male Female

Labour force participation (%) 22.87 23.08 22.48 46.58 7.21

Unemployment (%) 10.77 12.72 7.08 10.28 12.84

Non-labour force (%) 77.13 76.92 77.52 53.42 92.79

Source: TUIK (2002).

citizens, which would enable them to earn income enough to maintain their lives. This responsibility is also valid for the disabled persons. The state should provide the disabled persons with equal opportunities in employment (Disability Surveys, 2006) (Tables 4 and 5). People with disabilities are an important part of the Turkish labour market and they have a wide range of skills and frequently have significant job experience. Being able to utilise such skills and experience, particularly in the contemporary labour market, is very important for Turkeyâ&#x20AC;&#x;s economy. According to the data of the State Personnel

Presidency, 9.984 out of 2.279.000 public servants are disabled. Only 1% of the total disabled population is employed in public institutions. Public organizations generally prefer to employ people who have a 40 to 60% disability. The ones having more than a 61% disability constitute one fourth of the employed disabled people. Most of the employed disabled people are working within public sector. This means, private sector managers have to be informed and trained to employ more disabled people. The existing environment of entrepreneurship does not facilitate employment of disabled people and interest of entrepreneurs to hire job-disabled people. This

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problem has different reasons: The lack of information and appropriate interest of employers to employ disabled people and the insufficient ground of entrepreneurs/ managers to employ social groups with specific needs etc. (Fırat, 2010). Information and communication infrastructure in Turkey The World Economic Forum report, “Global Information Technology” ranks countries in terms of transition to an information society and different indicators related to this matter. Many criteria, such as levels of presentation and development of services, capabilities to produce technology, human capital, legal regulations, etc. are taken into account as much as technical infrastructure indicators. Turkey ranked 50th among 82 countries evaluated in the 2002 to 2003 report, and 56th of 102 countries evaluated in 2003 to 2004. In both reports, USA, Singapore, and Finland were awarded the top three rankings. According to a survey conducted by TUBITAK-BILTEN (2001), only 7% of Turkish people have internet access; 12.3% have computers at home. Of those with computers at home, about 50% are able to use internet. Users spend their time on the internet mostly for e-mailing (23%), conducting research (22.3%) and chatting (16.5%) (Aydın, 2001). In recent years, significant progress has been made towards establishing National Information Infrastructure in Turkey. The first stage is the Turkey National Information Infrastructure Master Plan, prepared by TUBITAK BILTEN. It is not possible to say that information technologies have been adopted in all respects in Turkey; however, utilization of computers in many areas, in practices of private and public institutions, particularly in banking, and increase in individual computer use highlight the discernable progress made in information technology (Information Technologies Association, 2002). In this sense, the communication infrastructure available in Turkey is at a significant size and technological level, despite some limitations. This infrastructure, which was once the second largest in Europe, is richer than the infrastructures of many European Union countries (DPT, 2003). Only 3% of the population makes use of e-government activities in Turkey, which consists of simple, inadequate and separate information-oriented, e-services. Institutional websites mostly include static information and provide institution-based information. Inter-institutional communication, information, and organization are limited. Although inter-institutional communication is partially adequate for information provision, it is highly inadequate in the area of delivering e-services (Alkan and Özenç, 2003).

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The E-Europe initiative was adopted by European Commission in 1999. The goals of the E-Europe + Action Plan include encouraging and promoting distance working; other objectives include the establishment of public internet access points in common areas, multipurpose telecenters and multimedia access to education in groups, and e-working possibilities. Member countries support the disadvantaged groups and regions in attending and assuming active roles. In this context, disabled people will be given special importance, such that progress in information technologies will enable disadvantaged groups to access information, assume an important role in educating disabled children, and create employment opportunities for disabled adults. Therefore, in preparing the related action plans, it is necessary to take into consideration the needs of people of all ages, in order to ensure equality of opportunity and avoid discrimination in reforms and the modernization of economies and societies. In the light of previous mentioned determinations, the most basic acquisitions are that distance working will be possible with the development of communication infrastructure, dependency on working place will be eliminated, and people will be able to work by accessing a computer at their or elsewhere (EEurope+, 2003, 2001). Much of the current research on telecommuting focuses on employees and organizations in the Western context; however, the phenomenon is very new among companies in Turkey. Recent societal changes have triggered interest in telecommuting as a new work arrangement (Iscan and Naktiyok, 2005). As a result of these developments, and as a candidate for EU membership, Turkey must develop the existing ICT infrastructure to the level of other member countries. Also, new employment policies should be developed for disabled people, in line with the emphasis on development of teleworking projects for disabled people within the E-Europe + Action Plan. FIELDWORK As the capital city of Turkey, Ankara is a centre for public institutions and e-government initiatives. In this context, Ankara has been chosen for the fieldwork and surveys were conducted in public and private institutions in Ankara. Fieldwork is based on sampling a unit or sample of appropriate size and quality to represent the community and has been edited as a survey that can be applied once at a specific place and time. Moreover, the question types were reviewed in terms of conformity with the software program used, which is Statistical Package for Social Sciences (SPSS); the survey questions were arranged as close-ended and the answers as multiple choice. The participating institutions were selected from public and private institutions in Ankara. A conceptual

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model of the survey is shown in Figure 1 (Meshur, 2006). Survey evaluation method The sample comprised 155 disabled employees working in public and private organizations in Ankara, the capital of the Turkey. Organizations were selected from Ankara because they have begun to implement new information and communication technologies. Also, these organizations are equipped to adopt telecommuting in terms of the content of their work and the available infrastructure. Data were gathered through questionnaire surveys. A pilot-test was conducted and a sociologist commented on the representativeness and suitability of questions. Questionnaire items were derived from an extensive review of the literature on teleworking and disability. Data analysis was performed in three stages. In the first stage, reliability analysis was conducted using Statistical Package for Social Sciences (SPSS) to evaluate the stability and consistency of the measured items. In the second stage, the percentage distributions (frequency) of questionnaire responses were determined using SPSS. Cross tabulations were used to understand whether there were statistically significant relationships between independent variables and dependent variables, and comparative analysis and chi-square (xÂ˛) tests were also conducted. These tests, which are frequently met in practice, particularly in survey evaluation, are convenient for testing meaningfulness of combinations in twovariable cross frequency (cross-tabulation, contingency table) tables. The convergence of the frequency distribution of the sample to a known theoretical distribution was tested using the chi-square (xÂ˛) method. Finally, the hypothesis of this paper will be to investigate through statistical analysis utilizing correlations if a positive correlation exists between dependent and independent variables (Figure 2). The mean age of the respondents was 36 years, 69% were male, 63.9% were married and 60% were parents. The majority of respondents (62.6%) were graduates. The mean commute time between respondentsâ&#x20AC;&#x; homes and workplaces was 30 min (Table 6). Hypotheses of the study This study has two main hypotheses. These are: 1. Main-hypothesis of the study; H1: Teleworking is an important way to increase employment among disabled people and can improve their quality of life. H2: Teleworking will increase the social integration of disabled people to community.

Within the two main hypotheses, sub-hypotheses will be tested in order to understand the attitudes of disabled people towards teleworking in terms of individual and organizational variables of the respondents. 2. Sub-hypotheses of the study h1: Disabled people who have a higher education level will have a more positive attitude towards teleworking than those of a lower education background. h2: Disabled people in white-collar occupations will have a more positive attitude towards teleworking than bluecollar employees. h3: Attitudes towards teleworking will vary significantly according to commuting transportation modes. In addition, as the physical distance between work and home increases, positive attitudes toward teleworking will also increase. h4: Disabled people who are multi-lingual will have a more positive attitude towards teleworking than others. h5: Disabled people who have a home computer will have a more positive attitude towards teleworking than others. h6: Disabled people who said their disability affected working conditions will have a more positive attitude towards teleworking than others. h7: Disabled people who perceive that their colleagues express negative behaviours towards them will have a more positive attitude towards teleworking than others. This condition also effects the selection of teleworking type for disabled people. h8: There will be significant differences between that perceive ergonomics of work surround and office barriers in terms of positive attitude towards teleworking. h9: The level and type of disability will significantly influence attitudes toward teleworking. h10: Disabled people who are accustomed to using computer software will have a more positive attitude towards teleworking than others. h11: Disabled people who are accustomed to using Internet technologies will have a more positive attitude towards teleworking than others. h12: Disabled people who are accustomed to using interactive technologies will have a more positive attitude towards teleworking than others. h13: Disabled people who state that computers have positive effects on social interaction have a more positive attitude towards teleworking than others. The results show that, while 61% of study participants have a positive attitude towards teleworking, 39% of them do not want to work with teleworking. Participants who expressed a positive attitude towards teleworking mainly prefer this kind of work due to transport costs (39.9%) and the difficulty of reaching the workplace (29.8%). Other reasons include the difficulty of working in the workplace (18.1%) and the comfort of working at home

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Table 6. Demographic characteristics of the study participants (n=155).

Characteristics Total Female

F 155

Percent 100

31.4 The presence of children

Gender

Age group

Education level

Marital status

None 1

F 155 62 40

Percent 100 40.0 25.8

Male

107

69.0

2 3 4+

36 16 1

23.2 10.3 0.6

15-18 19-24

2 7

1.3 4.5

Foot and leg

117

75.5

25-35 36-45

66 62

42.6 40.0

Hand and arm

12.3

46+

11.6 Both of them

12.3

Yes

32.7

105

67.7

40-60 61-70

96 28

61.9 18.1

71-80 81+

15 16

9.7 10.3

0-15 16-30

35 45

22.6 29.0

31-45 46-60 60+

30 21 24

19.4 13.5 15.5

111 44

71.6 28.4

Literate

1.3

Primary school High school College University Masterâ&#x20AC;&#x;s/ Ph D

23 26 51 46 7

14.8 16.8 32.9 29.7 4.5

Married Single or divorced

99 56

63.9 36.1

Employee Blue-collar worker

79 54

51.0 34.8

Employee status Self employment

14.2

Yes

57.4

Performing her/his occupation

Getting help from other people

Characteristics Total

Type of disability

Using prosthesis

Disability rating scale (%)

Commute time (minute) No

42.6

Yes No

32 123

20.6 79.4

(13.8%). The last reason is the negative treatment they receive at the workplace (7.4%). As for the types of teleworking, amongst the disabled persons who have a positive attitude towards teleworking, it was found that they prefer to telework full-time (35%), to work on a certain number of days a week

The use of the internet yes in the office No

(36%)or to work half-days (18%). The least preferred working type is working in telecenters (11%). As for the leisure time activities of the disabled people who participated in the questionnaire, it was found that watching Television ranked first (29.7%), reading newspapers and books ranked second (29%), going to

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Table 7. The results of x² analysis (disabled respondents n=155).

Variables Dependent variable attitudes towards teleworking Education level Employee status Commuting times and modes of transportation Disabled people who are multi-lingual Disabled people who have personal computer Disabled people who said their disabilities affected working conditions Disabled people who perceive that their colleagues express negative behaviours towards them Office barriers Ergonomics in the work environment Type of disability Disability rating scale Disabled people who are accustomed to using computer software Disabled people who are accustomed to using internet technologies Disabled people who are accustomed to using interactive technologies The effects of computer on social interaction

cinema or theatre ranked third (12.3%), spending time outdoors ranked fourth (9.7%), spending time with friends ranked fifth (9%) and doing sport ranked the last (3.9%). It is interesting that the disabled people working in conventional workplaces spend the majority of their leisure time watching TV or reading newspapers or books. Only a small proportion of disabled people in employment spend time outdoors. As for the leisure time preferences of disabled people who have a positive attitude towards teleworking, it was found that they would mainly prefer outdoor activities, cultural activities and family activities if they worked. Only 3% of the disabled who have a positive attitude towards teleworking reported that they would spend their leisure time at home if they teleworked. These results refute the view that the people who telework would experience social isolation by spending more time at home. Only 9.7% of the working disabled persons spend their leisure time outdoors when they work at conventional workplaces. This ratios were found to be 38% if they teleworked. The responses to the open-ended questions indicate that disabled people encounter many problems in conventional workplaces. Physical and psychological restrictions prevent the disabled from working efficiently and comfortably. By teleworking, disabled people will have a comfortable working environment by working at home and their efficiency at work will increase. Table 7 shows the comparative analysis and chi-square (x²), p and df values of the variables. The correlations of the independent and dependent variables are shown in Table 8. As can be seen from the table, the dependent variable, attitude towards telework, is significantly correlated with the independent variables.

x²

P Value

23.24 7.34 9.70 19.04 5.42 16.85 5.15 15.89 3.17 1.551 2.062 26.72 43.20 26.16 42.56

p=0.000<0.05 p=0.025<0.05 p=0,084<0.05 p=0.000<0.05 p=0.020<0.05 p=0.000<0.05 p=0.076<0.05 p=0.001<0.05 p=0.075<0.05 p=0.461<0.05 p=0.560<0.05 p=0.000<0.05 p=0.000<0.05 p=0.000<0.05 p=0.000<0.05

df=5 df=2 df=5 df=2 df=1 df=2 df=2 df=3 df=1 df=2 df=3 df=1 df=5 df=1 df=1

To empirically test the postulated hypotheses, a regression analysis was performed using the research variables. A summary of the results of the regression analysis is shown in Table 9, indicating that the model explained 46% of the variance in attitude towards telework. In addition, significant F-values indicate the regression model‟s strong explanatory power. DISCUSSION OF FINDINGS AND HYPOTHESES Like everyone, people with disabilities also want to actively participate in working life. However, they face various problems even when they seek jobs. The principle reasons for this are the incompatibility of the works with the disability and the negative approaches of employers. The findings obtained from field studies indicated that approximately half of the working disabled population does not work in the fields they are specialized in. In addition, the main reasons for quitting their previous work include the restrictions faced in the outside world and the distance between the workplace and their houses. As for transport duration to the workplace, it was found that approximately half of the disabled spend half an hour or more to reach to the workplace. Similarly, the majority of the working disabled reported that their jobs were not compatible with their disabilities. In addition to the previous mentioned problems, conventional workplaces are full of various physical and psychological difficulties for the disabled persons. The workplaces lack arrangements to suit the needs of the disabled. In other words, the offices are not ergonomically designed for the disabled and do not have the

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Table 8. Means, standard deviations and inter-correlations among variables (Disabled Respondents -n=155).

Variables 1. Dependent Variable Attitudes Towards Teleworking

â&#x20AC;&#x201D; X Mean

1,39

,49

1,000 *

2. Disabled people who have personal computer

1,45

,499

,18

3. Disabled people who perceive that their colleagues express negative behaviours towards them

3,29

,925

-,18

-,07

4. Barriers in the office 5. Ergonomics in the work environment

2,70 1,65

1,05 ,475

-,06 -,14

-,09 ,06

1,000 *

1,000 1 -,21**

1,000 -,45** 1,000

6. Disabled people who are accustomed to using computer software

1,27

,449

,41

,58

,02

,04

-,03

7. Disabled people who state that computers have positive effects on social interaction

1,58

,495

,52**

,23**

-,04

,01

-,006

1,000 ,32**

1,000

*Correlation is significant at the 0.05 level (2-tailed). **Correlation is significant at the 0.01 level (2-tailed).

Table 9. Results of regression analysis (occupied disabled respondents n=155).

Variables 1. Attitudes towards teleworking dependent variable 2. Education level 3. Employee status 4. Disabled people who perceive that their colleagues express negative behaviours towards them 5. Barriers in the office 6. Ergonomics in the work environment 7. Disabled people who are accustomed to using computer software 8. Disabled people who state that computers have positive effects on social interaction F- values R2 Adjusted R2

equipment suitable to facilitate their working lives. The majority of the disabled persons who participated in the questionnaire had a moderate degree of disability. The most important point here is that, the disabled persons having high degrees of disability have limited work opportunities. Furthermore, legal arrangements allow the disabled persons to work by providing a health report. Moreover, working in conventional workplaces poses a risk for the health of people with severe disabilities. Employees with disabilities may need periods of rest, and break times. However, these opportunities are often not available in offices. The disabled persons in employment, who reported that they do not find the arrangements at the

Beta 0.11 -0.03 -0.15 -0.21 -0.17 0.23 0.38 10.31 0.51 0.46

workplace ergonomic, and that they encounter physical restrictions, are more willing to telework than others. Based on this, it can be concluded that conventional workplaces do not offer the disabled persons a comfortable working environment and the opportunity to take a rest. The disabled persons in employment think that teleworking will offer the comfort of working at home and the opportunity to take breaks. The disabled persons in employment encounter various restrictions in reaching the workplace in urban spaces. The arrangements for the disabled persons in urban spaces are quite limited. The disabled persons who reported that they encounter physical barriers in urban spaces are more willing to telework (Table 8 r=-0.6 and r=-1.4). This verifies the

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DEMOGRAPHIC CHARACTERISTICS OF INDIVIDUALS

INDIVIDUAL

Gender, Age, Marital status, Education level, Employee status, the presence of children

PHYSICAL CHARACTERISTICS OF INDIVIDUALS

Disability-Orthopaedic Disabled People

TRANSPORTATION

PERCEPTION/ATTITUDES

Commute Time

ENVIRONMENT

Attitudes towards Telework

TECHNOLOGICAL ENVIRONMENT Hardware & Equipment

Consultancy

ORGANIZATIONAL ENVIRONMENT

Work Characteristics (Flexibility, independency, using videoconferencing, social interaction) Organizational Structure and Managerial Approach

SOCIAL AND URBAN ENVIRONMENT

Social Interaction LEGAL ARRANGEMENTS

E-LEARNING

TELEWORK

Spatial Behaviours

LEGAL ENVIRONMENT

Working Legislation

Home Based Telework

Full Time

Tele Center Based Telework

Part Time

Mobile Telework

Figure 1. Conceptual Model of the Survey. Source: Meshur (2006).

A Few Days a Week

Meshur and Ulusoy

CONCEPTUAL MODEL

SET UP OUESTIONNAIRE FORM

239

DETERMINING SPSS STATISTICAL ANALYSES

 Individual  Environment  Telework

Dependent and Independent Variables

PILOT REGION IMPLEMENTATION

SAMPLE AND FIELD SURVEY

DISABLED PEOPLE

FREQUENCY RANGE

MEANS, STANDART DEVIATIONS AND CORRELATIONS, X ² , CROSSTABLES REGRESSION ANALYSES Figure 2. The methodology of survey evaluation. Source: Meshur (2006).

hypothesis that the disabled persons face difficulties in the urban space. Teleworking will be a type of employment that facilitates the lives of the disabled persons who encounter difficulties in commuting between the workplace and their houses. Disabled individuals do not want to depend on and appreciate the assistance of others in compensating for

their disabilities. They often feel that negative societal attitudes serve to increase their sense of disempowerment and dependence (Welham, 1997). Disabled participants in the present study who perceive that their colleagues are not supportive of them have a more favourable attitude towards telework. The disability group most willing to telework includes

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the ones having both foot-leg and hand-arm disabilities. The group having foot-leg disability ranks the second among these. The disabled having only hand-arm disability are less willing to telework. This verifies the hypothesis that the disability group which has the most difficulty in using urban space is the one that has foot-leg disabilities (xÂ˛ =1,551, p=0,461<0, 05, df=2, Table 7). Similarly, the disabled having a high degree of disability have a more positive attitude towards teleworking (xÂ˛ =2,062, p=0,560<0, 05, df=3, Table 7). These groups should be given priority in teleworking application programs. The disabled persons who know a foreign language, have received a higher education and are familiar with computer technologies are more willing to telework. The disabled who do not have any information about teleworking and do not use information technologies have a negative attitude towards teleworking (Table 7). In this context, in teleworking applications, training and counselling services about information technologies should be provided. The preferences of the disabled persons about the types of teleworking show variations. In general, it was observed that the disabled persons generally prefer to work at home rather than in telecenters. In application process of this approach, different working types and conditions, including full-time, half day or work on certain days of the week, should be determined within the framework of a schedule that will be prepared by the employer in consultation with the employee. Consequently, the disabled persons who telework will have a more comfortable workplace and their working conditions will be improved. Their quality of life will also increase. Working without the problems they encounter in the conventional workplaces is important not only for the health of the disabled persons, but also for the organizations, since the working efficiency of disabled workers will increase and this will benefit the organizations. Furthermore, teleworking will offer important employment opportunities for the disabled persons who are unable to leave their houses due to chronic illness. Qualified people who want to work, but are unable to work, will be making significant contributions to the economy of the country. Thanks to this, the participation of the disabled in working life will be enhanced. It should be mentioned here that teleworking is an alternative type of working, not an obligation. This program should be devised for the disabled persons who want to work. In addition, for the disabled persons who do not work, teleworking should be considered as an alternative working option. Determining the jobs suitable for the ability and skills of the disabled persons, the disabled persons should be offered the opportunity of to telework. The disabled persons in employment reported that when they telework they will mostly spend their leisure

time outdoors. This indicates that teleworking will not cause social isolation; on the contrary, the disabled persons will be using the urban space more intensively. In this case, arrangements for the disabled should be given a greater priority. When the disabled persons were asked how they spent they leisure time before starting to telework, only a minority responded that they went outdoors or attended cultural activities. However, when they teleworked, this ratio significantly increased. This indicates that teleworking will give the disabled the opportunity to spend more time outdoors and more time on attending cultural activities. Thus, the integration of disabled people in social life will be enhanced. In this context, it was observed that the second hypothesis was verified. Teleworking implementation model The process model on implementation of teleworking should be taken into account with respect of the state, organizations, individuals, and persons with disabilities. First, the approach of the state towards teleworking is of utmost importance. A national teleworking policy should be defined. European Union candidate countries are expected to define policies encouraging teleworking. In this context, a Public Teleworking Service Program Institution should be founded to assist private sector companies and individual teleworking programs. In addition, establishment of a state-financed teleworking service program may also facilitate the implementation of teleworking. Organizations and institutions that will implement teleworking should establish a teleworking program that complies with the state policy on teleworking. Training and seminars on teleworking should be offered to managers. Organizational adaptation is a necessity. Institutions are responsible for establishment and durability of technological infrastructure in the houses of the teleworkers and its durability. Furthermore, roles that are suitable for teleworking should be defined. The location where teleworking will be carried out, types of teleworking and the working hours should be decided between employers and teleworkers. A contract should then be signed between the employer and teleworkers. Equal employment conditions should be secured between teleworkers and traditional, onsite workers. Institutions should implement a one-year pilot project to test the program before the final decision to initiate teleworking; policies should address any problems encountered during the pilot scheme and ineffective programs should be cancelled. Institutions should monitor and assess the teleworking process. It is of great importance that regular company meetings are held, so that teleworkers are not completely isolated from their companies, and in order to maintain

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communication with their co-workers. The major necessity is the desire of employees to adopt teleworking. In addition, individuals who will conduct their jobs through teleworking should be provided with appropriate training. This training should cover both the use of information technologies and the responsibilities associated with teleworking. The roles that are incurporated into teleworking should be convenient for distance working. This decision should be together by the advisor and the teleworker. In other words, in the event that the job is not fully suitable for teleworking, the duties and responsibilities appropriate to teleworking should be defined. Regular attendance at the meetings held by the institutions is necessary for avoiding social isolation of the teleworkers, and for face-to-face communication with co-workers. Potential teleworkers should demonstrate that they are capable of working independently and fulfilling their duties and responsibilities. Duties and instruments that are precisely described should require minimum face-toface communication, and they should be measurable. The following should be fulfilled in a teleworking environment in order to complete the work in an optimum manner: 1. The teleworker‟s home should include a dedicated workspace; this area should be clean and safe. 2. Any amendments to the employment contract or changes of location should be approved by the advisor. 3. The employer should visit the working area to identify any accident risks. The institutions should assure that the work area to be used by teleworkers has safe working conditions. 4. Private expenses incurred by workers are excluded from this program; these may vary between areas between the worker and the advisor. 5. Any software or hardware installed by the institution shall continue to be under the ownership of the institution and should be returned to the institution if the teleworking program comes to an end. 6. Except for cases defined through a formal policy, software belonging to the institution cannot be copied. 7. Workers using software provided by the institution are obliged to abide by the licensing terms. 8. Materials owned by the institution cannot be copied. Workers are obliged to take all measures to ensure data security. 9. Hardware owned by the institution cannot be used by other family members or for personal purposes. Teleworking includes the following steps during the implementation process: 1. Holding initial discussions with the attendants, and offering consultancy services to them. 2. Providing technical support and computer hardware for

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teleworkers. 3. Establishing a connection to the local area network. 4. Installing and configuring the hardware. 5. Training teleworkers in how to use the new hardware. 6. Initiating teleworking. Important points that should be kept in mind: 1. Needs related to the disability of the worker. 2. Ensuring concordance with institutional objectives and job distribution relating to teleworking. 3. Concordance of teleworking with institutional communication channels. 4. Workers‟ performance assessment process. CONCLUSION Urban planning is a discipline that has social as well as spatial and economic dimensions. In this context, the disabled persons, who are among the disadvantaged groups within society, should be considered in the light of this discipline. In Turkey, there are only a small number of disabled people who enter university exams and who participate in working life. The most important factor here is that the disabled persons cannot receive education. Another important factor is that urban spaces are not arranged for the comfortable use of the disabled persons. When disabled people leave their houses, they encounter many architectural and urban restrictions starting with the gardens of their houses to their final destinations. Under these negative conditions, it becomes difficult for them to receive education and they have little chance of being employed. In the process of accession to the European Union, it is an obligation for Turkey to conduct a planning and urban design policy that is sensitive to the disabled persons. In the literature, there are many academic studies on this issue. Additionally, new solutions should be suggested for the disabled persons. An important dimension of this discussion, which should lead to the opening of new horizons, is the opportunities the concept of “teleworking” will bring for the disabled persons. In this context, teleworking, which is a new type of working brought about by the emergence of information technology, and the employment opportunities it offers to the disabled persons, is an important opportunity that should be made use of. Teleworking improves the working conditions of the employed disabled and it offers employment opportunities for the disabled persons who have chronic diseases and who are unable to leave their houses. Study findings indicate that the majority of the disabled persons have a positive attitude towards teleworking. In addition, the organizations which do not have a positive

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attitude towards teleworking for all their employees were observed to develop a positive attitude when disabled people come into question. In this context, in the process of practicing teleworking, disabled employees should be given priority and pilot projects should be developed. Teleworking offers an opportunity not only for the disabled persons, but also for other groups who are unable to participate in a working life for various reasons. Pensioners, women, pregnant, mothers with young children can be employed in teleworking, or they can continue their jobs without interruption. Similarly, pensioners who have experience and knowledge but who have difficulty in commuting to work will continue to participate in the working life and continue to serve their organizations and countries. In this context, teleworking should be considered as a concept to be attached importance and considered as important in all its social and economic aspects. ACKNOWLEDGEMENTS This paper is based on the conceptual framework and field survey results of H. Filiz Alkan Meshur‟s PhD Thesis, “Telework as an Employment Opportunity for Disabled People; Its Modelling and Examining of the Model in terms of Urban Planning” supervising by Cigdem Ciftci Ulusoy. The authors are grateful to Prof. Dr. Hülagu Kaplan for his contributions during the completion of the thesis. REFERENCES Alkan M, Özenç K (2003). Physically disabled persons and access to the Internet, IX. Internet Conference in Turkey. Anderson J, Bricout JC, West MD (2001). Telecommuting: Meeting the needs of businesses and employees with disabilities, J. Vocat Rehabil. 16(2001):97-104. Anderson J (2003). Telecommuting: A work option for persons with disabilities, MITE, Midwest Institute for Telecommuting Education web site, http://www.mite.org/telecommutdisabilities/ telecommutdisabilities.html, accessed July 18, 2005. Aydın H (2001). Use of Internet in Turkey, Educ. Technol. Res. Dev. 49(4). Baloh P, Trkman P (2003). Informing science, Retrieved October 1, 2007, from http://proceedings.informingscience.org/ IS2003Proceedings/docs/071Baloh.pdf. Bileviciene T, Bileviciene E (2010). Telework organization model as method of development of disabled persons‟ employment quality, Perspect. Innov. Econ. Bus. 5(2), www.pieb.cz. Bradford W, Hesse W (1995). Curb cuts in the virtual community: Telework and persons with disabilities, Proceedings of the 28th Hawaii International Conference on System Science ‟95. Bricout JC (2004). Using telework to enhance return to work outcomes for individuals with spinal cord injuries, NeuroRehabil. 19 (2004):147159. Bruyère SM, Ruiz-Quintanilla SA (2000). Implications of the Information technology revolution for people with disabilities from a labour market and training perspective, Cornell University with Martha Bonney, Syracuse University Prepared for the International Labour Organisation.

Disability Surveys (2006). The key indicators of disability survey in Turkey, Disability Studies and Statistics Department, Republic of Turkey Prime Ministry Administration for Disabled People, Ankara, Turkey, http://www.ozida.gov.tr, accessed October 18, 2007. DPT, State Planning Organization (2003). Towards information society e transformation Turkey project, www.bilgitoplumu.gov.tr accessed December 14, 2005. EEOC, Equal Employment Opportunity Commission (2003). Work at home/Telework as a reasonable accommodation, http://www.eeoc.gov/facts/telework.html, accessed October 18, 2011. E-Europe+ (2003, 2001). Common enterprise to constitute information society in Europe action plan, June, www.europa.eu.int/ispo/iap/ Fırat S (2010). People with disabilities in Turkey: An overview, Inform. Technol. Manag. Soc. 3(2):51-54. Hesse BW (1995). Using telework to accommodate the needs of employees with disabilities, J. Organ. Comput. Electron. Commer. 6(4):327-343. Information Technologies Association (2002). Information shura, towards information society, Republic of Turkey Prime Ministry, METU culture and congress centre, Final report, Ankara. Iscan OF, Naktiyok A (2005). Attitudes towards telecommuting: the Turkish case, J. Inform. Technol. 20:52-63. Kurland MB, Bailey DE (1999). When workers are here, there and everywhere: A discussion of the advantages and challenges of telework, Organ. Dyn. 28:53-68. Lim HN, Hoorn AIJM, Marchau VAWJ (2003). The effects of telework on organisation and business travel, Paper submitted for “Symposium on Teleworking”, 4th Interbalkan Forum International IT conference Sofia, Bulgaria, 6-7 October 2003. Madsen SR (2003). The Benefits, Challenges, and Implications of Teleworking: A Literature Review, J. Bus. Entrep. 4:138-151, Available at: http://works.bepress.com/susan_madsen/50. Meshur Alkan FH (2006). Telework as an employment opportunity for disabled people: It‟s modelling and examining of the model in terms of urban planning, Selcuk University Faculty of Engineering and Architecture, Architecture Discipline, Ph. Doctorate Thesis. Mirti (1998). Implementing telework, Mirti handbook, http://www.telework-mirti.org/handbook/inglese/ Mokhtarian PL, Salomon I (1997). Emerging travel patterns: Do telecommunications make a difference? Resource Paper, Presented at the 8th Meeting of the international association for travel behaviour research, Austin, Texas, Sept. 21-25, 1997 (Forthcoming in conference book from Pergamon Press/Elsevier; Hani S. Mahmassani, Editor). Mokhtarian PL, Collantes GO, Gertz C (2004). Telecommuting, residential location, and commute-distance travelled: Evidence from State of California employees, Environ. Plann. A, 36:1877-1897. Moos M, Andrey J, Johnson LC (2006). The sustainability of telework: An ecological-footprinting approach, Sustainability: Sci. Practice Policy 2(1). Neumann P, Uhlenkueken C (2001). Assistive technology and the barrier city: A case study from Germany, Urban Stud. 38(2):367-376. Olszewski P, Lam SH (1993). Can teleworking help to reduce traffic congestion in Singapore? Paper presented at City Trans Asia‟93 Conference, Singapore, 2, 4. O‟Neill S, Conlon GP, Laverty H, McGowan C (1998). Teleworking for the disabled, IT & Society Project, http://intsys.fin.qub.qc.uk, accessed January 23, 2006. Pieper MD, Hermsdorf D (1997). BSCW for disabled teleworkers: usability evaluation and interface adaptation of an internet-based cooperation environment, Computer Networks and ISDN Systems pp.1479-1487. Reuters (2008). Accessed October 18, 2009. http://www.reuters.com/article/healthNews/idUSTRE4BH6WY200812 18, Salomon I (1998). Technological change and social forecasting: The case of telecommuting as a travel substitute, Transp. Res. Part C, 6(1):7-45. Shin B, Higa K, Sheng OR (1997). An adoption model of telework for organizations, Proceedings of The Thirtieth Annual Hawaii

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Review

Consideration about global finance crisis and solution offers Ece Demiray Erol Faculty of Economics and Administrative Sciences, Celal Bayar University, Turkey. E-mail: ecehan.erol@hotmail.com. Tel: 0 236 233 27 29. Fax: 0 236 233 06 57. Accepted 5 January, 2012

Global financial crisis that started from financial markets of the United States of America, has affected many countries and refreshed the old macroeconomic ideas. At the endpoint of crisis, reorganization of national financial markets will not be enough, while at the same time, strong economic policy implementations will come into the forefront. The coordination between developed countries regarding the monetary policy for the solution of global problems is necessary. Constraints on international capital fluences and decrease of debt rates in Euro zone are also necessary. Solution for economical problems is possible with just common operations. In a lot of countries, deficiency in balance of payment occured, taxes for households was placed and saving policies came into the forefront. In spite of increase in assistance from the ınternational monetary fund (IMF), effects of global crisis could not be eliminated. Key words: Global financial crisis, monetary policy, treasury policy, global market, finance market, debt rate, global liquidity. INTRODUCTİON Japan’s crisis of 1989, Asia’s crisis of 1997, Turkey’s crisis in 2001 , global financial crisis which started from the USA in 2009 and the financial tragedy of Greece, are all indicators of a continuation of international crisis. These crises, which started in the middle of the 1980’s, were based on the expansion of monetary and financial policies (Schratzenstaller, 2011). The quest for a cure for the outbreak of crisis has caused a drop in the short term interest rates of developed countries to 0 point and an increase in global debt rates to a record level. Rescue plans about monetary and treasury policies, as seen with the last global crisis, necessitated the consolidation process, because the wealth of liquidity in global markets will create new economic crises, the amount of debts of countries will enlarge and this situation will lead to the instability of Central Banks. The end of lax monetary and treasury polices have 4 important points (Borio and Disyatat, 2009):

ii. In accordance with the foresight of ECB (European Central Bank) and European Governments, retraction of governments from finance and asset markets should be done with the coordination of countries. iii. The new attempts about crisis induced monetary policy require international studies and specially a coordination with America. Otherwise, the success of monetary and treasury policies of European countries is dependent on timing and common implementation ability. iv. And the last point is European Central Bank’s buying operation of public bonds for stability of EU (European Union). In the year 2009, European Central Bank left nontraditional monetary policy and allowed the bonds, which lost their value due to the Euro crisis, to be reflected in ECB’s balance.

i. Governments must retract guarantees to the banks and leave civilization policies. Public budget balance should be provided with these steps.

In the presence of global monetary expansion, monetary policy coordination between countries is important, because devaluation of national currencies is inetivable

GLOBAL COORDINATION OF MONETARY POLICY

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with expansion due to the introduction of speculative capital. In many countries in this situation, exchange markets have been regulated and the exchange demand and supply rate being monitore to achieve a balance. Imported inflation induced deformation can be experienced in local financial or asset markets. Different monetary policies in developed economies complicate the exit from global crisis. Undervalued monetary policies lead to inflation expectations or deflation. Effects of idle infleunces on global liquidity expansion will affect the finacial and asset markets inside countries (Roth, 2009). Eventually, deformations in local fiscal and asset markets may occur. GLOBAL LIQUIDITY EXPANSION AND UNCERTAINTY Effects of idle influences on global liquidity expansion is seen mostly in national treasure and asset prices. Belke and Rees (2009) studied the effects of global shocks on national economical policies or world economy with VAR Analysis. Between 1984 and 2007, global liquidity shocks in G7 countries affected the power of national and global economic development (Belke and Rees, 2009; Belke and Schnabl, 2010). In accordance to structural refraction test analysis, global liquidity shock increased estate prices, but became more important as a function of national and global development. Global liquidity gives information about monetary values, like monetary policies of Central Bank or risk factors that does not depend on interest rates. Belke and Rees (2009) proved complication in national monetary policy implementation due to globalization. Idle fluencing global liquidity reduces the effectivity of national monetary policies on real or nominal variables. For example, the negative effects of global surplus of liquidity on national interest rates (Belke and Rees, 2011). The important question is “how can the monetary policies in coutries, which depend on each other, be coordinated”. Chicago doctrine starts from the variable exchange rate stage, and so, can eliminate the imported problems about macro economy. As a result of this, there is no need for internationally coordinated monetary policies. İncreasing liquidity surplus requires international coordination. For example; if FED implements lax monetary policy, foreign Central Banks will carry some parts of cost because of liquidity fluence or surplus. The main problem is how to coordinate the unlogical monetary policies of Central Banks in the international arena and how to eliminate the liquidity surplus which can occur in the future. Success in the coordination of economical policies or an attempt at applying foresight can asist the global financial solution. Consequently, the foundation of World Central Bank is has researched the idea and believes that the independent monetary policies of this bank can minimize the global problems. through this medium, the

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effects of global crises on countries can also be minimized. GLOBAL DEBT POLİCİES After the international financial crisis, the biggest debt was incurred by the United States of America. From 2007 to the end of 2009, the financial obligation of USA rose from $ 3916 billion to 12867. In approximately 5 years, the financial obligation of USA will rise to about $ 5.000 billion (Schmid, 2011). For this reason, America is one of the major partners of the international coordination of financial problems. Otherwise, global liquidity surplus is due to the monetary policy of America. Price stability in Euro zone and possible crisis in Asia will be due to financial fluences in middle term. consequently, many countries started to control capital fluences in order to balance the international financial fluences (Belke and Schnabl, 2010). So far, FED has raised discount limitations symbolically and with this, it has shown that it did not leave its traditional monetary policies. Central Banks of many countries did not consciously take the monetary and treasure policies against inflation seriously. consequently, devaluation in these countries damaged the economic stability (Spahn, 2007). Aizman and Marion (2009) proposed the seperation of inflation from public debts (Belke and Schnabl, 2010). If the economy of the USA does not rise again, inflation and public debts seperation will manifest itself. After the 2nd World War, public debts of America was 122% of its GNP in the year 1946. After 10 years, public debts decreased to 50% by devaluation. Repeat of this policy is inevitable for USA, because too much debts have been borrowed from abroad. 44% of public debt bonds of USA is held by foreigners. Most of this bonds are held by China and Japan, and would lose its worth because of inflation. INTERNATIONAL DEBT CRISIS AND CHINA In the year 2010, rescue operations were implemented in Euro zone with billions of dollars. Inflation rates of Euro zone will increase in comparsion to USA. If European Central Bank would take international capital fluences seriously, ECB can allow the inflation rate increase in order to protect the image of its trusted monetary policy. Investors will prefer dollar to Euro because of this debt crisis in European countries, and this progress will push up the Euro exchange rate. Global acceptance of the dollar will cripple the Euro in days to come. On the other hand, China criticizes the lax monetary policy of USA. Lax monetary policy renders speculative investments desirable, like estate market and stock markets. This situation prevents global development. FED creates weak dollar with low interest rates, this

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results in cost decrease on the debt of other countries, especially China. China, the biggest payee of USA, worries about depreciation of US dollar due to enlargement in debt stock. Imported credit enlargement, due to dollar, prevents Chinese Public Bank’s credit supply reduction policy in order to stabilize the estate and stock exchange markets. Monetary policy of Chinese Public Bank became dependent on American monetary policies (Schmidt, 2009). If China allows the yuan to increase in value, the export of China will decrease and at the same time, large amount of US dollar deposits on Chinese Public Sector will loose their value. In this case, Chinese Government will be led into a political dilemma. On the other hand, economic development of China depends on the presence of additional speculative investments. Europaen Central Bank implemented the monetary policy of FED and kept track of this policies. However, there is disbelief in East Asia, Russia, OPEC countries and other countries. As a result of the presence of this disbelief, FED will perhaps abandon the lax monetary policy and give power to US dollar with the aim of empowering it to become world currency. The power balance of the Euro, injured by European Countries in debt paradox, and dollar, which will be crippled in future, will make its presence felt. In spite of all negations in Euro zone, European Central Bank’s intent of protecting its stabilization oriented monetary policy will contribute to the provision of monetary stabilization for both euro zone and countries in the hinterland of the dollar region. Existing debt crisis of Greece, Portugal and Spain in euro zone, injured Euro in contrast with the dollar. Inflation expectations in the euro zone increased the uncertainty that heralds, its presence in every area and featured common finance and monetary policies. MONETARY STRUCTURE

POLICIES

AND

INSTITUTIONAL

The study of Belke and Rees in 2009 demonstrated that, global liquidity surplus would lead to an increase in prices of raw materials and estate market. The increase of raw material prices is perceived as front indicator of prospective increase in inflation rates (Belke and Rees, 2011; Belke and Schnabl, 2010). If the governments in euro zone supply bonds consistently and the banks rediscount this bonds again with European Central Bank, this case indicates a liquidity surplus in market conditions. Unless the expander monetary policy gets abandoned, it is not possible to avoid expansion in finance markets and monetary policies (Spahn, 2007). Figure 1 clearly shows outrageous indebtedness of euro countries in global finance crisis duration. Excluding Germany, the debt stock of all euro zone countries has gone beyond 60% (one of Maasticht criterias) of gross

domestic product (GDP). As seen in the figure, an increase in stock of European zone countries’ debts is expected in year 2014. Unless additional saving maneuvers are performed, the debt rate of America, with loans taken in the year 2006 taking over 61% of its GDP and will likely increase by 100% from now till year 2014. Despite the fact that the debt rate of Japan was 191% of its GDP in year 2006, this rate will reach a point of 247% in year 2014. The debt rates of countries like Brazil, India, China, Russia and Turkey are under 60% of GDP, Maastricht limitation, and are expected to decrease further till year 2014 (Figure 2). In a short term, public debts in euro zone will increase the pressure on low interest rate policy that the European Central Bank has implemented so far, but radical processes of control mechanisms of monetary policies will be postponed to following terms. There is The need for serious decisions in monetary policies area, tpbe taken, because there are no convincing debt consolidation policies in many European countries. Especially in the euro zone, there is no coordination between monetary policies and national treasury policies. Monetary policy and national policy is contained in the European Agreement just to facilitate the process of currency union and to assist the fluence of functions properly. In the institituonal frame of European system, political influencing continues its existance. European Central Bank considers stability of general prices level a superordinate goal. Foundations in public organization are responsible for the establishment of a just treasury policies and public financing. The European Central Bank has dealings with orther Eurpoean Foundations with its clear and positive policies. To achieve the common treasury policies in European countries would be a very desirable improvement. But in fact, this target is far away from possibility; because conditions of microeconomic frames of many countries in Europe, and treasury policy targets of these countries are in contradiction with each other. consequently, there is no foundaiton in Europe to implement and coordinate this treasury policy. Generally, there are two economic structures in the euro zone. The first group is the Anglo-Saxon: countries like England, Ireland and Spain. In these countries, economic development is intended to finance markets, estate markets and domestic consumption. The element that triggers economic development is mainly credit disposals. In economic development periods, rising public indebtedness rates are observed. In these countries, average public deficit rates are over 10% of GDP (Eder et al., 2010). In the countries of the second group, borrowing rate of household is less than in the countries of the first group. Excluding Spain, there is no need for consolidation in these countries and budget deficits are 50% of first group countries.

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OECD Countries

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Japan

200 Italy

USA

Greece

150

Germany 100

60 France

Spain Swiss

Household GDP(%)

-2

-3

-4

-6

Debt Rate ($)

=2014

=2006

Figure 1. New debt club (Maastricht criteria = 60% of GDP).

BRIC Countries 200

150 India Brazil

100

60 50

China

Russia

4 Household GDP (%)

-2

Debt Rate ($)

-3

-4

-6 =2014

=2006

Figure 2. New debt club (source: Fluckiger and Schwab (2010)

Source: Verlag Neue Z端richer Zeitung,2010,Der neue Schuldnerklub, REFORM OF INTERNATIONAL FINANCE SYSTEM

www.nzzlibro.ch/.../9873038236467.pdf?...

Because of global financial crisis in the year 2008, the United Nations created an international commission that consists of selected economists, presided over by Joseph

Stiglitz. This commision with 18 members, contains economists selected from 16 different countries. The commission attributed the cause of global financial crisis to the outrageous liberalization of capital markets and accentuated that global fluencing liquidity suprlus,

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that resulted in the financial and economy systems, becoming more intense about crisis. The causes include: inadequacy in control mechanisms of financial systems, distortions in tax systems, inadequacy in unemployment insurances and disorgani-sation of retirement programs, played major roles in the outbreak of economic instability. Inadequacy in financial markets featured structural discretions, and necessitated the global financial reform. In the global world, it is seen as inevitable to determine the frames of financial system, to eliminate the market paralogism, to reduce public paralogism and to constitute efficient control mechanisms with stronger rules. National rescue programs should cost less to public budget and macroeconomic stability should be provided again. These following precautions should be taken for the reorganisation of the financial system (Hanfstangl, 2010): i. Provision of credit fluence between creditors and borrowers and forwarding of credit fluence to small and medium sized enterprises should be guaranteed. ii. The stronger reorganisation of credit types and SWAP operations in international bond markets is inevitable. iii. Large and jeopardizing financial foundations should be divided and the amount of this kind of foundations should be delimited. iv. Credit score determinator foundations should be reevaluated and reformed, in order to prevent conflict between creditor foundations, creditor enterprises and governments. These foundations should be monitored more efficiently. So far, observations show that credit score determinator foundations acted unilateral. v. All credit score determinator foundations sould be more clear and prove their own analyses honestly. Stiglitz Commision recommended the following to generate secondary regulator institutions (Hanfstangl, 2010): - New Central Bank (NCB) should be founded and be specialized in macroeconomic subjects. - Financial Regulatory Authority (FRA) should be founded. The profession of this authority should be micro frame. FRA must specialize in consumer protection and be responsible for financial products. This authority must organise its own subcommittees, and determine professions about bond trade, insurance, financial stability and consolidation of financial products. Commission observed that the power distrubiton in current International Finance Foundation is problematic. moreover, the voting distribution in International Monetary Fund should be reorganised and developing countries should take larger parts. On the other side, enhancement of World Bank is also inevitable. Both of these foundations should become clearer and their functions

should be revised. The commission considered the effects of crisis in underdeveloped countries. One of the biggest problems in devepoling countries is credit taken from abroad. In crisis periods, higher interest rates are applied for these credits or capital is demanded back. Many developing countries signed agreement with other countries or signed World Trade Organisation (WTO) Agreement due to WTO rules. These signed agreements delimit these countries in foreign trade area and prevent these countries from taking decisions about their own trade organization policies. In crisis periods, developed countries put in place rescue programs like (investment encouragements, tax reductions and direct financial assists) on the agenda, but developing countries try to manage crisis by increasing taxes and decreasing budget. This kind of strategy leads to a decrease in consumption of developing countries and make effects of crisis larger. Commission welcomes the additional 250 billion USD in special borrowing rights of G-20 industrialised countries from the International Monetary Fund, in accordance with their decision in year 2009. Besides this, commission considers functional enlargement of World Bank and International Development Organisation and credit stock enlargements as inevitable (G20 Kommission, 2010). Stiglitz Commission recommends progressive tax systems, unemployment insurance and retirement programs in order to provide economic stabilisation. The specialized fund to handle this case must be founded. Foundations, like United Nations and World Bank, and developed countries must take part in this fund. Independence with International Monetary Fund, new credit options must be improved fast. This credits must be used for the stabilisation of developing countriesâ&#x20AC;&#x2122; budget deficits and structural accordance programs. This fund (automatic stabiliser) must be financed by United Nations, Developed Countries or World Bank (Hanfstangl, 2010). Developed countries should spare 0,7% of their GDP for underdeveloped countries. Commission demands CO2 tax, new finance taxes or equal other taxes in order to eliminate undevelopment and negations of global climate conditions. One of the most important opinions of this commission is functionalise the global economic policy through improvement of new methods. In the long term, Global Economic Policy Commission must be generated in the United Nations structure. The function of this foundation to search for solutions about global economic,social, ecological problems, and political improvement of this commission. The most important subject, this commission recommended, is the global currency. The connection of national currencies to USD causes incremental costs and fluctuations on Exchange rates. Fluctuations on Dollar affects the foreign exchange reserves and import options

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of other countries negatively. consequently, the commission discussed about a new exchange rate system. For example; by generating a new foundation, like International Monetary Fund, this foundation can act as new World Central Bank. Or a new currency, like Special Drawing Rights in International Monetary Fund , can be constituted. There plans underway to form a new Global Reserve Bank and to give larger positions to developing countries in this structure. CONCLUSION Immoderate monetary, treasury and financial policies, inadequate arrengements in financial markets and inadequate inspection of finance markets caused global crisis. Developed Countries prepared large rescue programs and prioritised saving policies. But the increasing debt rates in many countries in the EURO zone became a threat for European Unions. In developed countries, finance crisis led to increases in the monetary demand and public debt demand, this situation supports enlargement oriented treasury policies. however financial crisis did not create any effect on Balance of Payments or Balance of Capital. On the other hand, in the presence of global liquidity surplus, international capital fluences will accelerate and cause instability in national exchange markets. The effects of global financial crisis in developing countries are more complicated, because restriction of credits causes decrease in demand and productivity gets harmed, this causes increase in unemployment. In developing countries, the effects of financial crisis has been managed with tax increases and saving policies on households. In most underdeveloped countries, capital inflow decreased because of financial crisis and this countries had to quit their programs. In accordance to the projection of the World Bank, additional 55 million people will experience hunger (Hanfstangl, 2010). One of the biggest threats is the decrease in international trade. Unless the necessary reforms will be performed, prosperity of world will decrease and underdeveloped countries will sustain the biggest blow from this condition.

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REFERENCES Belke A, Rees A (2009). The importance of Global Shocks for National Policy-Makers- Rising Challanges for Central Banks, DİW Discussion Paper, Deutsches İnstitut for Wirtschaftsforschung 922:1-38. Belke A, Rees A (2011). İnternationale Geldpolitik im Zeichen von QEZ 13:99-101. Belke AE, Schnabl G (2010). Finanskrise, Globale Liquidität und MakroEkonomische Exit,in: Wirtschaftspolitische Konsequenzen der Finanz Und Wirtschaftskrise, HRG. Von Theresia Theurl, Berlin pp.1-13. Borio C, Disyatat P (2009). Unconventional Monetary Policies: An Appraisal,BİS Working Paper, Bank for İnternational Settlements, Basle, November Eurostat, Pressemitteilungen, Euroindikatoren, 292:1-37. Eder G, Meyer CA, Petersen AK, Schneider R (2010). Staatsverschuldung in Europa –Analyse und Handlungsoptionen, workingspaper, 135(4):1-21. Fluckiger S, Schwab M (2010). Globalization: The second wave, look at Switzerland offers two commentaries by Konrad Hummler & Rudolf H. Strahmbuch 0.2 to 3 Verlag Neue Zürcher Zeitung: 89. G20 Kommission (2010). Erstes Massnahmen Paket nach G20: Kommission legt Strategie zur unterstützung der Entwicklungsländer vor. http:De.welcomeeurope.com/…/erstes-ma-nahme… pp.1-2. Hanfstangl EM (2010). Wie lasst sich eine weitere Finanskrise vermeiden? Vorschläge der UN-Expertenkommission zur Reform des internationalen finanssystem: http:www.dgun.der.../Hanfstaengl_stiglitz_kom... pp.1-7. Roth JP (2009). Globale Krise: Wie ist die Schweiz betroffen? Schweizerische Natio-nalbank, Frankfurt, Montag pp.1-8. Schmid F (2011). Schulden-Supermacht USA, İnstitut für socialökologische Wirtschafts-Forschung pp.10-20 Schmidt D (2009). China und İnternationale Finanskrise, Bundeszentrale für politische bildung: http: www. Bpb.de/…/80N33L,0,china_und_die_.. pp. 1-2 . Spahn HP (2007). Realzins, intertemporale Preise und makroökonomische Stabilisierung, Hohenheimer Diskussionsbeiträge, Nr. 292, Stuttgart pp.1-24.

Full Length Research Paper

Organizational image as a crucial factor in the organizational efficiency of education faculties of state universities: A sample of Education Faculty of Pamukkale University in Turkey Ali Rıza ERDEM Pamukkale University, Education Faculty, Kinikli Campus, Denizli, TURKEY. E-mail: arerdem@gmail.com. Tel: (0258) 2961137. Fax: (0258) 2961200. Accepted 12 November, 2012

The aim of the study is to put forward the current and future images of the Education Faculty of PAU according to its internal and external participants. The model is “the case study”. Of the pool of the participants, 223 people were involved in the study. The data obtained were processed with thematic content analysis. According to the internal and external participants’ perceptions, the first leading three images which define the current position of the Education Faculty of PAU are as follows: (1) remaining as an institution / faculty of education for training teachers, (2) remaining as a faculty is to ever develop due to non-stop efforts of development and (3) remaining as a leader in the education faculties by producing proficient teachers for the society. The first current three images of the Education Faculty of PAU for participants are crucial for the administration of the faculty itself because it clearly indicates that the faculty has already established a virtual image over the present status. According to the participants’ perceptions, the first three images of the future status of the Education faculty of PAU are also as follows: (1) training fully qualified teachers in all aspects, (2) a faculty which has already completed its infra-structure base and (3) reaching a respectful place internally and internationally. According to the participants, the first three images to define the future status of the Education Faculty of PAU are highly guiding in clarifying the futuristic destination which the internal and external participants wish to take the faculty to and in clearing the picture of target point in the future. Key words: The Education Faculty of PAU, internal and external participants, organizational image.

INTRODUCTION Education faculties in state universities are quite similar to each other in many respects, such as mission, administrative function and target groups. Besides, for an education faculty to have a positive and remarkable organizational image is a vital point that distinguishes them from many other education faculties, for it is a priority base for the target groups who will prefer the state‟s education faculties. A virtual organizational image is now a must in an ever-changing world with institutional competition. In addition, in order to realize virtual organizational image of a state‟s education faculty, it is also crucial to establish a relevant appearance as well as functional effect in the structure.

Organizational image and efficiency Organizations now largely tend to establish a trustworthy trend in their covered areas to prove themselves better in order to get a chance of being an initial preference. It should also be noted that the perceptions of target group about the organizational participants‟ minds are critical in preference provision on the grounds that such factors building up an organizational image lead to the viewing of the institution itself as a compilation of experiments, beliefs, impressions, technical details and positive and negative thoughts. Organizational image is a means of perception by workers of the image group and target

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group itself (Ayhan and Karatepe, 2000; Abratt and Mofokeng, 2001; Nguyen and Leblanc, 2002; Aktan, 2006) as well as the approach of the internal and external participants of the organization. Organizational image could undoubtedly turn out to be neutral or negative. It should also be taken into consideration that major constituents of an organizational image are organizational outlook and organizational treatment. Organizational image should include certain other points such as mission, vision, products, provisions, administrative system, and ways of communication, which are appointed by the organization as well as the common satisfaction of the participants. Along with the perceptive image of the organization, there certainly exists a desired image, as well. While the perceptive image is the type which the participants perceive, the latter, that is the desired image, is the target point of the organization itself (Peltekoğlu, 2001; Laura, 2005; Aktan, 2006). Among the well-known approaches in defining the term “efficiency”, to get the best result is by using sources in the best way. Bernard (1948) studies the subject in a different way and explains that the individuals are the “efficiency” wing of the organization and their efforts are the “effectiveness” of the organization (Cameron, 1986; Thibodeaux and Favilla, 1996; Aydin, 1998). According to Başaran (1996), the term “effectiveness” could be used not only in terms of organization but administration itself as well: (1) Organizational effectiveness in an organization is realizing its target at the highest possible point by using its own sources (2) Administrative effectiveness is the administration of an organization built compatibly for realizing organizational effectiveness. The idea of organizational effectiveness is especially important for non-profit organizations as most people who donate money to non-profit and charity organizations are interested in knowing whether the organizations are effective in accomplishing their goals (Bryson, 1995; Aktan, 1997; Herman and Renz, 1998). For a real success, it should also be noted that an intense interaction be established within the organizations because a virtual image of an organization is to make a great contribution by adding authorization and transparency to get organizational efficiency. It is a well known fact that strategies for realizing targets will essentially make it easier for internal and external participants to have full comprehension (Bryson, 1995; Aktan 1997; Herman and Renz, 1998; Gadot, 2003). A remarkable factor in organizational image of the state’s education faculties An organizational outlook, the vision of the organization is a crucial factor of organizational image. The term “vision” is a frequently used term in administration; which is not only a creative stress to us, our way and ideas, but also an ultimate effective factor of reality. It may also mean a picture that defines how the future will be and what must

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be. It also necessitates a detailed study like a puzzle to bring so-called unrelated pieces together (Kozlu, 1996; Çetinkaya and, Gülmez, 1999; Ozden, 1998; Redhouse, 1998; Pat, 2001, Karaman, 2005). Vision is a prediction and picture on the future. It is more valuable to share vision. A shared vision is like a piston which pushes people rather than being a value. What inspires that power could be a brilliant idea. However, once it starts to move, it leaves its concrete meaning by turning into a concrete shape which is available to touch (provided it is pushing and gaining the support of more than one persons). Shared visions get their energy by using joint movements to realize them (Senge, 1993; Toktamısoglu, 2001). The visions which should primarily be taken over by teachers will also surely determine the visions which train themselves. With globalization, in today‟s modern world, vision of teachers has also changed a lot. Instead of traditionalism in visions of teachers, “modernist” movement has notably been put forward. As a result, teachers are expected not only to be open to innovations in education and training world but also to put them into practice. Moreover, as a result of technology which is the main step of the current globalization process, teachers also should be able to use modern technology to realize their vision. In parallel with the mission, a modernist movement in the education faculties should be put forward instead of a traditional one, as it is a crucial vision for an education faculty to use modern technology in training new generations of teachers. Vision of the education faculties at the state universities which train teachers in needed branches in the society is of great importance in obtaining effectiveness. The most immediate target of the education faculties in state universities is to train fully qualified teachers in the preservice process. Other targets include the provision of national and international contribution to science education through scientific studies and to meet certain educational needs of society or institutions. Education faculties in state universities would also indicate their own distinction by putting forward their visions. Although they may completely be distinct from each other in terms of performance, staff, geographical situations, administration, perception, interpretation of education and training and potential of their students, they are setup by the state itself for the same purpose. For this reason, education faculties in the state universities are expected to put forward their distinction in the form of their vision that determines the desired point in the future. The Faculty of Education, Pamukkale University This institution was founded as Denizli Teachers School for Girls in 1957 which is named “The Education Faculty of Pamukkale University” today. It was later called Denizli Education Academy, through a law registration number

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2547, which was a part of The University of Dokuz Eylul, Buca Education Faculty. Then through another law with registration number 3837, dated 3rd July, 1992, following the foundation of Pamukkale University, it was activated with “Primary School Teaching, Department of Education, Faculty of Pamukkale University” on 10th November, 1992. With its experience of nearly a half century, The Education Faculty of Pamukkale University has an important place among experienced and well known universities of education faculty in the country. In the study, certain current and futuristic images of The Education Faculty of Pamukkale University (PAU) are studied by thoroughly evaluating its most prominent “internal and external participants”, a term which points out all concerned groups in or out of the faculty. The most prominent factors which are included in the search focus are as follows: (1) Faculty administrator (the dean, the vice dean, chiefs of departments and vice chiefs, heads of science branches, the faculty secretary, the chief), (2) Academic staff (professors, associate professors, assistant professors, instructors, assistants, teaching staff, specialists), (3) Office staff (officers, technicians, janitors) and (4) Students (undergraduates and postgraduates). The most prominent factors included in the search focus are as follows, as well: (1) Administrators at Denizli Directory Office of the Ministry of Education (the director, the deputy director, officer head, the chief of inspectors of primary school education and the vice chief), (2) Principals at state‟s schools and private ones in Denizli (high school principals and first vice principals and other deputies, principals and vice principals of kindergartens), (3) Teachers at state‟s schools and private ones in Denizli (kindergartens teachers, primary school teachers, branch teachers), (4) Inspectors of primary schools, (5) Graduates of Education Faculty of Pamukkale Universities (PAU), (6) Parents of graduates of Education Faculty of Pamukkale University (PAU) and (7) Administrators of civil organizations in Denizli (administrators of education unions, volunteer associations, media, administrators of chambers). The problem sentence What are the current and future images which define the Education Faculty of PAU according to its internal and external participants? The sub-problems in this respect are: (1) What are the current images which define the Education Faculty of PAU? (2) What are the future images which define the Education Faculty of PAU? THE METHOD The model of the search The model search is “the case study”. In other words, according to

Yin (1984), it could be expressed as follows (as cited in Yildirim and Simsek, 2005): (1) It is a search method which studies the current process within its structure (content). (2) It is also a state in which an edge exists between the case and the content. (3) It is a preferable method to be used on occasions where there are enough amounts of database and evidence. Finally, “the case study” could surely be expressed to be a method allowing the researcher to study the matter or the case exhaustively by taking the questions “how?” and “Why?” into consideration. Like in many qualitative searching methods, existence of the case study will be relatively on a “small-scale” which obviously results from case studies being exhaustive and detailed search methods (Yildirim and Simsek, 2005). The data gained were collected randomly and, through “the case study”, chosen by group modeling method. Of all the internal and external participants of the Education Faculty of PAU, totally 223 people were chosen for modeling and were included in the inquiry (Table 1). Of the internalparticipants of the Education Faculty of PAU, totally 118 people were chosen for modeling and the inquiry, among whom are students, administrative staff and academic executives. Of the external participants of the Education Faculty of PAU, totally 105 people were chosen for modeling and the inquiry among whom are Denizli Office of Ministry of Education (MEM), state and private schools‟ principals and teaching staff, primary teaching inspector, graduates, students‟ parents and exclusives of certain civil organizations. The gathering of data, validity, reliability and analysis The perceptions of internal and external participants of the Education Faculty of PAU were obtained by “open ended inquiry”. Since, according to “the case study”, those who are included in the inquiry were required to give “creative (original) and virtual answers”, one of the ways to realize them was the “inquiry process”, indeed. According to Bryson‟s (1995) model, used for gathering data, which is also called “model in strategic planning for state‟s institutions and other non-profit organizations”, fictitious images are given place to overcome by studying the internal and external participants of the faculty, in the light of the data already obtained. Because such a process could not be adapted to by the individuals who were studied with an “open ended inquiry”, the questions: “what are the current images which define The Education Faculty of PAU and what are the future images which define the Education Faculty of PAU?” were given place instead. The inquiry was used for the volunteers, all of whom had already been evaluated for modeling beforehand. Certain questions in their mind were answered face to face. Meanwhile, the open ended inquiry was continued with volunteers and by persuading other individuals to be included until the number of models in the case study group, which had been chosen randomly and rationalized with model groups, was achieved at the desired level. The data obtained from internal and external shareholders in the Education Faculty, Pamukkale University were subjected to thematic content analysis process. Here are the steps followed in the course of the study. 1. Titling step: In this step, the declarations of the internal and external shareholders of the Education Faculty of PAU through sampling and the open-ended poll were studied in images of whether they pointed to a significant reality. Throughout the evaluation process, the image in the open-ended poll was marked in color pencils. Meanwhile, the terms in the poll not pointing out an image or not written ones were titled as “not question coded”. 2. Sorting out step: In this process, by using content analysis method, similarities and common points preferred by the internal and external participants at PAU Education Faculty were analyzed. Meanwhile, all of the participants were seen not to point to an

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Table 1. Model ranges.

image while some used unclear expressions to mention the image. 3. Reorganizing: In this stage, totally 241 produced current images and totally 257 produced desired images were pinpointed after sorting a number of non-problematic, vague and obscure expressions out. Then, in the third stage, these images were put into order, some of which were declared by only one participant while some others were invariably declared by more than one participants. 4. Building up concerned themes: By collecting the coded images under certain categories, the themes concerned were built up and each of them was supported by another matter declared by at least one participant. Meanwhile, it was considered vital that each theme should be different from one another while making up considerable harmony as a whole. In the section of “findings”, the image identifications were grouped and 84 different groups of current images and 67 different groups of desired images identifications were obtained, which were heavily categorized by considering (a) that each matter was identified by at least one participant (b) the criteria that each matter was declared by parallel identifications. 5. Obtaining validity and confidence: To gain virtual validity for the research, the participants were offered open-ended questions which would provide trustworthy, original and objective knowledge. The data obtained through the participants both from the Education Faculty of PAU and outside were exposed to the analysis of thematic content by grouping the codes under certain categories and each of the themes was invariably supported with the matters identified by at least one participant. Meanwhile, it was also considered vital that these themes should be distinct from one another while making up considerable harmony as a whole. Concerning the validity of the study, the research process was identified in a detailed way so as to allow the obtained analysis result for an evaluation. On the other hand, opinions of specialists were taken into consideration as to whether the concerned themes completely match with the current and future images which define the Education Faculty of PAU. 6. Expression in percentages: Each theme was rated in certain percentages; however, these ratings could not be available for use in statistical comparisons in a quantitative study, but they are suitable for listings or counseling works as the result of qualitative research.

Civil organization of administrators

Graduates & parents of student

Inspectors

Private schools‟ teachers

State‟s schools‟ teachers

Private schools‟ administrators

State‟s schools‟ administrators

Administrators of MEM

Student

Management staff 4

The total number

Total of external participants of the faculty

External participants of the faculty Totals of internal participants of the faculty

Modeling

Academic staff

Faculty administrators

Internal participants of the faculty

118

105

223

FINDINGS AND INTERPRETATION With thematic analysis of the datum of the study, certain findings have been reached and interpreted in the following lines. The current images of the Education Faculty of PAU according to participants The total number of made up images is 241. According to the participants‟ perception, the images which define the “current” trend in the Education Faculty of PAU are categorized in 84 groups (Table 2). As a result of the analysis of the data gained from the participants in the study, 84 distance image groups have been reached which explains the current trend in the Education Faculty of Pamukkale University. Among those images, the most stressed one, with 19.50%, is “An education institution/faculty which trains teachers”. Briefly, the participants regard the Education Faculty of PAU as an image which does not contradict its main function and it does not include any positive-negative meaning. The second most leading image, with 12.86%, is “a faculty which is steadily developing and with the effort of ever-developing”, which draws a positive image about the Education Faculty of PAU. The third most leading image, with 8.71%, is “one of the education faculties which train “qualified teachers”; participants in this image attribute the Education Faculty of PAU to positive qualifications of the teacher which it has trained. The fourth most leading image, with 5.35%, is “one of the casual education faculties which try to train teachers”. The image mentioned is negative because the

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Table 2. The images which define the “current” trend in The Education Faculty of PAU.

Images 1. An education institution / faculty which trains teachers 2. A faculty which is steadily developing and in the effort of ever-development 3. One of the education faculties which train “qualified teachers” 4. One of the casual education faculties which tries to train teachers 5. An educational institutions which trains casual teachers 6. An important and established unit of PAU which trains teachers with a considerable background 7. Development & improvement 8. A unit which contributes a lot to Denizli City 9. An insufficient, repetitive and unqualified education service 10. A faculty which tries to push the student 11. No an existing image 12. A faculty which is in too much insufficiency 13. An army on unemployment teachers 14. Crowd and exhaustion 15. Courses and examinations 16. Incapable of physical infrastructure and very few efficient staff 17. A weaker faculty in research and education service compared with scientific global criteria 18. Analyses on education 19. Too many courses 20. Contemporary, futuristic and sincere 21. Financial matters to get over 22. A qualified education service 23. The most successful faculty at KPSS exam with its graduates 24. Old buildings and a good education service 25. Development & change 26. Satisfying 27. I have no idea 28. One of the rarest education faculties which bears a nostalgic mood of teaching training schools in the past 29. The faculty which includes the biggest number of students in PAU 30. A traditional place where institutionalism couldn‟t established 31. A socially respected institution which performs in YOK‟s body 32. An institution which trains teachers to primary school 33. Over the expectation 34. How qualified is it education service? 35. It has completed the development process 36. The oldest faculty in Denizli 37. An educational faculty which could compete with the others in the country 38. Weak in promoting its title and achievements 39. Looks as if a primary school in jungle part of city 40. Efficiency in relative affairs 41. A converted faculty type from a typical training school of the past 42. Too many students 43. Civil engineering 44. Groups in affairs 45. No difficulty in passing the courses 46. A continuation of educational institution of the past 47. An established academic staff 48. A causal institution 49. Insufficient library 50. All flowers of my country 51. A not promising faculty

% 19.50 12.86 8.71 5.39 4.56 2.48 1.65 1.65 1.65 1.65 1.65 1.24 1.24 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.82 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41

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Table 2. Contd.

52. 53. 54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84.

As if high school under the university‟s control Insufficient social & cultural activity A cute faculty Two mid-terms An incredible contradictory Shabby No communication between the administration and the staff The place in which I‟m planning to build up a career Disappointment as well as beauties Easiness in studying A renewed place Door to future End of my ideals Stress A democratic approachment to education A resort A faculty where most of our students attend Red tape (too much bureaucracy) Students who come for training period Post graduate students who wander certain polls in their hands An institution which I have contributed in many ways but I couldn‟t get a mutual assistance Winds of change Broken affairs with the institution of National Education One of the promising faculties in the Aegean Region Not an considerable institution in Denizli Its degree is much high in OSS exams In need of development No inspiration, no passion Academic aspect of the city Broken affairs with exhaustive scientific studies The most important faculty Teaching how to learn An institution which trains teaching staff

participants regard the Education Faculty of PAU as a casual one. The fifth most leading image, with 4.56%, is “an institution which trains casual teachers”. The image is also negative as the participants attribute the Education Faculty of PAU to this causality of the teacher trained by the faculty. The sixth most leading image, with 2.48%, is “an important and established unit of PAU which trains teachers with a considerable background”. By this image the participants stress out the background of the Education Faculty of Pamukkale University. The seventh most leading images, with 1.65%, are “development and improvement”, “a unit which contributes a lot to Denizli City”, “an insufficient, repetitive and unqualified education service”, “a faculty which tries to push the student”, “no existing image”; among the ones mentioned earlier, the expression “no image” does not reflect the reality at all as participants globally always have opinion

0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41

either positive or negative about an institution. The eighth most leading images, with 1.24%, are “a faculty which has too much insufficiency” and “unemployed teachers”. The image mentioned in that category actually reflects negative opinions of the Education Faculty of PAU. The images, according to the participants, which define the desired status of the Education Faculty of PAU According to the participants, the images defining the desired status of the Education Faculty of Pamukkale University are categorized into 67 different groups (Table 3). The number of total images is 257. In the analysis of the data gained from the participants, totally 67 different image groups have been reached

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Table 3. The images which define the desired status of the Education Faculty of PAU.

Images 1. Training more qualified teachers in every aspects 2. A well established faculty in infrastructure 3. Being one of the well-known education faculties in int‟l arena as well as Turkey 4. Being an aspect faculty in the region 5. A contemporary faculty 6. A qualified training service 7. An education faculty which is preferred by promising students 8. An faculty of which is proud by not only by students but also its own staff 9. A university of pedagogy 10. A scientific faculty 11. Example of education faculty 12. A promising teacher‟s training faculty 13. A well-established academic spirit 14. A faculty hand to hand the public 15. A contemporary faculty which has already absorbed certain national and global values 16. A faculty open to cooperation with the primary and secondary schools in the neighborhood 17. Advancement 18. Freedom 19. Ever –innovating itself 20. An institution which has caught up with acceptable standards at least 21. Training generation of teachers who are inclined to investigation 22. Leadership and instinctiveness to success 23. A reflective faculty which experience the first in every aspects 24. A faculty free of traditional country mood 25. Open to cooperation 26. Students who tend to investigation but not repetitive knowledge 27. A faculty which could be considered “an academic surroundings” 28. A faculty in which students could be more active 29. An entertaining service of education 30. A faculty which has a considerable success in KPSS exams 31. More art 32. I have no idea 33. An internationally respected faculty 34. An institution which trains now generations of teachers who are of a progressive system 35. An institution by which we love teaching profession 36. An efficient institution which bears individuals of future 37. Cooperation, science, professional manner 38. A center of an efficient life in which institutionalism becomes true 39. A lightening source to Denizli City 40. A great faculty 41. Academic cooperation 42. Investigation 43. An institution which both trains teachers and runs after success in science 44. An institution whose students particularly utter those words “Here, I have realized how teaching profession must be performed”

% 15.56 9.72 8.56 7.39 6.61 5.05 2.72 2.72 2.33 2.33 2.33 1.94 1.94 1.55 1.16 1.16 1.16 1.16 1.16 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.77 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38

45. 46. 47. 48. 49.

0.38 0.38 0.38 0.38 0.38

An well-identified and established faculty in scientific criteria A post-modern institution A wealthy library Future and freedom of Turkey A faculty which will take its own place in the university campus area

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Table 3. Contd.

50. 51. 52. 53.

Practical education One mid-term exam and one final exam An active communication between the students and the faculty administration A faculty which has managed to train new generations of teachers who are secular, democratic, interrogative

0.38 0.38 0.38 0.38

54. 55. 56. 57. 58. 59. 60. 61. 62. 63. 64. 65. 66. 67.

A visioned faculty Entertainment, education and discipline Proficiency Students who have already realized themselves A center of ideals Leader An attentive policy to international educational projects Academic proficiency Primary school teachers Driving to future but not to today More social and scientific activities A Kemalist and Republican policy faculty A pride in education quality A leader in education service in Denizli City

0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38 0.38

which define the desired situation of the Education Faculty of Pamukkale University. Among those images, the most repeated one is, with 15.56%, “to train more qualified teachers in every aspect”. In this respect, the participants express the desire that the Education Faculty of PAU should mainly be known in future by training fully qualified teachers. The second most striking image is, with 9.72%, “to be a well qualified faculty in infrastructure”. In this respect, the participants express the desire that the Education Faculty of PAU should mainly be known in future as “a problem-free faculty in infrastructure”. The third most striking image is, with 8.56%, “being one of the well-known education faculties in int‟l arena as well as in Turkey”. In this respect, the participants express the desire that the Education Faculty of PAU should be a well-known faculty in both national and international arena. The fourth most leading image, with 7.39%, is “a respected expert, faculty in the area of training teachers”. The image indicates the desire of the participants is that the Education Faculty of PAU must essentially obtain the regional leadership in its branch in future. The fifth most leading image, with 6.61%, is “a contemporary faculty”, which to the participants means that the Education Faculty of PAU must be fully contemporary in all aspects in future. The sixth most leading image, with 5.05%, is “a qualified educational service”. The image clearly indicates that the desire of the participants is that the Education Faculty must be one step forward in future in “educational service quality”. The seventh most leading images, with 2.72%, are “an education faculty which is preferred by promising students” and “a faculty which not only the students but

also its staff is proud of”. The participants clearly direct the Education Faculty of PAU to “qualification” and “organizational culture” in future. The eighth most striking images, with 2.33%, are “a scientific faculty”, “a model faculty” and “a university of pedagogy”. With the last one, the participants express the desire that they would like to regard the Education Faculty of PAU as a “university” in the future. The ninth most striking images, with 1.94%, are “a faculty of academic essence” and “a well-known faculty through its teachers training service and academic studies”. With these images, the participants express the desire that Pamukkale University, Education Faculty should be an authority in “teachers‟ training” and “scientific studies”. The tenth most striking image is, with 1.55%, “a faculty associated with society”. With this image, the participants express the desire that the Education Faculty of PAU should be open to society. DISCUSSION The current images The current images are critical for indicating how the internal and external participants consider the current trend and common view. According to their perception, the most striking three images which define the current trend are orderly as follows: “an education faculty which trains teachers”, “a faculty with an effort to develop itself” and “one of the education faculties which trains qualified teachers”. According to the participants, these positive functions of the Education Faculty of PAU are quite

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important so that the faculty can establish a stable position in its mind. The desired images The desired images are also critical for indicating how the internal and the external participants would like to see this institution in future, by which the desired picture could be cleared. According to the participants, the most striking three images which define the desired images for future are orderly as follows: “training teachers who will be more qualified in every aspect”, “a faculty that is problem-free in infrastructure” and “a well-known faculty in both national and international arena”. According to the participants, these positive functions of the Education Faculty of PAU could be quite important for futuristic picture and what the target point must be. Regional images Certain institutions could care more about regional activities and the existing image could only be “regional”, too. Pamukkale University Education Faculty in Denizli City from the very first day has always been known to share its studies with certain social organizations in the city. According to the participants, the seventh image (1.65%), which is among the current images, is, “an accelerative function in Denizli”; the tenth images (0.41%) are “a cute faculty”, “the oldest faculty in Denizli”, “the most crowded faculty in Pamukkale University”, “one of the oldest faculties in Aegean Region”, “a casual institution in Denizli” and “academic aspect of the city”. The fourth desired image (7.39%) is, “a respected faculty for teachers‟ training in the region”, while the thirteen images (0.38%) are, “a source of enlightenment in Denizli” and “an effective leader in education service in the city”. The key decision makers in the Education Faculty of PAU are able to replace the fourth image, that is „‟a respected faculty for teachers‟ training in the region‟‟, with the most shared one by the participants. The third most striking image (8.56%) is, “being one of the well-known education faculties in int‟l arena as well as in Turkey‟‟.

exam” and the tenth images (0.41%) are “an established institution of YOK” and “a faculty which can compete with other education faculties”. On the other hand, among the desired images, the third one (8.56%) is, “being one of the well-known faculties in Turkey” and the thirteenth ones (0.38%) are “a faculty in Kemalist and Republican wing” and “freedom and future of Turkey”. These images are clearly “national ones”. The key decision makers in the Education Faculty of PAU are able to replace the third desired image, that is „‟a respected faculty in the country” with the most shared one by the participants. International images Institutions, with the globalization process, have had to lay more emphasis on opening a global window in order to take their place in global arena. Among education institutions, high-education units have particularly had to act internationally in students, technology, communication, production and cooperation dimension. As education institutions, education faculties are supposed to be more successful than other organizations in complying with winds of change in the society. Since 2004, education faculties in Turkey have perpetually attended a program called Erasmus which is a part of Socrates‟ program with the aim of pulling up education faculties‟ qualifications to European standards (Ustel, 2005; Aslan, 2005). For this reason, there is cooperation between Turkish and European education faculties. In that way, PAU Education Faculty has also signed certain agreements and mutual cooperation plans on education with certain education faculties in the Europe continent. According to the participants of the PAU Education Faculty, the following judgments are considerably striking: among the current images, the most agreed ninth one, with 0.82%, is “a weak faculty in researches, education and training service according to global scientific criteria”, while among the desired images, the most agreed third one, with 8.56%, is “one of the globally respected faculties”. The most agreed thirteenth images with 0.38% are “having an international fame” and “being attentive to international projects on education which points to us”. The key decision makers of PAU Education Faculty are actually supposed to put forward these images (that is being one of the globally respected faculties”, which can be realized in the faculty.

National images The institution successfully performs nation-wide duties. Besides, it works out pre-determined plans. As in other education faculties in the country, the Education Faculty of PAU also trains teachers, with an orientation process, in the branches which the country is in need of. According to the participants of PAU Education Faculty, among the current images, the ninth one with 0.82% is, “the faculty whose students are more successful in KPSS

A university of education Teachers are trained in certain education faculties which are part of universities, academies or Denmark Education University, Island Education University, the Education University of Harkov Skorovoda in Ukraine, Professional Education University of Nijmegen in Holland, the Education University of Anqing in P.R.C., the

Erdem

Education University of Hokkaide in Japan (Kocabaş, 2005; METU, 2006). In our country, teachers are also trained in education faculties which are part of universities or academies by exposing them to a certain process of orientation. There have been disputes in our country from time to time about “education universities” in teachers‟ training instead of education faculties (Eşme and Karaçay, 2002). The conversion of education faculties to “education universities” will be a new step and a distant process and perspective in teachers‟ training. According to the participants of PAU Education Faculty, among desired images, the most striking eighth one with 2.33% is “a university of pedagogy”, and it clearly points out “a university of education”. Like those in any country of the world, education faculties in Turkey have also undertaken mission to maintain vocational training and education to bring up qualified teachers who will be employed in education institutions after graduation. To discriminate the Education Faculty of PAU which serves in preschool teaching from other education faculties of universities, it seems crucial to establish an “organizational image” which is native to itself. In that way, the key decision makers in the PAU Education Faculty should also ensure the contributions of internal and external shareholders. This is because such an “organizational image” established with effective contribution of these internal and external shareholders will surely be considered as “shared (collective) organizational image” which could act as a guide both to draw a futuristic route for the organization and to provide effective participation of the internal and external shareholders in the course. In addition, it is indisputable that the “organizational image” which is based on the mentality of participation will be more realistic and inspiring and lead to internal-external participation.

REFERENCES Abratt R, Mofokeng TN (2001). Development and management of corporate image in South Africa”, Eur. J. Mark. 35(3/4):368-386. Aktan CC (1997). Change and new global administration, İstanbul: MSS, Publishing p.257 Aktan CC (2006). Civil merit, moral objection and a pacifist approach to incorrect applications in organizations: Whistleblowing, Mercek th Magazine, Retrieved June 4 2008 from http://www.canaktan.org/yonetim/whistleblowing/aktan-whistle.pdf . Aslan B (2005). High education service in European Union and of quality standards in higher education. J. Natl. Educ. 33(167):386-393

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Aydın M (1998). Administration of education. Ankara: Hatiboğlu Publishing House Ayhan DY, Karatepe O (2000). ”Flexible factors in institutional image: An ampiric evaluation”, The leeflet of the 5th marketing conference, Antalya: The University of Mediterranean. Başaran LE (1996). Administration of education. Ankara: Yargıcı Publishing House Bryson JM (1995). Strategic Planning for Public and Nonprofit Organizations (A Guide to Strengthening and Sustaining Organizational Achievement), San Francisco, Jossey–Bass Publishers, Revised Edition. Cameron K (1986). Effectiveness as a Paradox: Consensus and Conflict in Conceptions of Organizational Effectiveness. Manag. Sci. 32(5):539-553. Çetinkaya AN, Gülmez TS (1999). A planned development model (A planned development of school), Ankara: Publishing House of National Education, EARGED Eşme I, Karaçay T (2002). Teachers‟ training a general revision and a new model suggestion (report), Ankara: MEB. Gadot V (2003). “Politics and image in the organizational landscape: An empirical examination amongst public sector employees”. J. Managerial Psychol. 18 (8):764-787. Herman RD, Renz DO (1998). Nonprofit organizational effectiveness: Contrasts between especially effective and less effective organizations, Nonprofit. Manag. Leadership 9(1):23-38. Karaman A (2005). Vision management, İstanbul: IQ Culture and Art Publishing, No: 137. Kocabaş A (2005). Dutch education system and an active model in teachers‟ training. J. Natl. Educ. (special issue), 33(167):16-28. Kozlu C (1996). Vision researches for Turkish mirage and Asian Models, Ankara: Türkiye İş Bankası Publishing, No:335. Laura MR (2005). Changing Faces: Professional Image Construction in Diverse Organizational Settings. Acad. Manage. Rev. 30(4):685-711. Nguyen N, Leblanc G (2002). Contact personnel, physical environment and the perceived corporate image of intangible services by new clients. Int. J. Serv. Ind. Manag. 13(3):242-262 Ozden Y (1998). Convention in education (new values and existence), Ankara: PEGEM. Pat M (2001). The ones who are of dreams could never fall into sleep, (Translated: Berat Çelik), İstanbul Sistem Publishing. Peltekoğlu, F. B. (2001). What is Public Relations, Istanbul: Beta Publishing Inc. Redhouse (1998). English-Turkish Dictionary İstanbul: Sev Publishing House ODTÜ. (2006). EQUIPE plus project partners, Report by continual education center, 1: 9 Senge PM (1993). The fifth discipline (Translated: Ayşegül İldeniz, Ahmet Doğukan), İstanbul: Yapı Kredi Publishing. Thibodeaux MS, Favilla E (1996). Organizational Effectiveness and Commitment through Strategic Management. Ind. Manag. Data Syst. 96(5):21-25 Toktamısoglu M (2001). An exclusive in blue-jeans: The synthesis of mind and spirit in business, Ankara: Medicat Publishing. Ustel EL (2005). European guide of teachers Ankara: MEB (Ministry of Education).

Full Length Research Paper

Accounting information systems in the fast food industry: A valuable tool for small business survival Thembelihle Allah, Puleng August, Siphamandla Bhaza, Tinashe Chigovanyika, Unathi Dyan, Tinashe Muteweye, Mandisi Ngcoza, Neliswa Tshiwula, Vuyiseka Qambela, Yanga Vooi and Juan-Pierré Bruwer* Faculty of Business, Cape Peninsula University of Technology, PO Box 625, Cape Town, 8000, South Africa. Accepted 22 November, 2012

Prior research has shown that small businesses make limited use of financial information which has a distinct and direct effect on the performance, profitability and overall success of these entities holistically. It has been reported that up to 90% of small businesses fail within a period of 5 years. It is also evident that over 60% of small medium and micro enterprises (SMMEs) make use of financial information systems which have to be updated manually on a periodic basis. From this dispensation, the perception was formulated by the authors that small businesses are success adverse as a result of making inadequate use of accounting information systems. The main aim of this study was to determine to what extent small businesses make use of accounting information systems. In essence, this empirical research which fell within the positivistic research paradigm and responses were gleaned from 30 owners and/or managers of small businesses, operating in the fast food industry. Furthermore these entities also operated in the Cape Metropole and were targeted by means of purposive sampling. All respondents were assured of confidentiality and anonymity, and all responses were of a voluntary nature. Descriptive research was utilised to extract relevant findings, which were followed by relevant conclusions. Key words: SMME, accounting information systems, success, profitability, sustainability. INTRODUCTION Small businesses and small business success Small businesses in South Africa account for more than 56% of private sector‟s employment and 36% of the national Gross Domestic Product according to DTI (2008). According to Shah and Khedkar (2006), SMMEs play a catalytic role in the development of any country as they are described as the „engines of growth‟ in developing and transition economies, accounting for a significant proportion in manufacturing, exports and employment, and are deemed as major contributors to the national GDP. Despite the aforementioned, Brink et al. (2003) express the view that the survival rate of small businesses is fairly low in South Africa as less than 50%

*Corresponding author. E-mail: BruwerJP@cput.ac.za.

of newly established businesses survive beyond five years. Various factors are perceived to contribute to the high failure rate of these enterprises, including limited financing opportunities, legislation, inflation, interest rates and market fluctuations. Among this list of factors is the inadequate utilisation of Accounting Information Systems (hereafter referred to as AIS). By adequately using AIS it is possible to assess the risk of some operations and/or predict probable future earnings with sophisticated statistical software applications with the main intention to enhance business operations. Deloitte Touch Tohmatsu Limited (2007) conducted a study whereby the power of AIS has been tested and tried in larger companies with great success. In essence it was found that the AIS generated information which, in turn, benefited management in making proper decisions to enhance their firm‟s

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overall survival. The same AIS, according to the previous authors, could be implemented in SMMEs. AIS are also to record financial transactions of an organisation by means of combining methodologies, controls and accounting techniques with relevant technologies (Berisha-Namani, 2009). This type of system is used to track transactions and provides internal reporting data, external reporting data, financial statements, and respective trend analysis for specific „time-intervals‟ (information for relevant decision-making). Small businesses require effective information systems to support and to deliver information to the different internal users to make the correct business decisions, but more often than not a limited number of these entities actually make use of such a system (Bruwer and Watkins, 2010). LITERATURE REVIEW Small business success Small businesses play an important role in the stimulation of the economy through means of creating jobs and eliminating the poverty (Joubert et al., 1999). According to Luiz (2002), small business survival can be considered as a vital indicator of economic prosperity as these entities have a remarkable capacity to absorb labour; absorbing well over 50% of the South Africa‟s total employment. Bloom (2009) further states that unfortunately small businesses survival in South Africa leaves much to be desired. The latter is affirmed by Baron (2000) when stating that an estimated 70 to 80% of start-up small businesses in South Africa fail with their first five years of existence. Du Plooy et al. (2005) explains that the survival (and business success in essence) of small businesses can be measured by means of performance measures which include: financial performance measures (for example, profitability, liquidity, solvency, etc.) and non-financial performance measures (for example, customer basesize, employee satisfaction and customer satisfaction, etc.). The term „business success‟ has different meanings to different people as it can also be viewed in the light of a business owner achieving his/her personal objective(s) through means of a business, delivering superior customer service or having a sound atmosphere within the respective business venture (Femsa, 2007). Unfortunately, it is Adeniran and Johnston (2012:3089) who state that South African SMMEs have limited capabilities in terms of business success and are adversely affected by competitive forces of micro economic factors among other factors.

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survival and success pertain to that of macro-economic factors and micro-economic-factors. Economic factors influence the state of the economy and have both longterm and short-term effects thereon. According to Mohr and Fourie (2004:11-12) economic factors can be subcategorised as follows: macro economic factors and micro economic factors. These sub-categories are briefly expanded upon. Macro economic factors: Mohr and Fourie (2004:11-12) explain that macro-economic factors are external factors around a business that affects it directly. Businesses have limited/no control over such factors. Popular macro economic factors, that affect business survival (of both large and small entities) to a great extent, include crime, currency, fluctuating market conditions, political changes, unemployment, interest rates and exchange rates. The global financial crisis can be regarded as a macro economic factor which adversely affected the economic landscapes of South Africa, and Germany during from 2010 onwards. Essentially other macro economic factors to the likes of inflation rates and unemployment rates, among other, were largely affected by one major macro economic factor, namely that of the global economic crisis. Micro economic factors: Mohr and Fourie (2004:11-12) explain that micro-economic factors are internal factors inside a business, which affects it. Popular micro economic factors, that affect business survival (and business success) to a great extent include, management skills, business skills, financial management skills, business knowledge, accounting skills, financial difficulties and overhead costs. Brink et al. (2003) make mention that other micro economic factors which influenced the survival and success of small businesses include financial problems, the lack of funding, insufficient bookkeeping skills, expensive operating expenditure, poor cash flow management and bad debts. Jooste (2008) is of the opinion that small business survival is also adversely affected as a result of monetary issues, limited exposure, lack of sales, lack of competent staff and the negligence of financial performance measures. All in all these economic factors need to be managed effectively as they influence business decisions. To ensure that a well-informed business decision is made by management of small businesses, it is recommended that Accounting Information Systems are deployed. Business decisions, AIS and its importance

Factors affecting small business success Prior research has shown that factors affecting SMME

Sharkas (1974) is of the opinion that majority of small businesses fail due to inappropriate business decisions being made. In fundamental nature business decisions

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should be made with information (pertaining to the relevant business venture) which is accurate, reliable, and valid. One way to ensure that adequate business decisions are made is through means of utilising AIS. Femsa (2007) further states that AIS are capable of analysing and interpreting financial data to produce important information for decision-making. From a technological dispensation, AIS is available for use in an electronic format, which can provide all relevant stakeholders with „real-time-information‟ on demand. AIS are regarded as tools which, when incorporated into business process, help in the management and control of business related activities in the firms‟ economic and financial areas, by providing information for better decision-making. Sharkas (1974) explains that AIS should be simple, flexible, self-explanatory, based upon conventional accounting practices and capable of monitoring information for control as well as arrangements for planning and budgeting. In essence AIS should also provide an affordable, comprehensive solution for managing an entire business from sales and customer relationships to financials and operations. Rootman and Kruger (2010) collaborate the importance of AIS in the following extract: “SMMEs need to be familiar with their business functions as these functions are essential towards a firm‟s overall performance measured by sales, profits, rates of return, customer satisfaction and customer retention. It is this important for a firm‟s owners and managers to be able to adjust and manage these functions when global economic changes occur”. Rootman and Kruger (2010) further make mention that the lack of such systems can lead to high lead times in the business process, high cycle times in business transactions and poor utilisation of business resources. With AIS, small businesses can streamline operations, act on timely and complete information, and accelerate profitable growth. Briggs et al. (2003) raise the opinion that AIS should provide solutions (information which will lead to better decision-making) that are custom-made for small businesses, which should allow them to operate efficiently and to save on costs by managing more effectively. This is done by recording all transaction in a common database that is used by users throughout a business, by means of providing performance indicators to make the best possible business decisions. In essence, all accounting systems are designed with the main intention to provide information to decision-makers to assist them in their decision making (Sowden-Service, 2006). RESEARCH DESIGN This research was empirical in nature as it involved a practical involvement with specific research subjects as predetermined by the authors. Moreover, this research was deemed as a descriptive research as it describes a specific phenomenon at hand (Collis and Hussey, 2009). This research study also fell within the positivistic

research paradigm as the research was quantitative in nature.

Data collection Data were collected through means of questionnaires by taking into consideration a sample size of owner-managers of small businesses that operated in the fast-food industry within the Cape Metropole. Apart from the latter, SMMEs targeted also had to adhere to the following delineation criteria: 1. SMMEs should have been in existence for at least 1 year. 2. SMMEs owner and/or manager must be actively involved in business operations. As the actual size of the population was unknown, an attempt was made to gather information on the identified research problem. For this reason a total sample size of 30 SMMEs was chosen for this study. The study required authors to make use of non-probability sampling (purposive sampling), with the intention to glean rich data for data analysis purposes. The data collection tool used was that of a questionnaire which consisted mostly of close-ended questions, and Likert-scale questions. All data collected were analysed accordingly through means of descriptive statistics

RESEARCH FINDINGS AND DISCUSSION Respondents were specifically asked which AIS they make use of on a regular basis. Approximately 28% of respondents revealed that they make use of technological AIS, despite the fact that the phenomenon of information technology has been in existence for over 10 years. The collaborated view of respondents, pertaining to the afore-going question, is evident in Table 1. It is clear from Table 1 that the bulk of respondents made use of manual systems, meaning that all relevant information stemming from accounting data (to make effective decisions) had to be calculated on a manual, periodic basis as opposed to having real time information at their disposal. Respondents were further asked what information they normally glean from using their current AIS (be it manual or automatic). The summary of responses is evident as shown in Table 2. As accounting information generally stems from past events, it was interesting to note that accounting information is mostly used for predictive purposes in the sense of budgets (79.17%). The second most important reason why accounting information were used, was for controlling purposes in the sense of controlling stock (77.5%) and cash flow (74.17%) When respondents were asked how their AIS add value to their business, the following dispensation emerged in Table 3. From Table 3, it is evident that the accounting information at the disposal of management‟s fingertips is of some value (on average 66.53%) to their respective businesses.

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Table 1. The utilisation of AIS by respondents.

IAS used Pastel SAP MRP Software Quick Books Vision Point 2000 Business Version 32 e-Business Suite MS Office (Excel) Manuel System

Make use of (%) 6.5 0.5 2.0 11.5 4.0 2.0 2.0 18.5 53.0

Table 2. Uses of AIS in respondents‟ businesses.

System used for Billing Stock control Production planning Budgeting Cash flow Calculating taxation

Frequency (%) 69.17 77.50 65.00 79.17 74.17 71.67

Table 3. How AIS add value to respondents‟ businesses.

Add value by means of Feedback on the status of an order Saving time (doing books) Helps circulate information better Measure business growth Consolidate financial statements better Helps with accurate re-ordering level

Frequency (%) 64.17 63.33 63.33 67.50 71.67 69.17

LIMITATIONS OF THE RESEARCH This research only took into consideration the perception of small business enterprise owners and/or managers which operated in the fast moving consumer goods industry in the Cape Metro pole. In essence, the respondents also had to adhere to a predetermined set of delineation criteria. Both time and monetary constraints played an imperative role in the formulation of this research study as quantitative data had to be collected in a relatively short period of time (2 months). ETHICAL CONSIDERATIONS All respondents were assured of confidentiality and anonymity and all respondents were assured safety from

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any harm. Furthermore, all responses were voluntary in nature and respondents were informed that they could withdraw from the study any time so they wished. Conclusion Despite the improvement and advancement in the field of information technology, it is clear that small businesses are reluctant to adapt to new technology as the bulk of SMMEs still make use of manual accounting information systems. AIS are perceived as critical in establishing „solid ground‟ in the business realm however these entities lag behind in the implementation of these systems compared to large companies (Deloitte Touch Tohmatsu Limited, 2007). The afore-mentioned situation is largely attributed to economic factors, both macro and micro as the ability of small businesses to realise their goals depends on how well they acquire, interpret, synthesise, evaluate and understand accounting information at their disposal, in order to manage and/or control these economic factors. REFERENCES Adeniran T, Johnston K (2012). Investigating the dynamic capabilities and competitive advantage of South African SMEs. Afr. J. Bus. Manage. 6(11) pp. 4088-4099. Baron C (2000). Brilliant ideas but spectacular flops. Sunday Times Business Times: 1, 9 Apr. Berisha-Namani M (2009). The Role of Information Technology in Small and Medium Sized Enterprises in Kosova. Fulbright Academy 2009 Conference. Bloom K (2009). South Africa: Advancing or inhibiting entrepreneurs. Entrepreneur, 36:62, July. Briggs R, De Vreede G, Nunamaker J (2003). Special Issue: Information Systems Success. J. Manag. Inf. Syst. 19(4):5-8. Brink A, Cant M, Ligthelm A (2003). Problems experiences by small businesses is South Africa. Paper presented at the Annual conference of Small Enterprise Association of Australia and New Zealand, University of Ballarat, Australia. Bruwer J, Watkins J (2010). Sustainability of South African FMCG SMME retail businesses in the Cape Peninsula. Afr. J. Bus. Manage. 4(16):3550-3555. Collis J, Hussey R (2009). Business Research: A practical guide for undergraduate and post graduate students. Hampshire: Palgrave Macmillan. Deloitte Touch Tohmatsu Limited (2007). In the Dark II: What many boards and executives STILL don’t know about the health of their businesses - a survey by Deloitte in co-operation with The Economist Intelligence Unit. Deloitte Touch Tohmatsu Limited. New York: DTT Global Office Creative Studio. DTI (2008). Department of Trade and Industry – Annual Report [Online]. Available from: http://www.info.gov.za/view/DownloadFileAction?id=111951 [Accessed on 08/10/2012]. Du Plooy S, Goodey H, Lötter W, Nortjé D, Meyer C (2005). X-Kit Undergraduate – Financial Accounting. Cape Town: Maskew Miller Longman (Pty) Ltd. Femsa (2007). How do we build a successful business model? [Online]. Available from http://www.femsa.com/en/assets/006/17646.pdf [Accessed on 08/10/2012]. Jooste B (2008). SMEs are feeling the pinch. Available from: http://www.iol.co.za/news/south-africa/smes-are-feeling-the-pinch1.419931 397975 [Accessed: 08/10/2012].

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Joubert C, Schoeman N, Blignaut J (1999). Small, Medium and MicroSized Enterprises (SMMEs) and the Housing Construction Industry: A Possible Solution to South Africa's Socio-Economic Problems. South Afr. J. Econ. Manage. Sci. 2(1):21. Luiz J (2002). Small business development, entrepreneurship and expanding the business sector in a developing economy: the case of South Africa. J. Appl. Bus. Res. 8(2):53–68. Mohr P, Fourie L (2004). Ekonomie vir Suid-Afrikaanse studente. Pretoria: Van Schaik Publishers. Rootman C, Kruger J (2010). Adapting SMME Business Functions During Economic Turmoil. Acta Commercial 2010.

Shah T, Khedkar A (2006). Case on successful SME financing – SIDBI. Indian Institute of Planning and Management (IIPM), Ahmedabad. Sharkas W (1974). The mini information system – an aid to small business survival. J. Small Bus. Manage. 1974, pp. 39-41. Sowden-Service C (2006). Gripping GAAP. Durban: CSS Publishers.

Full Length Research Paper

Credit risk management of commercial banks in Iran; Using logistic model Hamid Sepehrdoust* and Adel Berjisian Department of Economics, Bu-Ali-Sina University, Hamedan, Hamedan Province, Iran. Accepted 19 December, 2012

The observed crisis and profitability decreases in banking system are mainly because of the inefficiency in credit risk control and that's why, utilization of customers' ranking system is the most important tool that is required for managing and controlling the risk. The goal of the study was to present an applied model for credit scoring of real entity customers of banks with reliance on statistical information of credit customers of Parsian Bank in Iran. For this purpose the logistic regression model is used to analyze credit ranking and financial scoring of bank’s customers based on their previous and current data record like; job stability, collaterals, income and some other main indicators for estimating non-default probability of facilities offered to each customer. The results of the model estimation showed that non-default probability of facilities have positive relation with variables amount of collaterals received from customer, monthly income amount of the customer, the status of applicant for taking facilities such as place of residence (be owner or tenant of the applicant), the age of applicant for taking facilities, occupational status of the applicant as stability and educational level of the applicant for taking facilities and have negative relation with amount of paid facilities to the customer and payback duration of granted facilities to the applicant. Key words: Risk management, credit risk, commercial bank, logistic regression. INTRODUCTION Financial sector is the backbone of economy of a country. It works as a facilitator for achieving sustained economic growth through providing efficient monetary intermediation. A strong financial system promotes investment by financing productive business opportunities, mobilizing savings, efficiently allocating resources and makes easy the trade of goods and services (Jah and Xiaofeng, 2012). Banks as institutions that are looking for maximum profitability have responsibility for increasing the value of shareholders‟ equities on one side and attracting the customer satisfaction in the other side. The role of the banking industry is crucial in the pattern and pace of economic growth and development (Mogboyin et al., 2012). As it is well articulated and established in the literature (Demirguc-Kunt and Huizinga, 1997), banks occupy a position in the financial system that supplies

*Corresponding author. E-mail: hamidbasu1340@gmail.com.

the credits need of the economy. Both theoretical and empirical evidence suggests a positive correlation between real economic growth and banks assetsespecially credits (Alashi, 1991). On the other hand since a considerable part of banks‟ income are resulted from absorbing resources of investors and granting facilities from the credits, therefore, they are always encountering with an important and challengeable issue of credit risk at the time of granting facilities. Many studies show that, evaluation of banking system customers risk in Iranian banks relies on expert's judgment and fingertip rule. This type of evaluation resulted in high rate of postponed claims (Salehi and Mansoury, 2011). Risk is a concept that denotes a potential negative impact to some characteristic of value that may arise from a future event (Mojtahedi et al., 2009), or one can say that exposure to the consequences of uncertainty constitutes a risk. In everyday usage, risk is often used synonymously with the probability of a known loss. Risk communication and risk perception are essential factors

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foe all human decision making (Cooper et al., 2005). The meaning of credit risk is non-receiving cash flows of granting facilities by banks that exact timely evaluation and examination thereof, especially for average and small facilities and this requires a systematic method. Credit risk management from the primary stages of granting facilities up to the examination time of application for receiving facilities are performed by credit experts and also supervision process over granting credit. In contemporary organizations, risk management has become established as a particular method and practice of viewing and attending to such risks. As a social and cultural phenomenon, in itself, it assumes and prescribes particular views of the nature, forms, degrees and methods of dealing with risky businesses (Giddens, 1999; Power, 2008). In fact, it is required that banks examine the applicant‟s ability in payback of obligations and estimating the probability amount of non-fulfillment of obligations in future (non-default of facilities paid) before any payments to them through credit risk management, customers‟ ranking and scoring instruments toward decreasing credit facilities risk. According to Basel committee, credit risk is most simply defined as the potential that causes a borrower or counter party not to meet its obligations in accordance with the agreed terms (Gumparthi et al., 2011). The reason behind it is that when the facilities are not recovered, the loss resulted from non-default created and therefore, bank must consider the proper coverage due to loss existence probability. Credit scoring is an instrument used to manage the risk that takes action toward ranking of customers by using quantitative statistics and information of facilities applicants and also statistical techniques (Mester, 1997). With the right credit scoring model, the bank can evaluate any new or existing profiles of customers accurately, enabling them to minimize potential risks that might be looming. Credit rating systems is used to categorize the risk‟s worthiness of a person as high, medium or low. This allows for decision support by accepting, extending or rejecting any credit request (Sheng and Ying, 2011). Credit scoring models divides the credit applicants into two: good and bad credit groups. Good credit group is a group that payback their dues timely and bad credit group is a group that will probably not pay their dues (Lee et al., 2002). The Basel committee has defined credit rating as a „summary indicator‟ of the risk inherent in individual credit, embodying an assessment of the risk of loss due to the default of a counter party by considering relevant quantitative and qualitative information. Credit rating, through the use of symbols, can be defined as an expression of the opinion about credit quality of the issuer of securities with reference to a particular instrument. Rating is a measure of credit risk and is only one element in investment decision making (Gumparthi et al., 2011). Some of the benefits of credit scoring system are shortening the granting facilities process, more quick

performance and reduction of credit risk toward responding increase in demand for credit products of bank. Credit scoring has obvious benefits in relation to decreasing the required time for approving facilities that causes increase in its usage in evaluating facilities. This method decreases the required time in facilities approving process. Commercial banking union found that traditional process on facilities approving on the average is 12.5 h for each small commercial facility (Allen, 1995), while in past the facility takers spend more than two weeks in this regard. Credit scoring can decrease this time to less than one hour. Therefore, Barnet Bank in its annual report confessed that the time spending on approving facilities for real entity customers or small commercial firms that was three or four weeks in the past, could be decreased to less than three hours by using the above-mentioned system (Lawson, 1995). Leonard (1995) in his study on a Canadian Bank found that after using this system for 18 months, facilities approving time that was nine days before stating the use of credit scoring system decreases to three days. Of course, scoring is vastly using in mortgage issues since the Federal National Mortgage Company encourages mortgage facilities grantors to use credit scoring system (Dezube, 1996). The goal of this study is presenting an applied model for credit scoring of real entity customers of banks with reliance on statistical information of credit customers of Parsian Bank. LITERATURE REVIEW The economic literature of 1950s, defines the word risk and non-assurance as knowledge related to occurrence and/or non-occurrence of event. From years relevant to 1980s henceforth, risk and non-assurance get separated and risk is applied to the condition that there was more than one event for each decision making and the occurrence probability for each event not to be distinct and definite (Greuning and Brajovice, 2003). Risk in banking defines as fluctuation or standard deviation of cash flows of a bank and its goal is augmenting shareholders' equities through acquiring ability toward achieving commercial and financial goals and maximizing the output after considering the risk. A systematic process of risk management is divided into risk identification, risk analysis and risk response (Li and Liao, 2007; Duijne et al., 2008). Risk identification requires recognizing and documenting the associated risk. Risk analysis examines each identified risk issue, refines the description of the risk and assesses the associated impact. Finally, risk response identifies, evaluates, selects and implements strategies in order to reduce the likelihood of occurrence or impact of risk events (Mojtahedi et al., 2009). In banking industry, risk is classified into four main groups including operational risk, commercial risk, event risk and financial risk. Financial

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risks are divided into two different risk groups: first group includes risks relevant to fluctuation in interest rate, currency and market rate, and second group includes pure risks as liquidity risk and credit risk and in the case of mismanagement, these two groups directly causes bank's loss (Joel, 2009). Credit risk means a risk resulted from inability of facility receiver in payment of the obligations to bank and/or risk of non-returning of original and profit amount of investment which caused decrease in current value of bank‟s assets (Altman, 1998). Basel Committee working under the supervision of international settlement bank of Swiss for assimilating banking rules, defines credit risk as potential probability in which facility receiver get incapable toward fulfillment of its obligations against bank within certain duration (BCBS, 2000).The origin of creation the credit risk may be observed in compilation of three risks that are respectively include: default risk, recover risk and exposure risk (Joel, 2009). Default risk or non-default probability of debts by the loaner is a loss if occurred, threatens the bank. Therefore, credit risk rooted in probability in default or non-default of facilities by facility receiver and its occurrence probability fluctuate in the range of zero and one. Payment default informed by a bank institution when scheduled installments not to be paid within a certain duration after due date. Default may be economic and occurred when economic value of assets or the current value of expected future cash flows become less than the value of non-deposited debts. Loss resulted from default is pending on default definition and default definition is pending on estimating default probability (resulted from past data). Ranking agencies consider the default event after passing three months from due date of a scheduled payment and no payment performs during this period, therefore, theoretical models of credit risk which propounded after Merton model (Merton, 1974), apply economic default definition for measuring of losses amount. It is noteworthy that, different default events necessarily not to create immediate loss but increase the probability of permanent default or bankruptcy. Default risk measures through the probability of occurring default within certain duration. Of course, default probability may not be measured directly, but must be used from statistics collected from default in the past that credited from system interior. Usually, previous statistics of default and ranking of agencies are proper and accepted standards of default which uses as a symbol of default risk. In the case of non-accessing of agencies‟ ranking, we can use estimation about default probability based on specifications of some applicants (real or legal). Followed by John Murray in 1909 and ranking of credit risk on bonds, some researchers realized approximation between bonds and paid facilities and examined the measurement of non-default risk of original and interest of facilities (Kiss, 2003). In this regard one may point out to the Fisher‟s study (Fisher, 1936) focused on the fundamentals of

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credit scoring method as the first evaluation system of credit demand. Dunham (1938) engaged in his studies for designing a credit risk system, used five important standards including existing condition, revenue conditions, financial conditions, guarantors or Collaterals and facilities payback information of other banks. Considering these factors, the objective of credit scoring models is to assign credit applicants to either a “good credit” group that is likely to repay financial obligation or a “bad credit” group with high possibility of defaulting. Therefore, credit scoring problems are basically a classification problem (Johnson and Wichern, 2002). Accurate credit quality estimation systems will substantially improve the profitability of the banking institutions (Thomas et al., 2002). Many studies have been conducted in this regard as follows. Durand (1941) in his studies examined which variable has been important from facility providers‟ point of view and which specifications are statistically considerable for credit risk management. The most important variables examined included: applicant‟s job, job stability, residing years at the current place, bank accounts, saving and life insurance policies, sex and monthly installments amount that the applicant must be paid. Most experts know Durand as founder of current credit scoring system. Isaac – Fair Institute (1996) found the necessity for application and development of credit scoring systems of credit facilities‟ customers that needs continuous collecting and updating of data. Bogess (1967) for the first time in an article suggested using computer for developing scoring models, evaluation of mass facilities products and increasing algorithm-writing skills which caused possibility for examination and studying a bog data collection from different point of views. He examined complicated tools of multiple criteria statistical methods which lead to creating much clearer models. Jah and Xiaofeng (2012), compared the financial performance of different ownership structured commercial banks in Nepal based on their financial characteristics and identify the determinants of performance exposed by the financial ratios for the period 2005 to 2010. The results show that public sector banks are significantly less efficient than their counterpart are; however domestic private banks are equally efficient to foreign-owned (joint venture) banks. Owojori et al. (2011), managed to provide an overview of risk management practices in insured banks in Nigeria. The employed trend analysis of variables to derive its results and concluded by pointing to some steps that would help to preserve the banking system and sustain its impact on our fragile economy. Sheng and Ying (2011) studied the use of batch and incremental classifiers such as logistic regression, neural networks and C5 to obtain the best classifier to be used for improving the predictive accuracy of consumer's credit card risk of a bank in Malaysia. Results showed that C5 emerged consistently as the technique that have generated the best models with an average predictive accuracy as high as 94.68%. Huang

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and Wu (2011), studied the customer credit quality assessment for banking industries, by using boosting and genetic algorithms (GA). The empirical results indicated that GA substantially improves the performance of underlying classifiers. Considering robustness and reliability, combining GA with ensemble classifiers is better than traditional models. Zribi and Boujelbene (2011), aimed to examine the determinants of bank credit risk in ten commercial banks, taking into account both macroeconomic factors and microeconomic variables that are likely to influence credit risk. Overall, the results show that the main determinants of bank credit risk in Tunisia is: ownership structure, prudential regulation of capital, profitability and macroeconomic indicators. The empirical results show that the public ownership increases the bank credit risk. Other authors that have written in the field of designing a risk measurement model include Beaver (1966), Altman (1968) and Morgan (1994). The importance of increasing the degree of credit risk in Iran also has led to studies in this area. Zekavat (2003) in a research inspired by Altman model, examined credit risk models of customers of Tosea Saderat Bank. Mansouri (2003) in his study used regression and neural networks models for evaluating customer‟s credit risk of Mellat Bank. Arabmazar and Roueintan (2006), made an attempt to evaluate the credit risk of legal customers of Keshavarzi Bank Iran and examined qualitative and financial information of a 200-member random sample of companies which received credit facilities from Bank. Safari et al. (2010) took action toward presenting a model for credit ranking of legal customers of Tejarat Bank in Iran. Salehi and Mansoury (2011), have studied Iranian banking credit risk and formulated an intelligent model by neural network and logistic regression to evaluate individual customers' credit risk without prejudice and discrimination. The result revealed that neural network and logistic regression have the same ability in predicting customer credit risk. The main objective of the present study is to present a comprehensive model for credit scoring of real entity customers of banks with reliance on statistical information of credit customers of Parsian Bank in Iran.

MATERIALS AND METHODS Data required for credit scoring of real customers have been collected from statistical information of Parsian Bank in Iran during the period of 2008 to 2010. Informative data are usually provided from data relevant to good pay and poor pay applicants. For example; in a similar study and through 5-year data of small commercial facilities less than 5 million dollar, a sample consist of data relevant to more than 5000 facility applicants related to 17 USA banks for creating a scoring model were examined (Asch, 1995) and variables used in this study are derived from five C (Character, Capacity, Capital, Collateral and Condition) model and based on five major standards for evaluating and granting regulated facilities. According to the five C model, facility providers for evaluating facility granting to its credit customers, for scoring and

decision making makes use of a data bank of previous records of customer (Dunham, 1938). Type of used information in this model is pending on different conditions. This model used five major standards for evaluating facility granting to the customers. These include: 1- Character: is a standard for recognizing commitment rate of applicant for payback of credit facilities. Attended items include what was the credit background of customer and if he has ever been bankrupt? Whether previous creditors have been referred to the court? 2- Income capacity: is a standard for estimating income authority of the applicant. This standard evaluates financial authority of real or legal entity and answers to this important question that if the applicant has authority for payback of installments relevant to the applied facilities? 3- Capital: is a standard for analyzing capital and assets of the applicant which indicates customer‟s authority in payback of facilities. 4- Collateral: is a standard for recognizing type of free assets able to putting collateral including property and bank collaterals and any other collateral assure the creditor for compensating non-default loss. 5- Condition: is a standard for more recognizing of external environmental conditions which have effect on payback authority of credit commitments of creditors. Main axis of external environmental conditions is job security and/or job stability of the applicant. Normally, the financial performance of commercial banks and other financial institutions has been measured using a combination of financial ratios analysis, benchmarking, measuring performance against budget or a mix of these methodologies (Avkiran, 1995). Depending on the commercial uses of credit scoring, the methodology to construct credit scoring models varies from bank to bank. It may involve firstly, a sample of historical records classified as "good" and "bad" depending on their repayment performance over a given period. Next, data could be obtained from internal or other external sources, namely, from credit bureau reports. Finally, statistical or other quantitative analysis is performed on the data to derive a credit scoring model (Koh et al., 2006). In this study the logistic regression model is used to estimate the model. Logistic regression is a type of regression analysis used for predicting the outcome of a categorical criterion variable based on one or more predictor variables. Referred to the target group, the criterion is coded as "0" to a "non-case" and "1" to a "case" in binary logistic regression as it leads to the most straightforward interpretation (Lemeshow and Hosmer, 2000). However, estimation of coefficients in this method is similar to ordinary regression model, but estimation method thereof is completely different. Because of nonlinear nature of logistic regression, coefficients of logistic model evaluate through general maximum likelihood (MLE) method. In logistic regression, dependent variables are a two-mode variable of (0 and 1) which allocated itself the amount of zero and one. If we suppose that Y is a random variable that can give up amounts of zero and one, therefore, probability of Y may be considered equations (2) and (3).

The symbol (β‫ )׳‬stands for vector of coefficients and the symbol(x) is column vector of independent variables. The above motioned

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equations may be considered equation (4).

 P  ln   ' X  1  P  

(4)

Equation (4) is an indicator of linear relation between independent variables and neoprene logarithm chance ratio. Whereas, chance ratio and logarithm thereof is not calculated directly, therefore, mentioned coefficient is estimated by maximum likelihood ratio. Considering each observation as a Bernoulli probability distribution, the equation (5) must be established for any observation.

P(Y  yi )  Pi Yi (1  Pi )1 yi ( yi  0,1)

(5)

The variable Pi is event probability in ith observing and yi is amount of random variable which can be zero and/or one (one for occurrence and zero for non-occurrence of event), while supposing that (n) is independent observation, therefore, likelihood equation will be according to equation (6) and with substituting Pi relevant to equation (2) in equation (6), we can reach equation (7).

By taking the natural logarithm of equation (7), we will have: n e ' X 1 ln L  l   yi ln ( )   (1  yi ) ln ( )  ' X i 1 i 1 1 e 1  e ' X n

(8)

Therefore, estimation of independent coefficients (βi vector) is achieved through maximizing the above-mentioned equation which is calculated through derivation against each independent variable and when each of these derivatives is fixed, it is equal to zero. Of course, the above-mentioned equations have no analytical answer and solving the system of equations through Newton-Raphson method is possible (Ypma, 1995). Finally, on the basis of presented theoretical basics, research model is defined as description of equation (9).

Y  0  1 AM  2CO  3I  4O  5S  6T  7 DE  8 AG

(9)

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against granting the facilities such as title deed, cheque, draft, participation bonds and long-term deposit certificate. Toward quantifying the above-mentioned variable and using thereof in the model of collaterals respectively improved liquidity and being ensure by encoded and used as virtual variables. Participation bonds and long-term deposit certificate with code No. 2, title deed with code No. 1 and cheque and draft with code No. 0 were defined. (I): indicates the monthly income of facility applicant that is entered directly into the model. (O): indicates the ownership status of the customer regarding his /her residence place as owner or tenant. In order to quantify this variable, the code No. 0 is assigned to the applicant being a tenant and code No. 1 will be assigned to the applicant being an owner in the model. (S): shows job stability of the applicant for facilities or duration that the customer employed at his/her current job, and in the case of employment at the current job for more than five years, his/her status from job point of view consider as stable. In this model, if the customer has stable status with code No. 1 and otherwise, with code No. 0 was identified. (T): shows payback duration of facilities or duration within which the customer must pay back the facilities through predetermined installments. This model insert at the model monthly. (AG): is the age of facility applicant, inserts directly in the model and (DE): indicates the educational degree of the applicant which toward quantifying and using them as virtual, secondary school diploma and lower code: 0, associate‟s degree and bachelor‟s degree code: one and master‟s degree and higher code: two, were allocated. A comprehensive model is constructed after attaching the weights. Each client will be rated on each of the parameters based on the scorecard provided. Each score of the client will be multiplied by the corresponding weights and a weighted score will be calculated for each parameter. The weighted scores of all the parameters will be summed to arrive at the final score of each client. Based on the final score, the client is given a rating by referring to the rating scale of the model. This final score decides the risk involved in operating with each client (Gumparthi et al., 2011). In logistic regression estimation model, independent variable have binary status, it is required to use from minimum sample of 1000observation (Whitehead, 2004). Therefore, for estimating suggested model of credit scoring, 1500 selected files of real entity customers of Parsian Bank which received credit facilities from bank were used. Parsian Bank is the biggest private bank of Iran with more than 4000000 customers and more than 10 years record has the most granted resources and facilities among private banks. It is noteworthy that, in the examined level and performing of this research, Parsian Bank has 279 branches. Due to the fact that default files need to be recognized after the period (date) of granting of facilities, and with reference to 150 older branches of Parsian Bank in Tehran which have more considerable credit files and based on cluster sampling, ten files from each branch including five files relevant to good pay customers and five file relevant to poor pay customers, whose facilities have been defaulted, were selected randomly.

Where; (Y): is a binary variable with the values of zero and one that indicate default and nonpayment of facilities. (AM): is the approved amount of facilities requested by the customer and examination of customer‟s conditions from character, collateral, income capacity, capital and external conditions in facilities committee for payment to the customer. (CO): is the amount of collateral which is given to the customer

RESULTS In this study, in order to assess the designed optimum model, at the first, the relevant data of the abovementioned variables for 1500 real entity customers of Parsian Bank were interred into the model through trial and error method by Eviews7 software. Then, in the

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Table 1. Goodness of fit criterions.

McFadden R-squared S.D. dependent var. Akaike info criterion Schwarz criterion Hannan-Quinn criter. LR statistic Prob (LR statistic) * Obs. with Dep.=0 ** Obs. with Dep.=1

0.447687 0.500167 0.777668 0.809548 0.789545 930.9389 0.000000 750 750

Mean dependent var S.E. of regression Sum squared resid. Log likelihood Restr. log likelihood Avg. log likelihood

0.500000 0.346677 179.1957 -574.2513 -1039.721 -0.382834

Total observations

1500

*Observations with zero value of dependant variable **Observations with unit value of dependant variable.

Table 2. Estimation results of logistic regression model.

Parameter C AM CO I O S T DE AG

Estimated value -4/182198 -0/001231* 3/803806 0/011367 0/698442 0/307626 0 0/731247 0/021451

P-value 0/0000 0/0000 0/0000 0/0000 0/0032 0/0479 0/0000 0/0000 0/0010

*Negative sign with the values indicates an indirect relation between the relevant variables.

estimated model, meaningfulness of coefficients through Wald statistics, meaningfulness of whole regression through LR statistics in confidence level of 95% and nonexistence of co-linearity between the variables and nonexistence of specified errors in the model were examined and result thereof are inserted in Table 1. The test of LR statistics is similar to F statistics in linear regression model having chi-square distribution with k=8 degree of freedom (k is the number of independent variables of model) and is calculated by using formula   2(l  l ) and achieved in 930.99389 as indicated in Table 1. The probability of LR statistics that is valued less than 0.05 and near zero indicates that within the confidence level of 0.95, the null hypothesis (Ho) is rejected, that is the regression result is meaningful. Mc. Fadden R-square statistics that is similar to R2 statistics in linear regression derived equal to 0.447687 as shown in Table 1, which is acceptable considering similar studies for logistic model. Wald statistics is used for evaluating the meaningfulness of logistic regression variables coefficients. As considered in third column of Table 2, meaningfulness level of Wald statistics for all achieved coefficients is less than 0.05 which means that considering zero for all above-mentioned coefficients were rejected. Therefore, the above-mentioned coefficients are meaningful.

In addition, Lemeshow-Hosmer test is used to examine the best fit of the model (Whitehead, 2004). Statistics of this test examines fit goodness of the model through grouping. In this examination, all observations of the sample were divided into 15 equal groups (100 observations each group). Statistics value of this test has chi-square distribution with k=8 degree of freedom and achieved in 19.9019 and its probability is 0.0977. Therefore, the null hypothesis based on equation (10) was approved and concluded that examined variables have much good proponent authority.

e X ' ( H0 : E y  ) 1  e X '

(10)

Therefore and finally the general figure of logistic equation is estimated as equation (11).  p  Y  ln   4 / 182198 0 / 001231AM  3 / 803806CO  0 / 011367I 1 p   0 / 698442O  0 / 307626S  0 / 012471T  0 / 731247DE  0 / 021451AG

(11)

In this study, Logistic model has been proposed for credit scoring of Bank‟s individual customers in order to approve or reject their requests for credit facilities. Considering the achieved coefficients from applying logistic regression model and estimating the equation as ˆ

general form (11), that is required to obtain Y i amount while putting relevant data of each facility applicants inside the introduced model and then put this obtained quantity in equation (12) in order to calculate value indicators of

Pˆi

for the mentioned customer.

pˆ Yˆi  ln ( i ) 1  pˆ i

(12)

Pˆ

Indicators amount of i with a range of values from zero to one (0 - 1) for each facility applicants will be demonstrative of non-default probability of facilities by the

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Table 3. Ranking sample of customers using Credit scoring model.

Rank 1 2 3 4 5 6 7 8 9 10

Customer code 700 297 1167 1165 70 389 293 1164 1038 783

Non-default probability 0.999999994 0.999999990 0.999999970 0.999999960 0.999999900 0.999999850 0.999999800 0.999999690 0.999999680 0.999999620

customer. Evidently, through determining threshold limitations, if achieved probability is being more than the above determined limit, the possibility of bank facilities non-default is considered positive, otherwise, default of customer‟s facility is recognized to be possible. Of course, such probabilities achieved by the model can be classified into two types of classification expenses. First type error: when a bad customer is placed wrongly at good customer‟s group and the second type error: when a good customer is placed wrongly at bad customer‟s group. As a result of the study, 1500-member of real entity sample customers of Parsian bank for facility granting, ˆ were ranked as shown in Table 3, using Pi indicator. For example; in Table 3, ten superior customers with highest non-default probability and last 10 customers with highest default probability were indexed. After calculating the non-default probability of customer‟s facilities and finally ranking them, it was observed that 700th customer while obtaining non-default probability in 0.999999994 has higher priority against other applicants of the facility. In th addition, non-default probability of 407 customer achieved equal to 0.0000000010 and has lowest rank among applicants for facilities. Conclusions The results of the study indicate that for a sustainable growth in Iran, the banking sector of the country has to be effective and efficient to respond favorably to the needs of the productive sectors of the economy. Commercial banks as institutions aiming at maximum profitability are required to examine credit status of customers before any payment to the applicants for the purpose of control, decrease of credit risk and increase in efficiency level of facility granting process. On the other hand, risks are events or conditions that may occur and has a harmful effect, which requires to be effectively adopted for minimizing its undesirable results. On the basis of discussions made, it has become clear

Rank 1491 1492 1493 1494 1495 1496 1497 1498 1499 1500

Customer code 518 176 24 726 344 411 406 408 1476 407

Non-default probability 0.0000001122 0.0000001028 0.0000000849 0.0000000657 0.0000000567 0.0000000194 0.0000000048 0.0000000035 0.0000000028 0.0000000010

that, credit risk management in banks and financial institutions propound in two levels of dealing with individual customers and also portfolio level in which credit scoring system is a plan to measure and control the risk, while dealing at customer‟s level. Performing this examination and results thereof has importance for a bank from different aspects such as shortening facility granting process, more quick performance, and decrease default risk of facilities and most important is acquiring indicators for credit risk measurement even individually or portfolio. Nowadays, commercial banks in Iran are interested in execution of credit scoring system due to confronting more applicants of facilities and time-consuming of exact evaluation of applicant‟s status and preserving customers‟ satisfaction. On the basis of model estimation and acquired meaningful coefficients, the study comes to the conclusion that, safer received collateral, higher monthly income, more stable ownership and occupational status, higher educational degree and older age of the client on one hand and lower credit payback duration and amount of the value of the facilities on the other hand would eventually lead to increase in the non-default probability of credit facilities. That means, non-default probability of facilities have positive relation with variables amount of collaterals received from customer, monthly income amount of the customer, the status of applicant for taking facilities such as place of residence (be owner or tenant of the applicant), the age of applicant for taking facilities, occupational status of the applicant as stability and educational level of the applicant for taking facilities and have negative relation with amount of paid facilities to the customer and payback duration of granted facilities to the applicant. ACKNOWLEDGEMENTS Authors want to thank and appreciate comprehensive supports of Bu Ali Sina University and Parsian Bank towards their cooperation in performing this research.

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Koh HC, Tan WC, Goh CP (2006). A two-step method to construct credit scoring models with data mining techniques. Int. J. Bus. Inform. 1(1):966-118. Lawson JC (1995). Knowing the score. US., Banker Mag. November, pp. 61-65. Lee TS, Chiu CC, Lu CJ, Chen IF (2002). Credit scoring using the hybrid neural discriminate technique. J. Expert Syst. Appl. 23:245254. Lemeshow DW, Hosmer S (2000). Applied logistic regression (2nd ed. ed.). New York: Wiley. ISBN 0-471-35632-8. Leonard KJ (1995). The development of credit scoring quality measures for consumer credit applications. International J. Qual. Reliab. Manag. 95:79-85. Li Y, Liao X (2007). Decision support for risk analysis on dynamic alliance. Decis. Support Syst. 42:2043-2059. Mansouri A (2003). Designing and explaining bank facilities allocation mathematical model (classic and neural networks model approach).Doctorate dissertation. Tarbiat Modares University (Teacher Training University). [in Persian]. Mester LJ (1997). What is the point of credit scoring? Federal Reserve Bank of Philadelphia Business Review. Merton RC (1974). On the pricing of corporate debt: the risk structure of interest rates. J. Financ. 29:449-470. Mogboyin O, Asaolu TO, Ajilore OT (2012). Bank consolidation program and lending performance in nigerian banking system: an empirical analysis with panel data. Int. J. Appl. Econ. Financ. 6:100-108. Mojtahedi SM, Mousavi SM, Aminian A (2009). A non-parametric statistical approach for analyzing risk factor data in risk management process. J. Appl. Sci. 9:113-120. Morgan DP (1994). Bank credit commitments, credit rationing and monetary policy. J. Money Credit Bank. 26:87-101. Owojori A, Akintoye R, Adidu A (2011). The challenge of risk management in Nigerian banks in the post consolidation era. J. Account. Taxation 3(2):23-31. Power M (2008). Organized uncertainty: designing a world of risk management. Oxford University Press, Oxford, UK., ISBN-10: 0199253943, p.275. Safari S, Shaghaghi ME, Sheikh MJ (2010). Credit risk management of legal entity customers in commercial banks; using data envelopment analysis.Human Sciences Instructor (Modares Oloume Ensani) Journal. No. 69:137-164. [in Persian]. Salehi M, Mansoury A (2011). An evaluation of Iranian banking system credit risk: Neural network and logistic regression approach. Int. J. Phys. Sci. 6(25):6082-6090. Sheng KL, Ying WT (2011). A comparative study of data mining techniques in predicting consumers‟ credit card risk in banks. Afr. J. Bus. Manag. 5(20):8307-8312. Thomas LC, Edelman DB, Crook LN (2002). Credit scoring and its applications. Society for Industrial and Applied Mathematics Philadelphia, PA, USA. Whitehead J (2004). An introduction to logistic regression. Department of economics. East Carolina University. p. 10. Ypma TJ (1995). Historical development of newton-raphson method. SIAM Rev. 37:531-551. Zekavat SM (2003). Credit risk models of Iran Bank-e-Tosea Saderat customers. Master‟s Program Thesis. Banking Higher Institute, Tehran. [in Persian]. Zribi N, Boujelbène Y (2011). The factors influencing bank credit risk: The case of Tunisia. J. Account. Taxation 3(4):70-78.

Full Length Research Paper

Accounting information systems: An intelligent agents approach Marcelo Seido Nagano* and Marcelo Botelho da Costa Moraes Department of Production Engineering, School of Engineering, São Carlos, University of São Paulo Av. Trabalhador Sãocarlense, 400, São Carlos – SP, 13566-590, Brazil. Accepted 19 October, 2011

The purpose of this paper is to present new approaches in the development of accounting information systems to enable better data management and information creation. The objective is achieved by applying an object-oriented modeling with the use of intelligent agents, according to the needs of users of accounting information. In development of this work, it was observed that a structure based on objects and using intelligent agents enables the development of reports for different users, with gains in the quality of information developed. The major limitation of this work is that it was done on a theoretical basis; however, the practical aspect is yet to be carried out due to the extent of its development. The great advantage of working is to use an object-oriented modeling with simultaneous application of intelligent agents, who carry on the development and analysis of accounting. Thus, the accounting information system is able to meet fully the qualities needed to users, without loss of comprehensibility, relevance, reliability and comparability, even with changes in business model or in accounting standards used. Furthermore, the development of new intelligent agents enables a retrospect on previous year's analysis. Key words: Accounting information systems, DCA (debit-credit accounting) model, resource, events and agents (REA) model; intelligent agents, object-oriented. INTRODUCTION Accounting is a science which can be defined as an information and evaluation system. The aim is to provide to its users demonstrations and analyses of an economic, financial, physical and productivity nature in relation to the entity. Accounting information is quantitative and qualitative which meets the needs of internal and external users. According to the Financial Accounting Standards Board (FASB) in the Statement of Financial Accounting Concepts (SFAC) No. 1, 1978, the information from financial reporting is subject to limitations. Moreover, according to the SFAC No. 2, 1980, information should

*Corresponding author. E-mail: drnagano@usp.br, drnagano@sc.usp.br. Tel: +55 16 3373 9428. Fax: +55 16 3373 9425.

be comprehensible to those who have a reasonable amount of knowledge about business and economics (FASB, 1980), but it does not indicate to which level of depth this knowledge is. These characteristics and needs intrinsic to accounting should be observed in its information system. Therefore, these results in the importance of modeling an accounting information system which can meet all the ways and visions needed to make decisions. The most classic way of registering economic transacttions was made formal by the friar Luca Pacioli, who showed merchants at that time how to register commercial transactions, emphasizing the doubling of each transaction in relation to “cost vs. benefit”, known as the double entry system (Fisher, 1997). Another way of retaining information is the REA model (economic Resources, economic Events, economic Agents), based on the modeling of databases. This

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approach is used in integrated system environments whereby each economic transaction is associated to (Entity-Relationship) a series of economic resources and economic agents (Fisher, 1997). There are various modeling techniques in the literature on information systems (e.g. entity-relationship diagrams and data flow charts), but the REA model is preferred due to a specific technique in accounting information systems (Rom and Rohde, 2007).

Aims The aim of this work is to propose a way of modeling accounting information systems oriented towards the objectives using support from intelligent agent tools to help take decisions according to various possibilities of formatting among different types of users and decisions. The following specific aims are presented:

structured, programmable and repetitive tasks whereby the human knowledge obtained is not extremely difficult (Baldwin et al., 2006). Considering this, the use of specialist systems is justified by problem structuring and the possibility of obtaining current knowledge from accountants and auditors.

Research problem Considering the aspects mentioned earlier, as well as the importance of accounting information systems and the constant need of improvement, this work describes and analyses the following question: How can accounting information systems be developed in order to perform better considering the usersÂ´ needs based on modern information technology?

METHODOLOGY

1. Present the accounting information system models; 2. Check how they can be made suitable regarding the needs of different types of information; 3. Develop oriented modeling to objects using the support of intelligent agents, which are flexible in terms of dealing with information; 4. Compare the proposed system with the current model according to the qualitative characteristics of accounting information.

Motivation Studying ways of information modeling has become a relevant subject in accounting as it includes the way that data and information are registered. It is worth mentioning that data is a source which does not add value as the information consists of the data in the structuring and relationship used in decision making process. Therefore, the work in this article can help improve accounting information systems so that they can provide assistance to a wide range of information users who have different levels of knowledge and distinct needs concerning accounting. Taking this into account, the way in which databases save information, provide access, search for data and proceed in formalization are fundamental for the user to use them efficiently. Therefore, the REA model can be highlighted in this sense. However, one of the characteristics of the REA model is its limitation at a transactional level. Most of the literature on the subject ignores the supply of information to take decisions (Rom and Rohde, 2007), thus the need to use intelligent agents to overcome this limitation. Artificial intelligence has been applied successfully in

This work is of a theoretical nature and is strongly based on bibliographical research. It presents a methodology to develop information systems which use object-oriented modeling together with intelligent agent applications to deal with information. Therefore, from the existing theories of accounting information systems, as well as technological tools of information and intelligent systems, this work uses deductive methods to present how these theories can be applied by developing accounting information systems which are more suitable for organizational needs.

ACCOUNTING INFORMATION SYSTEMS Progress in information technology and the increase in the use of the Internet requires administrators, accountants, auditors and academics to become cleverer and more knowledgeable in terms of design, operations and accounting information systems control (Beard and Wen, 2007) having direct implications in the security and reliability of the system. Considering this, it has become more important to define how economic events can be classified: 1. Transactions, where something with measurable value is passed voluntarily from one part to another, or simultaneously between both parts; and 2. Inter-actions, whereby there is a measurable effect on the value in the entity without there being the participation of another part (Birkett, 1968). The transactions normally refer to the negotiation process, while the inter-actions are related to the process of aggregating value. In both cases, measuring is relevant in terms of registering information regardless of the model and the way they are used. The measurement methodology establishes criteria checked for accounting,

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meeting the needs of consistency and comparability. In spite of this, there are some difficulties in devising measurement techniques and the current systems can reflect incorrect metrics without having the capacity to alter them later (Chambers, 1998). Measuring cannot be confused with quantification. The former derives from an estimate technique of evaluation, usually in monetary terms, while the latter, quantification, is related to physical counting, and is easily checked. Therefore, it is important to observe the reduction of information throughout the registration process in accounting information systems. This synthesizing process (in terms of the economic transaction) is used to make understanding easier for users. Thus, there is a need to summarize information, grouping it in a small number of account balances to increase the utility of the statement in its understanding (Babich, 1975). Currently, accounting information systems can be found isolated or inserted into ERP systems (Enterprise Resource Planning). In dedicated systems, as well as integrated systems (ERP), performance is usually based on databases. To understand the existing accounting information systems better, the DCA and REA models are described in detail as follows.

The DCA model The double entry method consists of the most classic way of accounting. Part of the presupposition of each economic event must be registered by debit and credit, hence the name double entry. This happens due to the duality of each event having a resource origin and an application on the same date and for the same amount of money. To better understand the DCA model (debit-credit accounting), the way in which accounting deals with these origins and resource applications should be observed. Each event, whether it be a transaction (negotiation) or inter-action (production) happens from an origin, that is, a financial loss in terms of reducing assets or generating liabilities. After information technology was introduced and computers, as well as data processing systems became more widespread, information systems of large corporations began to be developed within available computational language to use on a large scale. The current ERP systems work with related databases, where each event automatically generates debits and credits according to its configuration. This has made the accounting process easier. Moreover, standardized reports show the total amount of the accounts balances analytically or synthetically, producing the main financial statements. However, accounting information systems based on the

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DCA model are not very malleable as any change in the structure of a company that needs alterations in its chart of accounts would need a total restructuring of configuretions and system parameters. This would cause problems of losing uniformity and consistency of accounting information hindering its comparability and quality of information which enables users to identify similarities and differences between two economic phenomena (Hendriksen and Van Breda, 1999). This makes it impossible for users to compare the results of the organization before and after changing accounting decisions as these results reflect different measurement methodologies. Therefore, changes in accounting end up eliminating historical comparison data which help to check the efficiency and efficacy of the processes.

The REA model The REA accounting model is based on the principle of each economical event being in an entity carried out by internal and external economical agents bringing about changes in economic resources. This is why it is called REA: to relate aspects of economic Resources, economic Events and economic Agents. Developed in the 1980s, this model came from applying the events theory proposed by Sorter, according to whom accounting must be oriented to register the event which took place, and not just the financial amounts involved (Sorter, 1969). Therefore, as well as the usual information of dates and amounts involved in the event, data that can describe the event in detail and make its future forecasting possible is aggregated. The systemâ&#x20AC;&#x2122;s user can make his own model only decides which information is significant or not, given the function loss when only monetary values are observed (Sorter, 1969). The REA model can reduce the problems inherent to the traditional model, which limits the monetary measurement, without multidimensional information and often classified inappropriately, storing too much aggregated information without integrating other areas of the company (McCarthy, 1982). The model defines the economic resources as the patrimony of the entity. The economic agents are responsible for patrimonial changes (Figure 1). The economic events are transactions by negotiating (buying and selling) economic resources, or inter-actions in aggregating value to the resources, carried out by internal economic agents or together with external agents in the entity (Figure 2). As each event involves an origin and an application of resources (the main idea of double entry) there is a double event in this model. This relationship is called

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Hierarchy generalization ECONOMIC AGENT

STOCK HOLDER

EMPLOYEE

CUSTOMER

CLERK

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PROFESSIONAL

VENDOR

Figure 1. Example of generalization (McCarthy, 1982).

Economic Resource inside participation

Economic Agent

Economic Event Stock-flow External participation

Give

Economic Agent

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Economic Agent

Economic Event Stock-flow inside participation Economic Resource

Figure 2. The standard REA (McCarthy, 2003).

Economic Agent

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CUSTORMER-SERVICE OPEN-ORDERS No.

MAPPING TO STORAGE INTERNAL SCHEMA

SALES

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Figure 3. Schema specification for databases (McCarthy, 1982).

duality and binds economic events because every increment economic event must be related by a duality to a decrement economic event (Kasik and Hunka, 2011). This shows two types of relationship of each entity. At this point, the term entity is interpreted according to database theories referring to events, resources and agents: The first is the association, which determines how the different entities interact among themselves; the second is the generalization, in which each entity is a generalization of various different factors, but having the same characteristics (McCarthy, 1982). Where the database program (language) refers to internal schema, the conceptual schema which the REA model is applied can be determined. Exiting the system can be presented in various ways using formatted reports by the external schema (Figure 3). Currently, the ERP systems which met the needs of company resources attend to the REA model as each process cycle needs to be modeled in the system by databases based on entity-relationship (McCarthy, 2003). In practice, the ERP systems do not use this technique completely. The aim of accounting in systems is usually to record debits and credits. This would not be necessary when the REA model is used.

When comparing the REA and SAP model, one of the main ERP systems on the market, significant similarities are found, although there are situations whereby the REA model is less detailed (OÂ´Leary, 2004). Moreover, companies which implant ERP systems cannot use the whole capacity of the capturing system, processing and delivering financial and non-financial information to the decision makers in time (Wier et al., 2007). REA based system can capture a comprehensive set of business information more efficiently than traditional business reporting systems, allowing organizations to make more efficient and better business decisions, but the REA model needs a technological language to help take advantage of its benefits (Amrhein et al., 2009). INTELLIGENT AGENTS Intelligent agents are a field of artificial intelligence based on computing, highlighting perception, reasoning and action. Reasoning is particularly essential for higher intelligence to function (Wachsmuth, 2000). The agent does some activity for another, known as the

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Affects the World

Recognize input Internal Representation

Apply Method

Change Representation Select Method

General Knowledge

Method Store

Figure 4. Functional diagram of general intelligent agent (Wachsmuth, 2000).

main one, having autonomy when developing its functions. The idea of intelligent agents was introduced in the mid-1950s, and they have been defined in many different ways (Liu, 2011). Due to the inexistence of a universally accepted definition, concepts of “weak-notion” and “strong-notion” of the agency are used. The weak notion of the agency consists of the vision of an agent corresponding to an element of hardware and software based on the computational system having characteristics of (1) autonomy, operating without human intervention; (2) social ability, interacting with other agents (human or not); (3) reactivity, noticing its environment and responding; and (4) pro-activity where initiatives are taken (Wooldridge and Jennings, 1995). The strong notion of the agency consists of an agent being a computational system having the characteristics described previously, as well as being developed and implemented using concepts that are usually applied to humans (Wooldridge and Jennings, 1995), as the reasoning, belief, intention and others. The intelligent agent notices the input of the environment (Figure 4) and acts to change the environment, but before it uses an internal representation to observe the possible effects of alternative methods. These methods are observed from an internal method store and its exploration is guided by general world knowledge also internally (Wachsmuth, 2000). Observing the characteristics given by the notions from

the agency, two aspects are extreme important in determining an intelligent agent (Figure 5). 1. Agency/autonomy: The agency determines the level of autonomy invested in the agent being able to be evaluated from an asynchronous application, passing to the representation of the user, to the interactivity with other agents in handling data, applications and services; 2. Intelligence/capacity of reasoning: Intelligence is the level of learning and reasoning related to the agent’s skills to incorporate the determined objectives by the user and fulfill the tasks which are delegated to it. Varying from instructions on preferences, normally rules, progressing to reasoning from inference models to planning and learning (Vasarhelyi et al., 2005). Therefore, the relationship between the agent´s autonomy and the capacity of reasoning (intelligence) determines an intelligent agent. Among the various existing models in the area of artificial intelligence, expert systems are used in this work. Despite this, in accordance with the usefulness of the intelligent agent, other techniques can be used. The expert systems are computational programs which do tasks for human specialists, although they do not substitute a human being as a decision maker (Barbera, 1987) because they do not have autonomy characteristics. The expert systems grew out of the data mining studies in the 1990s because of increasing amount of

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Agent Interactivity Service Interactivity Application Interactivity Data Interactivity User Representation Asynchrony

Fixed Function Agents

Agency

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Intelligent Agent Threshold

Artificial Intelligence Preference Reasoning

Planning

Learning

Intelligence Figure 5. Intelligent agent scope (Adapted from Vasarhelyi et al., 2005).

data stored in relatively easily accessible databases (Kilpatrick, 2011). Furthermore, the expert systems differ as far as the computational programs are concerned in terms of function and structure. Regarding function, by doing activities normally designated to humans and in its structure in the way in which these functions are carried out –artificial intelligence tools and methodologies (Brown and Phillips, 1995). Expert knowledge about the process can be expressed in linguistic rules by words of spoken or even artificial language (Pamucar et al., 2011). To use intelligent agents in accounting, expert systems were selected as an artificial intelligence tool because the application in accounting information systems is well-structured, having specialists and documented knowledge on accounting operations to obtain rules. By using rules such as “If…., Then…….”, these systems are developed with the help of specialists who by themselves find ways of condensing their experience to simple rules (Foltin and Smith, 1994). This system of rules follows logic of how a human being takes decisions, called heuristics. In case the task is structured and advanced calculations are not needed and heuristics are used, the system specialist will be ideal in helping with the decision making (Shim and Rice, 1988).

OBJECT-ORIENTED INFORMATION SYSTEMS USING INTELLLIGENT AGENTS The presented model is based on applying the technology of intelligent agents to accounting information systems attempting to improve the way the systems make information available to the users, providing variations of format and giving information in detail. Even though, the REA model is the most accepted in terms of structuring the accounting phenomena; it is efficient in storing data, but not in handling information (Verdaasdonk, 2003). Taking this into account, developing a system to deal with data is needed, which provides relevant, reliable and comparable information. These are all characteristics that determine the usefulness of accounting information (FASB, 1980). Developing this model is done by language databases oriented to objects. Using the oriented modeling to objects was introduced by Knaus (2001) in accounting information systems developing. However, his proposal uses the DCA model as a base and each account is a distinct class (Knaus, 2001). Modeling databases oriented to objects came from the limitations of the relational databases. Their basic objective is to manage large amounts of information, making handling data easier and meeting the current

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Transaction

External agents: customer/supplier

Inter-action

Internal Agents Resource Allocation

External agents: information users Developing reports and analyses

Intelligent agents

Figure 6. Use case diagram â&#x20AC;&#x201C; general model for REA applying intelligent agents.

requirements of the systems with other types of databases, such as hypertexts, which are in constant use (Silberschatz et al., 1999). Within this characteristic, the UML language (Unified Modeling Language) can be applied, mainly as it is an appropriate tool for modeling intelligent agents (Heinze, 2004) and is based on object-oriented databases. This approach differs from the traditional accounting information systems because it separates data from information modeling operations the same time it uses an approach oriented to objects. Aiming to have a better performance in the proposed modeling, the UML developing is used to make visualizetion easier and integrate among the different objectives. In traditional systems, reports are developed in database itself while in the REA model object-oriented (REAOO), the reports and their analyses are developed using intelligent agents based on expert systems. The biggest difference is separating application from accounting databases, which does not normally happen. Therefore, in terms of this development, the use of UML language to model the system is of great help. It is

important to mention that the model is a simplification of reality presenting a general case of an information system for any activity that needs to be done. Taking this into account, while Entity-Relationship modeling in the REA model has 3 entities (Resource, Events and Agents) to develop the modeling Object-Oriented, these resources, events and agents are the classes to be implemented. Therefore, by using intelligent agents to develop information for different types of users, the external scheme (according to the REA model) can be developed by intelligent agents, where this agent is a new actor in this diagram (Figure 6). While the external agents can take part in transaction events as clients and suppliers, the internal agents act in the transaction and they are responsible for interaction and resource allocation; furthermore, inserting intelligent agents in the development and report analyses of information. Normally, there are many similar objects in a database, that is, they respond to the same messages, use the same methods and have variables of the same name and

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Class: Economic Resources ECONOMIC RESOURCES

CASH AND EQIVALENTS

INVENTORY

RECEIVABLES

FINISHED PRODUCTS

WORK IN PROCESS

RAW MATERIAL

FIXED ASSESTS

Figure 7. Hierarchy of classes.

1..* internal 1..* Economic agent

1 Economic Event

0..* 1..* external

Client

cost

1..* Economic Resource

duality 1 benefit

1..*

Employee

Name

Credit Limit

Function

etc...

Figure 8. REA object-oriented model. Figure 1. REA Object-Oriented Model

type. Considering this , grouping these similar objects is done by these classes (Silberschatz et al., 1999). Taking this into account, the entities used in the REA model can be considered as classes. In object-oriented modeling for databases, a class can have a specialization hierarchy, that is, the ISA relationship, which shows a class as being specialized from another (Silberschatz et al., 1999). Therefore, as in the generalization of the REA model, specialization of Resource, Event and Agent classes can be determined. An example is shown in Figure 7. Determining the classes and their specializations, the general model of the class diagram can be made in the presented proposal of the REA model (Figure 8). In the REA object-oriented model (REAOO), an economic agent, which can be internal or external, carries out one or more economic events and the economic event itself brings about the duality in relation to the resources,

providing consumption (cost) and generation (benefit) of one or more resources simultaneously. In the general case of commercializing, a product manufactured in the entity itself, a client (external economic agent) can acquire one or more products with a seller (internal economic agent), bringing about an economic event (sale) which will have an impact on the economic resources, whether it be from the cost of one or more units or the benefit of a cash receipt or account receivable. This model, similar to the original format of the REA model, can be applied to any situation within the various types of organizations that carry out economic activities. An intelligent agent is autonomous, that is, the intelligent agent is a software program separate from the databases, which accesses it remotely and makes searches, obtaining data which is needed to develop and/or analyze the information.

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Figure 9. General model - REA object-oriented with intelligent agents.

Considering this, the accounting information system consists of two separate environments. The first one is an environment to store data, where the REA object-oriented model acts. The second environment consists of an intelligent agent system which accesses the database by software interactivity and carries out its interpretation function (Figure 9). As an example of the expert system technique, the different ways of accounting a determined can be compared. Observing the between international accounting standards from the IASB (International Accounting Standards Board) and United States Generally Accepted Accounting Principles (USGAAP) by FASB, the accountant can increasingly make inferences about the economic aspect of the events to determine the most suitable way of accounting. Generating knowledge from the expert system which will make the inference within each intelligent agent (Figure 9) must be made by obtaining knowledge from the specialist, that is, an accountant and/or auditor who

can establish the knowledge in a formal way essentially using rules and heuristics to take decisions. Taking this into account, in accordance with the need of the information systemâ&#x20AC;&#x2122;s user, the intelligent agent system will develop the financial statements according to the desired standards, only altering its knowledge base, that is, the rules of the expert system. After developing traditional accounting reports (Balance Sheet and Income Statement, for example), the intelligent agent can proceed to analyze traditional financial indicators using an expert system developed for this. This agent will base its analysis on the other intelligent agentâ&#x20AC;&#x2122;s responses by the interactivity of agents. Therefore, these intelligent agents can continuously monitor the situation and financial/operational performance of the entity in terms of returning recommendations to the internal users of the system, helping or even taking decisions. It is worth mentioning that the preference to use expert systems as an artificial intelligent tool of intelligent agents is due to the easiness of structuring knowledge from

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human accounting specialists (accountants), but other ways of artificial intelligence could be used. An example would be to use neural networks to forecast results. ANALYSIS OF THE MODEL Based on the needs of the stakeholders, the proposed accounting information system evaluation can be made from four qualities of accounting information determined by FASB. Comprehensibility According to this analysis, the proposed system has advantages regarding the current systems because the REAOO model with intelligent agents provides the development of intelligent agents which can develop more specific reports to different types of users according to their capacity of understanding and level of knowledge about accounting. Greater information is necessary to a higher level of detail in making a specific decision (Cohen and Kaimenaki, 2011). Relevance The REAOO and intelligent agents are based on providing relevant information to take decisions at the right time, that is, when necessary. However, the predicttive value and feedback can be highlighted as important. While the DCA and REA models essentially focus on storing past information, the REAOO model can use intelligent agents to develop forecasts and future projects, adding the predictive value that current systems cannot. Another factor is the value as feedback. In this case, it is worth mentioning that previous expectations are fulfilled in case they happen, or corrected otherwise. Essentially, this quality is applied in forecast and realized comparison. Once again, the current systems cannot make these applications, but the REAOO model can develop specific intelligent agents to develop and control, even for budgeting and cash flow development and analysis.

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model, accounting register according to different accounting standards is direct, without the need for conversion, avoiding problems of reliability in this process and making it easier to check auditory processes. Comparability This quality shows the capacity of comparing accounting information over time in the same organization or between different organizations at the same moment the REAOO model can be highlighted. From the time in which the data analysis is disassociated from its storage, the comparison only depends on developing a new intelligent agent for the required objective. Therefore, from the time when the company starts using the REAOO model, it will be storing data in the model. If the company needs to change the way of accounting or even the way of analyzing some years afterwards, they just need to change the responsible intelligent agent and the past data will be available from the original REAOO system. In the case where this same organization decides to implant a budget system or even develop its accounting according to accounting standard from another country, they just need to develop specific intelligent agents for this work and the organization will have past information and analyses since the REAOO system was implanted. By doing this, possibilities of comparing become limited only from start storing the data in the REAOO system, the analysis provided by the intelligent agents can be replied to original data, without bias or adjustments. This is a characteristic of the proposed system which makes it possible not to lose past comparison parameters in case of changes in accounting standards or calculus methodologies. In other words, theoretically it will never lose consistency. Normally, after having changes in standards, or even new analysis needs (using new costing methodologies, for example), entities end up being adopted to make adjustments in previous periods (restricted to few periods) for comparison. In the proposed model, REAOO, any alteration in the standards implies that making a specific intelligent agent is suitable. Thus, when it is created, it can recalculate the past, without having to be adjusted prone to errors.

Reliability Conclusion Reliability of information is closely linked to the definitions of the rules of business. In the traditional systems, reliability is developed by the storing data system. In the REAOO model, reliability should at least be observed in the intelligent agent. Therefore, applying intelligent agents in financial accounting eliminates the need of having computational routines to convert accounting standards. In the REAOO

As shown, accounting information systems are fundamental for taking decisions in entities. In spite of this, most of the modeling and development of the systems do not observe the usersÂ´ needs or a way of accounting work. Alles et al. (2008) discussed accounting separating it between research in accounting information systems

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(AIS) and research which is not focused on accounting information systems. They show the need to aggregate value in AIS research as this area of research shows difficulties in methodologies when presenting the results as they depend on application and rarely possible practical tests. Therefore, it is common to see problems between the needs shown by the accountants and the existing specifications in the systems which make suitable replies impossible, as shown by Sayed (2006). Analyzing the progress of information technology and its application in accounting information systems, it can be observed that there were practically no improvements in the way of working. The DCA model, which is still the standard model, did not progress after the computer age. Currently, most systems simply automatically replicate double entry in accounting general ledger. It was only when the REA model came about that accounting began to see computing as a way of improving processes. However, these initiatives are still specifics, perhaps because accountants do not know about the existing technology and developers unknown the accounting needs. The concept of new models, as in this work, has become pertinent, but at the same time complex as multidisciplinary knowledge is needed in distinct areas. There are also difficulties in applying it. Because of this, the present work has as the major limitation a non practical development of the model REAOO. Moreover, the definition of intelligent agent based on expert system requires a more complex modeling, identifying practical problems observed in companies. Despite all this, by creating conditions to apply an object-oriented model using intelligent agent support, this work makes it possible to study the development of new applications of intelligent agents in more perspectives areas such as costs, forecasting, budgets and simulations among others in practically all the objectives involved in accounting and using other artificial intelligence techniques. So, there are future perspectives as the practical application of the model, with a further development of artificial intelligence techniques in reporting and decision making is associated. REFERENCES Alles MG, Kogan A, Vasarhelyi MA (2008). Exploiting comparative advantage: a paradigm for value added research in accounting information systems Int. J. Account. Inform. Syst. 9(4):202-215. Amrhein DG, Farewell S, Pinsker, R (2009). REA and XBRL GL: st Synergies for the 21 Century Business Reporting System Int. J. Dig. Account. Res. 9:127-152. Babich G (1975). The application of information theory to accounting reports: an appraisal ABACUS 11(2):172-181. Baldwin AA, Brown CE, Trinkle BS (2006). Opportunities for artificial intelligence development in accounting domain: the case for auditing Intell. Syst. Account. Finan. Manag. 14:77-86. Barbera AT (1987). Artificial intelligence in accounting: the future has arrived Rev. Bus. 9(2):17-21.

Beard D, Wen J (2007). Reducing the threat levels for accounting information systems CPA J. 77:34-42. Birkett WP (1968). Accounting inputs ABACUS 4(2):164-173. Brown CE, Phillips ME (1995). Expert systems for management accounting tasks Montvale: The IMA Foundation for Applied Research Inc. p.204. Chambers RJ (1998). Wanted: foundations of accounting measurement ABACUS 34(1): 36-47. Cohen S, Kaimenaki E (2011). Cost accounting systems structure and information quality properties: an empirical analysis J. Appl. Account. Res. 12(1):5-25. Financial Accounting Standards Board (1978). SFAC/01: objectives of financial reporting by business enterprises Norwalk: FASB. p.8. Financial Accounting Standards Board (1980). SFAC/02: qualitative characteristics of accounting information Norwalk: FASB. p.60. Fisher SA (1997). In defense of double entry accounting Nat. Pub. Account. 42(3): 33-34. Foltin LC, Smith LM (1994). Accounting expert systems CPA J. 64(11):46-53. Heinze C (2004). Modeling intention recognition for intelligent agent systems Edinburgh: DSTO Systems Sciences Laboratory p.249. Hendriksen ES, Van Breda MF (1999). Accounting theory São Paulo: Atlas p.550. Kasik J, Hunka F (2011). Business process modelling using REA Ontology. Econ. Manag. 16:1047-1063. Kilpatrick J (2011). Expert systems and mass appraisal J. Prop. Invest. Finan. 29(4/5):529-550. Knaus M (2001). Object-oriented accounting – a Framework for a modern accounting information systems Zurich: PhD Thesis in Economic Sciences, University of Zurich p.409. Liu G (2011). The application of intelligent agents in libraries: A survey. Program 45(1):78-97. McCarthy WE (1982). The REA accounting model: a generalized framework for accounting systems in a shared data environment Account. Rev. 57(3): 554-578. McCarthy WE (2003). The REA modeling approach to teaching accounting information systems Issue Account. Educ. 18(4):427-441. O´leary DE (2004). On the relationship between REA and SAP Int. J. Account. Inform. Syst. 5:65-81. Pamucar D, Bozanic D, Dorovic B, Milic A (2011). Modelling of the fuzzy logical system for offering support in making decisions within the engineering units of the Serbian Army. Int. J. Phys. Sci. 6(3): 592609. Rom A, Rohdes C (2007). Management accounting and integrated information systems: a literature review Int. J. Account. Inform. Syst. 8:40-68. Sayed HE (2006). ERPs and accountant's expertise: the construction of relevance J. Enter. Inform. Manag. 19(1):83-96. Shim JK, Rice JS (1988). Expert systems applications to managerial accounting J. Syst. Manag. 39(6):6-13. Silberschatz A, Korth HF, Sudarshan S (1999). Database systems São Paulo: Makron Books., p. 808. Sorter GH (1969). An "events" approach to basic accounting theory Accout. Rev. 44(1):12-19. Vasarhelyi MA, Bonson E, Hoitash R (2005). Artificial intelligence in accounting and auditing: international perspectives - Vol. 6 Princeton: Markus Wiener Publishers p.257. Verdaasdonk P (2003). An object-oriented model for ex ante accounting information. J. Inf. Syst. 17(1):43-61. Wachsmuth I (2000). The concept of intelligence in AI In: Cruse H, Dean J and Ritter H, eds. Prerational Intelligence–Adaptive Behavior and Intelligent Systems without Symbols and Logic (Vol. 1). Dordrecht: Kluwer Academic Publishers, pp.43-55. Wier B, Hunton J, Hassabelnaby HR (2007). Enterprise resource planning systems and non-financial performance incentives: the join impact on corporate performance Int. J. Account. Inform. Syst. 8:165190. Wooldridge M, Jennings NR (1995). Intelligent agents: theory and practice Knowl. Eng. Rev. 10(2):115-152.

Full Length Research Paper

Internal Control and Accounting Policies and Procedures Practices: An Institutional Perspective Muhammad H. Al-Hazmi Department of Accounting and MIS, King Fahd University of Petroleum and Minerals, Saudi Arabia. Accepted 18 July, 2012

The present studies demonstrate the importance of organizational routines and institutions in shaping the internal control and accounting policies and procedures practices in two Saudi firms operate in the real estate sector. An attempt has been made to distinguish the control environment, which represents management’s overall attitude, awareness and actions, from control policies and procedures, which are the detailed set of guidelines and procedures that management stabilities over information and transactions processing. Key words: Internal Control, Accounting Policies and Procedures, Accounting Practices, the Institutional Economic Perspectives, Organizational routines and Institutions. INTRODUCTION Accounting links decision makers with economic activities and with the results of their decisions. The more important the decision is the greater the need for accurate information. Accounting information is simply the means of measuring and communicating economic events to decision makers. Organizations are expected to have certain systems, policies and procedures in place for managing and controlling business operations to reduce exposures and any negative occurrence of potential financial effect. Exposures are inherent in the operation of any organization and may result from a variety of causes such as excessive costs, deficient revenues, and loss of assets, inaccurate accounting, business interruption, statutory sanctions, competitive disadvantage, fraud and embezzlement. Internal controls are methods and procedures used to authorize transactions and safeguard assets, encourage adherence to company policies, promote operational efficiency and ensure accurate and reliable accounting record. At a minimum, certain financial controls should be in place as part of the financial management system.

*Corresponding author. E-mail: talha@kfupm.edu.sa.

Although a large body of empirical research has been undertaken during the last five decades in the area of existing accounting policies and procedures practices of the internal control accounting system, more efforts are needed to uncover the economic, organizational and political aspects of these policies and procedures practices of the internal control. In particular, more research is needed in developing countries as the bulk of research existed to date relate to the practices in developed economies. The Internal Control Structure and Accounting Policies and Procedures There was a considerable agreement in the literature that the scope of internal control structure includes: (1) control environment (2) accounting information system; and (3) control policies and procedures (Felix and Niles, 1988; lea et al., 1992; Gadh et al., 1993; Felix, 1998; Kinney, 2000; O‟Leary et al., 2006). The current USA auditing standards and Committee of Sponsoring Organisations (COSO) model include general statements, which suggest that the internal control structure comprises these three elements. O‟Leary et al. (2006) compare these three elements of the internal control structure to the national auditing standards in USA, Australia and UK

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and conclude that they are comparatively consistent. The scope of the internal control structure can therefore, be summarized into three main elements: the control environment, the accounting information system and control policies and procedures. The control environment covers management‟s philosophy and operating style, organizational structure, assignment of authority and responsibility, internal audit, use of the information technology, human resources and audit committee. The accounting information system component includes database contents, data input-processing-output and inclusion in the financial report. The accounting control policies and procedures component includes segregation of duties, authorization procedures, adequate documentation, independent checks, physical controls and records (O‟Leary et al., 2006). Leary et al. (2006) found out that prior research has not studied the relative importance of the component elements of internal control structures or the consequential effects of one element on the other. They concluded that the control environment forms a critical component of the internal control structure and is considered to be the most important element mitigating the effect of other elements. Felix (1998) suggests that most of the research into the internal control evaluation has not assisted internal control evaluation. Rather, it appears to have assessed auditors and their behavior. Research that contributes to our understanding of the role of internal controls in either the management of the enterprise or external auditing has been sparse. Most research that has appeared in the last ten years with internal control content has been focused on auditor judgments rather than use of enterprise internal controls in management or auditing” (Felix, 1998: 8). The audit profession views the internal control structure of an organization as „management‟s philosophy and operating style, and all the policies and procedures adopted by management to assist in achieving the entity‟s objectives‟ (AUS 402.10). This view further suggests the internal control structure comprises various elements, as managements‟ philosophy and operating style is quite distinct from specific control policies and procedures. However, managements‟ philosophy and operating style is likely to influence the design and implementation of specific control policies and procedures (Felo, 2001). This research contributes to this on-going empirical research by investigating and evaluating the existing accounting policies and procedures practices of the internal control accounting system and the way data and accounting information flow in two Saudi firms operate in the real estate sector. Specifically, the research stemmed from the fact that, firstly, the maintenance of accounting records in reasonable detail and accuracy, and the adequacy of the internal control structure, which includes the assessment of control environment, accounting system, and control procedures over revenue and

expenditure cycles, is a management priority and responsibility. Secondly, the management choices of policies and procedures practices of the internal control is delineated in each organization to a system of clear roles and responsibilities and subjected to economic, organizational and political aspects of these policies. This study distinguishes the control environment, which represents management‟s overall attitude, awareness and actions, from control policies and procedures, which are the detailed set of guidelines and procedures that management establishes over information and transaction processing. The Conceptual Framework The theoretical framework of this paper builds on the institutional perspective. The institutional perspective literature outlined three areas of institutional economic namely: old institutional economic, new institutional economic and the socialist institutional economic. Ahmed and Scapens (2000) distinguish three broad forms of institutionalism which have impacted, to different degrees, on accounting research: new institutional economic (NIE), new institutional sociology (NIS), and old institutional economics (OIE). OIE approach provides a useful basis for understanding the institutionalized character of organizational routines and ruled-based behavior (Hodgson, 1988; Scapens, 1994). The OIE framework emphasizes the interplay between institutions and actions in economy and society and brings into focus both the enabling and constraining qualities of institutional (Nelson and Winter, 1982; Hodgson, 1988). In this case, whilst, existing routines and institutions may constrain individual action, by establishing more or less fixed patterns of human actions. They provide information, which enables actors in a highly complex world (Scapens, 1994). Burns and Scapens (2000) differentiate between rules and routine. The rules are formalized statement of procedures and normally changed only at discrete intervals, where as routines are the procedures actually in use and have the potential to be a cumulative process of change as they continue to be reproduced. Internal control policies and procedures constitute organizational rules and routines, which represent the structuring properties of institutions and the day to day actions and thoughts of organizational members. In order to understand the practices of accounting control policies and procedures, the institutional character is used to explain these practices. Although such an approach may be able to explain certain practices, it may not assist our understanding of how these practices come to be used in organizations, or the nature of resistance to their use. However, the extent to which specific routines are modified may depend on other rules and routines, including control procedures.

Al-Hazmi

In this study, the rules are defined as the formal accounting control policies and procedures, as they are set out in the manual procedures. Whiles routines are the management practices actually in use. It is assumed that management practices in use may not actually replicate the system set out in the policies and procedures manual as demonstrated by Roberts and Scapens (1985). The new institutional sociology (NIS) approach explores the process through which organizations and social agencies initiate and design structures, political and procedures in order to demonstrate conformity with institutionalized rules, value and expectations (DiMaggio, 1988; Scott, 1995; Ahmed and Scapens, 2000). NIS approach has been used to explain: (1) The role of these broader institutions in shaping organizational accounting practices (Mezias, 1990; Covaleski et al. (1993), (2) the success and survival of the firms (Ahmed and Scapens, 2000). While NIS approach explains how the institutionalized rules and values and expectations influence the firm and the design of its accounting system, it does not explore how the latter shape the institutionalized rules and values and expectations (Ahmed and Scapens, 2000). The new institutional economics (NIE) approach focus on the analysis of market and individual rationality, and based on Williamson transaction cost approach and the two core assumptions of neoclassical economics: the rational maximizing economic agent and the general equilibrium of market forces (Scapens, 1994). While the NIE approach seeks to broaden the domain of economic analysis by examining the transactions and governance structures internal to the firm, it is used to explain the choice and use of management accounting control systems (Scapens and Arnold, 1986; Scapens, 1994; Spicer and Ballow, 1993; Colbert and Spicer, 1995). However, NIE approach is criticized by not recognizing the impact of the broader economic, political, and social institutions, which can be important in understanding the development of accounting practices. The complex set of relationships between economic, political and social institutions is grounded in the specific context and history of the company, and this lead to limit the use of NIE model to focus on the study of accounting history and management choices within the framework of neoclassical economics approach (Ahmed and Scapens, 2000). Thus the NIS approach demonstrates the impact of external forces on the organizational norms and practices, and control and structure. Due to the complex set of the relationship between accounting, routines and institutions, the focal point of this study is limited to OIE and NIS approaches. The NIS approach considers the external macro-focus while the OIE focus on intra-organizational behaviors. This study focuses on both approaches in order to understand: (1) the conformity with institutionalized rules and values and expectations (NIS); and the institutionalized character of organizational routines and ruled-based behavior (OIE). Subsequently, the study presents (1) the research

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method and data collection, (2) a description of the control environment, the accounting information system, and the control policies and procedures operating of both revenue and expenditure cycles, and (3) findings, limitations and conclusions. RESEARCH METHOD AND DATA COLLECTION Given the wide view in a very complex area, we were limited to exploring the internal control structure and practices and their relationship. Specifically, we describe the internal control structure and practices and how they have arisen and used over the previous years in both companies. Because of the complex set of the relationship between the variety of accounting and behavioral issues that relate to internal control structure, it is intended to use a case study method. One advantage of using this research method is that it provides the possibility of an in-depth investigation and analysis of the subject matter of research under consideration. In addition, to the rich description, the major strength is that it allows researchers to deal with a variety of evidence and internal checks including observation, interviews and documentation on its validity (Ryan et al., 2002). The reasons for limiting the study to two cases are, firstly. It allows replication of comparative logic among individual cases. Secondly, it permits the development of rich description of budgeting practices in a wide range of circumstances, which takes into account the differences that exist between the two cases. Thirdly, it ensures that research topic itself is of a manageable size. Finally, it improves the chances of being accepted to the organization that we will be dealing with. In this section, we provide an overview of the case study method and outline how the fieldwork was conducted. This is followed by a description of the two cases under-consideration. The Case Study Method Its proponents see case-based research as the salvation of accounting research from an overly normative approach to accounting theory formulation (Yin, 1984; Snow and Thomas, 1994). Many accounting researchers have shown that a case-based research strategy is particularly useful when "what, how and why" questions are being asked and when the researcher's wish is to explore new ideas (Ansari and Euske, 1987; Simons, 1990; Bakar, 1991; Berry et al., 1991; Archer and Otley, 1991). One of the major strengths of the case study is that it allows rich description of issues under considerations. Case study research appears to have a number of potential roles to play (Scapens, 1990), but the central role seems to be that of exploration (Otley and Berry, 1994). It has been argued that the case study is more correctly a method of data collection, a point made by Scapens (1990), Llwellyn (1992) and Otley and Berry (1994). Each method of data collection has its own strengths and weaknesses. The case study allows researchers to deal with a variety of evidence and internal checks on its validity; for example, interviews, observations and documentation (Campbell and Fiske, 1959; Webb et al., 1966; Gross et al., 1971; Denzin, 1978; Yin, 1981, 1984; Hoque and Hopper, 1994; Snow and Thomas, 1994). However, the integration of such differently derived data might be confusing because of the danger of using, by accident, different epistemologies and ontological assumptions, which could lead to theoretical opportunism and incoherence (Berry et al., 1991; Hoque and Hopper, 1994). In addition, as the context of each case is particular, the findings lack generalisability (Halfpenny, 1979; Huberman and Miles, 1983; Yin, 1984; Patton, 1987; Scapens, 1990; Spicers, 1992; Otley and Berry, 1994; Snow and Thomas, 1994). Despite these criticisms, there is a prima facie case for the use of a case-based research method in a wide variety of contexts with the caveat that greater clarity

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concerning the initial theoretical position is needed (Scapens, 1990; Spicers, 1992; Otley and Berry, 1994). The literature on case-based research has been centered on the debate about the theoretical presuppositions of researchers. Sometimes, it was not clear whether the written case studies reflect the initial theoretical position of researchers or new positions taken up in the light of the empirical evidence available (Otley and Berry, 1994). Some researchers (Gersick, 1988; Bettenhausen and Murnigham, 1986, Eisenhardt, 1989, 1991) switched their research focus pursuant to issues emerging during data collection. There is thus an argument that a review of theory or assumptions is an essential precursor for the case study method. “It argued that, it is incumbent upon researchers using case-based methods to be clear about their initial theoretical positions, and to interpret their results in a way, which indicates the theoretical modification the empirical observations have triggered" (Otley and Berry, 1994).

Access for Data The data for the two case studies were collected over three-month periods. The researcher had an access to two Saudi companies operate in the real estate industry through consultation projects. Data were collected from the two companies using semi-structured questionnaires, personal interviews, written narrative, secondary data, and direct observation of group discussion and a study of archival and documentary materials. The findings were communicated to the consulting group and participants for feedback. Personal interviews were conducted during on site-visits with the discussion group and managers at various levels of management. The time to complete an interview varied in length between ½ - 3½ h. Key personal interviews were conducted with the following key administrators and management teams in the two companies, including the managing director (CEO), the internal auditor, the chief accountant, the financial controller and accounting staff. Seven meetings were conducted during the project time. A discussion group was formed and attended by all higher management team and the consulting group. The interview techniques involved the following: 1. A semi-structured questionnaire was developed and used as a guideline during the interview to make sure that all relevant topics were covered and to help the researchers conduct the interviews in a systematic and comprehensive fashion (Berry, 1976; Otley, 1976; Patton, 1987; Murshed, 1989; Hoque, 1993). A copy of the interview guideline was sent in advance for each company. The guideline to interview meetings served several purposes: to introduce the subject, we are interested in and the proposed method of data collection, and to stress the confidentiality of information provided the possible involvement of employees. It also emphasized the importance placed on the view of the respondents regarding their perception and attitudes towards the internal control structure and accounting policies and procedures practices, market conditions and the strategic responses of their organization. 2. Note-taking: The members of the consultant team take notes in each interview. It was found useful to take notes of selected key issues to help formulate new questions if a subject showed especial interest, to help to review the discussion when written up the manuscript text, and it makes the researcher aware of the documentary evidence deemed relevant during the interview and serve as a reminder for him to collect it. A manuscript text was written up for each interview usually within two weeks of the day of the interview. Each manuscript text was dated, with a note where the interview took place and who was present. The texts were used together with the study of relevant documents and direct observation to formulate the empirical evidence and database for each case. In addition to the personal interview, a study of documentary materials and direct observation of the group

discussion were conducted. Documents and operating statements were collected during on-site visits, including corporate plans, financial plans and budgets, progress reports, production plans and reports, internal memos, instruction for and description of internal control structure and accounting systems. There was extensive data collection of procedures manual and reports for each company. Secondary data was collected through the consulting group and includes but not limited to organization chart, job description for key positions, user manual and accounting system documentation, which included the chart of accounts, operating and maintenance manual, forms used with the system, accounting procedures flowcharts including the Revenue and Expenditure Cycles, and the audited annual reports. In addition, a range of documentary materials and literature relating to the real estate sector was collected. Government rules and regulations documents on the historical development and changes in the economy and international market were collected from relevant sources. Direct observation of the group discussion during interview meeting was carried out. These firsthand observations allowed the researchers to get a close view and personal knowledge of what is happening in the company. The management at the two companies provided full support and fruitful discussion in the area under consideration. We spent a total of 9½ h of group discussion in both companies. On these meetings we were accompanied by the managing directors, divisions‟ coordinators and administrative areas coordinators, controllers, financial directors/managers and senior and staff accountants. Table 1 presents a summary of interviewee and interview duration. It became clear that the market pressure in both companies were similar. Tours were given at both companies to accounting divisions and departments guided by the coordinators and directors who were senior employees in the company. A database was created for each company and was kept in separate manual files, including the manuscript text of personal interviews and the archival documentation. While the hand written notes were kept in a separate notebook for reference purposes. At the initial stage, a report for each company was produced and continuous discussions with each company were maintained throughout this study. Such close discussion has ensured that the focus was maintained within the framework agreed at the outset. Then a first draft for each case was submitted and discussed with the relevant managers. This was used as a confirmation process to ensure that our description regarding internal control structure and control policies and procedures practices of each company were correct. No contradictory comments were made. To further the process of confirmation, some techniques were used to validate field data. By using several sources of data including semistructured questionnaire, personal interview, observation and documentary analysis, data from one type of source can be checked against data from another. In some cases, cross checking of the same point was carried out with different interviewees.

THE DESCRIPTION OF THE TWO CASES This section is devoted to describe the internal control structure, which includes the study of the existing control environment, accounting information system, and control policies and procedures over revenue and expenditure cycles within the two local companies under consideration. Firstly, a brief historical background of both the company and the business sector, followed by a detailed description of the internal control structure (control environment, the accounting information system, and the control policies and procedures).

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Table 1. Data Collection (Interviewee and Interview Duration).

Company name

No. of Meeting

Interviewee

Case studies in real estate sector 2 meetings and 1 Managing director, chief accountant, X group discussion accounting staff, Consulting group.

5 meetings and 2 group discussions

Total

7 meetings and 3 group discussions

Managing director, operation coordinator, financial controller, corporate planning director, consulting group, chief accountants Accounting staff.

Company History and the Business Activities The two cases under consideration are regional family business organizations operating in the real estate industry and located in the gulf region. The two companies have been established for long time of periods as a proprietorship and then became family partnership companies owned by family members. Both companies represent a good name in the real estate industry. Recently, each company is conducting a project that aims to reorganize and restructure their business activities and the way they deliver their products and services in order to meet future challenges and customer expectations. In addition, they entered into franchise brokerage agreement with the international organization to support their services and develop their own portfolios and electronic platform network over the last ten years. Both companies engage in providing commercial and residential local and international real estate services, including buying, selling, leasing, marketing, management and development of real estate. Each company defines their own market segments and business lines operating in a highly competitive and innovative marketplace. They introduced various business initiatives to coop with available market opportunities. They generate their revenues from their major business lines, including the sources from Portfolio Investment, Installment Sales, Placement, and Brokerage. A portfolio investment activity is an administrative unit responsible for the purchase and sale of raw land. Land and real estate activities include purchasing, selling, marketing and valuation of raw land and other real estate. Each company developed their own programs with owners and investors to manage financing buy and sell raw land. The real estate placement is one of the developed programs, where the company engages in planning and development of raw land and then resells at auction to investors at higher prices. Under placement, the

Interview duration (hours)

Observation of group discussion (hours)

3½

9½

company is a partner in investment of at least 20 to 25% of the project and generates additional auction brokerage fees plus any additional profit and loss from sales. The company recalls unsold shares at auction and resells at installments. Another program is the real estate portfolio where the company offers its services to potential investors for predetermined fees. In addition, both companies continue their conventional business to manage real state of other owners and as a brokerage. As their main business‟s activities expand in terms of products, services and geographical areas, their operations become more complex, which needs to be matched with their internal control structure in order to meet competition and market changes. The internal control structure In this section, the three elements of the internal control structure will be described for both companies, with a view to determining strengths and weaknesses of the revenue and expenditure cycles. The Control Environment Information System

and

the

Accounting

Control environment is the overall attitude of management and employees about the importance of control. The control environment covers (1) management‟s philosophy and operating style, (2) the integrity, ethical values, and competence of an organization‟s employees; (3) the way the management assigns authority and responsibility (organization structure), as well as organizes and develops its business; (4) the attention and direction provided by the board of directors and audit committee. Management‟s philosophy about the role of internal audit, use of information technology and personnel policies and procedures of hiring, training, evaluating, compensating

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and promoting of employees have great effect on the control environment. The descriptions of the control environment and the accounting information system for the two companies are as follows: The First Company: The existing organization structure of this company is relatively very simple administrative functional units and central accounting services. The family members chaired the companyâ&#x20AC;&#x;s main business lines, and top management emphasizes maintaining close supervision over their business activities. The company has an internal audit, which reports directly to the chief accountant in a periodic and ad-hoc basis. The company builds excellent banking relationship and network, and the company develops good knowledge of computer applications with unified and homogenous manual accounting system and reliable source of information. However, the use of computer accounting packages is limited. It seems that the way they develop their structure is based on the existing practices rather than on the best practices available and this leads to a position where the organization structure is not well defined and updated. In addition, the description of job responsibilities for each position in the organization is not clear due to lack of formal description, especially in the accounting department where the treasurer and the controller functions combined. This of course would sometimes result into confusion in terms of assignments and duplication of efforts. As a matter of the control environment that relates to human resources, it seems that the company hires professional employees with good background, experience planning ability and clear analysis. However, the manpower is inadequate, and the personnel policies and procedures regarding hiring process, training programs, career path, and compensation and motivation packages are not clear. The Second Company: Over the past decade, the organization structure of this company grew in an organic manner, and followed a relatively very simple horizontal structure with minimum communication between the different administrative units and central accounting services. The recent growth and shift in the market have led the company to add more management layers, and put pressure on the company where senior executives strive to maintain its unique culture. Currently, the organization is structured around three segments and four core business line activities. A member of the family chair the companyâ&#x20AC;&#x;s main business lines and top management emphasize maintaining a close relationship with investors. The company has an internal auditor who is a trusted person report directly to the group general manager in a periodic and ad-hoc basis. Under the existing organization structure, the financial controller is carrying out the dual responsibly of

treasurer and controllership. This may be contributed to the lack of formal description of job responsibilities for each position in the organization which led to assignments and duplication of efforts. This of course also indicates sometimes the nature of the way family business is structured. Due to the recent engagement with the international organization and the creation of new segments and business lines, the company is restructuring the way they conduct their business activities with emphasis on maintaining the close relationships between management and inventors. The company has an organization structure that is currently under revision. The proposed restructuring initiatives depict the administrative arrangement within the company where organization structure gives greater power to work directly with customers and suppliers with simple reporting communication network between all levels of the organization. The company builds excellent banking relationship and network, and develops good knowledge of computer applications and environment with a unified and homogenous manual accounting system. The computer accounting packages used by the groupâ&#x20AC;&#x;s entities are separate, non-integrated and not unified, and do not contain all necessary application systems with some subsidiaries and business segments using only the manual system. It seems that the organization structure is not well defined and updated where the revisions in practice have apparently not been documented formally and reflected in the existing organization structure. This might be explained by the fact that the increasing complexity of business activities and the new restructuring will influence the internal control structure, reporting requirements and the accounting system in general and will be reflected later in their future constructs on both their business activities and the types of information needed by the management team. The company gives a considerable attention to human resources of their organization by hiring professional wellpaid employees and reasonable employment positions. However, the manpower is inadequate due to rapid market growth and shortage of qualified manpower supply. In addition, the personnel policies and procedures regarding hiring process, training programs, career path, and compensation and motivation packages are not clear. The Revenue and Expenditure Cycles Accounting Policies and Procedures Practices

and

In this section, the revenue and expenditure cycles will be described for both companies, with a view to determining strengths and weaknesses of the existing accounting policies and procedures practices. Two processing steps

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are considered in the revenue cycle: the sales processing system and cash receipts processing system. In addition, two processing steps are considered in the expenditure cycle: the purchase processing system and cash disbursement processing system. The Existing Sale and Collection Model The essential purpose of the revenue cycle is to facilitate the exchange of products and services with customers for cash. The revenue cycle composes of the sales processing system and cash receipts processing. Sales involve cash and credit sales. The control points over sales processing include receiving the sales order, checking the customerâ&#x20AC;&#x;s credit, order processing and delivering, and billing the customers. The control points over cash receipts processing include the receipt of cash, the processing of the cash deposit, and the posting of cash amounts to the ledgers. This section describes the exiting accounting policies and procedures practices related to the sales processing system and cash receipts processing system for both companies. The First Company Company differentiates between sales of land and real estate of the company and other owners, and the services provided by the company to them. Based on the accounting manuals of the company, the sales processing system for land and real estate as a source of revenue is described as follows: the sales process (or rent) begins in sales department with a receipt of customer to the company place or through telephone call. The company salesperson welcomes the customer and tries to define and comply with customer's specifications and record his order in a requisite lists for future follow up. Upon meeting the customer's specification, the salespersons negotiate the sale price and brokerage fees, then prepare sales order authorized by sales manager, and then send the order to ownership department. Upon receiving the sales order, the ownership department prepares the sales contract and release and sends the release document to surveying department for approving compliance with specification. Upon approval by the surveying department, the ownership department sends the three documents including sales order, sales contract and release document to the accounting department to sign the contract and release document and to make sure that the sale amount will be paid in full. Then the ownership department follows up the change of ownership legal procedures and updates its inventory accounts for records and future follow up, and then sends copies of sales contract, release documents and the check to the accounting department for record purposes. The accounting department receives the checks and prepares check receipt voucher with two copies. One

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copy is kept in the department. The original and the other copy with checks are sent to the cashier. The cashier receives and signs the check receipt voucher; give the original to the payee, then prepares an original and a copy of the daily cash lists. The cashier sends the copy of the check receipt voucher and the daily cash lists to the auditing unit for verification and then send them to the accounting department for GL posting and record. In the payment day, the accountants prepare a deposit slip and a deposit lists and sends them to the cashier for deposit in the bank. The Second Company Based on the accounting manuals of the company, the sales processing system for their major sources of revenues is described as follows: Cash sales sign the contract and then send the contract to the chief accountant for recording the transaction. Credit sales sign temporary contract and then send the contract to chief accountant for credit approval. Upon approval, the customer signs the binding contract and the chief accountant records the transaction. Sales contract is the only document used in this company in sales processing system. Accounting department received checks, prepares remittance advice, and then sends them to cashier. The cashier prepares deposit slips and sends copies for GL posting. The Existing Purchasing and Payment Model The essential purpose of the expenditure cycle is to facilitate the exchange of products and services with suppliers for cash. The expenditure cycle composes of the purchasing processing system and cash disbursements processing system. The control points over purchase processing include receiving the purchase requisition, preparing the purchase order, receiving goods/services, checking invoices. The control points over cash disbursement processing include the ascertaining the validity of the payment obligation, preparing the cash disbursement, the processing of the cash disbursement, and the posting to the ledgers. This section describes the exiting accounting policies and procedures practices related to the purchase processing system and cash disbursement processing system for both companies. The First Company The company differentiates between land and real estate purchasing and other inventory purchasing. Based on the manual, the inventory purchasing processing system starts with filling a purchase requisition approved and authorized by the requesting department including ware-

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house manager. The requisition is sent to a costing department for balance verification and then to the purchasing department. The purchasing department asks for bidding, and tenders and prepares a purchase order for the winning supplier. The purchase order is then authorized, and copies (six copies) are sent to supplier, warehouse, receiving, requesting and accounting department. Upon receiving goods, a committee of technical and financial persons headed by the warehouse manager and the presence of the custodian of the inventory prepares an inspection memorandum. The custodian of inventory including warehouse department prepares receiving reports with three copies. A copy of the receiving report is sent to the accounting department. The invoice is sent to warehouse, purchasing and trading managers for verification and comparison with the purchase order and then to the auditing unit for revision. The accounting department receives the invoice from the auditing unit, compares the invoice with the purchase order, inspection memorandum and the receiving reports, and prepares check (or cash) payment slip. The land and real estate purchasing is similar to the sales procedures except it is requested that the general manager (MD) appoints a person from the sales department to evaluate and follow up. Sales, surveying, and ownership departments perform similar procedures to sales processing, prepare purchasing contract and the accounting department reviews the documents, and issues the check. The Second Company The company differentiates between purchasing national purchasing and international purchasing. Based on the manual, the national purchasing processing system starts with filling a purchase requisition approved and authorized. The requisition is sent to the purchasing department. The purchasing department asks for bidding, and tenders sand prepares a purchase order for winning supplier. The purchase order is then authorized and copies are sent to supplier, receiving, and accounting department. Upon receiving goods, a committee of requesting department and, purchasing department prepares receiving and inspection memorandum. The receiving department prepares receiving reports. A copy of the receiving report is sent to accounting department. The accounting department receives the invoice from the supplier, compares the invoice with purchase order, inspection memorandum and the receiving reports, and prepares check payment slip. The foreign and international purchasing is similar to the local and national purchasing except it is requested that the purchasing department prepare a line credit and overdraft order, and the accounting department

authorizes it. Observations from the Two Cases The control environment Information System

and

the

Accounting

This section accentuates observations related to control environment and accounting information system for both cases. These observations take into account the overall attitude of management and employeesâ&#x20AC;&#x; philosophy and operating style. Factors included within the control environment and accounting information system are: internal audit, assignment of authority and responsibility (organizational structure), human resources, use of information technology, database contents, data inputprocessing-output and inclusion in the financial report. In both cases, the management at all levels lacked awareness of the overall policies and procedures used to direct operations toward desired goals, ensure accurate financial reports, and ensure compliance with applicable laws and regulations with minimum attention and direction provided by the board of directors or group general manager. This partly may be contributed by the lack of compliance to policies and procedures due to the inadequacy in the internal audit function and inadequate manpower or because organizational support attention may be directed to only some of the problem areas. The managementâ&#x20AC;&#x;s philosophy emphasizes maintaining close supervision over their business activities and close relationship between management, suppliers and customers. This led family members to chair the companyâ&#x20AC;&#x;s main business lines. The first company has a small board of directors consist of 2 to 3 family members while the second company has 5 to 6 members who consider being a moderate size. All members of the board are heavily involved in running their businesses and their background is varied. Nevertheless, the recent engagement with a total quality philosophy put pressures on both companies to think about how they conduct their business and restructure the way they do their business activities. However, less effort was devoted to the question of where they want to be in the future and how they cope with the recent changes in a real estate market. Under the new initiatives, both companies involve in a strategic planning project through which they determine their visions, missions, objectives and goals, and then they construct their organization structure on this basis to meet competition and market changes. Of course, the new restructuring will influence the internal control structure, reporting requirements and the accounting system in general. The two companies have an audit function unit where internal auditor reports directly to either the chief accountant or to the general manager of the company.

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However, there is a lack of proper internal auditing practices were the internal auditor possibly substitutes the functions of other that may not even be appropriate for the position. This seems a bit too ambitious when considering the existing practices of the auditing unit. Even so, the private companies are not required by the law to have an internal audit unit, both companies try to establish an internal audit unit devoted to internal auditing activities including financial and operational compliance. This might be explained by the fact that they may want to meet the expectation of external institutional pressures of financial and investor sectors. Both companies give considerable attention to the human resources factor by hiring professional well-paid employees with good background, experience planning ability and clear analysis. However, the manpower is inadequate, and the personnel policies and procedures regarding hiring process, training programs, career path, and compensation and motivation packages are not clear. This may be contributed to both the rapid market growth and the shortage of qualified manpower supply. The overwhelming volume of work, the severe shortage in the number of qualification of employees, and lack of proper training programs put pressures on the shouldersâ&#x20AC;&#x; of their employees to meet the management expectations and carry out their functional responsibilities. The two companies implement a manual accounting system and separate non-integrated accounting packages in certain subsidiaries. The accounting packages currently used by the group's entities are not unified and limited to a general ledger, do not contain all necessary financial and accounting application systems and some subsidiaries are still using manual accounting systems. This, therefore, creates a need to use other time consuming tools to prepare the required reports including excel sheets. Using the manual accounting systems is a time consuming process and increases the demand on human resources. Moreover, implementing manual accounting systems in certain subsidiaries and separate nonintegrated accounting packages in other subsidiaries restrict the management ability to prepare accurate and timely consolidated financial statements at the group level. The generated financial reports by the existing accounting system are not adequate, for example, financial reports are currently limited to two financial statements (balance sheet and income statement) and do not include the cash flow statement. It seems that when they report they do not comply with presentation and disclosure requirements. This may be explained by the fact that it is quite understandable that the private company is not required by law to comply with GAAP presentation and disclosure requirements. Nevertheless, clearly the company pursued good accounting practices to enhance their financial position, but the current accounting system focuses on the book keeping activities and generating financial statement. Limited attention is paid for other internal financial

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reports, including accounting receivable and collection, payroll and compensation, assets utilization. Managerial reports are completely ignored where there is no evidence of preparation of any formal financial budgets at both subsidiaries and group levels. Given the current situation of the market opportunities, considerable attention has been paid by the management at both companies to incorporate additional financial reports emerged due to business expansion (for example, placement) including customer and product profitability, and divisional and business unit performance evaluation. Accounting Policies and Procedures Practices This section highlights the observations related to the accounting policies and procedure, including segregation of duties, authorization procedures, adequate documenttation, independent checks, physical controls and records for both companies. Segregation of duties is overlapping functions; confusion to whom they should report to. Lack of clear duties, proper training, and function overloading creates a problem of confusion. Clearly, at both companies, there are inadequate policies and control procedures in certain areas of operations related to cash processing and order processing system. For example, it is possible that account receivable is increasing with expansion of business, while there are no clear credit policies and procedures or the billing procedures are not clear, which may hinder financial control. Billing procedures are subjected to wide variations depending on the type of sales and industry (cash, credit or installments). Based on the manual and leaf lets, it is clearly written that (1) in the case of delay of payments by customers, follow up may be conducted by sales, accounting department or management, (2) accounting department issues and record checks while Purchases handles LCs and decides on payment terms. Obviously, formal description of job responsibilities for each position in the organization is not clear, especially in the accounting department where the treasurer and the controller functions combined. This of course would sometimes result into confusion in terms of assignments and duplication of efforts. The existing accounting system does not have a clear written chart of accounts and coding in the accounting policies and procedures. Furthermore, it is not clear whether the existing manual match with the existing end user manual of existing computer packages. It seems that the accounting system is a bookkeeping driven system with weaknesses and inadequate policies and control procedures in certain areas of operation. Certain subsidiaries have drafted some policies and procedures but these are not yet complete and have not been formally approved to date. The absence of formally approved financial policies and procedures covering all aspects of the business creates uncertainty and in-

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consistency with regards to processes, standards, responsibilities, controls and chart of accounts. The internal control policies and procedures (the rules) of order processing for both sales and purchasing is generally reasonable. However, compliance to these procedures (the routine) is questionable. Management attention has been paid to revise the existing control policies and procedures related to sales processing in order to expand their credit sales market. Currently, sales processing starts in the sales department without any consideration to obtain verification of credit authorization from the credit department for credit sales. It could be the case that the credit sales are at a minimum. Therefore, the second company introduces a billing department because there is a limited number of internal control procedures impeded in the company practices related to sales order processing system due to the missing of a credit and billing department. This department plays an essential role in follow up and preparing the sales journal vouchers to the accounting department for GL posting. Based in the provided accounting manuals, the purchasing processing system starts with filling a purchase requisition approved and authorized. The requisition is sent to the purchasing department. The purchasing department asks for bidding, and tenders and prepares a purchase order for winning supplier. The purchase order will be authorized, and copies will be sent to the supplier, receiving, and accounting department. Upon receiving goods, a committee of requesting department and purchasing department prepares the receiving and inspection memorandum. The receiving department prepares receiving reports. A copy of the receiving report will be sent to the accounting department for payment arrangements. In general, the cash processing of collecting and disbursement procedures sound good in both companies. In case of collections, accounting department received checks and then sends them to cashier. The cashier prepares deposit slip and sends a copy for GL posting. The Mailroom prepares a remittance list and sends copies to cashier and accounting department. Accounting department receives remittance advice and cashier receives checks. The cashier prepares deposit slip and cash receipts listing (journal voucher), and deposits the fund in the bank and sends the listing to the accounting department. Controller reconciles receipts and verifies all documents of remittance list, journal vouchers and deposit tickets. In case of payment, the accounting department authorizes checks and then sends them to cashier. Treasurer verifies all documents before preparing check. Controller compares the amount and payee‟s name on returned check with check authorization. Conclusion and Direction for Future Research NIS approach is used to explain how external institutions

influence accounting system and their associated behavior (James, 2009; Abernethy and Chua, 1996; Bealing, 1994; Berry et al., 1985; Carpenter and Feroz, 1992; Covaleski et al., 1993; Hoque and Alam, 1999). Accounting information plays an extensive role throughout the entire organization as it searches to conform to and represents itself in some form of rationality in order to gain legitimacy to its external influences (Meyer and Rowan, 1977). NIS approach suggests that reforms would prompt organizations of an affected field to change, that is, defensive responses to changing notions of what constitutes a legitimate organizational practice (James, 2009; DiMaggio and Powell, 1991). Recently, accounting researchers have used NIS to explain the success and survival of firms in terms of the extent to which they encapsulate social values and expectations in their organizational structures and behavior. Over the last decay, real estate sector operates in a highly competitive and innovative marketplace. The market pressure and external forces of other institutional players, including funders, professionals and investors have a dynamic impact on the adoptive nature of organizational behavior and companies within this sector find themselves immersed in a certain cultural and historical context. As part of the management‟s philosophy at both companies, it was found that management is proactive in the concerns of organizational competitiveness and endeavor to incorporate components into the design that enhance an organization‟s ability to be rational, competitive, and consistent with the needs and objects of external institutions. It is clearly that the management tries to legitimize the organization and its management‟s philosophy to cope with external forces. Each company is conducting a project that aims to define their own market and to reorganize and restructure their business activities and the way they deliver their products and services in order to meet future challenges and customer expectations. The accounting information plays an extensive role throughout the entire organization as it searches for, conforms to, and presents itself in some form of rationality in order to gain legitimacy to its external influences. For example, the second company considers a strategic planning project through which they determine their visions, missions, objectives and goals, and then they construct their organization structure on these bases to meet competition and market changes. Of course, the new restructuring will influence the internal control structure, reporting requirements and the accounting system in general. Management at both companies considers cash processing of collection and disbursement procedures critical to maintaining the excellent banking relationship. Even so, the chief accounting officer carries out the duals' responsibilities of treasurer and controllership. Cash processing procedures and documentation flow is quite good and reasonable and both companies develop a

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sound and reasonable control over cash inflows and outflows. It seems that because of the overwhelming volume of work under the severe shortage in number and qualification of employee, the accounting department is just performing the daily operations, and to some extent, the main financial operations. However, management responsible to make sure that the accounting system and control procedures over cash processing are functioning and consistent with banking requirements that play the essential part in their businesses. The observations and evidence from the two cases show that: (1) the process of institutionalization involves the creation of new structures, processes and roles that later become routines, formalized and embedded in the organizational constitution, (2) the accounting information plays an extensive role throughout the entire organization as it searches for, conforms to, and presents itself in some form of rationality in order to gain legitimacy to its external influences, and (3) the NIS approach explains how external institutions influence accounting systems and their associated behavior (Norhayati and Siti-Nabila, 2009; James, 2009; Hoque and Alam, 1999; Abernethy and Chua, 1996; Bealing, 1994; Berry et al., 1985; Carpenter and Feroz, 1992; Covaleski et al., 1993; Zucker, 1987; Meyer and Rowan, 1977 ). Clearly, the NIS explained the institutionalizing process at the macro level and suggests that the impact of the competitive and innovative market and reforms prompt organizations of an affected field to change and attempt to model structures to appear legitimate. The adoptive nature of organizational behavior is defensive responses to changing notions of what constitutes a legitimate organizational practice (James, 2009; DiMaggio and Powell, 1991; Norhayati and Siti-Nabila, 2009). It seems that the NIS fairly explained how the institutional pressures motivate management to cope with external forces but does not explain the institutionalizing process at the micro level which involved social actions and interactions in individual organizations. OIE, on the other hand, helps to explain the change in the habits and routines of organizational members. The OIE approach explores the complex and ongoing relationship between actions and institutions, and demonstrates the importance of organizational rules and routines and institutions in shaping exiting accounting practices (Norhayati and Siti-Nabila, 2009). OIE approach is used to explore the existing accounting practices as institutionalized routines, which enable organizations to function, reproduce and legitimate behavior, and achieve organizational cohesion (Scapens, 1994; Burns and Scapens, 2000). It argued that accounting as institutionalized routines creates understanding of activities according to particular sets of accounting rules and procedures, which enable decisions to be made and activities to be undertaken in a complex and uncertain world. The OIE provides a useful basis for understanding the

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institutional characteristics and implementation of accounting policies and procedures. According to Burns and Scapens (2000), the new rules and routines might be institutionalized if the new system challenges the prevailing institutions. However, organizational members who champion the new system may use power to enable the change. Although it could lead to the enactment of the new rules and routines, it stayed at the level of ceremonial implementation. It means the rules and routines could be implemented but not translated into the daily of the organization (Norhayati and Siti-Nabiha, 2009). Based on the observation from the first company, it seems that the way they develop their internal control structure is based on the existing practices rather than on the best practices available and this leads to a position where the organization structure is shaped within existing routines and institutions. It is clear that organizational member‟s position recognizes that the formal rules and informal routines can be changed and if the change is consistent with the existing routines and institutions it is easier to be achieved than change, which challenges those rules and institutions. However, the recent growth and shift in the market have led the company to add more management layers, and put pressure on the company where senior executives strive to maintain its unique culture. Even so, both companies develop a sound and reasonable control over cash inflows and outflows. The existing reporting system does not generate cash flow statement. This may be explained by the fact that it is quite understandable that the private company is not required by law to comply with GAAP presentation and disclosure requirements. The internal control policies and procedures (the rules) of order processing for both sales and purchasing is generally reasonable. However, compliance to these procedures (the routine) is questionable in both companies. For example, sales processing starts in the sales department without any consideration to obtain verification of credit authorization from the credit department for credit sales. It could be the case that the credit sales are at a minimum. Lately, management attention has been paid to revise the existing control policies and procedures related to sales processing in order to expand their credit sales market. The market pressure and external forces of the institutional players, including legal and regularity system seem to exert pressure on the management of both companies in multiple and complex ways resulting in a response aiming at legitimacy rather than efficiency. As such, although the selection of the „new‟ accounting system may be based on efficiency criteria, it may not necessarily be optimal in the neo-classical economic sense, but is likely to represent a „satisfactory‟ solution in a rational sense. Neo-classical economic theory is more concerned with predicting the rational or „optimal‟ outcomes, rather than explaining the unfolding processes

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in moving from one equilibrium state to another. However, it will be path- dependent, in that the existing routines and institutions will shape the selection and implementation process. If, over time, the emerging routines become widely accepted in the organization such that they become the unquestionable form of management control, then they can be said to be institutionalized. As such, they are more than a set of routine procedures required by senior management and implemented by accountants; they are an inherent feature of the management control process, and represent the expected form of behavior and define the relations between the various groups (Burn ad Scapens, 2000). Accounting control policies and procedures at both companies seems to be mainly driven by external institutional pressures rather than technical pressures. The routines which emerge in the two companies may be difficult to predict. However, they are not arbitrary, they can be explained where the selection of the new accounting system may be quite intentional and rational, and in a business organization will probably reflect a concern for economic efficiency while they construct normative models of organizational legitimacy. As changes occur in the institutional rules that define legitimacy, organizations respond by voluntarily adopting recommended changes or by giving the appearance of having adopted changes in order to appear legitimate (DiMaggio and Powell, 1991; Meyer and Rowan, 1977). In conclusion, firstly, it was found that the accounting control policies and procedures practices at the two companies are closely similar while the control environment and accounting information system differs. Secondly, this study demonstrates the importance of organizational routines and institutions in shaping the internal control and accounting policies and procedures practices. Thirdly, it was found that at the macro level the NIS approach explains how external institutions influence both the control environment and the accounting information system, while the OIE approach provides a useful basis for understanding the institutional characteristic of the existing accounting policies and procedures practices at the micro level. An interpretation of the results is that the control environment forms a critical component of the internal control structure and is considered the most important element mitigating the effect of the accounting control policies and procedures practices. This is in conformance of auditing practices and the audit profession views, which suggests that the internal control structure comprises various elements and represents the management‟s philosophy and operating style, which is distinct from the control policies and procedures adopted by management to assist in achieving the organization‟s objectives. This study provides useful insights for understanding the rules of internal control policies and procedures and the routine of compliance to these

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